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. 118
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No. 25
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)
__X__ on March 31, 1996 pursuant to paragraph (b)
__ __ 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, 1995 was filed on February 27, 1996.
<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) ..................... *
(c) ..................... Performance
(d)...................... Performance; About Your Account
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
(c) ..................... An Overview of the Funds; About the Investment
Principles 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) ..................... 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) ..................... About the Management and Expenses of the Fund
(e) ..................... About Your Account
(f)...................... About Your Account
(g) ..................... About Your Account
(h) ..................... About the Management and Expenses of the Funds
7(a) ..................... Inside Back Cover; About Your Account
(b) ..................... About Your Account
(c) ..................... About Your Account
(d) ..................... About Your Account
(e) ..................... *
(f) ..................... About the Management and Expenses of the Funds
8(a) ..................... About Your Account
(b) ..................... *
(c) ..................... About Your Account
(d) ..................... About Your Account
9 ........................ *
<PAGE>
Part B of
Form N-1A
Item No. SAI Caption
- --------- -----------
10 ........................ Cover Page
11 ........................ Cover Page
12 ........................ *
13(a) Goals and Investment Policies
(b) ..................... Goals and Investment Policies
(c) ..................... Goals and Investment Policies
(d) ..................... Goals and Investment Policies
14(a) ..................... Directors and Officers
(b) ..................... Directors and Officers
(c) ..................... Directors and Officers
15(a) ..................... *
(b) ..................... *
(c) ..................... Directors and Officers
16(a)(i) .................. Investment Management and Other Services
(a)(ii) ................. Investment Management and Other Services
(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) ..................... Investment Management and Other Services
(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 March 31, 1996. 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.
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 of each of the Funds -- Class A
shares.
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
March 31, 1996
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
913-236-2000
<PAGE>
Table of Contents
AN OVERVIEW OF THE FUNDS........................................3
EXPENSES........................................................5
FINANCIAL HIGHLIGHTS............................................6
PERFORMANCE....................................................14
Explanation of Terms .........................................14
ABOUT WADDELL & REED...........................................15
ABOUT THE INVESTMENT PRINCIPLES OF THE FUNDS...................16
Investment Goals and Principles ..............................16
Risk Considerations ........................................17
Securities and Investment Practices ..........................19
ABOUT YOUR ACCOUNT.............................................32
Ways to Set Up Your Account ..................................32
Buying Shares ................................................33
Minimum Investments ..........................................35
Adding to Your Account .......................................35
Selling Shares ...............................................36
Shareholder Services .........................................38
Personal Service ...........................................38
Reports ....................................................38
Exchanges ..................................................38
Automatic Transactions .....................................38
Dividends, Distributions and Taxes ...........................39
Distributions ..............................................39
Taxes ......................................................40
ABOUT THE MANAGEMENT AND EXPENSES OF THE FUNDS.................42
WRIMCO and Its Affiliates ....................................43
Breakdown of Expenses ........................................45
Management Fee .............................................45
Other Expenses .............................................46
APPENDIX A.....................................................47
DESCRIPTION OF BOND RATINGS ..................................47
DESCRIPTION OF PREFERRED STOCK RATINGS 51
<PAGE>
An Overview of the Funds
The Funds: This Prospectus describes the Class A shares of four separate
series (each a "Fund" and, collectively, the "Funds") 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 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 Funds through Waddell & Reed, Inc.
and its account representatives. The price to buy a Class A share of a 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 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 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 0.44% 0.56% 0.56% 0.61%
12b-1 fees 0.12% 0.13% 0.12% 0.13%
Other expenses 0.18% 0.15% 0.12% 0.18%
Total Fund
operating
expenses1 0.74% 0.84% 0.80% 0.92%
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return2 and (2) redemption at the end of each time period:
1 Year $ 65 $ 66 $ 65 $ 66
3 Years $ 79 $ 83 $ 82 $ 85
5 Years $ 96 $101 $ 99 $105
10 Years $144 $155 $151 $164
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."
1Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.
2Use 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)
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 SAI.
For a Class A share outstanding throughout each period.*
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ............ $5.62 $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42 $6.09
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment
income .......... 0.40 0.39 0.41 0.45 0.47 0.50 0.55 0.54 0.56 0.55
Net realized and
unrealized gain
(loss) on
investments ..... 0.72 (0.75) 0.41 0.00 0.56 (0.26) 0.07 (0.02) (0.28) 0.34
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........ 1.12 (0.36) 0.82 0.45 1.03 0.24 0.62 0.52 0.28 0.89
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income .......... (0.40) (0.39) (0.41) (0.46) (0.47) (0.50) (0.56) (0.54) (0.55) (0.56)
Distributions from
capital gains ... (0.00) (0.02) (0.33) (0.00) (0.04) (0.01) (0.02) (0.06) (0.04) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions . (0.40) (0.41) (0.74) (0.46) (0.51) (0.51) (0.58) (0.60) (0.59) (0.56)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $6.34 $5.62 $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return** ...... 20.50% -5.76% 13.19% 7.50% 18.78% 4.24% 10.61% 8.99% 4.50% 15.23%
Net assets, end of
period (000
omitted) .......... $563,445 $517,836 $641,668 $589,946 $524,404 $439,487 $403,010 $335,337 $319,273 $339,544
Ratio of expenses to
average net assets 0.74% 0.72% 0.65% 0.64% 0.65% 0.67% 0.64% 0.65% 0.64% 0.64%
Ratio of net investment
income to average
net assets ........ 6.54% 6.60% 6.14% 7.29% 7.96% 8.54% 8.97% 9.00% 8.83% 8.82%
Portfolio turnover
rate .............. 66.38% 127.11% 175.39% 115.17% 318.76% 294.66% 353.57% 179.07% 232.65% 252.49%
*On 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.
**Total return calculated without taking into account the sales load deducted on
an initial purchase.
</TABLE>
<PAGE>
United Income Fund
(Audited)
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 SAI.
For a Class A share outstanding throughout each period.*
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ............ $23.34 $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03 $16.20
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.36 0.36 0.40 0.46 0.51 0.61 0.65 0.60 0.72 0.48
Net realized and
unrealized gain
(loss) on
investments ..... 6.53 (0.80) 3.11 1.96 4.29 (1.61) 3.89 2.35 0.59 3.12
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ........ 6.89 (0.44) 3.51 2.42 4.80 (1.00) 4.54 2.95 1.31 3.60
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment
income .......... (0.35) (0.36) (0.40) (0.46) (0.53) (0.63) (0.65) (0.67) (0.66) (0.49)
Distributions from
capital gains ... (0.92) (0.63) (0.39) (0.35) (0.29) (0.60) (1.96) (0.60) (2.60) (2.28)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions . (1.27) (0.99) (0.79) (0.81) (0.82) (1.23) (2.61) (1.27) (3.26) (2.77)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ..... $28.96 $23.34 $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return** ...... 29.60% -1.82% 16.05% 11.96% 29.64% -5.45% 27.49% 19.83% 7.17% 22.11%
Net assets, end of
period (000
omitted) ..........$3,975,717$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
Ratio of expenses to
average net assets 0.83% 0.74% 0.66% 0.65% 0.66% 0.68% 0.64% 0.67% 0.63% 0.62%
Ratio of net investment
income to average
net assets ........ 1.31% 1.45% 1.70% 2.19% 2.71% 3.44% 3.41% 3.65% 3.99% 2.70%
Portfolio turnover
rate .............. 17.59% 18.54% 21.70% 19.25% 24.68% 30.94% 60.77% 48.64% 58.46% 29.90%
*On 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.
**Total return calculated without taking into account the sales load deducted on
an initial purchase.
</TABLE>
<PAGE>
United Accumulative Fund
(Audited)
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 SAI.
For a Class A share outstanding throughout each period.*
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ............ $6.58 $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78 $8.73
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income 0.11 0.13 0.11 0.16 0.19 0.28 0.31 0.26 0.25 0.20
Net realized and
unrealized gain
(loss) on
investments ..... 2.12 (0.13) 0.55 0.85 1.22 (0.99) 1.43 0.71 0.19 1.28
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........ 2.23 0.00 0.66 1.01 1.41 (0.71) 1.74 0.97 0.44 1.48
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income .......... (0.11) (0.13) (0.11) (0.16) (0.20) (0.29) (0.29) (0.29) (0.32) (0.25)
Distributions from
capital gains ... (0.92) (0.48) (0.84) (0.50) (0.09) (0.09) (0.76) (0.00) (2.15) (2.18)
Distribution in excess
of capital gains (0.00) (0.00) (0.02) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions . (1.03) (0.61) (0.97) (0.66) (0.29) (0.38) (1.05) (0.29) (2.47) (2.43)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $7.78 $6.58 $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return** ...... 34.21% 0.04% 9.06% 14.20% 23.68% -10.17% 27.56% 17.05% 4.53% 18.05%
Net assets, end of
period (000
omitted) ..........$1,206,128 $967,020$1,033,774 $992,924 $904,635 $767,218 $877,109 $737,231 $696,359 $683,989
Ratio of expenses to
average net assets 0.80% 0.71% 0.65% 0.62% 0.63% 0.64% 0.60% 0.63% 0.59% 0.60%
Ratio of net investment
income to average
net assets ........ 1.42% 1.76% 1.34% 2.13% 2.79% 4.12% 4.19% 4.09% 3.17% 2.37%
Portfolio turnover
rate .............. 229.03% 205.40% 230.29% 194.41% 241.11% 288.64% 338.24% 245.42% 316.74% 260.69%
*On 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.
**Total return calculated without taking into account the sales load deducted on
an initial purchase.
</TABLE>
<PAGE>
United Science and Technology Fund
(Audited)
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 SAI.
For a Class A share outstanding throughout each period.*
<TABLE>
<CAPTION>
For the fiscal year ended December 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ............ $15.21 $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00 $9.98
------ ------ ------ ------ ------ ------ ----- ----- ------ -----
Income from investment operations:
Net investment
income (loss) ... (0.01) 0.00 0.01 0.03 0.10 0.24 0.20 0.20 0.19 0.17
Net realized and
unrealized gain
(loss) on
investments ..... 8.40 1.40 1.21 (0.66) 5.90 (0.65) 2.50 0.64 1.06 1.61
------ ------ ------ ------ ------ ------ ----- ----- ------ -----
Total from investment
operations ........ 8.39 1.40 1.22 (0.63) 6.00 (0.41) 2.70 0.84 1.25 1.78
------ ------ ------ ------ ------ ------ ----- ----- ------ -----
Less distributions:
Dividends from net
investment
income .......... (0.00) (0.00) (0.01) (0.03) (0.10) (0.25) (0.19) (0.21) (0.25) (0.24)
Distributions from
capital gains ... (0.71) (1.02) (0.95) (0.12) (0.75) (0.79) (0.70) (0.00) (1.72) (1.52)
Distribution in excess
of capital gains (0.00) (0.00) (0.07) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
------ ------ ------ ------ ------ ------ ----- ----- ------ -----
Total distributions . (0.71) (1.02) (1.03) (0.15) (0.85) (1.04) (0.89) (0.21) (1.97) (1.76)
------ ------ ------ ------ ------ ------ ----- ----- ------ -----
Net asset value,
end of period ..... $22.89 $15.21 $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00
====== ====== ====== ====== ====== ====== ====== ===== ===== ======
Total return** ...... 55.37% 9.78% 8.51% -4.03% 59.25% -3.51% 27.40% 9.05% 12.43% 18.19%
Net assets, end of
period (000
omitted) .......... $820,783 $496,503 $446,611 $428,806 $405,380 $239,077 $247,584 $214,693 $214,828 $180,890
Ratio of expenses to
average net assets 0.93% 0.96% 0.91% 0.87% 0.85% 0.90% 0.84% 0.89% 0.81% 0.83%
Ratio of net investment
income to average
net assets ........ -0.07% 0.00% 0.06% 0.24% 0.75% 2.06% 1.73% 1.94% 1.65% 1.62%
Portfolio turnover
rate .............. 32.89% 64.39% 68.38% 45.79% 59.24% 63.86% 83.19% 60.67% 85.35% 91.71%
*On 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.
**Total return calculated without taking into account the sales load deducted on
an initial purchase.
</TABLE>
<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. Non-standardized total return may not reflect deduction
of the applicable sales charge or may be for periods other than those required
to be presented or may otherwise differ from standardized total return. Total
return quotations that do not reflect the applicable sales charge will reflect a
higher rate of return.
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.
<PAGE>
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.
<PAGE>
About the Investment Principles of the Funds
Investment Goals and Principles
The goals of each Fund are set forth below. There is no assurance that a
Fund will achieve its goals; some 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 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.
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. At least 65% of United Income Fund's total
assets will be invested during normal market conditions in income-producing
securities. 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.
Risk Considerations
There are risks inherent in any investment. The Funds are subject to varying
degrees of market risk, financial risk and, in some cases, prepayment risk.
Market risk is the potential for fluctuations in the price of the security
because of market factors. Because of market risks, you should anticipate that
the share prices of the Funds will fluctuate. Financial risk is based on the
financial situation of the issuer. The financial risk of a Fund depends on the
credit quality of the underlying securities. Prepayment risk is the possibility
that, during periods of falling interest rates, a debt security with a high
stated interest rate will be prepaid prior to its expected maturity date.
Certain types of instruments in which the Funds may invest, and certain
strategies WRIMCO may employ in pursuit of a Fund's goal(s), involve special
risks. United Bond Fund invests primarily in debt securities, including, among
others, U.S. Government Securities and non-investment grade debt securities
(commonly called "junk bonds"). The market risk to which the Fund is subject is
the possibility that the price of its debt securities will fall because of
changing interest rates. The financial risk to which the Fund is subject is the
possibility that an issuer will fail to make timely payments of interest or
principal to the Fund. The Fund is also subject to prepayment risk. Although
investments in U.S. Government Securities provide substantial protection against
financial risk, they do not protect investors against price changes due to
market risk. Lower-quality debt securities 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.
United Income Fund and United Accumulative Fund invest primarily in equity
securities. These Funds are subject to greater market risk than funds investing
solely in debt securities. The market risk to which these Funds are subject is
the possibility of a change in the price of securities caused by stock market
price changes. The financial risk to which these Funds are subject is the
possibility that the price of a security will fall because of poor earnings
performance by the issuer.
United Science and Technology Fund may invest in equity securities and debt
securities. This Fund is subject to differing market risks, financial risks and
prepayment risks depending on the types of securities in which it invests. For
equity securities, market risk is the possibility of change in price caused by
stock market price changes; for debt securities, market risk is the possibility
that the price will fall because of changing interest rates. For equity
securities, financial risk is the possibility that the price of the security
will fall because of poor earnings performance by the issuer. For debt
securities, financial risk is the possibility that a bond issuer will fail to
make timely payments of interest or principal to the Fund. The Fund is also
subject to prepayment risk.
A Fund may use various techniques to increase or decrease its exposure to
changing security prices, interest rates or other factors that affect security
values. These techniques may involve derivative instruments, including options,
futures contracts, options on futures contracts, indexed securities, stripped
securities and mortgage-backed securities. 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
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.
See "Risks of Derivative Instruments" for further information on the risks of
investing in these instruments.
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' 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(s). 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
goal(s) of a Fund and the type of securities in which a Fund may invest are
fundamental policies; 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 value. The debt securities in which a
Fund invests may include debt securities whose performance is linked to a
specified equity security or securities index.
Debt securities have varying levels of sensitivity to changes in interest rates
and varying degrees of quality. As a general matter, however, when interest
rates rise, the values of fixed-rate debt securities fall and, conversely, when
interest rates fall, the values of fixed-rate debt securities rise. The values
of floating and adjustable-rate debt securities are not as sensitive to changes
in interest rates as the values of fixed-rate debt securities. Longer-term
bonds are generally more sensitive to interest rate changes than shorter-term
bonds.
Lower-quality debt securities 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.
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.
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, including
securities rated in the lowest category (D by Standard & Poor's Ratings Services
("S&P") and C by Moody's Investors Service, Inc. ("MIS")). 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 S&P and MIS are described in Appendix A. While credit ratings are
only one factor WRIMCO relies on in evaluating high-yield debt securities,
certain risks are associated with credit ratings. Credit ratings evaluate the
safety of principal and interest payments, not market value risk. 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 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.
United Bond Fund does not currently intend to invest more than 20% of its assets
in non-investment grade debt securities.
Debt Holdings, by Ratings. During the fiscal year ended December 31, 1995,
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 37.5%
AA 5.9
A 13.4
BBB 26.6
BB 9.6
B 2.2
CCC 0.0
CC 0.0
C 0.0
D 0.0
Unrated(equivalent to)
AAA 0.9%
AA 0.0
A 0.0
BBB 0.0
BB 0.1
B 0.0
CCC 0.0
CC 0.0
C 0.0
D 0.0
The percentage of assets in each category was calculated on the basis of a
monthly dollar-weighted average. The monthly dollar-weighted average was
calculated using the market value of the securities in United Bond Fund's
portfolio at the end of each month in the thirteen-month period ended with its
last fiscal year, averaged over its last fiscal year. The rating used for each
security is that security's rating as of the end of each month and, as ratings
may change over time, does not necessarily indicate past or future ratings of
any particular security or the ratings of securities in the Fund's portfolio in
general. Asset composition of the 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 generally have higher
yields than common stocks of the same or similar issuers, but lower yields than
comparable nonconvertible securities, are less subject to fluctuation in value
than the underlying stock because they have fixed income characteristics, and
provide the potential for capital appreciation if the market price of the
underlying common stock increases.
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.
Policies and Restrictions: Each Fund may invest in convertible securities as
long as WRIMCO determines that it is consistent with the Fund's goal(s) and
investment policies.
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
governmental 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 United
States 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: As a fundamental policy, each Fund may purchase an
unlimited amount of foreign securities; however, as an operating policy, a Fund
may not invest more than 20% of its net assets 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.
As a fundamental policy, less than 5% of the total assets of the Corporation may
be invested in securities issued by foreign governments.
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.
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 futures contracts on
broadly-based stock indices ("Stock Index Futures") and options thereon for the
purposes of hedging not more than 10% of their respective total assets.
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: As a fundamental policy, United Bond Fund may buy
and sell put and call options on debt securities. As a fundamental policy,
calls on securities that are written by the Fund must be covered (i.e., the Fund
must own the securities that are subject to the call or other investments
acceptable for escrow arrangements).
Each Fund will write a put only when it has determined that it would be willing
to purchase the underlying security at the exercise price.
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
total assets of each Fund and may purchase calls and write and purchase puts on
securities. Each of these Funds must purchase and sell put and call options on
securities that are issued by the Options Clearing Corporation, except that each
Fund may write unlisted put options and purchase unlisted put and call options
on U.S. Government Securities and may purchase optional delivery standby
commitments.
As a fundamental policy, United Income Fund, United Accumulative Fund and United
Science and Technology Fund may, for non-speculative purposes, write and
purchase options on stock indices that are not limited to stocks of any industry
or group of industries ("broadly-based stock indices"). Each of these Funds may
write and purchase only listed options on 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).
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.
As a fundamental policy, United Income Fund, United Accumulative Fund and
United Science and Technology Fund may buy and sell Debt Futures, Stock Index
Futures and options on Debt Futures and Stock Index Futures.
Indexed Securities. Each Fund may purchase and sell indexed securities, which
are securities whose prices are indexed to the prices of other securities,
securities indices, currencies, precious metals or other commodities, or other
financial indicators, as long as WRIMCO determines that it is consistent with
the Fund's goal(s) and investment policies. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic. The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the United States and abroad.
At the same time, indexed securities are subject to the credit risks associated
with the issuer of the security, and their values may decline substantially if
the issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
Mortgage-Backed Securities may include pools of mortgages, such as CMOs and
stripped mortgage-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 the Federal Home Loan Mortgage Corporation or the Federal National
Mortgage Association) 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 and
marketability (i.e., liquidity) of these securities could be adversely affected
by actions of the U.S. Government to tighten the availability of its credit.
Policies and Restrictions: Each Fund may invest in mortgage-backed securities
as long as WRIMCO determines that it is consistent with the Fund's goal(s) and
investment 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.
Policies and Restrictions: Each Fund may invest in stripped securities as
long as WRIMCO determines that it is consistent with the Fund's goal(s) and
investment policies.
Risks of Derivative Instruments. The use of options, futures contracts and
options on futures contracts and the investment in indexed securities, stripped
securities and mortgage-backed securities involves special risks, including (i)
possible imperfect or no correlation between price movements of the portfolio
investments (held or intended to be purchased) involved in the transaction and
price movements of the instruments involved in the transaction, (ii) possible
lack of a liquid secondary market for any particular instrument at a particular
time, (iii) the need for additional portfolio management skills and techniques,
(iv) losses due to unanticipated market price movements, (v) the fact that,
while such strategies can reduce the risk of loss, they can also reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in investments involved in the transaction, (vi) incorrect forecasts
by WRIMCO concerning interest rates or direction of price fluctuations of the
investment involved in the transaction, which may result in the strategy being
ineffective, (vii) loss of premiums paid by a Fund on options it purchases, and
(viii) the possible inability of a Fund to purchase or sell a portfolio security
at a time when it would otherwise be favorable for it to do so, or the possible
need for a Fund to sell a portfolio security at a disadvantageous time, due to
the need for the Fund to maintain "cover" or to segregate securities in
connection with such transactions and the possible inability of a Fund to close
out or liquidate its position.
For a hedging strategy to be completely effective, the price change of the
hedging instrument must equal the price change of the investment being hedged.
The risk of imperfect correlation of these price changes increases as the
composition of a Fund's portfolio diverges from instruments underlying a hedging
instrument. Such equal price changes are not always possible because the
investment underlying the hedging instruments 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.
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. An embedded
derivative is a derivative that is part of another financial instrument.
Embedded derivatives typically, but not always, are debt securities whose return
of principal or interest, in part, is determined by something that is not
intrinsic to the security itself. The use of derivative techniques for
speculative purposes can increase investment risk. 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.
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 rate 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.
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.
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 goal(s), investment policies 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.
Policies and Restrictions: Each Fund may purchase securities in which it may
invest on a when-issued or delayed-delivery basis or sell them on a delayed-
delivery basis.
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 if, as a result, no more than 10% of its net assets would
consist of illiquid investments (which include 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. Certain
restricted securities may be determined to be liquid in accordance with
guidelines adopted by the Board of Directors.
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, and such loans must be on a
collateralized basis in accordance with applicable regulatory requirements.
Other Instruments may include warrants and securities of closed-end investment
companies. 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.
Policies and Restrictions: As a fundamental policy, each Fund may purchase
shares of other investment companies that do not redeem their shares, but not
more than 10% of the total assets of the Corporation may be invested in such
shares. Each Fund does not currently intend to invest more than 5% of its
assets in the shares of other investment companies.
A Fund may not invest any of its assets in companies, including predecessors,
with less than three years' continuous operation. As a fundamental policy,
United Bond Fund may invest in warrants subject to the limitations set forth in
the SAI.
<PAGE>
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 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
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.
PercentPercent
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
$1,000,0001.50 1.52
$1,000,000
to less
than
$2,000,0001.00 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 (the "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 whether you are
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 Class
A shares 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 NAV 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"). Class A 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 account representatives.
Fund Class A shares may be purchased at NAV 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 NAV.
Purchases of Class A shares in a 401(k) plan having 100 or more eligible
employees and purchases of Class A shares in a 457 plan having 100 or more
eligible employees may be made at NAV. Shares may also be issued at NAV 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 with 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 Class A 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
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 below.
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 Fiduciary properly authorized by court
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 receipt of a written request in good order by Waddell &
Reed, Inc. at its home office. Note the following:
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 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 Class A 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 a 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 investment income and net
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
certain 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 dividend 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 certain 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 net capital gains, when
designated as such, are taxable to you as long-term capital gains, whether
received in cash or paid 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 other 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, capital
gains 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
capital gains 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 shares of a Fund within thirty days before or after
redeeming other shares of a Fund (regardless of class) 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.
<PAGE>
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, 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. 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 designed for institutional investors. 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 this
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 (the "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 a 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
class are entitled to vote, each as a separate class. Shares are fully paid and
nonassessable when purchased.
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 have 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 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. From January 1987 to August 1992, Mr.
Cusser was Vice President of Kidder, Peabody & Co., New York.
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 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.
The combined net asset values of all of the funds in the United Group were
approximately $13.6 billion as of December 31, 1995.
Management fees for each Fund as a percent of each Fund's net assets for the
fiscal year ended December 31, 1995 were as follows: United Bond Fund 0.44%,
United Income Fund 0.56%, United Accumulative Fund 0.56%, United Science and
Technology Fund 0.61%.
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 that was in existence at any time during the month,
and a fee for each account on which a dividend or distribution had a record date
during the month.
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 Services. A S&P 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 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.
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 S&P. 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 S&P 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 MIS
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 Services. A S&P 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 S&P 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 MIS' 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: MIS 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 LLP 66201-9217
1800 Massachusetts Avenue, N. W. (913) 236-2000
Washington, D. C. 20036
Shareholder Servicing Agent
Independent Accountants Waddell & Reed
Price Waterhouse LLP Services Company
Kansas City, Missouri 6300 Lamar Avenue
P. O. Box 29217
Investment Manager Shawnee Mission, Kansas
Waddell & Reed Investment 66201-9217
Management Company (913) 236-1579
6300 Lamar Avenue
P. O. Box 29217 Accounting Services Agent
Shawnee Mission, Kansas Waddell & Reed
66201-9217 Services Company
(913) 236-2000 6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000
Our INTERNET address is:
http://www.waddell.com
<PAGE>
United Funds, Inc.
Class A Shares
PROSPECTUS
March 31, 1996
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.
NUP1000(3-96)
printed on recycled paper
<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 March 31, 1996. 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.
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 of each of the Funds -- Class Y
Shares.
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
March 31, 1996
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
<PAGE>
Table of Contents
AN OVERVIEW OF THE FUNDS........................................3
EXPENSES........................................................5
FINANCIAL HIGHLIGHTS............................................6
PERFORMANCE.....................................................9
Explanation of Terms ..........................................9
ABOUT WADDELL & REED...........................................10
ABOUT THE INVESTMENT PRINCIPLES OF THE FUNDS...................11
Investment Goals and Principles ..............................11
Risk Considerations ........................................12
Securities and Investment Practices ..........................14
ABOUT YOUR ACCOUNT.............................................27
Buying Shares ................................................27
Minimum Investments ..........................................29
Adding to Your Account .......................................29
Selling Shares ...............................................29
Telephone Transactions .......................................31
Shareholder Services .........................................31
Personal Service ...........................................31
Reports ....................................................31
Exchanges ..................................................31
Dividends, Distributions and Taxes ...........................32
Distributions ..............................................32
Taxes ......................................................32
ABOUT THE MANAGEMENT AND EXPENSES OF THE FUNDS.................34
WRIMCO and Its Affiliates ....................................35
Breakdown of Expenses ........................................37
Management Fee .............................................37
Other Expenses .............................................38
APPENDIX A.....................................................39
DESCRIPTION OF BOND RATINGS ..................................39
DESCRIPTION OF PREFERRED STOCK RATINGS .......................42
<PAGE>
An Overview of the Funds
The Funds: This Prospectus describes the Class Y shares of four separate
series (each a "Fund" and, collectively, the "Funds") 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 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 Funds through Waddell & Reed, Inc.
and its account representatives. The price to buy a Class Y share of a 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 and reinvestment procedures.
Who May Want to Invest: The Funds 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 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)3
Management
fees 0.44% 0.56% 0.56% 0.61%
12b-1 fees None None None None
Other expenses 0.21% 0.20% 0.20% 0.19%
Total Fund
operating
expenses 0.65% 0.76% 0.76% 0.80%
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return4 and (2) redemption at the end of each time period:
1 Year $ 7 $ 8 $ 8 $ 8
3 Years $21 $24 $24 $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."
3Expense ratios are based on the management fees and other Fund-level expenses
of the applicable Fund for the fiscal year ended December 31, 1995, 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.
4Use 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)
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 SAI.
For a Class Y share outstanding throughout the period:
For the
period from
June 19, 1995
to December 31, 1995
--------------------
Net asset value,
beginning of period $6.11
----
Income from investment
operations:
Net investment income 0.21
Net realized and
unrealized gain
on investments .. 0.22
----
Total from investment
operations ....... 0.43
----
Less distributions:
Dividends from net
investment income (0.20)
Distribution from
capital gains ... (0.00)
----
Total distributions (0.20)
----
Net asset value,
end of period .... $6.34
=====
Total return ....... 7.20%
Net assets, end of
period (000
omitted) ......... $3,032
Ratio of expenses to
average net assets 0.63%*
Ratio of net investment
income to average
net assets ....... 6.41%*
Portfolio turnover
rate ............. 66.38%
*Annualized.
<PAGE>
Financial Highlights
UNITED INCOME FUND
(Audited)
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 SAI.
For a Class Y share outstanding throughout the period:
For the
period from
June 19, 1995
to December 31, 1995
--------------------
Net asset value,
beginning of period $27.73
-----
Income from investment
operations:
Net investment income 0.21
Net realized and
unrealized gain
on investments .. 2.14
-----
Total from investment
operations ....... 2.35
-----
Less distributions:
Dividends from net
investment income (0.20)
Distribution from
capital gains ... (0.92)
-----
Total distributions (1.12)
-----
Net asset value,
end of period .... $28.96
======
Total return ....... 8.45%
Net assets, end of
period (000
omitted) ......... $107,703
Ratio of expenses to
average net assets 0.74%*
Ratio of net investment
income to average
net assets ....... 1.36%*
Portfolio turnover
rate ............. 17.59%
*Annualized.
<PAGE>
Financial Highlights
UNITED ACCUMULATIVE FUND
(Audited)
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 SAI.
For a Class Y share outstanding throughout the period:
For the
period from
July 11, 1995
to December 31, 1995
--------------------
Net asset value,
beginning of period $7.84
----
Income from investment
operations:
Net investment income 0.05
Net realized and
unrealized gain
on investments .. 0.87
----
Total from investment
operations ....... 0.92
----
Less distributions:
Dividends from net
investment income (0.06)
Distribution from
capital gains ... (0.92)
----
Total distributions (0.98)
----
Net asset value,
end of period .... $7.78
=====
Total return ....... 11.92%
Net assets, end of
period (000
omitted) ......... $655
Ratio of expenses to
average net assets 0.76%*
Ratio of net investment
income to average
net assets ....... 1.24%*
Portfolio turnover
rate ............. 229.03%
*Annualized.
Financial Highlights for United Science and Technology Fund Class Y shares
are not included because there were no outstanding shares on December 31,
1995.
<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. Non-standardized total return may be for periods other
than those required to be presented or may otherwise differ from standardized
total return.
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.
<PAGE>
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.
<PAGE>
About the Investment Principles of the Funds
Investment Goals and Principles
The goals of each Fund are set forth below. There is no assurance that a
Fund will achieve its goals; some 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 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.
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. At least 65% of United Income Fund's total
assets will be invested during normal market conditions in income-producing
securities. 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.
Risk Considerations
There are risks inherent in any investment. The Funds are subject to varying
degrees of market risk, financial risk and, in some cases, prepayment risk.
Market risk is the potential for fluctuations in the price of the security
because of market factors. Because of market risks, you should anticipate that
the share prices of the Funds will fluctuate. Financial risk is based on the
financial situation of the issuer. The financial risk of a Fund depends on the
credit quality of the underlying securities. Prepayment risk is the possibility
that, during periods of falling interest rates, a debt security with a high
stated interest rate will be prepaid prior to its expected maturity date.
Certain types of instruments in which the Funds may invest, and certain
strategies WRIMCO may employ in pursuit of a Fund's goal(s), involve special
risks. United Bond Fund invests primarily in debt securities, including, among
others, U.S. Government Securities and non-investment grade debt securities
(commonly called "junk bonds"). The market risk to which the Fund is subject is
the possibility that the price of its debt securities will fall because of
changing interest rates. The financial risk to which the Fund is subject is the
possibility that an issuer will fail to make timely payments of interest or
principal to the Fund. The Fund is also subject to prepayment risk. Although
investments in U.S. Government Securities provide substantial protection against
financial risk, they do not protect investors against price changes due to
market risk. Lower-quality debt securities 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.
United Income Fund and United Accumulative Fund invest primarily in equity
securities. These Funds are subject to greater market risk than funds investing
solely in debt securities. The market risk to which these Funds are subject is
the possibility of a change in the price of securities caused by stock market
price changes. The financial risk to which these Funds are subject is the
possibility that the price of a security will fall because of poor earnings
performance by the issuer.
United Science and Technology Fund may invest in equity securities and debt
securities. This Fund is subject to differing market risks, financial risks and
prepayment risks depending on the types of securities in which it invests. For
equity securities, market risk is the possibility of change in price caused by
stock market price changes; for debt securities, market risk is the possibility
that the price will fall because of changing interest rates. For equity
securities, financial risk is the possibility that the price of the security
will fall because of poor earnings performance by the issuer. For debt
securities, financial risk is the possibility that a bond issuer will fail to
make timely payments of interest or principal to the Fund. The Fund is also
subject to prepayment risk.
A Fund may use various techniques to increase or decrease its exposure to
changing security prices, interest rates or other factors that affect security
values. These techniques may involve derivative instruments, including options,
futures contracts, options on futures contracts, indexed securities, stripped
securities and mortgage-backed securities. 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
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.
See "Risks of Derivative Instruments" for further information on the risks of
investing in these instruments.
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' 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(s). 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
goal(s) of a Fund and the type of securities in which a Fund may invest are
fundamental policies; 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 value. The debt securities in which a
Fund invests may include debt securities whose performance is linked to a
specified equity security or securities index.
Debt securities have varying levels of sensitivity to changes in interest rates
and varying degrees of quality. As a general matter, however, when interest
rates rise, the values of fixed-rate debt securities fall and, conversely, when
interest rates fall, the values of fixed-rate debt securities rise. The values
of floating and adjustable-rate debt securities are not as sensitive to changes
in interest rates as the values of fixed-rate debt securities. Longer-term
bonds are generally more sensitive to interest rate changes than shorter-term
bonds.
Lower-quality debt securities 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.
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.
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, including
securities rated in the lowest category (D by Standard & Poor's Ratings Services
("S&P") and C by Moody's Investors Service, Inc. ("MIS")). 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 S&P and MIS are described in Appendix A. While credit ratings are
only one factor WRIMCO relies on in evaluating high-yield debt securities,
certain risks are associated with credit ratings. Credit ratings evaluate the
safety of principal and interest payments, not market value risk. 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 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.
United Bond Fund does not currently intend to invest more than 20% of its assets
in non-investment grade debt securities.
Debt Holdings, by Ratings. During the fiscal year ended December 31, 1995,
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 37.5%
AA 5.9
A 13.4
BBB 26.6
BB 9.6
B 2.2
CCC 0.0
CC 0.0
C 0.0
D 0.0
Unrated(equivalent to)
AAA 0.9%
AA 0.0
A 0.0
BBB 0.0
BB 0.1
B 0.0
CCC 0.0
CC 0.0
C 0.0
D 0.0
The percentage of assets in each category was calculated on the basis of a
monthly dollar-weighted average. The monthly dollar-weighted average was
calculated using the market value of the securities in United Bond Fund's
portfolio at the end of each month in the thirteen-month period ended with its
last fiscal year, averaged over its last fiscal year. The rating used for each
security is that security's rating as of the end of each month and, as ratings
may change over time, does not necessarily indicate past or future ratings of
any particular security or the ratings of securities in the Fund's portfolio in
general. Asset composition of the 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 generally have higher
yields than common stocks of the same or similar issuers, but lower yields than
comparable nonconvertible securities, are less subject to fluctuation in value
than the underlying stock because they have fixed income characteristics, and
provide the potential for capital appreciation if the market price of the
underlying common stock increases.
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.
Policies and Restrictions: Each Fund may invest in convertible securities as
long as WRIMCO determines that it is consistent with the Fund's goal(s) and
investment policies.
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
governmental 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 United
States 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: As a fundamental policy, each Fund may purchase an
unlimited amount of foreign securities; however, as an operating policy, a Fund
may not invest more than 20% of its net assets 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.
As a fundamental policy, less than 5% of the total assets of the Corporation may
be invested in securities issued by foreign governments.
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.
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 futures contracts on
broadly-based stock indices ("Stock Index Futures") and options thereon for the
purposes of hedging not more than 10% of their respective total assets.
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: As a fundamental policy, United Bond Fund may buy
and sell put and call options on debt securities. As a fundamental policy,
calls on securities that are written by the Fund must be covered (i.e., the Fund
must own the securities that are subject to the call or other investments
acceptable for escrow arrangements).
Each Fund will write a put only when it has determined that it would be willing
to purchase the underlying security at the exercise price.
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
total assets of each Fund and may purchase calls and write and purchase puts on
securities. Each of these Funds must purchase and sell put and call options on
securities that are issued by the Options Clearing Corporation, except that each
Fund may write unlisted put options and purchase unlisted put and call options
on U.S. Government Securities and may purchase optional delivery standby
commitments.
As a fundamental policy, United Income Fund, United Accumulative Fund and United
Science and Technology Fund may, for non-speculative purposes, write and
purchase options on stock indices that are not limited to stocks of any industry
or group of industries ("broadly-based stock indices"). Each of these Funds may
write and purchase only listed options on 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).
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.
As a fundamental policy, United Income Fund, United Accumulative Fund and
United Science and Technology Fund may buy and sell Debt Futures, Stock Index
Futures and options on Debt Futures and Stock Index Futures.
Indexed Securities. Each Fund may purchase and sell indexed securities, which
are securities whose prices are indexed to the prices of other securities,
securities indices, currencies, precious metals or other commodities, or other
financial indicators, as long as WRIMCO determines that it is consistent with
the Fund's goal(s) and investment policies. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic. The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the United States and abroad.
At the same time, indexed securities are subject to the credit risks associated
with the issuer of the security, and their values may decline substantially if
the issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments.
Mortgage-Backed Securities may include pools of mortgages, such as CMOs and
stripped mortgage-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 the Federal Home Loan Mortgage Corporation or the Federal National
Mortgage Association) 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 and
marketability (i.e., liquidity) of these securities could be adversely affected
by actions of the U.S. Government to tighten the availability of its credit.
Policies and Restrictions: Each Fund may invest in mortgage-backed securities
as long as WRIMCO determines that it is consistent with the Fund's goal(s) and
investment 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.
Policies and Restrictions: Each Fund may invest in stripped securities as
long as WRIMCO determines that it is consistent with the Fund's goal(s) and
investment policies.
Risks of Derivative Instruments. The use of options, futures contracts and
options on futures contracts and the investment in indexed securities, stripped
securities and mortgage-backed securities involves special risks, including (i)
possible imperfect or no correlation between price movements of the portfolio
investments (held or intended to be purchased) involved in the transaction and
price movements of the instruments involved in the transaction, (ii) possible
lack of a liquid secondary market for any particular instrument at a particular
time, (iii) the need for additional portfolio management skills and techniques,
(iv) losses due to unanticipated market price movements, (v) the fact that,
while such strategies can reduce the risk of loss, they can also reduce the
opportunity for gain, or even result in losses, by offsetting favorable price
movements in investments involved in the transaction, (vi) incorrect forecasts
by WRIMCO concerning interest rates or direction of price fluctuations of the
investment involved in the transaction, which may result in the strategy being
ineffective, (vii) loss of premiums paid by a Fund on options it purchases, and
(viii) the possible inability of a Fund to purchase or sell a portfolio security
at a time when it would otherwise be favorable for it to do so, or the possible
need for a Fund to sell a portfolio security at a disadvantageous time, due to
the need for the Fund to maintain "cover" or to segregate securities in
connection with such transactions and the possible inability of a Fund to close
out or liquidate its position.
For a hedging strategy to be completely effective, the price change of the
hedging instrument must equal the price change of the investment being hedged.
The risk of imperfect correlation of these price changes increases as the
composition of a Fund's portfolio diverges from instruments underlying a hedging
instrument. Such equal price changes are not always possible because the
investment underlying the hedging instruments 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.
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. An embedded
derivative is a derivative that is part of another financial instrument.
Embedded derivatives typically, but not always, are debt securities whose return
of principal or interest, in part, is determined by something that is not
intrinsic to the security itself. The use of derivative techniques for
speculative purposes can increase investment risk. 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.
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 rate 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.
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.
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 goal(s), investment policies 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.
Policies and Restrictions: Each Fund may purchase securities in which it may
invest on a when-issued or delayed-delivery basis or sell them on a delayed-
delivery basis.
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 if, as a result, no more than 10% of its net assets would
consist of illiquid investments (which include 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. Certain
restricted securities may be determined to be liquid in accordance with
guidelines adopted by the Board of Directors.
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, and such loans must be on a
collateralized basis in accordance with applicable regulatory requirements.
Other Instruments may include warrants and securities of closed-end investment
companies. 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.
Policies and Restrictions: As a fundamental policy, each Fund may purchase
shares of other investment companies that do not redeem their shares, but not
more than 10% of the total assets of the Corporation may be invested in such
shares. Each Fund does not currently intend to invest more than 5% of its
assets in the shares of other investment companies.
A Fund may not invest any of its assets in companies, including predecessors,
with less than three years' continuous operation. As a fundamental policy,
United Bond Fund may invest in warrants subject to the limitations set forth in
the SAI.
<PAGE>
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, investment fund administrators and other third
parties 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 obtain an account number by calling 1-
800-366-2520, then mail a completed application to Waddell & Reed, Inc., P.O.
Box 29217, Shawnee Mission, Kansas 66201-9217 or fax it to 913-236-5044.
Instruct your bank to wire the amount you wish to invest to UMB Bank, n.a., ABA
Number 101000695, W&R Underwriter Account Number 0007978, 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 (the "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 whether you are
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: Any amount
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 amount you wish
to invest, along with the account number and registration, to UMB Bank, n.a.,
ABA Number 101000695, W&R Underwriter Account Number 0007978, 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 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 Class Y share) is the Fund's Class Y
NAV.
To sell shares by telephone or fax: If you have elected this method in your
application or by subsequent authorization, call 1-800-366-5465 or fax your
request to 913-236-5044 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 below.
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
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.
When you place an order to sell shares, your shares will be sold at the next
NAV calculated after receipt of a written request in good order by Waddell &
Reed, Inc. at its home office. Note the following:
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 a 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 investment income and net
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
certain 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 dividend 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 certain 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 net capital gains, when
designated as such, are taxable to you as long-term capital gains, whether
received in cash or paid 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 other 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, capital
gains 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
capital gains 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 shares within
thirty days before or after redeeming other Fund shares (regardless of class) 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.
<PAGE>
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, 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 this
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 (the "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 a 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
class are entitled to vote, each as a separate class. Shares are fully paid and
nonassessable when purchased.
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 have 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 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. From January 1987 to August 1992, Mr.
Cusser was Vice President of Kidder, Peabody & Co., New York.
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 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.
The combined net asset values of all of the funds in the United Group were
approximately $13.6 billion as of December 31, 1995.
For the fiscal year ended December 31, 1995, management fees for each Fund as a
percent of each Fund's net assets were as follows: United Bond Fund 0.44%,
United Income Fund 0.56%, United Accumulative Fund 0.56%, United Science and
Technology Fund 0.61%.
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 Services. A S&P 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 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.
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 S&P. 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 S&P 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 MIS
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 Services. A S&P 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 S&P 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 MIS' 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: MIS 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 LLP 66201-9217
1800 Massachusetts Avenue, N. W. (913) 236-2000
Washington, D. C. 20036
Shareholder Servicing Agent
Independent Accountants Waddell & Reed
Price Waterhouse LLP Services Company
Kansas City, Missouri 6300 Lamar Avenue
P. O. Box 29217
Investment Manager Shawnee Mission, Kansas
Waddell & Reed Investment 66201-9217
Management Company (913) 236-1579
6300 Lamar Avenue
P. O. Box 29217 Accounting Services Agent
Shawnee Mission, Kansas Waddell & Reed
66201-9217 Services Company
(913) 236-2000 6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000
Our INTERNET address is :
http://www.waddell.com
<PAGE>
United Funds, Inc.
Class Y Shares
PROSPECTUS
March 31, 1996
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
NUP1000-Y(3-96)
<PAGE>
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
(913) 236-2000
March 31, 1996
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 March 31, 1996, which may be
obtained from the Corporation or its underwriter, Waddell & Reed, Inc., at the
address or telephone number shown above.
TABLE OF CONTENTS
Performance Information ............................... 2
Goals and Investment Policies ...................... 4
Investment Management and Other Services .............. 29
Purchase, Redemption and Pricing of Shares ............ 34
Directors and Officers ................................ 49
Payments to Shareholders .............................. 54
Taxes ................................................. 56
Portfolio Transactions and Brokerage .................. 59
Other Information ..................................... 62
Financial Statements .................................. 64
<PAGE>
PERFORMANCE INFORMATION
Waddell & Reed, Inc., the Corporation'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, 1995, which is the most recent balance sheet
included in this SAI, for the periods shown were as follows:
One-year Five-year Ten-year
period from period from period from
1-1-95 to 1-1-91 to 1-1-86 to
12-31-95 12-31-95 12-31-95
----------- ----------- -----------
United Bond Fund 13.57% 9.12% 8.88%
United Income Fund 22.15 15.10 14.34
United Accumulative Fund 26.49 14.28 12.43
United Science and
Technology Fund 46.43 21.67 16.86
The average annual total return quotations for Class A shares without sales
load deducted as of December 31, 1995, which is the most recent balance sheet
included in this SAI, for the periods shown were as follows:
One-year Five-year Ten-year
period from period from period from
1-1-95 to 1-1-91 to 1-1-86 to
12-31-95 12-31-95 12-31-95
----------- ----------- -----------
United Bond Fund 20.50% 10.42% 9.52%
United Income Fund 29.60 16.47 15.02
United Accumulative Fund 34.21 15.64 13.10
United Science and
Technology Fund 55.37 23.12 17.55
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.
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.
The aggregate total return quotations for Class Y shares as of December
31, 1995, which is the most recent balance sheet included in this SAI, for the
periods shown were as follows:
Period from
inception* to
December 31, 1995:
United Bond Fund 7.20%
United Income Fund 8.45
United Accumulative Fund 11.92
*United Income Fund and United Bond Fund commenced selling Class Y shares
on June 19, 1995 and United Accumulative Fund commenced selling Class Y shares
on July 11, 1995. United Science and Technology Fund had no Class Y shares
outstanding as of December 31, 1995.
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, 1995, the date of the most
recent balance sheet included in this SAI, is 5.60%. The yield for United Bond
Fund Class Y shares computed according to the formula for the 30-day period
ended on December 31, 1995, the date of the most recent balance sheet included
in this SAI, is 6.16%.
Change in yields primarily reflect different interest rates received by a
Fund as its portfolio securities change. Yield is also affected by portfolio
quality, portfolio maturity, type of securities held and operating expenses of
the applicable class.
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 that 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.
GOALS AND INVESTMENT POLICIES
The goals and investment policies of United Bond Fund, United Income Fund,
United Accumulative Fund and United Science and Technology Fund (each a "Fund"
and, collectively, the "Funds") are described in the Prospectus, which refers to
the following investment methods and practices.
United Science and Technology Fund
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.
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 does 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 that 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 that it is permitted to
use. The debt securities that 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 that might
result from an unduly hasty disposition. A debt security may not be purchased
if, at the time of purchase, it is in default in the payment 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.
Among the other debt securities in which the Fund may invest are deposits
in banks (represented by certificates of deposit or other evidence of deposit
issued by such banks) of varying maturities. The Federal Deposit Insurance
Corporation insures the principal of certain such deposits ("Insured Deposits"),
currently to the extent of $100,000 per bank. 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 or (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.
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.
Specific Securities and Investment Practices
U.S. Government Securities
Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government Securities") 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 ten 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. United
Bond Fund will invest in securities of agencies and instrumentalities only if
WRIMCO is satisfied that the credit risk involved is acceptable.
U.S. Government Securities may include 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 a collateralized mortgage obligation ("CMO"). 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 section could be adversely
affected by actions of the U.S. Government to tighten the availability of its
credit.
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 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.
Each Fund may purchase mortgage-backed securities issued by both
government and non-government entities such as banks, mortgage lenders, or other
financial institutions. Other types of mortgage-backed securities will likely
be developed in the future, and each Fund may invest in them if WRIMCO
determines they are consistent with the Fund's goal and investment policies.
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
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.
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.
Indexed Securities
Each Fund may purchase securities whose prices are indexed to the prices of
other securities, securities indices, currencies, precious metals or other
commodities, or other financial indicators, as long as WRIMCO determines that it
is consistent with the Fund's goal(s) and investment policies. Indexed
securities typically, but not always, are debt securities or deposits whose
value at maturity or coupon rate is determined by reference to a specific
instrument or statistic. Gold-indexed securities, for example, typically
provide for a maturity value that depends on the price of gold, resulting in a
security whose price tends to rise and fall together with gold prices.
Currency-indexed securities typically are short-term to intermediate-term debt
securities whose maturity values or interest rates are determined by reference
to the values of one or more specified foreign currencies, and may offer higher
yields than U.S. dollar-denominated securities of equivalent issuers. Currency-
indexed securities may be positively or negatively indexed; that is, their
maturity value may increase when the specified currency value increases,
resulting in a security that performs similarly to a foreign-denominated
instrument, or their maturity value may decline when foreign currencies
increase, resulting in a security whose price characteristics are similar to a
put on the underlying currency. Currency-indexed securities may also have
prices that depend on the values of a number of different foreign currencies
relative to each other.
Recent issuers of indexed securities have included banks, corporations and
certain U.S. Government agencies. Certain indexed securities that are not
traded on an established market may be deemed illiquid.
Foreign Securities and Currency
As a fundamental policy, 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. WRIMCO believes that there are investment
opportunities as well as risks in investing 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.
Further, an investment in foreign securities may be affected by changes
in currency rates and in exchange control regulations (i.e., currency blockage).
A Fund may bear a transaction charge in connection with the exchange of
currency. There may be less publicly available information about a foreign
company than about a domestic company. Foreign companies are not generally
subject to uniform accounting, auditing and financial reporting standards
comparable to those applicable to domestic companies. Most foreign stock
markets have substantially less volume than the New York Stock Exchange (the
"NYSE") and securities of some foreign companies are less liquid and more
volatile than securities of comparable domestic companies. There is generally
less government regulation of stock exchanges, brokers and listed companies than
in the United States. In addition, with respect to certain foreign countries,
there is a possibility of expropriation or confiscatory taxation, political or
social instability or diplomatic developments that could adversely affect
investments in securities of issuers located in those countries. If it should
become necessary, a Fund would normally encounter greater difficulties in
commencing a lawsuit against the issuer of a foreign security than it would
against a U.S. issuer.
Restricted Securities
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. Restricted securities are subject to legal or
contractual restrictions on resale because they are not registered under the
Securities Act of 1933, as amended (the "1933 Act"). Restricted securities
generally can be sold in privately negotiated transactions, pursuant to an
exemption from registration under the 1933 Act, 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. See "Illiquid Investments."
Lending Securities
One of the ways in which a Fund may try to realize income is by lending
securities. 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 that 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.
There are two methods of receiving compensation for making loans. The
first is to receive a negotiated loan fee from the borrower. This method is
available for all three types of collateral. The second method, which is not
available when letters of credit are used as collateral, is for a Fund to
receive interest on the investment of the cash collateral or to receive interest
on the U.S. Government Securities used as collateral. Part of the interest
received in either case may be shared with the borrower.
The letters of credit that a Fund may accept as collateral are
agreements by banks (other than the borrowers of the Fund's securities), entered
into at the request of the borrower and for its account and risk, under which
the banks are obligated to pay to the Fund, while the letter is in effect,
amounts demanded by the Fund if the demand meets the terms of the letter. The
Fund's right to make this demand secures the borrower's obligations to it. The
terms of any such letters and the creditworthiness of the banks providing them
(which might include the Fund's custodian bank) must be satisfactory to the
Fund. Under the Fund's current securities lending procedures, each Fund may
lend securities only to creditworthy broker-dealers and financial institutions
deemed creditworthy by WRIMCO. Each Fund will make loans only under rules of
the NYSE, which presently require the borrower to give the securities back to
the Fund within five business days after the Fund gives notice to do so. If a
Fund loses its voting rights on securities loaned, it will have the securities
returned to it in time to vote them if a material event affecting the investment
is to be voted on. 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.
Some, but not all, of these rules are necessary to meet requirements of
certain laws relating to securities loans. These rules will not be changed
unless the change is permitted under these requirements. These requirements do
not cover the present rules, which may be changed without shareholder vote, as
to: (i) whom securities may be loaned; (ii) the investment of cash collateral;
or (iii) voting rights.
Repurchase Agreements
Each of the Funds may purchase securities subject to repurchase
agreements if as a result no more than 10% of its net assets would consist of
illiquid investments (which include repurchase agreements not terminable within
seven days). See "Illiquid Investments." A repurchase agreement is an
instrument under which a Fund purchases a security and the seller (normally a
commercial bank or broker-dealer) agrees, at the time of purchase, that it will
repurchase the security at a specified time and price. The amount by which the
resale price is greater than the purchase price reflects an agreed-upon market
interest rate effective for the period of the agreement. The return on the
securities subject to the repurchase agreement may be more or less than the
return on the repurchase agreement.
The majority of the repurchase agreements in which a Fund would engage are
overnight transactions, and the delivery pursuant to the resale typically will
occur within one to five days of the purchase. The primary risk is that a Fund
may suffer a loss if the seller fails to pay the agreed-upon amount on the
delivery date and that amount is greater than the resale price of the underlying
securities and other collateral held by the Fund. In the event of bankruptcy or
other default by the seller, there may be possible delays and expenses in
liquidating the underlying securities or other collateral, decline in their
value and loss of interest. 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
underlying securities, which will be held by the Funds' custodian bank or by a
third party that qualifies as a custodian under Section 17(f) of the Investment
Company Act of 1940, as amended (the "1940 Act"), is and, during the entire term
of the agreement, will remain 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 by WRIMCO 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 or sold by a Fund are subject to market fluctuation;
their value may be less or more when delivered than the purchase price paid or
received. For example, delivery to a Fund and payment by a Fund in the case of
a purchase by it, or delivery by a Fund and payment to it in the case of a sale
by a 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, however, be sold at
or before the settlement date to pay the purchase price of the when-issued or
delayed-delivery securities.
Warrants
As a fundamental policy and pursuant to certain state requirements, United
Bond Fund has undertaken that it will not 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 NYSE or the American Stock Exchange.
Warrants are options to purchase equity securities at specific prices valid
for a specific period of time. Their prices do not necessarily move parallel to
the prices of the underlying securities. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of the
issuer. Warrants are highly volatile and, therefore, more susceptible to a
sharp decline in value than the underlying security might be. They are also
generally less liquid than an investment in the underlying shares.
Securities of Other Investment Companies
In order to comply with regulations of the State of Ohio, for so long as
such regulations are in effect and applicable to the Funds, the Funds will not
invest in securities of other investment companies, except by purchase in the
open market where no commission or profit to a sponsor or dealer results from
the purchase other than the customary broker's commission, or except when the
purchase is part of a plan of merger, consolidation, reorganization or
acquisition.
Illiquid Investments
Each Fund has an operating policy, which may be changed without
shareholder approval, which provides that the Fund may not invest more than 10%
of its net assets in illiquid investments. Investments currently considered to
be illiquid include: (i) repurchase agreements not terminable within seven
days; (ii) securities for which market quotations are not readily available;
(iii) OTC options and their underlying collateral; (iv) Insured Deposits; (v)
restricted securities not determined to be liquid pursuant to guidelines
established by the Corporation's Board of Directors and (vi) non-government
stripped fixed-rate mortgage-backed securities. The assets used as cover for
over-the-counter ("OTC") options written by a Fund will be considered illiquid
unless the OTC options are sold to qualified dealers who agree that the Fund may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure will be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.
Options, Futures and Other Strategies
General. As discussed in the Prospectus, WRIMCO may use certain options to
attempt to enhance income or yield or may attempt to reduce overall risk of its
investments by using certain options and futures contracts (sometimes referred
to as "futures"). Options and futures are sometimes referred to collectively as
"Financial Instruments." A Fund's ability to use a particular Financial
Instrument may be limited by its investment limitations or operating policies.
See "Operating Restrictions of United Income Fund, United Accumulative Fund and
United Science and Technology Fund," "Investment Restrictions," "Additional
Investment Restrictions of United Bond Fund" and "Additional Investment
Restrictions of United Income Fund, United Accumulative Fund and United Science
and Technology Fund."
Hedging strategies can be broadly categorized as "short hedges" and "long
hedges." A short hedge is a purchase or sale of a Financial Instrument intended
partially or fully to offset potential declines in the value of one or more
investments held in a Fund's portfolio. Thus, in a short hedge a Fund takes a
position in a Financial Instrument whose price is expected to move in the
opposite direction of the price of the investment being hedged.
Conversely, a long hedge is a purchase or sale of a Financial Instrument
intended partially or fully to offset potential increases in the acquisition
cost of one or more investments that a Fund intends to acquire. Thus, in a long
hedge a Fund takes a position in a Financial Instrument whose price is expected
to move in the same direction as the price of the prospective investment being
hedged. A long hedge is sometimes referred to as an anticipatory hedge. In an
anticipatory hedge transaction, a Fund does not own a corresponding security
and, therefore, the transaction does not relate to a security the Fund owns.
Rather, it relates to a security that the Fund intends to acquire. If a Fund
does not complete the hedge by purchasing the security it anticipated
purchasing, the effect on the Fund's portfolio is the same as if the transaction
were entered into for speculative purposes.
Financial Instruments on securities generally are used to attempt to hedge
against price movements in one or more particular securities positions that a
Fund owns or intends to acquire. Financial Instruments on indices, in contrast,
generally are used to attempt to hedge against price movements in market sectors
in which a Fund has invested or expects to invest. Financial Instruments on
debt securities may be used to hedge either individual securities or broad debt
market sectors.
The use of Financial Instruments is subject to applicable regulations of
the Securities and Exchange Commission (the "SEC"), the several exchanges upon
which they are traded, the Commodity Futures Trading Commission (the "CFTC") and
various state regulatory authorities. In addition, a Fund's ability to use
Financial Instruments will be limited by tax considerations. See "Taxes."
In addition to the instruments, strategies and risks described below and in
the Prospectus, WRIMCO expects to discover additional opportunities in
connection with options, futures contracts, options on futures contracts and
other similar or related techniques. These new opportunities may become
available as WRIMCO develops new techniques, as regulatory authorities broaden
the range of permitted transactions and as new options, futures contracts,
options on futures contracts or other techniques are developed. WRIMCO may
utilize these opportunities to the extent that they are consistent with the
Funds' goals and permitted by the Funds' investment limitations and applicable
regulatory authorities. The Funds' Prospectus or this SAI will be supplemented
to the extent that new products or techniques involve materially different risks
than those described below or in the Prospectus.
Special Risks. The use of Financial Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Financial Instruments are described in the sections
that follow.
(1) Successful use of most Financial Instruments depends upon WRIMCO's
ability to predict movements of the overall securities and interest rate
markets, which requires different skills than predicting changes in the prices
of individual securities. There can be no assurance that any particular
strategy will succeed.
(2) There might be imperfect correlation, or even no correlation, between
price movements of a Financial Instrument and price movements of the investments
being hedged. For example, if the value of a Financial Instrument used in a
short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of correlation
might occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which Financial
Instruments are traded. The effectiveness of hedges using Financial Instruments
on indices will depend on the degree of correlation between price movements in
the index and price movements in the securities being hedged.
Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that the standardized contracts available will
not match a Fund's current or anticipated investments exactly. A Fund may
invest in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a Fund's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. A Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in a Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.
(3) If successful, the above-discussed strategies can reduce risk of loss
by wholly or partially offsetting the negative effect of unfavorable price
movements. However, such strategies can also reduce opportunity for gain by
offsetting the positive effect of favorable price movements. For example, if a
Fund entered into a short hedge because WRIMCO projected a decline in the price
of a security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the Financial Instrument. Moreover, if the price of the
Financial Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss. In either such case, the Fund would
have been in a better position had it not attempted to hedge at all.
(4) As described below, a Fund might be required to maintain assets
as "cover," maintain segregated accounts or make margin payments when it takes
positions in Financial Instruments involving obligations to third parties (i.e.,
Financial Instruments other than purchased options). If a Fund were unable to
close out its positions in such Financial Instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. These requirements might impair a Fund's ability
to sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that a Fund sell a portfolio
security at a disadvantageous time. A Fund's ability to close out a position in
a Financial Instrument prior to expiration or maturity depends on the existence
of a liquid secondary market or, in the absence of such a market, the ability
and willingness of the other party to the transaction ("counterparty") to enter
into a transaction closing out the position. Therefore, there is no assurance
that any position can be closed out at a time and price that is favorable to the
Fund.
Cover. Transactions using Financial Instruments, other than purchased
options, expose the Fund to an obligation to another party. A Fund will not
enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities or other options or futures contracts, or (2)
cash, receivables and short-term debt securities, with a value sufficient at all
times to cover its potential obligations to the extent not covered as provided
in (1) above. Each Fund will comply with SEC guidelines regarding cover for
these instruments and will, if the guidelines so require, set aside cash, U.S.
Government Securities or other liquid, high-grade debt securities in a
segregated account with its custodian in the prescribed amount as determined
daily on a mark-to-market basis.
Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Financial Instrument is open, unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of a Fund's assets for use as cover or segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
Options. As discussed in the Prospectus, and under "Operating
Restrictions of United Income Fund, United Accumulative Fund and United Science
and Technology Fund," "Additional Investment Restrictions of United Bond Fund"
and "Additional Investment Restrictions of United Income Fund, United
Accumulative Fund and United Science and Technology Fund," certain of the Funds
may purchase and/or write (sell) call and put options on equity and debt
securities and broadly-based stock indices.
The purchase of call options serves as a long hedge, and the purchase of
put options serves as a short hedge. Writing put or call options can enable a
Fund to enhance income or yield by reason of the premiums paid by the purchasers
of such options. However, if the market price of the security underlying a put
option declines to less than the exercise price on the option, minus the premium
received, the Fund would expect to suffer a loss.
Writing call options can also serve as a limited short hedge, because
declines in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and the Fund will be obligated to
sell the security at less than its market value. If the call option is an OTC
option, the securities or other assets used as cover would be considered
illiquid to the extent described under "Illiquid Investments."
Writing put options can serve as a limited long hedge because increases in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security depreciates to a
price lower than the exercise price of the put option, it can be expected that
the put option will be exercised and a Fund will be obligated to purchase the
security at more than its market value. 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. If the put option is an OTC option, the securities or other
assets used as cover would be considered illiquid to the extent described under
"Illiquid Investments."
The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value.
A Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction. For example, a Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, a Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit a Fund to realize profits or
limit losses on an option position prior to its exercise or expiration.
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 of Options on Securities. Certain of the Funds may purchase or write
both exchange-traded and OTC options. Exchange markets for options on debt
securities exist, but these instruments are primarily traded on the OTC market.
Exchange-traded options in the United States are issued by a clearing
organization affiliated with the exchange on which the option is listed that, in
effect, guarantees completion of every exchange-traded option transaction. In
contrast, OTC options are contracts between a Fund and its counterparty (usually
a securities dealer or a bank) with no clearing organization guarantee. Thus,
when a Fund purchases an OTC option, it relies on the contra party from whom it
purchased the option to make or take delivery of the underlying investment upon
exercise of the option. Failure by the counterparty to do so would result in
the loss of any premium paid by the Fund as well as the loss of any expected
benefit of the transaction.
A Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. Each Fund intends to
purchase or write only those exchange-trade options for which there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. Although a Fund
will enter into OTC options only with major dealers in unlisted options, there
is no assurance that the Fund will in fact be able to close out an OTC option
position at a favorable price prior to expiration. WRIMCO will evaluate the
ability to enter into closing purchase transactions on unlisted options prior to
writing them. In the event of insolvency of the counterparty, the Fund might be
unable to close out an OTC option position at any time prior to its
expiration.
If a Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by a Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.
Options on Stock Indices. United Accumulative Fund, United Income Fund
and United Science and Technology Fund are permitted to write and purchase
options on broadly-based stock indices, subject to the limitations set forth
under "Operating Restrictions of United Income Fund, United Accumulative Fund
and United Science and Technology Fund" and "Additional Investment Restrictions
of United Income Fund, United Accumulative Fund and United Science and
Technology Fund." Broadly-based stock indices are indices that are not limited
to stocks of any particular industry or industries. A Fund may purchase calls
on stock indices to hedge against anticipated increases in the price of
securities it wishes to acquire and may purchase puts on stock indices to hedge
against anticipated declines in the market value of portfolio securities.
Puts and calls on stock indices 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 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, prior to the
expiration date, the purchaser of the 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. When a Fund buys a put
on a stock index, it pays a premium and has the right, prior to the expiration
date, to require the seller of the 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 less 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 the put has the right, prior to the expiration date, 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.
Risks of Options on Stock Indices. The risks of investment in options on
stock indices may be greater than options on securities. Because 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 a call index option 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 underlie the 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. By the time it learns that it has been assigned, the index may
have declined, with a corresponding decline in the value of its 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 "Additional Investment Restrictions of United Bond
Fund," United Bond Fund may purchase and sell futures contracts on debt
securities ("Debt Futures") and options thereon. Subject to the limitations set
forth under "Operating Restrictions of United Income Fund, United Accumulative
Fund and United Science and Technology Fund," and "Additional Investment
Restrictions of United Accumulative Fund, United Income 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, futures
contracts on broadly-based stock indices ("Stock Index Futures") and options
thereon. 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 that WRIMCO anticipates that it may wish to include in the
portfolio of a Fund.
The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures can
serve as a short hedge. Writing call options on futures contracts can serve as
a limited short hedge, using a strategy similar to that used for writing call
options on securities or indices. Similarly, writing put options on futures
contracts can serve as a limited long hedge.
Futures strategies also can be used to manage the average duration of a
Fund's fixed-income portfolio. If WRIMCO wishes to shorten the average duration
of a Fund's fixed-income portfolio, the Fund may sell a debt futures contract or
a call option thereon, or purchase a put option on that futures contract. If
WRIMCO wishes to lengthen the average duration of a Fund's fixed-income
portfolio, the Fund may buy a debt futures contract or a call option thereon, or
sell a put option thereon.
No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract a Fund is required to deposit "initial margin"
consisting of cash or U.S. Government Securities in an amount generally equal to
10% or less of the contract value. Margin must also be deposited when writing a
call or put option on a futures contract, in accordance with applicable exchange
rules. Unlike margin in securities transactions, initial margin on futures
contracts does not represent a borrowing, but rather is in the nature of a
performance bond or good-faith deposit that is returned to the Fund at the
termination of the transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as periods of high volatility, the
Fund may be required by an exchange to increase the level of its initial margin
payment, and initial margin requirements might be increased generally in the
future by regulatory action.
Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker. When a Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when a Fund purchases or
sells a futures contract or writes a call or put option thereon, it is subject
to daily variation margin calls that could be substantial in the event of
adverse price movements. If the Fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.
Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. Positions in futures and options on futures may
be closed only on an exchange or board of trade that provides a secondary
market. Each Fund intends to enter into futures and options on futures only on
exchanges or boards of trade where there appears to be a liquid secondary
market. However, there can be no assurance that such a market will exist for a
particular contract at a particular time. In such event, it may not be possible
to close a futures contract or options position.
Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a futures or related option can vary from the
previous day's settlement price; once that limit is reached, no trades may be
made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.
If a Fund were unable to liquidate a futures contract or options on
futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain cash
or securities in a segregated account.
As an operating policy, to the extent that a Fund enters into futures
contracts or options on futures contracts, in each case other than for bona fide
hedging purposes (as defined by the CFTC), the aggregate initial margin and
premiums required to establish those positions (excluding the amount by which
options are "in-the-money" at the time of purchase) will not exceed 5% of the
liquidation value of the Fund's portfolio, after taking into account unrealized
profits and unrealized losses on any contracts the Fund has entered into. (In
general, a call option on a futures contract is "in-the-money" if the value of
the underlying futures contract 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
underlying futures contract is exceeded by the strike price of the put.) This
policy does not limit to 5% the percentage of a Fund's assets that are at risk
in futures contracts and options on futures contracts.
Risk of Futures Contracts and Options Thereon. The ordinary spreads
between prices in the cash and futures markets (including the options on futures
market), due to 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.
Stock Index Futures. The risk of imperfect correlation between
movements in the price of a Stock Index Future and movements in the price of the
securities that are the subject of the hedge increases as the composition of a
Fund's portfolio diverges from the securities 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 that are the subject of the hedge, the hedge
will not be fully effective but, if the price of the securities 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 securities 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 securities, the Fund will experience either a loss or a gain on the
futures contract that will not be completely offset by movements in the price of
the securities that 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 the
securities being hedged if the historical volatility of the prices of such
securities being hedged is less than the historical volatility of the prices of
the securities included in the index. It is also possible that, where a Fund
has sold futures contracts to hedge against decline in the market, the market
may advance and the value of the securities 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 of 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 securities will tend to move in the same
direction as the market indices on which the futures contracts are based.
Where Stock Index Futures are purchased to hedge against a possible
increase in the price of securities before a Fund is able to invest in them in
an orderly fashion, it is possible that the market may decline instead. If the
Fund then concludes not to invest in them 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
securities it had anticipated purchasing.
Combined Positions. A Fund may purchase and write options in combination
with each other, or in combination with futures contracts, to adjust the risk
and return characteristics of its overall position. For example, a Fund may
purchase a put option and write a call option on the same underlying instrument,
in order to construct a combined position whose risk and return characteristics
are similar to selling a futures contract. Another possible combined position
would involve writing a call option at one strike price and buying a call option
at a lower price, in order to reduce the risk of the written call option in the
event of a substantial price increase. Because combined options positions
involve multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
Turnover. A Fund's options and futures activities may affect its turnover
rate and brokerage commission payments. The exercise of calls or puts written
by a Fund, and the sale or purchase of futures contracts, may cause it to sell
or purchase related investments, thus increasing its turnover rate. Once a Fund
has received an exercise notice on an option it has written, it cannot effect a
closing transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price. The
exercise of puts purchased by a Fund may also cause the sale of related
investments, also increasing turnover; although such exercise is within the
Fund's control, holding a protective put might cause it to sell the related
investments for reasons that 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
purchases or sells a futures contract. Such commissions may be higher than
those that would apply to direct purchases or sales.
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 of Directors 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 indices, 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 that are issued by the Options Clearing
Corporation may be purchased or sold, except for options on U.S.
Government Securities and except for optional delivery standby
commitments; only options on stock indices, options on futures
contracts and futures contracts that 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 that 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 that
are held by a 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 that 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 that redeem their shares.
A Fund can buy shares of investment companies that 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;
(iii) Lend money or other assets, other than through certain limited
types of loans; the Funds may buy debt securities that 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 that 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 that
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 "Warrants."
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, but only if
(i) the investments to which the call relates are either debt
securities or 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.
(iv) United Bond Fund may purchase calls but only if the related
investments are either debt securities or Debt Futures.
(v) United Bond Fund may purchase put options but only if the investments
to which the put relates 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").
(vi) United Bond Fund may write (i.e., sell) puts but only if the related
investments are debt securities or Debt Futures.
In order to comply with certain state regulations, United Bond Fund has
adopted an operating policy that 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.
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 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 that 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 on securities in
which the Funds may invest and may, for non-speculative purposes,
write and purchase options on broadly-based stock indices.
(ii) The Funds may not buy or sell commodities or commodities contracts
except that each Fund may, for non-speculative purposes, buy or sell
Stock Index Futures, 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, 1995 and December 31, 1994 were as follows:
1995 1994
---- ----
United Bond Fund 66.38% 127.11%
United Income Fund 17.59 18.54
United Accumulative Fund 229.03 205.40
United Science and
Technology Fund 32.89 64.39
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 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 and Waddell & Reed Funds, Inc. and serves as distributor for TMK/United
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, the
Corporation 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, for each Fund during the last three fiscal years were as follows:
1995 1994 1993
---- ---- ----
United Bond Fund ........ $ 2,407,401 $ 2,552,094 $ 2,833,151
United Income Fund ...... 20,740,095 15,069,003 13,089,827
United Accumulative Fund 6,103,149 4,773,506 4,776,064
United Science and Technology
Fund ................. 4,025,985 2,777,832 2,598,347
--------- ----------- -----------
Total ...............$ $33,276,630 $25,172,435$23,297,389
=========== ========== ===========
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 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 one-twelfth of .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.
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
Fees paid to the Agent for the fiscal years ended December 31, 1995,
1994 and 1993 were as follows:
1995 1994 1993
---- ---- ----
United Bond Fund ............. $65,000 $66,667 $ 70,000
United Income Fund ........... 100,000 100,000 100,000
United Accumulative Fund ..... 96,250 92,500 98,750
United Science and Technology
Fund ...................... 71,667 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. The Fund will notify
shareholders of any change in the limitation.
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, 1995, 1994 and 1993 were $18,952,707, $19,687,406 and
$23,716,003, respectively, and the amounts retained by Waddell & Reed, Inc. were
$8,341,305, $8,600,788, and $10,559,627, 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 1940 Act, 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 who may regularly sell Class A shares of each Fund, and other
third parties, for providing shareholder services and/or maintaining shareholder
accounts with respect to Class A shares. For its fiscal year ended December 31,
1995, service fees paid (or accrued) with respect to Class A shares were as
follows:
1995
----
United Bond Fund......... $ 668,365
United Income Fund ...... 4,616,319
United Accumulative Fund 1,268,218
United Science and Technology
Fund .................. 865,511
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 1940 Act. 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, 1995 was as follows:
United Bond Fund
Net asset value per Class A share (Class A net assets
divided by Class A shares outstanding) .......... $6.34
Add: selling commission (5.75% of offering price) . .39
----
Maximum offering price per Class A share (Class A
net asset value per share divided by 94.25%) .... $6.73
=====
United Income Fund
Net asset value per Class A share (Class A net assets
divided by Class A shares outstanding) .......... $28.96
Add: selling commission (5.75% of offering price) . 1.77
------
Maximum offering price per Class A share (Class A
net asset value per share divided by 94.25%) .... $30.73
======
United Accumulative Fund
Net asset value per Class A share (Class A net assets
divided by Class A shares outstanding) .......... $7.78
Add: selling commission (5.75% of offering price) . .47
-----
Maximum offering price per Class A share (Class A
net asset value per share divided by 94.25%) .... $8.25
=====
United Science and Technology Fund
Net asset value per Class A share (Class A net assets
divided by Class A shares outstanding) .......... $22.89
Add: selling commission (5.75% of offering price) . 1.40
------
Maximum offering price per Class A share (Class A
net asset value per share divided by 94.25%) .... $24.29
======
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 on each day that the 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 other 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 change 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 Quotation System ("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. Foreign currency
exchange rates are generally determined prior to the close of trading of the
regular session of the NYSE. Occasionally events affecting the value of foreign
investments and such exchange rates occur between the time at which they are
determined and the close of the regular session of trading on the NYSE, which
events will not be reflected in a computation of a Fund's net asset value on
that day. If events materially affecting the value of such investments or
currency exchange rates occur during such time period, investments will be
valued at their fair value as determined in good faith by or under the direction
of the Board of Directors. The foreign currency exchange transactions of a Fund
conducted on a spot (that is, cash) basis are valued at the spot rate for
purchasing or selling currency prevailing on the foreign exchange market. This
rate under normal market conditions differs from the prevailing exchange rate in
an amount generally less than one-tenth of one percent due to the costs of
converting from one currency to another.
Options and futures contracts purchased and held by a 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 a Fund will be either the closing price
of that contract or the bid price. Conversely, the value of a futures contract
sold by a 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 Corporation'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, 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
("UTMA") 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 of Class A shares 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 a 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 of Intention is accepted
by Waddell & Reed, Inc. Each purchase made from time to time under the
Statement of Intention 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 of
Intention 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 of
Intention 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 Intention 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 of Intention
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 of Intention. An
amount equal to 5% of the purchase required under the Statement of Intention
will be held "in escrow." If a purchaser does not, during the period covered by
the Statement of Intention, invest the amount required to qualify for the
reduced sales charge under the terms of the Statement of Intention, 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 of Intention which is not completed will be
collected by redeeming part of the shares purchased under the Statement of
Intention 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 of Intention.
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 of Intention will be deducted in computing the aggregate purchases
under the Statement of Intention.
Statements of Intention are not available for purchases made under a 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 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 shares of a Fund may be purchased
at net asset value by the Directors and officers of the Fund, 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. "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 UGMA
or UTMA 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 of Class A shares 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 for the Class A shares, there
are a number of instances in which a 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 1940 Act 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 shares of a Fund but also for Class A 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 shares which you still own of any of the funds in the United Group; or,
you must own Class A 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 paid 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 further 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 Corporation 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 Class A 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 Class A 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. Class A 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 Class A shares of United Cash Management, Inc. automatically
exchanged each month into Class A shares of a Fund or any other fund in the
United Group. The Class A 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 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.
You may redeem your Class A shares of a Fund and use the proceeds to
purchase Class Y shares of that Fund if you meet the criteria for purchasing
Class Y shares.
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 for Class A shares, 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 1940 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
Class A shares of that Fund 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. Wise is a member of the Corporation's Board of Directors. The
other persons are officers but not members of the Board of Directors. 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. and Waddell & Reed Funds, 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 Fund 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. Father of Linda Graves, Director of the Fund and each of
the other funds in the Fund Complex.
KEITH A. TUCKER*
President of the Fund and 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.
DODDS I. BUCHANAN
905 13th Street
Boulder, Colorado 80302
Advisory Director, The Hand Companies; President, Buchanan Ranch
Corporation; formerly, Senior Vice President and Director of Marketing Services,
The Meyer Group of Management Consultants; formerly, Professor of Marketing,
College of Business, University of Colorado.
JAY B. DILLINGHAM
926 Livestock Exchange Building
Kansas City, Missouri 64102
Retired.
LINDA GRAVES*
1 South West Cedar Crest Road
Topeka, Kansas 66606
First Lady of Kansas; formerly, partner, Levy and Craig, P.C., a law firm.
Daughter of Ronald K. Richey, Chairman of the Board of the Fund and each of the
other funds in the Fund Complex.
JOHN F. HAYES*
335 N. Washington
P. O. Box 2977
Hutchinson, Kansas 67504-2977
Director of Central Bank and Trust; Chairman, Gilliland & Hayes, P.A., a
law firm; formerly, President, Gilliland & Hayes, P.A.
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
Fund 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.
ELEANOR B. SCHWARTZ
5100 Rockhill Road
Kansas City, Missouri 64113
Chancellor, University of Missouri-Kansas City; formerly, Interim
Chancellor, University of Missouri-Kansas City; formerly, Vice Chancellor for
Academic Affairs, University of Missouri-Kansas City.
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.
Robert L. Hechler
Vice President and Principal Financial Officer of the Fund 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 Fund 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 Fund 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 Fund 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; Senior 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, five of the Corporation's Directors may be
deemed to be "interested persons" as defined in the 1940 Act 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. Mr. Leslie S.
Wright retired as a Director of the Corporation and of each of the funds in the
Fund Complex effective March 11, 1996, and has elected a position as Director
Emeritus. During the Corporation's fiscal year ended December 31, 1995, Mr.
Wright received total compensation for his service as a Director of $42,000 from
the Fund Complex and the Corporation and aggregate compensation from the
Corporation of $18,386.
As of April 1, 1996, the funds in the United Group, TMK/United Funds, Inc.
and Waddell & Reed Funds, Inc. pay to each Director a total of $44,000 per year,
plus $1,000 for each meeting of the Board of Directors attended (prior to April
1, 1996, the funds in the United Group (with the exception of United Asset
Strategy Fund, Inc.), TMK/United Funds, Inc. and Waddell & Reed Funds, Inc. paid
to each Director a fee of $40,000 per year, plus $1,000 for each meeting of the
Board of Directors attended) and $500 for each committee meeting attended which
is not in conjunction with a Board of Directors meeting, other than Directors
who are affiliates of Waddell & Reed, Inc. The fees to the Directors who
receive them are divided among the funds in the United Group, TMK/United Funds,
Inc. and Waddell & Reed Funds, Inc. based on their relative size.
During the Corporation's fiscal year ended December 31, 1995, the
Corporation's Directors received the following fees for service as a director:
COMPENSATION TABLE
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 19,719 0 45,000
Dodds I. Buchanan 19,719 0 45,000
Jay B. Dillingham 19,719 0 45,000
Linda Graves 5,356 0 12,000
John F. Hayes 19,719 0 45,000
Glendon E. Johnson 19,719 0 45,000
William T. Morgan 19,719 0 45,000
Doyle Patterson 19,719 0 45,000
Eleanor B. Schwartz 5,356 0 12,000
Frederick Vogel III 19,719 0 45,000
Paul S. Wise 19,719 0 45,000
The officers are paid by WRIMCO or its affiliates.
Shareholdings
As of February 29, 1996, 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 a Fund makes to you as a
shareholder of a class of shares of a Fund, other than payments when you redeem
your shares. The first source is a Fund's net investment income, which is
derived from the dividends, interest and earned discount 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 realized 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 once each year in the latter part of the fourth calendar quarter. Even if
a Fund has net realized 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.
Choices you have on your Dividends and Distributions
On your application form, you can give instructions that (i) you want
cash for your dividends and distributions, (ii) you want your dividends and
distributions paid 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 paid 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 paid in shares of
that Fund of the same class as that with respect to which they were paid. All
payments in shares 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
In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Code, a Fund (each Fund is treated as a separate
entity for these purposes) must distribute to its shareholders for each taxable
year at least 90% of its investment company taxable income (consisting generally
of taxable 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 contracts) 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, or any of the following that were held for less than
three months--options, 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) ("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 the
shareholders 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 shares of a Fund 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 distributions
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 each
November 1 and the end of the current calendar year.
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.
Each of the Funds may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, a Fund will be
subject to Federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain on disposition of the stock (collectively
"PFIC income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC
income will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
would have to be distributed to satisfy the Distribution Requirement and to
avoid imposition of the Excise Tax -- even if those earnings and gain were not
received by the Fund. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
The "Tax Simplification and Technical Corrections Bill of 1993," passed in
May 1994 by the House of Representatives, would substantially modify the
taxation of U.S. shareholders of foreign corporations, including eliminating the
provision described above dealing with PFICs and replacing them (and other
provisions) with a regulatory scheme involving entities called "passive foreign
corporations." Three similar bills were passed by Congress in 1991 and 1992 and
vetoed. It is unclear at this time whether, and in what form, the proposed
modifications may be enacted into law.
Proposed regulations have been published pursuant to which open-end RICs,
such as the Funds, would be entitled to elect to "mark-to-market" their stock in
certain PFICs. "Marking-to-market," in this context, means recognizing as gain
for each taxable year the excess, as of the end of that year, of the fair market
value of such a PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in
effect).
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 the 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 a
Fund's investment company taxable income to be distributed to its
shareholders.
Income from Options, Futures and Currencies
The use of hedging and option income 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 contracts
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 a 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 a 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. Each
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 of each Fund's hedging transactions. To the
extent this treatment is not available, a 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 lapses without being exercised,
the premium it receives also will be a short-term gain. If such an option is
exercised and thus the Fund 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 Funds 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) may also affect the taxation
of options and futures contracts in which the Funds may invest. That section
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
"short sale" rules applicable to straddles. If a Fund makes certain elections,
the amount, character and timing of the recognition of gains and losses from the
affected straddle positions will be determined under rules that vary according
to the elections made. Because only a few of the regulations implementing the
straddle rules have been promulgated, the tax consequences of straddle
transactions to the Funds are not entirely clear.
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 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 research services and 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, 1995, 1994 and 1993.
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.
1995 1994 1993
------- ---------- ----------
United Bond Fund ............. $ 469 $ 0 $ 1,236
United Income Fund ........... 1,882,280 1,730,535 2,078,626
United Accumulative Fund ..... 4,952,823 4,787,543 5,230,858
United Science and
Technology Fund ........... 321,141 516,617 438,946
---------- ---------- ----------
Total ..................... $7,156,713 $7,034,695 $7,749,666
========== ========== ==========
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 .................. 660,046,203 996,121
United Accumulative Fund ............ 2,476,957,394 3,553,524
United Science and Technology Fund .. 113,149,683 170,106
-------------- ----------
Total ............................ $ $
============== ==========
As of December 31, 1995, United Accumulative Fund owned securities of
Donaldson, Lufkin & Jenrette, Inc., Paine Webber Group Inc. and J. P. Morgan &
Co. Incorporated in the amounts of $6,250,000, $2,000,000 and $20,062,500,
respectively. Donaldson, Lufkin & Jenrette, Inc., Paine Webber Group Inc. and
J. P. Morgan & Co. Incorporated is each a regular broker of the 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. and Waddell & Reed Funds, 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 shares to the public. Shares
outstanding on that date were designated as Class A shares. Each class of a
Fund represents an interest 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, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Aerospace - 1.96%
Loral Corporation,
7.625%, 6-15-2004 ..................... $ 2,000 $ 2,167,860
McDonnell Douglas Corporation:
8.625%, 4-1-97 ........................ 3,000 3,106,500
9.25%, 4-1-2002 ....................... 5,000 5,822,000
Total ................................. 11,096,360
Airlines - 0.96%
Federal Express Corporation,
7.89%, 9-23-2008 ...................... 5,000 5,444,900
Automotive - 2.18%
General Motors Corporation,
8.8%, 3-1-2021 ........................ 10,000 12,325,300
Banks and Savings and Loans - 11.46%
Bank of Boston Corporation,
6.625%, 12-1-2005 ..................... 5,000 5,086,950
BayBanks, Inc.,
5.812%, 9-30-97 ....................... 5,000 4,991,200
Bayerische Landesbank Girozentale, NY Branch,
CD, Currency Protected Duetschemark Swap
Rate Inverse Floating Rate,
5.235%, 3-28-97 (A) ................... 5,000 4,987,500
Chevy Chase Savings Bank, F.S.B.,
9.25%, 12-1-2005 ...................... 1,500 1,530,000
Citicorp,
7.75%, 6-15-2006 ...................... 5,000 5,558,900
First Union Corporation,
6.55%, 10-15-2035 ..................... 2,000 2,080,060
Kansallis-Osake-Pankki,
10.0%, 5-1-2002 ....................... 6,000 7,178,640
NBD Bank, National Association,
8.25%, 11-1-2024 ...................... 6,000 7,342,620
NationsBank Corporation,
8.57%, 11-15-2024 ..................... 5,000 6,076,700
Riggs National Corporation,
8.5%, 2-1-2006 ....................... 4,000 4,280,000
Skandia Enskilda Banken, NY Branch Certificate
of Deposit Dollarized Australian Dollar
Reset,
4.0%, 4-5-99 .......................... 5,000 4,656,250
SouthTrust Bank of Alabama, N.A.,
7.69%, 5-15-2025 ...................... 5,000 5,506,100
Wells Fargo & Company,
8.75%, 5-1-2002 ....................... 5,000 5,659,300
Total ................................. 64,934,220
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Beverages - 1.79%
Coca-Cola Enterprises Inc.,
0.0%, 6-20-2020 ....................... $50,000 $ 10,146,000
Building - 5.48%
Boise Cascade Office Products Corporation,
9.875%, 2-15-2001 ..................... 2,500 2,757,675
Canadian Pacific Forest Products Ltd.,
9.25%, 6-15-2002 ..................... 4,000 4,483,320
Doman Industries Limited,
8.75%, 3-15-2004 ...................... 3,000 2,842,500
Noranda Forest Inc.,
7.5%, 7-15-2003 ....................... 3,000 3,162,750
Noranda Inc.,
7.0%, 7-15-2005 ....................... 5,000 5,177,400
Owens-Corning Fiberglas Corporation,
8.875%, 6-1-2002 ...................... 5,000 5,601,200
USG Corporation:
9.25%, 9-15-2001 ...................... 2,000 2,140,000
8.5%, 8-1-2005 ........................ 750 776,250
Del Webb Corporation,
10.875%, 3-31-2000 .................... 4,000 4,080,000
Total ................................. 31,021,095
Canadian Oil - 1.46%
NOVA Corporation of Alberta,
8.5%, 12-15-2012 ...................... 7,000 8,266,370
Chemicals Major - 1.69%
Dow Capital Corporation,
9.0%, 5-15-2010 ....................... 8,000 9,596,560
Chemicals Specialty and Miscellaneous Technology - 0.89%
Geon Company (The),
6.875%, 12-15-2005 .................... 5,000 5,017,700
Computers and Office Equipment - 0.26%
Unisys Corporation,
9.75%, 9-15-96 ........................ 1,500 1,455,000
Domestic Oil - 2.57%
Anadarko Petroleum Corporation,
7.25%, 3-15-2025 ...................... 5,000 5,742,750
Seagull Energy Corporation,
7.875%, 8-1-2003 ...................... 3,500 3,482,500
Union Texas Petroleum Holdings, Inc.,
8.25%, 11-15-99 ....................... 5,000 5,320,900
Total ................................. 14,546,150
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Electrical Equipment - 3.16%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... $15,000 $ 17,918,250
Financial - 11.79%
Banc One Credit Card Master Trust,
7.55%, 12-15-99 ....................... 5,000 5,182,800
Chrysler Financial Corporation,
12.75%, 11-1-99 ....................... 9,000 11,048,220
Countrywide Mortgage Backed Securities,
Inc., Series 1994-G A5,
6.5%, 4-25-2024 ....................... 10,000 9,871,000
DLJ Mortgage Acceptance Corp.,
1994-3 A13,
6.5%, 4-25-2024 ....................... 4,852 4,754,747
Equicon Loan Trust,
7.3%, 2-18-2013 ....................... 4,571 4,653,443
General Motors Acceptance Corporation,
8.875%, 6-1-2010 ...................... 10,000 12,173,100
MBNA Corporation,
6.206%, 5-5-99 ........................ 5,000 4,996,000
Residential Asset Securities Corporation,
Mortgage Pass-Through Certificates,
1995-KS3 Class D,
8.0%, 10-25-2024 ...................... 4,000 4,061,480
Residential Funding Mortgage
Securities I, Inc.,
8.0%, 8-25-2020 ....................... 10,000 10,053,100
Total ................................. 66,793,890
Food and Related - 0.89%
Nabisco, Inc.,
6.8%, 9-1-2001 ........................ 5,000 5,053,300
Hospital Management - 0.93%
Tenet Healthcare Corporation,
8.625%, 12-1-2003 ..................... 5,000 5,250,000
Household Products - 2.20%
Procter & Gamble Company (The),
8.0%, 9-1-2024 ........................ 10,000 12,440,900
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Insurance - 1.12%
Penn Central Corporation (The),
10.625%, 4-15-2000 .................... $ 4,000 $ 4,274,240
Reliance Group Holdings, Inc.,
9.0%, 11-15-2000 ...................... 2,000 2,057,500
Total ................................. 6,331,740
International Oil - 0.33%
YPF Sociedad Anoima,
8.0%, 2-15-2004........................ 2,000 1,880,000
Leisure Time - 4.68%
Jones Intercable, Inc.,
9.625%, 3-15-2002 ..................... 2,500 2,687,500
Marriott International, Inc.,
6.75%, 12-15-2003 ..................... 5,000 5,099,850
Tele-Communications, Inc.,
6.58%, 2-15-2005 ..................... 5,000 5,284,200
Time Warner Incorporated,
7.75%, 6-15-2005 ...................... 5,000 5,205,150
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 ...................... 4,000 4,152,240
Viacom Inc.,
6.75%, 1-15-2003 ...................... 2,500 2,521,475
Viacom International Inc.,
9.125%, 8-15-99 ....................... 1,500 1,567,500
Total ................................. 26,517,915
Machinery - 0.59%
Joy Technologies Inc.,
10.25%, 9-1-2003 ...................... 3,000 3,360,000
Multi-Industry - 0.55%
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 3,000 3,120,000
Public Utilities - Pipelines - 2.88%
Arkla, Inc.,
8.875%, 7-15-99 ....................... 5,000 5,363,050
Coastal Corporation (The),
10.375%, 10-1-2000 .................... 5,000 5,843,400
NorAm Energy Corp.,
7.5%, 8-1-2000 ........................ 5,000 5,130,650
Total ................................. 16,337,100
Publishing and Advertising - 0.97%
News America Holdings Incorporated,
9.125%, 10-15-99 ...................... 5,000 5,526,900
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Steel - 0.96%
USX Corporation,
8.21%, 1-21-2000 ...................... $ 5,000 $ 5,413,100
Telecommunications - 2.23%
Bell Telephone Company of Pennsylvania (The),
8.35%, 12-15-2030 ..................... 5,000 6,280,700
Motorola, Inc.,
8.4%, 8-15-2031 ....................... 5,000 6,355,300
Total ................................. 12,636,000
Trucking - 0.89%
Ryder System, Inc.,
6.95%, 12-1-2025 ...................... 5,000 5,032,700
TOTAL CORPORATE DEBT SECURITIES - 64.87% $367,461,450
(Cost: $347,418,052)
OTHER GOVERNMENT SECURITIES
Australia - 0.64%
New South Wales Treasury,
7.0%, 2-1-2000 (B)..................... $A5,000 3,615,374
Canada - 4.07%
Hydro Quebec:
8.05%, 7-7-2024 ....................... $10,000 11,417,600
7.4%, 3-28-2025 ....................... 5,000 5,793,150
Province of Nova Scotia,
8.25%, 11-15-2019 ..................... 5,000 5,817,850
Total ................................. 23,028,600
Supranational - 1.08%
Inter-American Development Bank,
8.4%, 9-1-2009 ........................ 5,000 6,147,400
TOTAL OTHER GOVERNMENT SECURITIES - 5.79% $ 32,791,374
(Cost: $29,614,379)
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
6.83%, 7-3-2002 ....................... $ 4,500 $ 4,613,220
7.5%, 11-15-2017 ...................... 8,000 8,284,960
7.5%, 4-15-2019 ....................... 11,823 11,911,765
7.95%, 12-15-2020 ..................... 9,000 9,382,500
8.0%, 4-1-2025 ........................ 8,868 9,189,089
Federal National Mortgage Association:
7.09%, 4-1-2004 ....................... 4,500 4,552,020
7.0%, 7-25-2006 ....................... 10,000 10,287,500
7.5%, 12-25-2006 ...................... 5,000 5,276,550
7.5%, 9-1-2009 ........................ 4,937 5,077,789
6.5%, 5-25-2018 ....................... 10,000 9,984,300
7.0%, 8-25-2021 ....................... 10,000 10,234,300
United States Treasury:
5.625%, 1-31-98 ....................... 10,000 10,082,800
7.875%, 11-15-99 ...................... 15,000 16,307,850
7.875%, 8-15-2001 ..................... 15,000 16,753,050
7.5%, 2-15-2005 ....................... 5,000 5,667,200
5.875%, 11-15-2005 .................... 5,000 5,112,500
0.0%, 5-15-2020 ....................... 50,000 11,055,000
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 27.14% $153,772,393
(Cost: $147,580,162)
TOTAL SHORT-TERM SECURITIES - 1.29% $ 7,315,579
(Cost: $7,315,579)
TOTAL INVESTMENT SECURITIES - 99.09% $561,340,796
(Cost: $531,928,172)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.91% 5,136,249
NET ASSETS - 100.00% $566,477,045
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS
Aerospace - 1.22%
Boeing Company (The) ................... 635,000 $ 49,768,125
Airlines - 3.08%
AMR Corporation* ....................... 400,000 29,700,000
Southwest Airlines Co. ................. 2,475,000 57,543,750
USAir Group, Inc.* ..................... 2,900,000 38,425,000
Total ................................. 125,668,750
Automotive - 6.16%
Chrysler Corporation ................... 1,100,000 60,912,500
Dana Corporation ....................... 760,000 22,230,000
Eaton Corporation ...................... 500,000 26,812,500
Ford Motor Company ..................... 1,900,000 55,100,000
General Motors Corporation ............. 1,000,000 52,875,000
Magna International Inc., Class A ...... 376,500 16,283,625
AB Volvo, ADR Series B (C) ............. 850,000 17,405,707
Total ................................. 251,619,332
Banks and Savings and Loans - 2.52%
Citicorp ............................... 750,000 50,437,500
First Bank Systems, Inc. ............... 500,000 24,812,500
Grupo Financiero Bancomer, S.A. de C.V.,
Series B, CPO Shares (C)* ............. 2,000,000 557,356
Skandia Enskilda Banken, Class A (C) ... 3,300,000 27,328,164
Total ................................. 103,135,520
Beverages - 1.37%
PepsiCo, Inc. .......................... 1,000,000 55,875,000
Biotechnology and Medical Services - 1.09%
Medtronic, Inc. ........................ 800,000 44,700,000
Building - 3.25%
Armstrong World Industries, Inc. ....... 900,000 55,800,000
Georgia-Pacific Corporation ............ 425,000 29,165,625
Temple-Inland Inc. ..................... 350,000 15,443,750
Weyerhaeuser Company ................... 750,000 32,437,500
Total ................................. 132,846,875
Chemicals Major - 7.21%
Air Products and Chemicals, Inc. ....... 1,150,000 60,662,500
Dow Chemical Company (The) ............. 575,000 40,465,625
du Pont (E.I.) de Nemours and Company .. 1,000,000 69,875,000
PPG Industries, Inc. ................... 1,250,000 57,187,500
Praxair, Inc. .......................... 1,000,000 33,625,000
Union Carbide Corporation .............. 875,000 32,812,500
Total ................................. 294,628,125
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Chemicals Specialty and Miscellaneous
Technology - 2.19%
Polaroid Corporation ................... 700,000 $ 33,162,500
WMX Technologies, Inc. ................. 600,000 17,925,000
Xerox Corporation ...................... 280,000 38,360,000
Total ................................. 89,447,500
Computers and Office Equipment - 3.68%
Computer Associates International, Inc. 375,000 21,328,125
General Motors Corporation, Class E .... 1,081,000 56,212,000
Microsoft Corporation* ................. 300,000 26,343,600
Oracle Systems Corporation* ............ 1,100,000 46,612,500
Total ................................. 150,496,225
Consumer Electronics and Appliances - 1.00%
Whirlpool Corporation .................. 765,000 40,736,250
Drugs and Hospital Supply - 2.72%
Abbott Laboratories .................... 500,000 20,875,000
Astra AB, Class A (C) ................... 600,000 23,940,375
Baxter International Inc. .............. 500,000 20,937,500
Merck & Co., Inc. ...................... 400,000 26,300,000
Pfizer Inc. ............................ 300,000 18,900,000
Total ................................. 110,952,875
Electrical Equipment - 2.92%
Emerson Electric Co. ................... 400,000 32,700,000
General Electric Company ............... 1,200,000 86,400,000
Total ................................. 119,100,000
Electronics - 9.05%
AMP Incorporated ....................... 1,100,000 42,212,500
Analog Devices, Inc.* .................. 820,000 29,007,500
Applied Materials, Inc.* ............... 1,730,000 68,009,760
cisco Systems, Inc.* ................... 1,000,000 74,687,000
Intel Corporation ...................... 1,530,000 86,922,360
Micron Technology, Inc. ................ 800,000 31,700,000
Teradyne, Inc.* ........................ 750,000 18,750,000
Texas Instruments Incorporated ......... 350,000 18,112,500
Total ................................. 369,401,620
Engineering and Construction - 1.77%
BBC Brown Boveri Ltd, Series A (C) ..... 25,000 28,986,135
Fluor Corporation ...................... 400,000 26,400,000
Foster Wheeler Corporation ............. 400,000 17,000,000
Total ................................. 72,386,135
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Financial - 2.34%
Federal Home Loan Mortgage Corporation . 500,000 $ 41,750,000
Federal National Mortgage Association .. 295,200 36,641,700
Grupo Financiero Banamex Accival,
S.A. de C.V., Class B, CPO Shares (C) . 9,800,000 16,386,261
Grupo Financiero Banamex Accival,
S.A. de C.V., Class L (C) ............. 442,500 648,121
Total ................................. 95,426,082
Food and Related - 0.84%
CPC International Inc. ................. 500,000 34,312,500
Hospital Management - 2.02%
Columbia/HCA Healthcare Corporation .... 375,000 19,031,250
Tenet Healthcare Corporation* ......... 1,000,000 20,750,000
United HealthCare Corporation .......... 650,000 42,575,000
Total ................................. 82,356,250
Household Products - 3.53%
Colgate-Palmolive Company .............. 600,000 42,150,000
Gillette Company (The) ................. 1,000,000 52,125,000
Procter & Gamble Company (The) ......... 600,000 49,800,000
Total.................................. 144,075,000
Leisure Time - 2.56%
Walt Disney Company (The) .............. 700,000 41,300,000
McDonald's Corporation ................. 1,400,000 63,175,000
Total ................................. 104,475,000
Machinery - 6.76%
Case Corporation ....................... 810,000 37,057,500
Caterpillar Inc. ....................... 1,600,000 94,000,000
Deere & Company ........................ 2,055,000 72,438,750
Ingersoll-Rand Company ................. 400,000 14,050,000
Mannesmann AG (C) ...................... 65,000 20,701,185
Parker Hannifin Corporation ............ 600,000 20,550,000
TRINOVA Corporation .................... 600,000 17,175,000
Total ................................. 275,972,435
Multi-Industry - 2.30%
ITT Corporation* ....................... 750,204 39,760,812
ITT Hartford Group, Inc.* .............. 750,204 36,291,118
ITT Industries, Inc. ................... 750,204 18,004,896
Total ................................. 94,056,826
Packaging and Containers - 0.10%
Pilkington PLC (C) ..................... 1,364,516 4,281,945
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Paper - 2.10%
Bowater Incorporated ................... 460,000 $ 16,330,000
International Paper Company ............ 1,200,000 45,450,000
Union Camp Corporation ................. 500,000 23,812,500
Total ................................. 85,592,500
Railroads - 3.20%
CSX Corporation ........................ 700,000 31,937,500
Conrail Inc. ........................... 600,000 42,000,000
Norfolk Southern Corporation ........... 300,000 23,812,500
Union Pacific Corporation .............. 500,000 33,000,000
Total ................................. 130,750,000
Retailing - 7.99%
Cifra, S.A. de C.V., Series C (C)* ..... 8,000,000 8,088,140
Circuit City Stores, Inc. .............. 1,600,000 44,200,000
Dayton Hudson Corporation .............. 316,600 23,745,000
Gap, Inc. (The) ........................ 700,000 29,400,000
General Nutrition Companies, Inc.* ..... 800,000 18,600,000
Home Depot, Inc. (The) ................. 765,000 36,624,375
May Department Stores Company (The) .... 1,000,000 42,250,000
Next plc (C) ........................... 4,200,000 29,752,621
Nordstrom, Inc. ........................ 375,000 15,140,625
Penney (J.C.) Company, Inc. ............ 676,000 32,194,500
Tommy Hilfiger Corporation* ............ 560,000 23,730,000
Wal-Mart Stores, Inc. .................. 1,000,000 22,375,000
Total ................................. 326,100,261
Services, Consumer and Business - 0.50%
Block (H & R), Inc. .................... 500,000 20,250,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Steel - 0.42%
Nucor Corporation ...................... 300,000 $ 17,137,500
Telecommunications - 7.73%
AT&T Corporation ....................... 500,000 32,375,000
BellSouth Corporation .................. 93,000 4,045,500
General Instrument Corporation* ........ 750,000 17,531,250
General Motors Corporation, Class H .... 176,100 8,650,912
MCI Communications Corporation ......... 1,875,000 49,100,625
Motorola, Inc. ......................... 1,700,000 96,900,000
Nokia Corporation, Series A (C) ........ 760,000 29,875,175
Telefonaktiebolaget LM Ericsson,
Class B, ADR........................... 2,000,000 39,000,000
Telefonos de Mexico S.A. de C.V., ADR .. 1,200,000 38,250,000
Total ................................. 315,728,462
Tire and Rubber - 1.11%
Goodyear Tire & Rubber Company (The) ... 1,000,000 45,375,000
TOTAL COMMON STOCKS - 92.73% $3,786,652,093
(Cost: $2,225,514,055)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Banks and Savings and Loans - 0.27%
Morgan Guaranty Trust Company of New York,
7.375%, 2-1-2002 ...................... $10,250 10,960,428
Electrical Equipment - 0.29%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 10,000 11,945,500
TOTAL CORPORATE DEBT SECURITIES - 0.56% $ 22,905,928
(Cost: $19,907,722)
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
6.75%, 4-30-2000 ...................... $37,000 $ 38,936,580
5.75%, 8-15-2003 ...................... 50,000 50,601,500
10.375%, 11-15-2012 ................... 8,500 11,751,250
9.0%, 11-15-2018 ...................... 20,000 27,240,600
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 3.15% $ 128,529,930
(Cost: $114,725,972)
TOTAL SHORT-TERM SECURITIES - 3.57% $ 145,927,500
(Cost: $145,927,500)
TOTAL INVESTMENT SECURITIES - 100.01% $4,084,015,451
(Cost: $2,506,075,249)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.01%) (594,984)
NET ASSETS - 100.00% $4,083,420,467
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS
Airlines - 0.55%
USAir Group, Inc.* ..................... 500,000 $ 6,625,000
Automotive - 1.74%
Federal-Mogul Corporation .............. 333,700 6,548,862
Ford Motor Company ..................... 500,000 14,500,000
Total ................................. 21,048,862
Banks and Savings and Loans - 14.01%
Ahmanson (H. F.) & Company ............. 500,000 13,250,000
Barnett Banks, Inc. .................... 300,000 17,700,000
Boatmen's Bancshares, Inc. ............. 247,100 10,115,533
City National Corporation .............. 350,000 4,900,000
Crestar Financial Corporation .......... 350,000 20,693,750
First Security Corporation* ............ 145,000 5,546,250
Fourth Financial Corporation ........... 140,000 5,705,000
Great Western Financial Corporation .... 500,000 12,750,000
Mercantile Bancorporation Inc. ......... 300,000 13,800,000
Morgan (J.P.) & Co. Incorporated ....... 250,000 20,062,500
Northern Trust Corporation ............. 300,000 16,706,100
Roosevelt Financial Group, Inc. ........ 700,000 13,475,000
Washington Mutual, Inc. ................ 500,000 14,375,000
Total ................................. 169,079,133
Biotechnology and Medical Services - 0.88%
MediSense, Inc.* ....................... 85,300 2,713,564
Owen Healthcare, Inc.* ................. 211,000 5,697,000
Pyxis Corporation* ..................... 150,000 2,203,050
Total ................................. 10,613,614
Building - 1.08%
American Health Prop. (#) .............. 221,200 4,755,800
National Health Investors, Inc. ........ 250,000 8,281,250
Total ................................. 13,037,050
Chemicals Major - 3.45%
du Pont (E.I.) de Nemours and
Company .............................. 400,000 27,950,000
PPG Industries, Inc. ................... 300,000 13,725,000
Total ................................. 41,675,000
Chemicals Specialty and Miscellaneous Technology - 1.75%
Ecolab Inc. ............................ 300,000 9,000,000
Geon Company (The) ..................... 500,000 12,187,500
Total ................................. 21,187,500
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Computers and Office Equipment - 11.35%
Cerner Corporation* .................... 700,000 $ 14,350,000
DST Systems, Inc.* ..................... 300,000 8,550,000
General Motors Corporation, Class E .... 500,000 26,000,000
HBO & Company .......................... 200,000 15,300,000
HPR Inc.* .............................. 86,900 2,607,000
Informix Corporation* .................. 1,000,000 30,062,000
Intuit Inc.* ........................... 210,000 16,406,250
Parametric Technology Corporation* ..... 200,000 13,275,000
PSINET Inc.* ........................... 250,000 5,734,250
Summit Medical Systems, Inc.* .......... 220,900 4,694,125
Total ................................. 136,978,625
Drugs and Hospital Supply - 12.84%
ALZA Corporation* ...................... 344,900 8,536,275
Abbott Laboratories .................... 700,000 29,225,000
Baxter International Inc. ............... 400,000 16,750,000
Johnson & Johnson ...................... 200,000 17,125,000
Lilly (Eli) and Company ................ 400,000 22,500,000
Pfizer Inc. ............................ 250,000 15,750,000
SmithKline Beecham plc, ADR ............ 400,000 22,200,000
United States Surgical Corporation ..... 500,000 10,687,500
Warner-Lambert Company ................. 125,000 12,140,625
Total ................................. 154,914,400
Electrical Equipment - 2.89%
Emerson Electric Co. ................... 250,000 20,437,500
General Electric Company ............... 200,000 14,400,000
Total ................................. 34,837,500
Electronics - 0.42%
Digital Link Corporation* .............. 356,700 5,105,090
Financial - 2.62%
Donaldson, Lufkin & Jenrette, Inc. ..... 200,000 6,250,000
Lehman Brothers Holdings Inc. .......... 100,000 2,125,000
Paine Webber Group Inc. ................ 100,000 2,000,000
Regional Acceptance Corporation* ....... 250,000 2,375,000
Travelers Group, Inc. .................. 300,000 18,862,500
Total ................................. 31,612,500
Food and Related - 2.84%
Archer-Daniels-Midland Company ......... 578,200 10,407,600
Pioneer Hi-Bred International, Inc. .... 150,300 8,360,438
Ralcorp Holdings* ...................... 638,200 15,476,350
Total ................................. 34,244,388
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Hospital Management - 3.73%
Assisted Living Concepts, Inc.* (D) .... 250,000 $ 3,281,250
Beverly Enterprises, Inc.* ............. 1,250,000 13,281,250
Health Systems International, Inc.,
Class A* .............................. 100,000 3,212,500
LTC Properties, Inc. ................... 250,000 3,750,000
Sierra Health Services, Inc.* .......... 350,000 11,112,500
Tenet Healthcare Corporation* .......... 500,000 10,375,000
Total ................................. 45,012,500
Insurance - 11.82%
Allstate Corporation (The) ............. 450,000 18,506,250
American International Group, Inc. ..... 350,000 32,375,000
Berkley (W. R.) Corporation ........... 300,000 16,050,000
General Re Corporation ................. 100,000 15,500,000
Jefferson-Pilot Corporation ............ 150,000 6,975,000
Lincoln National Corporation ........... 400,000 21,500,000
Providian Corporation .................. 150,000 6,112,500
Prudential Reinsurance Holdings, Inc. .. 570,000 13,323,750
TIG Holdings, Inc. ..................... 220,000 6,270,000
USLIFE Corporation ..................... 200,000 5,975,000
Total ................................. 142,587,500
International Oil - 0.64%
ENI S.p.A., ADR* ....................... 225,000 7,706,250
Leisure Time - 5.05%
Boston Chicken, Inc.* .................. 500,000 16,031,000
Comcast Corporation, Class A ........... 900,000 16,368,300
Tele-Communications, Inc., Class A* .... 900,000 17,943,300
Wendy's International, Inc. ............ 500,000 10,625,000
Total ................................. 60,967,600
Machinery - 3.10%
Cooper Industries, Inc. ................ 350,000 12,862,500
Ingersoll-Rand Company ................. 250,000 8,781,250
Parker Hannifin Corporation ............ 250,000 8,562,500
TRINOVA Corporation .................... 250,000 7,156,250
Total ................................. 37,362,500
Metals and Mining - 0.99%
Aluminum Company of America ............ 225,000 11,896,875
Multi-Industry - 1.67%
Berkshire Hathaway Inc.* ............... 135 4,333,500
ITT Corporation* ....................... 126,000 6,678,000
ITT Hartford Group, Inc.* .............. 126,000 6,095,250
ITT Industries, Inc. ................... 126,000 3,024,000
Total ................................. 20,130,750
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Public Utilities - Electric - 1.54%
Central and South West Corporation ..... 200,000 $ 5,575,000
Detroit Edison Company (The)* .......... 200,000 6,900,000
Texas Utilities Electric Company ...... 150,000 6,168,750
Total ................................. 18,643,750
Railroads - 3.04%
Conrail Inc. ........................... 250,000 17,500,000
Illinois Central Corporation ........... 500,000 19,187,500
Total ................................. 36,687,500
Retailing - 1.72%
Family Dollar Stores, Inc. ............. 664,500 9,136,875
Mercantile Stores Company, Inc. ........ 250,000 11,562,500
Total ................................. 20,699,375
Services, Consumer and Business - 0.84%
Block (H & R), Inc. .................... 250,000 10,125,000
Telecommunications - 4.98%
Ascend Communications, Inc.* ........... 175,000 14,207,725
MFS Communications Company, Inc.* ...... 350,000 18,725,000
Nokia Corporation, Series A, ADS ....... 700,000 27,212,500
Total ................................. 60,145,225
Textiles and Apparel - 0.19%
Warnaco Group, Inc. (The), Class A ..... 91,400 2,285,000
TOTAL COMMON STOCKS - 95.73% $1,155,208,487
(Cost: $1,054,333,005)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Banks and Savings and Loans - 0.10%
U.S. Bancorp,
Master Note ........................... $ 1,233 1,233,000
Consumer Electronics and Appliances - 0.55%
TDK (USA) Corp.,
5.74%, 1-17-96 ........................ 6,660 6,643,010
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1995
Principal
Amount In
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Financial - 2.47%
BHP Finance (U.S.A.) Inc.,
5.62%, 2-21-96 ........................ $ 6,470 $ 6,418,488
Dresdner U.S. Finance Inc.,
5.61%, 1-19-96 ........................ 10,000 9,971,950
PHH Corp.,
5.68%, 1-19-96 ........................ 5,610 5,594,067
USAA Capital Corporation,
5.6%, 2-6-96 .......................... 5,720 5,687,968
USL Capital Corporation,
5.72%, 1-10-96 ........................ 2,100 2,096,997
Total ................................. 29,769,470
Food and Related - 0.63%
ConAgra, Inc.,
5.95%, 1-19-96 ........................ 3,385 3,374,930
General Mills, Inc.,
Master Note ........................... 1,382 1,382,000
Sara Lee Corporation,
Master Note ........................... 2,905 2,905,000
Total ................................. 7,661,930
Multi-Industry - 0.05%
Textron Inc.,
6.0%, 1-29-96 ......................... 625 622,083
Public Utilities - Electric - 0.31%
Western Resources Inc.,
6.0%, 1-19-96 ......................... 3,705 3,693,885
Public Utilities - Gas - 0.17%
Michigan Consolidated Gas Company,
5.8%, 1-10-96 ......................... 2,000 1,997,100
Publishing and Advertising - 0.32%
American Greetings Corporation,
5.67%, 1-18-96 ........................ 3,930 3,919,477
Retailing - 0.20%
Rite Aid Corp.,
5.94%, 1-12-96 ........................ 2,405 2,400,635
Telecommunications - 0.19%
Southwestern Bell Telephone Company,
5.8%, 1-8-96 .......................... 2,280 2,277,429
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1995
Principal
Amount In
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Tobacco - 0.11%
Philip Morris Companies Inc.,
5.6%, 1-19-96 ......................... $ 1,375 $ 1,371,150
Total Commercial Paper - 5.10% 61,589,169
Municipal Obligation - 0.17%
California
Oakland-Alameda County Coliseum Lease
Revenue Bonds (Oakland Coliseum Project),
1995 Series B-1 (Canadian Imperial Bank
of Commerce),
5.88%, 1-12-96 2,000 2,000,000
TOTAL SHORT-TERM SECURITIES - 5.27% $ 63,589,169
(Cost: $63,589,169)
TOTAL INVESTMENT SECURITIES - 101.00% $1,218,797,656
(Cost: $1,117,922,174)
CASH AND OTHER ASSETS, NET OF LIABILITIES - (1.00%) (12,014,892)
NET ASSETS - 100.00% $1,206,782,764
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS
Automotive - 0.75%
AB Volvo (C) ........................... 300,000 $ 6,143,191
Biotechnology and Medical Services - 0.76%
Pyxis Corporation* ..................... 200,000 2,937,400
Ventritex, Inc.* ....................... 190,000 3,336,780
Total ................................. 6,274,180
Computers and Office Equipment - 42.98%
Adobe Systems Incorporated ............. 200,000 12,425,000
America Online, Inc.* .................. 540,000 20,148,480
Arbor Software Corporation* ............ 9,000 423,000
AVANT! Corporation* .................... 132,300 2,497,163
Broderbund Software, Inc.* ............. 233,000 14,183,875
Cerner Corporation* .................... 550,000 11,275,000
Computer Associates International,
Inc. .................................. 225,000 12,796,875
DST Systems, Inc.* ..................... 127,500 3,633,750
Elcom International, Inc.* ............. 200,000 3,025,000
First Data Corporation ................. 150,000 10,031,250
General Motors Corporation, Class E .... 325,000 16,900,000
HBO & Company .......................... 401,000 30,676,500
HCIA Inc.* ............................. 200,000 9,325,000
HPR Inc.* .............................. 100,800 3,024,000
Inference Corporation, Class A* ......... 210,000 3,937,500
Informix Corporation* .................. 1,000,000 30,062,000
Intuit Inc.* ........................... 280,000 21,875,000
Learmonth & Burch ADR* ................. 500,000 4,437,500
Macromedia, Inc.* ...................... 470,000 24,469,140
Microsoft Corporation* ................. 123,000 10,800,876
Minnesota Educational Computing
Corporation* .......................... 250,000 6,281,250
NETCOM On-Line Communication Services,
Inc.* ................................. 200,000 7,150,000
Objective Systems Integrators, Inc.* .... 69,600 3,801,900
Oracle Systems Corporation* ............ 300,000 12,712,500
Parametric Technology Corporation* ..... 400,000 26,550,000
Pixar* ................................. 52,500 1,512,630
Pure Software Inc.* .................... 161,700 5,174,400
SQA, Inc.* ............................. 6,000 113,250
Scopus Technology, Inc.* ............... 6,700 167,500
Shiva Corporation* ..................... 221,100 16,140,300
Summit Medical Systems, Inc.* .......... 200,000 4,250,000
Sync Research, Inc.* ................... 100,000 4,562,500
Synopsys, Inc.* ........................ 350,000 13,343,750
UUNET Technologies, Inc.* .............. 80,000 5,060,000
Total ................................. 352,766,889
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Drugs and Hospital Supply - 4.16%
ALZA Corporation* ...................... 200,000 $ 4,950,000
Abbott Laboratories .................... 150,000 6,262,500
OmniCare, Inc. ......................... 300,000 13,425,000
Roche Holdings AG (C) .................. 1,200 9,483,535
Total ................................. 34,121,035
Electrical Equipment - 1.05%
General Electric Company ............... 120,000 8,640,000
Electronics - 17.25%
Applied Materials, Inc.* ............... 320,000 12,579,840
Atmel Corporation* ..................... 460,000 10,235,000
Cascade Communications Corp.* .......... 310,200 26,405,775
cisco Systems, Inc.* ................... 375,600 28,052,437
Digital Link Corporation* .............. 300,000 4,293,600
KEMET Corporation* ..................... 125,000 3,000,000
LSI Logic Corporation* ................. 290,000 9,497,500
Lam Research* .......................... 200,000 9,125,000
Silicon Valley Group, Inc.* ............ 200,000 5,062,400
Summa Four, Inc.* ...................... 250,000 3,375,000
3Com Corporation* ...................... 290,000 13,539,230
VLSI Technology, Inc.* ................. 70,000 1,264,340
Xilinx, Inc.* .......................... 500,000 15,187,500
Total ................................. 141,617,622
Hospital Management - 2.12%
PhyCor, Inc.* .......................... 150,000 7,593,750
United HealthCare Corporation .......... 150,000 9,825,000
Total ................................. 17,418,750
Machinery - 3.76%
Cognex Corporation* .................... 320,000 11,200,000
Deere & Company ........................ 390,000 13,747,500
Parker Hannifin Corporation ............ 172,050 5,892,712
Total ................................. 30,840,212
Services, Consumer and Business - 4.27%
Alternative Resources Corporation* ..... 350,000 10,500,000
Block (H & R), Inc. .................... 100,000 4,050,000
CUC International Inc.* ................ 600,000 20,475,000
Total ................................. 35,025,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1995
Shares Value
COMMON STOCKS (Continued)
Telecommunications - 15.16%
Ascend Communications, Inc.* ........... 850,000 $ 69,008,950
DSC Communications Corporation* ........ 200,000 7,400,000
MFS Communications Company, Inc.* ...... 280,000 14,980,000
Motorola, Inc. ......................... 180,000 10,260,000
Nokia Corporation, Series A, ADS ....... 300,000 11,662,500
Tellabs* ............................... 300,000 11,137,500
Total ................................. 124,448,950
Textiles and Apparel - 0.94%
Department 56, Inc.* ................... 200,000 7,675,000
TOTAL COMMON STOCKS - 93.20% $764,970,829
(Cost: $346,811,367)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 0.75%
U.S. Bancorp,
Master Note ........................... $ 180 180,000
Wachovia Corporation,
5.77%, 1-16-96 ........................ 5,995 5,980,587
Total ................................. 6,160,587
Financial - 2.46%
Bell Atlantic Financial Services Inc.,
5.76%, 1-9-96 ......................... 1,210 1,208,451
Kerr-McGee Credit Corp.,
5.7%, 2-6-96 .......................... 11,700 11,633,310
Transamerica Financial Group,
5.72%, 1-11-96 ........................ 7,350 7,338,322
Total ................................. 20,180,083
Food and Related - 1.65%
ConAgra, Inc.,
5.98%, 1-12-96 ........................ 11,725 11,703,576
General Mills, Inc.,
Master Note ........................... 232 232,000
Sara Lee Corporation,
Master Note ........................... 1,620 1,620,000
Total ................................. 13,555,576
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1995
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Public Utilities - Electric - 1.78%
Pacificorp:
5.74%, 1-12-96 ........................ $ 6,200 $ 6,189,126
5.55%, 2-22-96 ........................ 2,750 2,727,954
Western Resources Inc.:
5.85%, 1-4-96 ......................... 3,655 3,653,218
5.99%, 1-19-96 ........................ 2,000 1,994,010
Total ................................. 14,564,308
Public Utilities - Gas - 0.20%
Questar Corporation,
6.0%, 1-8-96 .......................... 1,625 1,623,104
Tobacco - 0.90%
Philip Morris Companies Inc.,
5.6%, 1-19-96 ......................... 7,435 7,414,182
TOTAL SHORT-TERM SECURITIES - 7.74% $ 63,497,840
(Cost: $63,497,840)
TOTAL INVESTMENT SECURITIES - 100.94% $828,468,669
(Cost: $410,309,207)
CASH AND OTHER ASSETS, NET OF LIABILITIES - (0.94)% (7,686,086)
NET ASSETS - 100.00% $820,782,583
See Notes to Schedules of Investments on page .
<PAGE>
Notes to Schedules of Investments
*No income dividends were paid during the preceding 12 months.
(A) Coupon resets semiannually based on 14.13% - 1.5 x (5-year Deutschemark
swap rate). Coupon guaranteed at 3%.
(B) Principal amounts are denominated in the indicated foreign currency where
applicable ($A - Australian Dollar).
(C) Listed on an exchange outside the United States.
(D) Affiliate as defined by the Investment Company Act of 1940 by reason of
ownership by the Fund of 5% or more of its outstanding voting securities.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES United
DECEMBER 31, 1995 United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
Assets ----------------------------------------
------------
Investment securities --
at value (Notes 1 and 3)$561,340,796$4,084,015,451$1,218,797,656$828,468,669
Cash .............. 4,052 81,632 948 4,705
Receivables:
Investment securities
sold ............ --- 15,649,573 6,802,539 ---
Dividends and interest 7,871,493 8,062,252 1,956,981 242,265
Fund shares sold .. 597,187 5,233,842 446,658 3,391,027
Prepaid insurance
premium ........... 15,421 49,926 32,936 10,569
----------------------------------------------------
Total assets .... 569,828,949 4,113,092,676 1,228,037,718 832,117,235
Liabilities ----------------------------------------------------
Payable for investment
securities purchased --- 10,597,000 11,085,975 ---
Payable for Fund
shares redeemed ... 3,012,320 16,759,128 9,527,501 10,827,953
Accrued service fee . 194,310 1,402,549 403,896 286,518
Accrued transfer agency
and dividend disbursing 73,440 441,466 98,435 109,191
Accrued accounting
services fee....... 5,833 8,333 8,333 7,083
Other .............. 66,001 463,733 130,814 103,907
----------------------------------------------------
Total liabilities 3,351,904 29,672,209 21,254,954 11,334,652
----------------------------------------------------
Total net assets $566,477,045$4,083,420,467$1,206,782,764$820,782,583
Net Assets ====================================================
$1.00 par value capital stock
Capital stock ..... $ 89,314,140$ 140,988,723$ 155,158,736$ 35,861,356
Additional paid-in
capital .......... 474,620,683 2,336,040,977 924,117,418 360,220,346
Accumulated undistributed
income (loss):
Accumulated undistributed net
investment income 575,962 2,184,484 1,322,673 ---
Accumulated undistributed net
realized gain (loss) on
investment
transactions ..... (27,445,756) 26,267,003 25,308,421 6,541,328
Net unrealized appreciation
of investments
at end of period . 29,412,016 1,577,939,280 100,875,516 418,159,553
----------------------------------------------------
Net assets applicable to
outstanding units
of capital ..... $566,477,045$4,083,420,467$1,206,782,764$820,782,583
====================================================
Net asset value per share
(net assets divided by
shares outstanding)
Class A ........... $6.34 $28.96 $7.78 $22.89
Class Y $6.34 $28.96 $7.78 $22.89
Capital shares
outstanding
Class A ........... 88,836,167 137,269,909 155,074,578 35,861,356
Class Y ........... 477,973 3,718,814 84,158 ---
Capital shares authorized 400,000,000 600,000,000 600,000,000 200,000,000
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended DECEMBER 31, 1995
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ --------------------------------------
Investment Income (Loss)
Income:
Dividends ......... $ ---- $ 60,846,446 $ 16,326,285$ 1,955,821
Interest .......... 39,676,688 18,236,047 7,850,613 3,711,014
----------- ------------ ------------------------
Total income .... 39,676,688 79,082,493 24,176,898 5,666,835
----------- ------------ ------------------------
Expenses (Note 2):
Investment
management fee ... 2,407,401 20,740,095 6,103,149 4,025,985
Transfer agency and
dividend disbursing
-- Class A ..... 746,244 4,104,581 979,985 931,218
Service fee -- Class A 668,365 4,616,319 1,268,218 865,511
Custodian fees .... 27,105 344,514 57,333 38,584
Accounting services fee 65,000 100,000 96,250 71,667
Audit fees ........ 17,184 96,327 30,010 16,945
Shareholder servicing
fee -- Class Y ... 2,493 88,933 471 ---
Legal fees ........ 6,944 51,547 26,458 8,553
Other ............. 104,531 605,080 163,676 139,371
----------- ------------ ------------------------
Total expenses .. 4,045,267 30,747,396 8,725,550 6,097,834
----------- ------------ ------------------------
Net investment
income (loss) 35,631,421 48,335,097 15,451,348 (430,999)
----------- ------------ ------------------------
Realized and Unrealized
Gain (Loss) on
Investments
Realized net gain
on securities ..... 4,083,731 137,622,658 161,862,782 26,780,476
Realized net gain (loss) on foreign
currency transactions 27,596 (60,510) 1,331 474
----------- ------------ ------------------------
Realized net gain
on investments .. 4,111,327 137,562,148 161,864,113 26,780,950
Unrealized appreciation
in value of
investments during
the period......... 61,755,254 742,707,419 140,365,483 255,993,038
----------- ------------ ------------------------
Net gain on
investments ..... 65,866,581 880,269,567 302,229,596 282,773,988
----------- ------------ ------------------------
Net increase
in net assets
resulting
from operations. $101,498,002 $928,604,664 $317,680,944$282,342,989
============ ============ ========================
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended December 31, 1995 United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------------------------------------------------
Increase in Net Assets
Operations:
Net investment
income .......... $ 35,631,421$ 48,335,097$ 15,451,348$ (430,999)
Realized net gain
on investments .. 4,111,327 137,562,148 161,864,113 26,780,950
Unrealized
appreciation .... 61,755,254 742,707,419 140,365,483 255,993,038
----------------------------------------------------
Net increase
in net assets resulting
from operations. 101,498,002 928,604,664 317,680,944 282,342,989
----------------------------------------------------
Dividends to shareholders
from:*
Net investment income
Class A ......... (35,740,983) (46,382,026) (14,998,659) ---
Class Y ......... (90,066) (676,269) (4,366) ---
Realized net gain on
investment transactions
Class A ......... --- (121,455,126) (127,689,006)(24,276,021)
Class Y ......... --- (3,204,607) (68,073) ---
----------------------------------------------------
(35,831,049) (171,718,028) (142,760,104)(24,276,021)
----------------------------------------------------
Capital share
transactions (Note 5)(17,026,228) 181,629,624 64,841,625 66,213,033
----------------------------------------------------
Total increase .... 48,640,725 938,516,260 239,762,465 324,280,001
Net Assets
Beginning of period 517,836,320 3,144,904,207 967,020,299 496,502,582
----------------------------------------------------
End of period $566,477,045$4,083,420,467$1,206,782,764$820,782,583
====================================================
Undistributed net
investment income $575,962 $2,184,484 $1,322,673 $---
======== ========== ========== ====
*See "Financial Highlights" on pages .
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended December 31, 1994 United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------------------------------------------------
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.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED BOND FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
--------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Net asset value,
beginning of period $5.62 $6.39 $6.31 $6.32 5.80
----- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.40 0.39 0.41 0.45 0.47
Net realized and
unrealized gain
(loss) on
investments ..... 0.72 (0.75) 0.41 0.00 0.56
----- ----- ----- ----- -----
Total from investment
operations ....... 1.12 (0.36) .82 .45 1.03
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment income (0.40) (0.39) (0.41) (0.46) (0.47)
Distribution from
capital gains ... (0.00) (0.02) (0.33) (0.00) (0.04)
----- ----- ----- ----- -----
Total distributions (0.40) (0.41) (0.74) (0.46) (0.51)
----- ----- ----- ----- -----
Net asset value,
end of period .... $6.34 $5.62 $6.39 $6.31 $6.32
===== ===== ===== ===== =====
Total return* ...... 20.50% -5.76% 13.19% 7.50% 18.78%
Net assets, end of
period (000
omitted) ......... $563,445 $517,836 $641,668 $589,946 $524,404
Ratio of expenses to
average net assets 0.74% 0.72% 0.65% 0.64% 0.65%
Ratio of net investment
income to average
net assets ....... 6.54% 6.60% 6.14% 7.29% 7.96%
Portfolio turnover
rate ............. 66.38% 127.11% 175.39% 115.17% 318.76%
*Total return calculated without taking into account the sales load deducted on
an initial purchase.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED BOND FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout the Period:
For the
period from
June 19, 1995
to December 31, 1995
--------------------
Net asset value,
beginning of period $6.11
----
Income from investment
operations:
Net investment income 0.21
Net realized and
unrealized gain
on investments .. 0.22
----
Total from investment
operations ....... 0.43
----
Less distributions:
Dividends from net
investment income (0.20)
Distribution from
capital gains ... (0.00)
----
Total distributions (0.20)
----
Net asset value,
end of period .... $6.34
=====
Total return ....... 7.20%
Net assets, end of
period (000
omitted) ......... $3,032
Ratio of expenses to
average net assets 0.63%*
Ratio of net investment
income to average
net assets ....... 6.41%*
Portfolio turnover
rate ............. 66.38%
*Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED INCOME FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
----------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Net asset value,
beginning of period $23.34 $24.77 $22.05 $20.44 $16.46
------ ------ ------ ------ ------
Income from investment
operations:
Net investment income 0.36 0.36 0.40 0.46 0.51
Net realized and
unrealized gain
(loss) on
investments ..... 6.53 (0.80) 3.11 1.96 4.29
------ ------ ------ ------ ------
Total from investment
operations ....... 6.89 (0.44) 3.51 2.42 4.80
------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.35) (0.36) (0.40) (0.46) (0.53)
Distribution from
capital gains ... (0.92) (0.63) (0.39) (0.35) (0.29)
------ ------ ------ ------ ------
Total distributions (1.27) (0.99) (0.79) (0.81) (0.82)
------ ------ ------ ------ ------
Net asset value,
end of period .... $28.96 $23.34 $24.77 $22.05 $20.44
====== ====== ====== ====== ======
Total return* ...... 29.60% -1.82% 16.05% 11.96% 29.64%
Net assets, end of
period (000
omitted) ......... $3,975,717$3,144,904$3,060,073$2,537,161$2,150,986
Ratio of expenses to
average net assets 0.83% 0.74% 0.66% 0.65% 0.66%
Ratio of net investment
income to average
net assets ....... 1.31% 1.45% 1.70% 2.19% 2.71%
Portfolio turnover
rate ............. 17.59% 18.54% 21.70% 19.25% 24.68%
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED INCOME FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout the Period:
For the
period from
June 19, 1995
to December 31, 1995
--------------------
Net asset value,
beginning of period $27.73
-----
Income from investment
operations:
Net investment income 0.21
Net realized and
unrealized gain
on investments .. 2.14
-----
Total from investment
operations ....... 2.35
-----
Less distributions:
Dividends from net
investment income (0.20)
Distribution from
capital gains ... (0.92)
-----
Total distributions (1.12)
-----
Net asset value,
end of period .... $28.96
======
Total return ....... 8.45%
Net assets, end of
period (000
omitted) ......... $107,703
Ratio of expenses to
average net assets 0.74%*
Ratio of net investment
income to average
net assets ....... 1.36%*
Portfolio turnover
rate ............. 17.59%
*Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED ACCUMULATIVE FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
----------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Net asset value,
beginning of period $6.58 $7.19 $7.50 $7.15 $6.03
----- ----- ----- ----- -----
Income from investment
operations:
Net investment income . .11 .13 .11 .16 .19
Net realized and
unrealized gain
(loss) on
investments ..... 2.12 (0.13) .55 .85 1.22
----- ----- ----- ----- -----
Total from investment
operations ....... 2.23 0.00 .66 1.01 1.41
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment income (0.11) (0.13) (0.11) (0.16) (0.20)
Distribution from
capital gains ... (0.92) (0.48) (0.84) (0.50) (0.09)
Distribution in
excess of capital
gains ........... (0.00) (0.00) (0.02) (0.00) (0.00)
----- ----- ----- ----- -----
Total distributions (1.03) (0.61) (0.97) (0.66) (0.29)
----- ----- ----- ----- -----
Net asset value,
end of period .... $7.78 $6.58 $7.19 $7.50 $7.15
===== ===== ===== ===== =====
Total return* ...... 34.21% 0.04% 9.06% 14.20% 23.68%
Net assets, end of
period (000
omitted) ......... $1,206,128 $967,020$1,033,774 $992,924 $904,635
Ratio of expenses to
average net assets 0.80% 0.71% 0.65% 0.62% 0.63%
Ratio of net investment
income to average
net assets ....... 1.42% 1.76% 1.34% 2.13% 2.79%
Portfolio turnover
rate ............. 229.03% 205.40% 230.29% 194.41% 241.11%
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED ACCUMULATIVE FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout the Period:
For the
period from
July 11, 1995
to December 31, 1995
--------------------
Net asset value,
beginning of period $7.84
----
Income from investment
operations:
Net investment income 0.05
Net realized and
unrealized gain
on investments .. 0.87
----
Total from investment
operations ....... 0.92
----
Less distributions:
Dividends from net
investment income (0.06)
Distribution from
capital gains ... (0.92)
----
Total distributions (0.98)
----
Net asset value,
end of period .... $7.78
=====
Total return ....... 11.92%
Net assets, end of
period (000
omitted) ......... $655
Ratio of expenses to
average net assets 0.76%*
Ratio of net investment
income to average
net assets ....... 1.24%*
Portfolio turnover
rate ............. 229.03%
*Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
UNITED SCIENCE AND TECHNOLOGY FUND
Class A Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the fiscal year ended December 31,
----------------------------------------------
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Net asset value,
beginning of period $15.21 $14.83 $14.64 $15.42 $10.27
------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... (0.01) .00 .01 .03 .10
Net realized and
unrealized gain
(loss) on
investments ..... 8.40 1.40 1.21 (0.66) 5.90
------ ------ ------ ------ ------
Total from investment
operations ....... 8.39 1.40 1.22 (0.63) 6.00
------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.00) (0.00) (0.01) (0.03) (0.10)
Distribution from
capital gains ... (0.71) (1.02) (0.95) (0.12) (0.75)
Distribution in
excess of capital
gains ........... (0.00) (0.00) (0.07) (0.00) (0.00)
------ ------ ------ ------ ------
Total distributions (0.71) (1.02) (1.03) (0.15) (0.85)
------ ------ ------ ------ ------
Net asset value,
end of period .... $22.89 $15.21 $14.83 $14.64 $15.42
====== ====== ====== ====== ======
Total return* ...... 55.37% 9.78% 8.51% -4.03% 59.25%
Net assets, end of
period (000
omitted) ......... $820,783 $496,503 $446,611 $428,806 $405,380
Ratio of expenses to
average net assets 0.93% 0.96% 0.91% 0.87% 0.85%
Ratio of net investment
income to average
net assets ....... -0.07% 0.00% 0.06% 0.24% 0.75%
Portfolio turnover
rate ............. 32.89% 64.39% 68.38% 45.79% 59.24%
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
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. At December 31, 1995, United Science and Technology Fund
reclassified $449,234 from accumulated undistributed net realized gain
(loss) on investment transactions; of this amount, $430,539 was
reclassified into undistributed net investment income and $18,695 was
reclassified into additional paid-in capital. In addition, for each of the
Funds, the following amounts were reclassified between accumulated
undistributed net investment income and accumulated undistributed net
realized gain on investment transactions:
Increase (Decrease) Increase (Decrease
Undistributed Undistributed
Net Investment Net Realized
Income Gain
----------------- ------------------
United Bond Fund $ 27,596 $(27,596)
United Income Fund (60,510) 60,510
United Accumulative Fund 1,331 (1,331)
United Science and
Technology Fund 474 (474)
Net investment income, net realized gains and net assets were not affected
by these changes.
F. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management And Payments To Affiliated Persons
The Corporation 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 $13.6 billion of
combined net assets at December 31, 1995) 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 Corporation 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
For Class A shares, 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. With respect to Class Y shares, the
Corporation pays WARSCO a monthly fee at an annual rate of .15% of the average
daily net assets of the class for the preceding month. The 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 for Class A shares (which are not an
expense of the Corporation) of $18,952,707, out of which W&R paid sales
commissions of $10,611,402 and all expenses in connection with the sale of the
Corporation's shares, except for registration fees and related expenses.
Under a Service Plan for Class A shares 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 $224,666.
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, 1995
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 $185,722,108$ 657,857,236$2,337,338,500$245,940,282
Purchases of U.S. Government
securities 161,542,010 37,872,969 --- ---
Purchases of short-term
securities 321,281,5181,796,909,5331,941,967,010 804,408,104
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 202,331,295 584,247,1652,179,813,636 196,749,559
Proceeds from maturities and
sales of U.S. Government
securities 158,670,827 37,857,813 --- ---
Proceeds from maturities and sales
of short-term securities 323,408,4231,819,691,5512,160,927,856 807,504,916
For Federal income tax purposes, cost of investments owned at December 31,
1995 and the related appreciation (depreciation) were as follows:
Aggregate
Cost AppreciationDepreciation Appreciation
-------------- --------------------------------------
United Bond Fund $ 531,928,173$ 30,530,707$ 1,118,084$ 29,412,623
United Income Fund 2,506,075,2491,624,793,741 46,853,539 1,577,940,202
United Accumulative
Fund 1,117,922,174 135,508,422 34,632,940 100,875,482
United Science and
Technology Fund 410,392,673 441,686,409 23,610,413 418,075,996
NOTE 4 -- Federal Income Tax Matters
The Corporation's income and expenses attributed to each Fund and the gains
and losses on security transactions of each Fund have been attributed to that
Fund for Federal income tax purposes as well as for accounting purposes. For
Federal income tax purposes, United Income Fund, United Science and Technology
Fund and United Accumulative Fund realized capital gain net income of
$137,622,658, $23,260,417 and $152,961,921, respectively, during the year ended
December 31, 1995. A portion of the capital gain net income was paid to
shareholders during the year ended December 31, 1995. Remaining capital gain
net income will be distributed to the Fund's shareholders. For Federal income
tax purposes, United Bond Fund realized capital losses of $80,903 during the
year ended December 31, 1995. This amount is available to offset future
realized capital gain net income through December 31, 2003. Remaining prior
year capital loss carryforwards of United Bond Fund aggregated $27,347,477,
which are available to offset future capital gain net income through December
31, 2002.
NOTE 5 -- Commencement of Multiclass Operations
On June 17, 1995, each Fund within the Corporation was authorized to offer
investors a choice of two classes of shares, Class A and Class Y, each of which
has equal rights as to assets and voting privileges with respect to each Fund.
Class Y shares are not subject to a sales charge on purchases; they are not
subject to a Rule 12b-1 Service Plan and have a separate transfer agency and
dividend disbursement services fee structure. A comprehensive discussion of the
terms under which shares of either class are offered is contained in the
prospectus and the Statement of Additional Information for the Corporation.
United Income Fund and United Bond Fund commenced multiclass operations on June
19, 1995 and United Accumulative Fund commenced multiclass operations on July
11, 1995. United Science and Technology Fund had not commenced multiclass
operations as of December 31, 1995.
Income, non-class specific expenses and realized and unrealized gains and
losses are allocated daily to each class of shares based on the value of
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
Transactions in capital stock for the fiscal year ended December 31, 1995
are summarized below.
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
----------- ------------ ------------------------
Shares issued from sale
of shares:
Class A ............ 7,903,177 13,156,068 3,690,645 15,272,219
Class Y ............ 494,273 3,737,901 76,842 ---
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 4,996,291 5,453,592 17,417,933 1,060,921
Class Y ............ 14,634 133,843 9,457 ---
Shares redeemed:
Class A ............ (16,233,171) (16,103,667) (12,973,028)(13,108,833)
Class Y ............ (30,934) (152,930) (2,141) ---
----------- ----------- ---------- ----------
Increase (decrease) in
outstanding capital
shares:
Class A ............ (3,333,703) 2,505,993 8,135,550 3,224,307
Class Y ............ 477,973 3,718,814 84,158 ---
----------- ----------- ---------- ----------
Total for Fund .... (2,855,730) 6,224,807 8,219,708 3,224,307
========= ========== ========= =========
Value issued from sale
of shares:
Class A ............ $47,524,601 $358,973,863 $28,187,349$315,997,134
Class Y ............ 3,026,041 104,695,114 600,969 ---
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 29,904,406 155,645,364 133,229,799 23,096,462
Class Y ............ 90,066 3,880,877 72,439 ---
Value redeemed:
Class A ............ (97,382,064) (437,078,074) (97,231,889)(272,880,563)
Class Y ............ (189,278) (4,487,520) (17,042) ---
----------- ------------ ----------- -----------
Increase (decrease) in
outstanding capital:
Class A ............ ($19,953,057) $ 77,541,153 $64,185,259 $66,213,033
Class Y ............ 2,926,829 104,088,471 656,366 ---
----------- ----------- ---------- ----------
Total for fund .. ($17,026,228) $181,629,624 $64,841,625 $66,213,033
=========== ============ =========== ===========
<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, 1995, the results of its operations for
the year then ended and 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, 1995 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
February 8, 1996
<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, 1995
Statement of Assets and Liabilities
For the year ended December 31, 1995
Statements of Operations
For each of the two years in the period ended December 31, 1995
Statement of Changes in Net Assets
Schedule I -- Investment Securities as of December 31, 1995
Report of Independent Accountants
Included in Part C:
-------------------
Financial Data Schedule
Other schedules prescribed by Regulation S-X are not filed because the
required matter is not present or is insignificant.
<PAGE>
(b) Exhibits:
(1) Articles of Incorporation, as amended, filed April 18, 1995 as EX-
99.B1-charter to the Post-Effective Amendment No. 117 to the
Registration Statement on Form N-1A*
Articles Supplementary as proposed, filed April 18, 1995 as EX-99.B1-
ufartsup to the Post-Effective Amendment No. 117 to the Registration
Statement on Form N-1A*
(2) Bylaws, as amended, attached hereto as EX-99.B2-ufbylaw
(3) Not applicable
(4) Article FIFTH and Article SEVENTH of the Articles of Incorporation, as
amended, filed April 18, 1995 as EX-99.B1-charter to the Post-
effective Amendment No. 117 to the Registration Statement on Form N-
1A*; Article I, Article IV and Article VII of the Bylaws, as amended,
attached hereto as EX-99.B2-ufbylaw
(5) Investment Management Agreement filed September 30, 1994 as EX-99.B5-
UFIMA to Post-Effective Amendment No. 116 to the Registration
Statement on Form N-1A*
Assignment of the Investment Management Agreements (refiling by EDGAR)
attached hereto as EX-99.B5-ufassign
(6) Underwriting Agreement, dated February 8, 1995, filed April 18, 1995
as EX-99.B6-ufua to the Post-Effective Amendment No. 117 to the
Registration Statement on Form N-1A*
(7) Not applicable
(8) Custodian Agreement, as amended filed April 18, 1995 as EX-99.B8-ufca
to the Post-Effective Amendment No. 117 to the Registration Statement
on Form N-1A*
(9) Shareholder Servicing Agreement filed April 18, 1995 as EX-99.B9-ufssa
to the Post-Effective Amendment No. 117 to the Registration Statement
on Form N-1A*
Fund Class A application attached hereto as EX.99.B9-ufappca
Fund Class Y application filed April 18, 1995 as EX-99.B9-ufappcy to
the Post-Effective Amendment No. 117 to the Registration Statement on
Form N-1A*
Fund NAV application filed April 18, 1995 as EX-99.B9-ufappnav to the
Post-Effective Amendment No. 117 to the Registration Statement on Form
N-1A*
Accounting Services Agreement filed April 18, 1995 as EX-99.B9-ufasa
to the Post-Effective Amendment No. 117 to the Registration Statement
on Form N-1A*
Service Agreement filed 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 filed April 18, 1995 as EX-99.B9-ufsaa
to the Post-Effective Amendment No. 117 to the Registration Statement
on Form N-1A*
Class Y Letter of Understanding attached hereto as EX-99.B9-uflou
- ---------------------------------
*Incorporated herein by reference
(10) Not applicable
(11) Consent of Independent Accountants attached hereto as EX-99.B11-
ufconsnt
(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
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
- ---------------------------------
*Incorporated herein by reference
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-
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, filed April 18, 1995 as EX-99.B15-ufspca to
the Post-Effective Amendment No. 117 to the Registration Statement on
Form N-1A*
(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)
attached hereto as EX-99.B16-ufyield
(17) Financial Data Schedules attached hereto as EX-27.B17-uffds1, EX-
27.B17-uffds2, EX-27.B17-uffds3, EX-27.B17-uffds4
(18) Multiple Class Plan attached hereto as EX-99.B18-ufmcp
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, 1995
-------------- ------------------------------
Class A Capital Stock 412,329
Class Y Capital Stock 17
27. Indemnification
---------------
Reference is made to Article SEVENTH paragraph 6(b) through 6(f) of the
Articles of Incorporation, as amended, filed April 18, 1995 as EX-99.B1-
charter to the Post-Effective Amendment No. 117 to the Registration
Statement on Form N-1A*; and to Article IV of the Underwriting Agreement
filed April 18, 1995 as EX-99.B6-ufua to Post-Effective Amendment No. 117
to the Registration Statement on Form N-1A*, both of which provide
indemnification. Also refer to Section 2-418 of the Maryland General
Corporation Law regarding indemnification of directors, officers, employees
- ---------------------------------
*Incorporated herein by reference
and agents.
28. Business and Other Connections of Investment Manager
----------------------------------------------------
Waddell & Reed Investment Management Company is the investment manager of
the Registrant. Under the terms of an Investment Management Agreement
between Waddell & Reed, Inc. and the Registrant, Waddell & Reed, Inc. is to
provide investment management services to the Registrant. Waddell & Reed,
Inc. assigned its investment management duties under this agreement to
Waddell & Reed Investment Management Company on January 8, 1992. Waddell &
Reed Investment Management Company is not engaged in any business other
than the provision of investment management services to those registered
investment companies described in Part A and Part B of this Post-Effective
Amendment.
Each director and executive officer of Waddell & Reed Investment Management
Company has had as his sole business, profession, vocation or employment
during the past two years only his duties as an executive officer and/or
employee of Waddell & Reed Investment Management Company or its
predecessors, except as to persons who are directors and/or officers of the
Registrant and have served in the capacities shown in the Statement of
Additional Information of the Registrant, and except for Mr. Ronald K.
Richey. Mr. Richey is Chairman of the Board and Chief Executive Officer of
Torchmark Corporation, the parent company of Waddell & Reed, Inc., and
Chairman of the Board of United Investors Management Company, a holding
company of which Waddell & Reed, Inc. is an indirect subsidiary. Mr.
Richey's address is 2001 Third Avenue South, Birmingham, Alabama 35233.
The address of the others is 6300 Lamar Avenue, Shawnee Mission, Kansas
66202-4200.
As to each director and officer of Waddell & Reed Investment Management
Company, reference is made to the Prospectus and SAI of this Registrant.
29. Principal Underwriter
---------------------
(a) Waddell & Reed, Inc. is the principal underwriter of the Registrant.
It is also the principal underwriter to the following investment
companies:
United International Growth Fund, Inc.
United Continental Income Fund, Inc.
United Vanguard Fund, Inc.
United Retirement Shares, Inc.
United Municipal Bond Fund, Inc.
United High Income Fund, Inc.
United Cash Management, Inc.
United Government Securities Fund, Inc.
United New Concepts Fund, Inc.
United Gold & Government Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund II, Inc.
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 Technology Fund
United Periodic Investment Plans to acquire shares of United
Accumulative Fund
- ---------------------------------
*Incorporated herein by reference
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
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(b) 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 28th
day of March, 1996.
UNITED FUNDS, INC.
(Registrant)
By /s/ Keith A. Tucker*
------------------------
Keith A. Tucker, President
Pursuant to the requirements of the Securities Act of 1933, and/or the
Investment Company Act of 1940, this Post-Effective Amendment has been signed
below by the following persons in the capacities and on the date indicated.
Signatures Title
---------- -----
/s/Ronald K. Richey* Chairman of the Board March 28, 1996
- ---------------------- ------------------
Ronald K. Richey
/s/Keith A. Tucker* President and Director March 28, 1996
- ---------------------- (Principal Executive ------------------
Keith A. Tucker Officer)
/s/Theodore W. Howard* Vice President, March 28, 1996
- ---------------------- Treasurer and Principal ------------------
Theodore W. Howard Accounting Officer
/s/Robert L. Hechler* Vice President and March 28, 1996
- ---------------------- Principal Financial ------------------
Robert L. Hechler Officer
/s/Henry L. Bellmon* Director March 28, 1996
- ---------------------- ------------------
Henry L. Bellmon
/s/Dodds I. Buchanan* Director March 28, 1996
- --------------------- ------------------
Dodds I. Buchanan
/s/Jay B. Dillingham* Director March 28, 1996
- -------------------- ------------------
Jay B. Dillingham
/s/Linda Graves* Director March 28, 1996
- -------------------- ------------------
Linda Graves
/s/John F. Hayes* Director March 28, 1996
- ------------------- ------------------
John F. Hayes
/s/Glendon E. Johnson Director March 28, 1996
- ------------------- ------------------
Glendon E. Johnson
/s/William T. Morgan* Director March 28, 1996
- ------------------- ------------------
William T. Morgan
/s/Doyle Patterson* Director March 28, 1996
- ------------------- ------------------
Doyle Patterson
Director
- -------------------- ------------------
Eleanor B. Schwartz
/s/Frederick Vogel III* Director March 28, 1996
- ------------------- ------------------
Frederick Vogel III
/s/Paul S. Wise* Director March 28, 1996
- ------------------- ------------------
Paul S. Wise
*By
Sharon K. Pappas
Attorney-in-Fact
ATTEST:
Sheryl Strauss
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. AND WADDELL & REED FUNDS, 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/her behalf as such director or officer as
indicated below opposite his/her signature hereto, to any Registration Statement
and 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 or amendment or supplement thereto; 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: February 7, 1996 /s/Keith A. Tucker
--------------------------
Keith A. Tucker, President
/s/Ronald K. Richey Chairman of the Board February 7, 1996
- -------------------- ----------------
Ronald K. Richey
/s/Keith A. Tucker President and Director February 7, 1996
- -------------------- (Principal Executive ----------------
Keith A. Tucker Officer)
/s/Theodore W. Howard Vice President, Treasurer February 7, 1996
- -------------------- and Principal Accounting ----------------
Theodore W. Howard Officer
/s/Robert L. Hechler Vice President and February 7, 1996
- -------------------- Principal Financial ----------------
Robert L. Hechler Officer
/s/Henry L. Bellmon Director February 7, 1996
- -------------------- ----------------
Henry L. Bellmon
/s/Dodds I. Buchanan Director February 7, 1996
- -------------------- ----------------
Dodds I. Buchanan
/s/Jay B. Dillingham Director February 7, 1996
- -------------------- ----------------
Jay B. Dillingham
/s/Linda Graves Director February 7, 1996
- -------------------- ----------------
Linda Graves
/s/John F. Hayes Director February 7, 1996
- -------------------- ----------------
John F. Hayes
/s/Glendon E. Johnson Director February 7, 1996
- -------------------- ----------------
Glendon E. Johnson
/s/James Judd Director February 7, 1996
- -------------------- ----------------
James Judd
/s/William T. Morgan Director February 7, 1996
- -------------------- ----------------
William T. Morgan
/s/Doyle Patterson Director February 7, 1996
- -------------------- ----------------
Doyle Patterson
Director
- -------------------- ----------------
Eleanor Schwartz
/s/Frederick Vogel III Director February 7, 1996
- -------------------- ----------------
Frederick Vogel III
/s/Paul S. Wise Director February 7, 1996
- -------------------- ----------------
Paul S. Wise
Director
- -------------------- ----------------
Leslie S. Wright
Attest:
/s/ Sharon K. Pappas
- --------------------------------
Sharon K. Pappas, Vice President
and Secretary
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 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 Treasurers, 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 or 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.B5-ufassign
Assignment
Waddell & Reed, Inc. ("W&R") does hereby assign, transfer and convey, and United
International Growth Fund, Inc. ("Fund") does hereby consent to the assignment,
transfer and conveyance of, effective January 8, 1992, the Investment Management
Agreement between W&R and the Fund, dated July l, 1990, to Waddell & Reed
Investment Management Company ("WRIMCO"), a wholly owned subsidiary of W&R. W&R
has provided certain undertakings, agreements and guarantees in connection with
this assignment as provided in the Guarantee of Performance attached hereto as
Exhibit A.
Executed this 8th day of January, 1992.
Waddell & Reed, Inc.
By: William T. Morgan
William T. Morgan, President
United International Growth Fund, Inc.
By William T. Morgan
William T. Morgan, President
Accepted:
Waddell & Reed Investment Management Company
By Rodney O. McWhinney
Rodney O. McWhinney, Sr. Vice President
Guarantee of Performance
In consideration of each of the Funds' listed in Exhibit A hereto consent to the
assignment by Waddell & Reed, Inc., of the Investment Management Agreement
between Waddell & Reed, Inc., and the particular Fund to Waddell & Reed
Investment Management Company ("WRIMCO"), a wholly owned subsidiary of Waddell &
Reed, Inc., Waddell & Reed, Inc. hereby undertakes and agrees that at all times
WRIMCO shall be staffed and adequately supported to assure that WRIMCO is fully
capable of carrying out any and all of its obligations, duties and
responsibilities under the Investment Management Agreements assigned to it and
hereby further guarantees that WRIMCO shall perform its obligations, duties and
responsibilities in accordance with the terms of the several Investment
Management Agreements and in accordance with all applicable Federal laws and
regulations.
Dated this 11th day of December, 1991.
Waddell & Reed, Inc.
By: Rodney O. McWhinney
Rodney O. McWhinney
Senior Vice President
EXHIBIT A
United Funds, Inc.
United Bond Fund
United Income Fund
United Accumulative Fund
United Science & Energy Fund
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United Government Securities Fund, Inc.
United Vanguard Fund, Inc.
United High Income Fund, Inc.
United Cash Management, Inc.
United Retirement Shares, Inc.
United High Income Fund II, Inc.
United New Concepts Fund, Inc.
United Gold & Government Fund, Inc.
United Continental Income Fund, Inc.
United International Growth Fund, Inc.
TMK/United Funds, Inc.
Bond Portfolio
Growth Portfolio
High Income Portfolio
Income Portfolio
Money Market Portfolio
EX-99.B9-uflou
DATE
ADDRESS
Dear:
The purpose of this Letter of Understanding is to confirm our mutual
understanding regarding the establishment of an account in the United Funds on
behalf of [NAME OF INSTITUTION OF PLAN] and our agreement as to subsequent
administrative procedures.
It is our understanding that the Plan wishes to establish an account in the
United Funds for the purpose of utilizing [FUND NAME] as a participant-directed
investment alternative. This Letter of Understanding shall serve as a
substitute application to open the account.
We will establish the mutual fund account upon receipt of the initial share
purchase with the following registration:
The Federal Tax Identification Number to be shown on the account is
.
We will set up the account to have dividend and capital gains (securities
profits) distributions reinvested rather than paid in cash. Exhibit A reflects
the frequency of anticipated distributions.
[The next two paragraphs are included only for employee benefit plan/accounts:]
By approving and signing the Letter of Understanding, you certify that the [PLAN
NAME] is a [401(k) / 403(b) / 457] plan having 100 or more eligible employees,
thereby qualifying the plan to establish an omnibus account, under the terms of
the [FUND NAME] Prospectus, for making purchases of Class Y shares, which are
priced at net asset value (no sales load).
The undersigned trustee on behalf of the Plan also certifies that it has the
authority to open such an account on behalf of [PLAN NAME].
It is our understanding that funds will be wire transferred from your bank for
the purpose of purchasing [FUND NAME] shares. To insure timely investment, any
wire must be received by United Missouri Bank by 2:00 p.m. (Central) on the day
of the wire. The following wire order instructions should be used:
United Missouri Bank, N.A.
ABA #101000695; United K.C.;
For Waddell & Reed Account #000-797-8
FBO (Registration of
Account)
Account No. (To be provided for each
account)
Notify Control Depart. 236-1978
When funds are to be wired from the account to your bank in accordance with your
request, the wire must be received by your bank by 1:00 p.m. Eastern on the day
of the wire. The following wire order instructions are to be used:
We offer to provide an enhanced level of service to ...your institution / the
Plan... and its authorized representatives. Contained in Exhibits B and C
hereto is information provided to allow us to provide this service. We cannot
overemphasize that our ability to serve the institutional client is dependent
upon the Plan's representatives interfacing with the members of our
institutional support staff as identified in Exhibit C.
If any of the above does not conform to your understanding and/or instructions,
or if you have questions or need additional information, please do not hesitate
to call me at the number shown on Exhibit C. We are very much looking forward
to our relationship with [NAME OF INSTITUTION OR NAMES OF PLAN AND TRUSTEE] and
are determined to provide the best possible service.
Sincerely,
SALES REP NAME
SALES REP TITLE
<PAGE>
ACKNOWLEDGED AND APPROVED
[If signed by a plan trustee, add next line:]
AS TRUSTEE FOR
By:
Title:
Date:
The above signatory certifies that the following
persons are authorized to instruct transactions in the
account (type or print):
For Waddell & Reed use only:
Accepted:
<PAGE>
EXHIBIT A
FREQUENCY OF DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS
[FUND NAME] ordinarily distributes investment income by way of a dividend once
per [NORMAL DIVIDEND FREQUENCY].
[FUND NAME] generally distributes capital gains (securities profits), if capital
gains are available for distribution, once each year in December, on the same
date as the December dividend distribution.
For the Fund and in the case of reinvested dividend and capital gain
distributions, the record date and the reinvestment date are the same. The per
share distribution amounts are applied to the share balance in the account after
the posting of that day's activity.
For the remainder of [YEAR], the ordinary dividend distribution dates would be
[DATES].
<PAGE>
EXHIBIT B
ADDITIONAL SERVICES WE WILL PROVIDE
The following services can be provided by us on an ongoing basis:
1. Coordinating purchases by notifying Waddell & Reed Services Company of each
incoming wire transfer and verifying the posting of the purchase(s) the
following business morning.
2. Confirming the purchase to you including: the date and dollar amount of the
investment, the purchase price and number of shares purchased, and the new Fund
account share balance.
3. Notifying you of dividend and/or capital gains distributions and
reinvestments including: the per share and dollar amount of distributions, the
date of reinvestment, the reinvestment price and number of shares purchased, and
the new Fund account share balance.
4. Processing redemptions based on your request by notifying Waddell & Reed
Services Company of the redemption, instructing them as to the outgoing wire
transfer, and verifying the posting of the redemption the following business
morning.
5. Confirming the redemption to you including: the date and dollar amount of
the redemption, the selling price and number of shares redeemed, and the new
Fund account share balance.
6. At the end of each month following the initial investment, we will provide
a report, if desired, which reflects all transactions in the account during the
previous month, and the share balance, net asset value per share and total
market value of the account.
Each of the confirmations, notifications and reports identified above will be
made available at your request, by telephone or facsimile transmission, as
appropriate to whomever you request.
<PAGE>
EXHIBIT C
LIST OF WADDELL & REED CONTACTS
During the period of account setup and initial wire transfer, your contacts at
Waddell & Reed are the following:
PRIMARY SECONDARY
Cynthia LaGree James McCroy
913-236-1722 913-236-1744
On an ongoing basis once the account is operational, your contacts are as
follows:
PRIMARY SECONDARY
Julie Herrick Dana Arth
913-236-1854 913-236-1853
BACKUP
Cynthia LaGree
913-236-1722
Our fax numbers are:
Primary: 913-236-1801
Secondary: 913-236-1888
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. 118 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 8, 1996, relating to the financial statements and financial highlights
of United Funds, Inc., which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the Class
A Shares Prospectus and the Class Y Shares Prospectus which constitute part of
this Registration Statement. We also consent to the reference to us under the
heading "Custodial and Auditing Services" in such Statement of Additional
Information, to the references to us under the heading "Financial Highlights" in
the Class A Shares Prospectus and the Class Y Shares Prospectus and to the
references to us under the heading "Independent Accountants" in the Class A
Shares Prospectus and the Class Y Shares Prospectus.
Price Waterhouse LLP
Kansas City, Missouri
March 28, 1996
<TABLE>
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RUN DATE: 03/26/96, TIME: 10:31:00
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/95 THROUGH 12/31/95
UNITED BOND FUND 000000000000024
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<PAGE>
FDCSY2 PAGE
RUN DATE: 03/26/96, TIME: 10:31:00
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/95 THROUGH 12/31/95
UNITED BOND FUND 000000000000024
SECURITY SHORT NAME METHOD INCOME ANNUAL RATE COMMENT CALCULATION ERROR
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<PAGE>
FDCSY2 PAGE
RUN DATE: 03/26/96, TIME: 10:31:00
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/95 THROUGH 12/31/95
UNITED BOND FUND 000000000000024
SECURITY SHORT NAME METHOD INCOME ANNUAL RATE COMMENT CALCULATION ERROR
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<PAGE>
FDCSY2 PAGE
RUN DATE: 03/26/96, TIME: 10:31:00
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/95 THROUGH 12/31/95
UNITED BOND FUND 000000000000024
S U M M A R Y D A T A CLASS 01
TOTAL INCOME.................. 2,975,621.54
TOTAL EXPENSES................ 384,666.56-
AVERAGE SHARES................ 89,134,548.6760
MAXIMUM OFFERING PRICE........ 6.730000
EXPONENT USED IN FORMULA...... 6
SEC ADVERTISED YIELD.......... 5.239268
<PAGE>
FDCSY2 PAGE
RUN DATE: 03/26/96, TIME: 10:31:00
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/95 THROUGH 12/31/95
UNITED BOND FUND 000000000000024
SECURITY SHORT NAME METHOD INCOME ANNUAL RATE COMMENT CALCULATION ERROR
- --------- ------------------------- -------- ------------- --------------- -------------------- --------------------
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23321PJA7 DLJMA 1994-3 A13 YTM 26,501.54 6.65711450 STANDARD YTM INC BASED ON EFF DT
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398037AS0 GREYHOUND FINANCIAL SEYTM IS 2,603.45 UR 5.91911860 ILSTANDARD YTM
<PAGE>
FDCSY2 PAGE
RUN DATE: 03/26/96, TIME: 10:31:00
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/95 THROUGH 12/31/95
UNITED BOND FUND 000000000000024
SECURITY SHORT NAME METHOD INCOME ANNUAL RATE COMMENT CALCULATION ERROR
- --------- ------------------------- -------- ------------- --------------- -------------------- --------------------
44881HEU4 HYDRO-QUEBEC MTN STEP/P00FOYTM RI 30,638.11 HR 6.21538740 STANDARD YTM
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458182BS0 INTERAMER DEV BANK P99/04 YTM-CALL 11,812.90 1.89536450 STANDARD YTM
480206AJ0 JONES INTERCABLE YTM 18,524.50 8.06104250 STANDARD YTM
481206AD2 JOY TECHNOLOGIES YTM-CALL 20,261.83 7.01347000 STANDARD YTM
484610AB6 KANSALLIS - OSAKE FOYTM RI 38,063.37 HR 6.20043720 STANDARD YTM
543859AJ1 LORAL CORP YTM 11,774.30 6.32765820 STANDARD YTM
55263EAL9 MBNA CORP. FLOAT ACTUAL 25,877.75 6.17500000
570387AG5 MARK IV INDUST SR SUB NOT YTM 21,220.37 8.00827240 STANDARD YTM
571900AA7 MARRIOTT INTL YTM 28,050.04 6.42488850 STANDARD YTM
580169AK6 MCDONNELL DOUGLAS NOTES YTM 15,220.86 5.63775670 STANDARD YTM
580169AL4 MCDONNELL DOUGLAS YTM 30,314.47 6.04974590 STANDARD YTM
620076AC3 MOTOROLA INC DEB (PUT 01) YTM 24,547.89 6.44788860 STANDARD YTM
628931AB3 NBD BANK N.A. P04 YTM 40,372.17 6.51806500 STANDARD YTM
629527AF9 NABISCO INC P97 YTM 28,379.60 6.56911620 STANDARD YTM
63858SAA7 NATIONSBANK CORP MTN P04 YTM 34,919.46 6.84802200 STANDARD YTM
652478AD0 NEWS AMER HLDGS YTM 28,433.59 5.97315780 STANDARD YTM
652478AQ1 NEWS AMER HLDGS YTM 28,976.79 7.62076320 STANDARD YTM
655419AA7 NORAM ENERGY YTM 30,408.33 6.82452210 STANDARD YTM
65542LAF8 NORANDA FOREST YTM 18,073.92 6.57530790 STANDARD YTM
655422AN3 NORANDA INC. NOTES YTM 29,132.94 6.49468690 STANDARD YTM
669771AR8 NOVA CORP OF ALBERTA YTM 47,403.75 6.69845020 STANDARD YTM
669827DH7 NOVA SCOTIA P01 YTM 33,548.57 6.84807300 STANDARD YTM
690734AH1 OWENS CORNING FIBER YTM 31,099.41 6.54879820 STANDARD YTM PAGE
707271AL6 PENN CENTRAL CORP SUB NOT YTM 31,739.58 8.67011690 STANDARD YTM
742718BG3 PROCTOR & GAMBLE P04/14 SEYTM IS 65,493.87 UR 6.17266930 ILSTANDARD YTM
759464AG5 RELIANCE GROUP HOLDINGS FOYTM RI 14,295.98 HR 8.26719200 STANDARD YTM
7609203W6TERFMSI 1992-S33 A7 YTM 66,835.95 7.95080590 STANDARD YTM
76110WAG1 RASC 1995-KS3 CLASS D YTM 26,719.84 7.86501590 STANDARD YTM
766570AD7 RIGGS NATIONAL SUB DEBENT YTM-CALL 26,413.63 7.18152730 STANDARD YTM
783549AZ1 RYDER SYSTEM INC YTM 20,337.33 6.89785960 STANDARD YTM
803111MN0 SARA LEE CORP ..ACTUAL 5,371.82 54 0.00000000
812007AC6 SEAGULL ENERGY ..YTM 23,935.80 56 7.96211200 STANDARD YTM
8305059B1 SE BANKEN NY BRANCH CD ..YTM 25,137.33 60 6.36321490 STANDARD YTM
8447HBAA0 SOUTHTRUST BK OF BIRM P05..YTM 31,825.60 00 6.88183920 STANDARD YTM
87924FAU0 TELECOMM STEP/ P99 ..YTM 26,306.23 5.76883460 STANDARD YTM
88033GAC4 TENET HEALTHCARE ..YTM 34,308.43 68 7.76601040 STANDARD YTM
88320DAH2 TEXTRON FINANCE MLP ACTUAL 2,220.00 6.00000000
887315AN9 TIME WARNER YTM 31,777.46 7.14505320 STANDARD YTM PAGE
89350BZ56 TRANSAMERICA FINANCE BOA ACTUAL 1,568.24 5.72000000
900262AR7 TURNER BROADCASTING SEYTM IS 28,715.98 UR 7.96803550 ILSTANDARD YTM
90328AB69 USAA CAPITAL CORP GSC YTM/ACTL 2,376.89 5.60000000 STANDARD YTM PAGE
903293AN8 USG CORP. YTM 14,167.80 7.70649730 STANDARD YTM
903293AP3 USG CORP SEYTM IS 5,310.09 UR 7.96931750 ILSTANDARD YTM
<PAGE>
FDCSY2 PAGE
RUN DATE: 03/26/96, TIME: 10:31:00
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/95 THROUGH 12/31/95
UNITED BOND FUND 000000000000024
SECURITY SHORT NAME METHOD INCOME ANNUAL RATE COMMENT CALCULATION ERROR
- --------- ------------------------- -------- ------------- --------------- -------------------- --------------------
90337QAV9 USX MTN FOYTM RI 28,332.67 HR 5.89222140 STANDARD YTM
908640AD7 UNION TEXAS PETROLEUM SR YTM 28,877.87 6.35195980 STANDARD YTM
909214AW8 UNISYS CORP FOYTM RI 9,175.78 HR 14.69432750 STANDARD YTM
909214AY4 UNISYS CORP YTM 16,735.17 14.28985520 STANDARD YTM
911596MN1 U S BANCORP ACTUAL 3,246.41 0.00000000
912803AT0 US TREASURY STRIP YTM 70,034.18 6.28853270 STANDARD YTM
912810DZ8 US TREASURY BOND YTM 1,847.87 6.14020590 STANDARD YTM
912827B92 US TREASURY NOTE YTM 79,019.85 5.43369110 STANDARD YTM
912827J45 US TREASURY NOTE YTM 45,888.07 5.19809090 STANDARD YTM
912827S86 US TREASURY NOTE YTM 24,766.86 5.61017390 STANDARD YTM
912827V82 US TREASURY NOTE YTM 4,160.16 5.57458560 STANDARD YTM
912827YE6 US TREASURY YTM 74,779.72 5.35014630 STANDARD YTM
925524AD2 VIACOM INC. YTM 8,198.17 7.01514240 STANDARD YTM
925524AE0 VIACOM INC SR NOTES YTM 6,554.97 6.59293800 STANDARD YTM
925526AH8 VIACOM INTERNATIONAL YTM 10,336.42 7.67424670 STANDARD YTM
947423AD1 DEL WEBB SENIOR NOTES YTM-CALL 31,882.36 9.11970060 STANDARD YTM
949740BU7 WELLS FARGO & CO YTM 29,962.23 6.19900380 STANDARD YTM
984245AA8 YPF SA YTM 14,937.28 9.05610600 STANDARD YTM
<PAGE>
FDCSY2 PAGE
RUN DATE: 03/26/96, TIME: 10:31:00
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/95 THROUGH 12/31/95
UNITED BOND FUND 000000000000024
S U M M A R Y D A T A CLASS 03
TOTAL INCOME.................. 15,738.54
TOTAL EXPENSES................ 1,535.49-
AVERAGE SHARES................ 471,320.9882
MAXIMUM OFFERING PRICE........ 6.340000
EXPONENT USED IN FORMULA...... 6
SEC ADVERTISED YIELD.......... 5.771902
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT TO
SHAREHOLDERS DATED DECEMBER 31, 1995 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-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 2,506,075,249
<INVESTMENTS-AT-VALUE> 4,084,015,451
<RECEIVABLES> 28,945,667
<ASSETS-OTHER> 49,926
<OTHER-ITEMS-ASSETS> 81,632
<TOTAL-ASSETS> 4,113,092,676
<PAYABLE-FOR-SECURITIES> 10,597,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19,075,209
<TOTAL-LIABILITIES> 29,672,209
<SENIOR-EQUITY> 140,988,723
<PAID-IN-CAPITAL-COMMON> 2,336,040,977
<SHARES-COMMON-STOCK> 140,988,723
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,184,484
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,267,003
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,577,939,280
<NET-ASSETS> 4,083,420,467
<DIVIDEND-INCOME> 60,846,446
<INTEREST-INCOME> 18,236,047
<OTHER-INCOME> 0
<EXPENSES-NET> (30,747,396)
<NET-INVESTMENT-INCOME> 48,335,097
<REALIZED-GAINS-CURRENT> 137,562,148
<APPREC-INCREASE-CURRENT> 880,269,567
<NET-CHANGE-FROM-OPS> 928,604,664
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (47,058,295)
<DISTRIBUTIONS-OF-GAINS> (124,659,733)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,893,969
<NUMBER-OF-SHARES-REDEEMED> (16,256,597)
<SHARES-REINVESTED> 5,587,435
<NET-CHANGE-IN-ASSETS> 938,516,260
<ACCUMULATED-NII-PRIOR> 968,192
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20,740,095
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30,747,396
<AVERAGE-NET-ASSETS> 3,691,965,276
<PER-SHARE-NAV-BEGIN> 23.34
<PER-SHARE-NII> .36
<PER-SHARE-GAIN-APPREC> 6.53
<PER-SHARE-DIVIDEND> (0.35)
<PER-SHARE-DISTRIBUTIONS> (0.92)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 28.96
<EXPENSE-RATIO> .83
<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, 1995 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-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 1,117,922,174
<INVESTMENTS-AT-VALUE> 1,218,797,656
<RECEIVABLES> 9,206,178
<ASSETS-OTHER> 32,936
<OTHER-ITEMS-ASSETS> 948
<TOTAL-ASSETS> 1,228,037,718
<PAYABLE-FOR-SECURITIES> 11,085,975
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,168,979
<TOTAL-LIABILITIES> 21,254,954
<SENIOR-EQUITY> 155,158,736
<PAID-IN-CAPITAL-COMMON> 924,117,418
<SHARES-COMMON-STOCK> 155,158,736
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,322,673
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 25,308,421
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 100,875,516
<NET-ASSETS> 1,206,782,764
<DIVIDEND-INCOME> 16,326,285
<INTEREST-INCOME> 7,850,613
<OTHER-INCOME> 0
<EXPENSES-NET> (8,725,550)
<NET-INVESTMENT-INCOME> 15,451,348
<REALIZED-GAINS-CURRENT> 161,864,113
<APPREC-INCREASE-CURRENT> 140,365,483
<NET-CHANGE-FROM-OPS> 317,680,944
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (15,003,025)
<DISTRIBUTIONS-OF-GAINS> (127,757,079)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,767,487
<NUMBER-OF-SHARES-REDEEMED> (12,975,169)
<SHARES-REINVESTED> 17,427,390
<NET-CHANGE-IN-ASSETS> 239,762,465
<ACCUMULATED-NII-PRIOR> 873,019
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,103,149
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,725,550
<AVERAGE-NET-ASSETS> 1,085,622,643
<PER-SHARE-NAV-BEGIN> 6.58
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> 2.12
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> (0.92)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.78
<EXPENSE-RATIO> .8
<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, 1995 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-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 410,309,207
<INVESTMENTS-AT-VALUE> 828,468,669
<RECEIVABLES> 3,633,292
<ASSETS-OTHER> 10,569
<OTHER-ITEMS-ASSETS> 4,705
<TOTAL-ASSETS> 832,117,235
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,334,652
<TOTAL-LIABILITIES> 11,334,652
<SENIOR-EQUITY> 35,861,356
<PAID-IN-CAPITAL-COMMON> 360,220,346
<SHARES-COMMON-STOCK> 35,861,356
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6,541,328
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 418,159,553
<NET-ASSETS> 820,782,583
<DIVIDEND-INCOME> 1,955,821
<INTEREST-INCOME> 3,711,014
<OTHER-INCOME> 0
<EXPENSES-NET> (6,097,834)
<NET-INVESTMENT-INCOME> (430,999)
<REALIZED-GAINS-CURRENT> 26,780,950
<APPREC-INCREASE-CURRENT> 255,993,038
<NET-CHANGE-FROM-OPS> 282,342,989
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (24,276,021)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 15,272,219
<NUMBER-OF-SHARES-REDEEMED> (13,108,833)
<SHARES-REINVESTED> 1,060,921
<NET-CHANGE-IN-ASSETS> 324,280,001
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,025,985
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 6,097,834
<AVERAGE-NET-ASSETS> 657,953,760
<PER-SHARE-NAV-BEGIN> 15.21
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 8.40
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.71)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 22.89
<EXPENSE-RATIO> .93
<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, 1995 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-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 531,928,172
<INVESTMENTS-AT-VALUE> 561,340,796
<RECEIVABLES> 8,468,680
<ASSETS-OTHER> 15,421
<OTHER-ITEMS-ASSETS> 4,052
<TOTAL-ASSETS> 569,828,949
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,351,904
<TOTAL-LIABILITIES> 3,351,904
<SENIOR-EQUITY> 89,314,140
<PAID-IN-CAPITAL-COMMON> 474,620,683
<SHARES-COMMON-STOCK> 89,314,140
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 575,962
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (27,445,756)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,412,016
<NET-ASSETS> 566,477,045
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 39,676,688
<OTHER-INCOME> 0
<EXPENSES-NET> (4,045,267)
<NET-INVESTMENT-INCOME> 35,631,421
<REALIZED-GAINS-CURRENT> 4,111,327
<APPREC-INCREASE-CURRENT> 61,755,254
<NET-CHANGE-FROM-OPS> 65,866,581
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (35,831,049)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,397,450
<NUMBER-OF-SHARES-REDEEMED> (16,264,105)
<SHARES-REINVESTED> 5,010,925
<NET-CHANGE-IN-ASSETS> 48,640,725
<ACCUMULATED-NII-PRIOR> 747,994
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,407,401
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,045,267
<AVERAGE-NET-ASSETS> 543,889,816
<PER-SHARE-NAV-BEGIN> 5.62
<PER-SHARE-NII> .40
<PER-SHARE-GAIN-APPREC> .72
<PER-SHARE-DIVIDEND> (0.40)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.34
<EXPENSE-RATIO> .74
<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. Subsequent to such approval, Rule
18f-3 under the Investment Company Act of 1940 was adopted. It was determined
that the Funds operate under Rule 18f-3, and this Plan was adopted pursuant to
Rule 18f-3. 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 Rule 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, investment fund administrators and other third parties and other
third parties 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 of shares;
(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.
For any Fund, these expenses may, but are not required to, be directly
attributed and charged to a particular Class. The shareholder servicing fees
and other expenses listed above that are attributed and charged to a particular
Class are borne on a pro rata basis by the outstanding shares of that Class.
The expenses of the Funds that are not 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 the
Classes of that Fund.
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.
Adopted: April 17, 1995
As amended: December 6, 1995
Effective: January 9, 1996
March 28, 1996
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N. W.
Judiciary Plaza
Washington, D. C. 20549
Re: United Funds, Inc.
Post-Effective Amendment No. 118
Dear Sir or Madam:
In connection with the filing of the above-referenced Post-Effective Amendment,
I hereby represent that the Amendment does not contain disclosures which would
render it ineligible to become effective pursuant to paragraph (b) of Rule 485.
Yours truly,
Sharon K. Pappas
General Counsel
SKP:sw
