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. 119
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No. 26
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, 1997 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, 1996 was filed on February 25, 1997.
<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 ........................ *
Part B of
Form N-1A
Item No. SAI Caption
- --------- -----------
10(a) ..................... Cover Page
(b) ..................... *
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 ........................ 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, 1997. 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, 1997
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..................................................33
Ways to Set Up Your Account .......................................33
Buying Shares .....................................................34
Minimum Investments ...............................................37
Adding to Your Account ............................................37
Selling Shares ....................................................37
Shareholder Services ..............................................37
Personal Service ................................................40
Reports .........................................................40
Exchanges .......................................................40
Automatic Transactions ..........................................40
Distributions and Taxes ...........................................41
Distributions ...................................................41
Taxes ...........................................................42
ABOUT THE MANAGEMENT AND EXPENSES OF THE FUNDS......................44
WRIMCO and Its Affiliates .........................................45
Breakdown of Expenses .............................................47
Management Fee ..................................................47
Other Expenses ..................................................48
APPENDIX A..........................................................49
DESCRIPTION OF BOND RATINGS .......................................49
DESCRIPTION OF PREFERRED STOCK RATINGS 53
<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 0.14% 0.15% 0.13% 0.15%
Other expenses1 0.20% 0.16% 0.14% 0.23%
Total Fund
operating
expenses2 0.78% 0.87% 0.83% 0.99%
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return3 and (2) redemption at the end of each time period:
1 Year $ 65 $ 66 $ 65 $ 67
3 Years $ 81 $ 84 $ 82 $ 87
5 Years $ 98 $103 $101 $109
10 Years $149 $159 $154 $172
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."
1Expense information has been restated to reflect the current shareholder
servicing fee which became effective April 1, 1996.
2Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.
3Use 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
The following information has been audited by Deloitte & Touche LLP,
independent accountants, with respect to the fiscal year ended December 31,
1996, and by Price Waterhouse LLP, independent accountants, with respect to all
other fiscal years, and should be read in conjunction with the financial
statements and notes thereto, together with the report of Deloitte & Touche LLP,
included in the SAI.
For a Class A share outstanding throughout each period.*
<TABLE>
For the fiscal year ended December 31,
-----------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ............ $6.34 $5.62 $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11 $6.42
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.39 0.40 0.39 0.41 0.45 0.47 0.50 0.55 0.54 0.56
Net realized and
unrealized gain
(loss) on
investments ..... (0.20) 0.72 (0.75) 0.41 0.00 0.56 (0.26) 0.07 (0.02) (0.28)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........ 0.19 1.12 (0.36) 0.82 0.45 1.03 0.24 0.62 0.52 0.28
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income .......... (0.39) (0.40) (0.39) (0.41) (0.46) (0.47) (0.50) (0.56) (0.54) (0.55)
Distributions from
capital gains ... (0.00) (0.00) (0.02) (0.33) (0.00) (0.04) (0.01) (0.02) (0.06) (0.04)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions . (0.39) (0.40) (0.41) (0.74) (0.46) (0.51) (0.51) (0.58) (0.60) (0.59)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $6.14 $6.34 $5.62 $6.39 $6.31 $6.32 $5.80 $6.07 $6.03 $6.11
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return** ...... 3.20% 20.50% -5.76% 13.19% 7.50% 18.78% 4.24% 10.61% 8.99% 4.50%
Net assets, end of
period (000
omitted) ..........$518,873 $563,445 $517,836 $641,668 $589,946 $524,404 $439,487 $403,010 $335,337 $319,273
Ratio of expenses to
average net assets 0.77% 0.74% 0.72% 0.65% 0.64% 0.65% 0.67% 0.64% 0.65% 0.64%
Ratio of net investment
income to average
net assets ........ 6.34% 6.54% 6.60% 6.14% 7.29% 7.96% 8.54% 8.97% 9.00% 8.83%
Portfolio turnover
rate .............. 55.74% 66.38% 127.11% 175.39% 115.17% 318.76% 294.66% 353.57% 179.07% 232.65%
*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
The following information has been audited by Deloitte & Touche LLP,
independent accountants, with respect to the fiscal year ended December 31,
1996, and by Price Waterhouse LLP, independent accountants, with respect to all
other fiscal years, and should be read in conjunction with the financial
statements and notes thereto, together with the report of Deloitte & Touche LLP,
included in the SAI.
For a Class A share outstanding throughout each period.*
<TABLE>
For the fiscal year ended December 31,
------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $28.96 $23.34 $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08 $17.03
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income 0.33 0.36 0.36 0.40 0.46 0.51 0.61 0.65 0.60 0.72
Net realized and
unrealized gain
(loss) on
investments ... 5.53 6.53 (0.80) 3.11 1.96 4.29 (1.61) 3.89 2.35 0.59
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ...... 5.86 6.89 (0.44) 3.51 2.42 4.80 (1.00) 4.54 2.95 1.31
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.32) (0.35) (0.36) (0.40) (0.46) (0.53) (0.63) (0.65) (0.67) (0.66)
Distributions from
capital gains . (1.59) (0.92) (0.63) (0.39) (0.35) (0.29) (0.60) (1.96) (0.60) (2.60)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (1.91) (1.27) (0.99) (0.79) (0.81) (0.82) (1.23) (2.61) (1.27) (3.26)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period ... $32.91 $28.96 $23.34 $24.77 $22.05 $20.44 $16.46 $18.69 $16.76 $15.08
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return** .... 20.36% 29.60% -1.82% 16.05% 11.96% 29.64% -5.45% 27.49% 19.83% 7.17%
Net assets, end of
period (000
omitted) ........ $4,850,419$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
Ratio of expenses to
average net assets 0.86% 0.83% 0.74% 0.66% 0.65% 0.66% 0.68% 0.64% 0.67% 0.63%
Ratio of net investment
income to average
net assets ...... 1.03% 1.31% 1.45% 1.70% 2.19% 2.71% 3.44% 3.41% 3.65% 3.99%
Portfolio turnover
rate ............ 22.24% 17.59% 18.54% 21.70% 19.25% 24.68% 30.94% 60.77% 48.64% 58.46%
Average commission
rate paid ....... $0.0496
*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
The following information has been audited by Deloitte & Touche LLP,
independent accountants, with respect to the fiscal year ended December 31,
1996, and by Price Waterhouse LLP, independent accountants, with respect to all
other fiscal years, and should be read in conjunction with the financial
statements and notes thereto, together with the report of Deloitte & Touche LLP,
included in the SAI.
For a Class A share outstanding throughout each period.*
<TABLE>
For the fiscal year ended December 31,
------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period ............ $7.78 $6.58 $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75 $7.78
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.11 0.11 0.13 0.11 0.16 0.19 0.28 0.31 0.26 0.25
Net realized and
unrealized gain
(loss) on
investments ..... 0.82 2.12 (0.13) 0.55 0.85 1.22 (0.99) 1.43 0.71 0.19
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment
operations ........ 0.93 2.23 0.00 0.66 1.01 1.41 (0.71) 1.74 0.97 0.44
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income .......... (0.11) (0.11) (0.13) (0.11) (0.16) (0.20) (0.29) (0.29) (0.29) (0.32)
Distributions from
capital gains ... (0.85) (0.92) (0.48) (0.84) (0.50) (0.09) (0.09) (0.76) (0.00) (2.15)
Distribution in excess
of capital gains (0.00) (0.00) (0.00) (0.02) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions . (0.96) (1.03) (0.61) (0.97) (0.66) (0.29) (0.38) (1.05) (0.29) (2.47)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $7.75 $7.78 $6.58 $7.19 $7.50 $7.15 $6.03 $7.12 $6.43 $5.75
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return** ...... 12.18% 34.21% 0.04% 9.06% 14.20% 23.68% -10.17% 27.56% 17.05% 4.53%
Net assets, end of
period (000
omitted) ..........$1,285,227$1,206,128 $967,020$1,033,774 $992,924 $904,635 $767,218 $877,109 $737,231 $696,359
Ratio of expenses to
average net assets 0.83% 0.80% 0.71% 0.65% 0.62% 0.63% 0.64% 0.60% 0.63% 0.59%
Ratio of net investment
income to average
net assets ........ 1.34% 1.42% 1.76% 1.34% 2.13% 2.79% 4.12% 4.19% 4.09% 3.17%
Portfolio turnover
rate .............. 240.37% 229.03% 205.40% 230.29% 194.41% 241.11% 288.64% 338.24% 245.42% 316.74%
Average commission
rate paid ......... $0.0575
*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
The following information has been audited by Deloitte & Touche LLP,
independent accountants, with respect to the fiscal year ended December 31,
1996, and by Price Waterhouse LLP, independent accountants, with respect to all
other fiscal years, and should be read in conjunction with the financial
statements and notes thereto, together with the report of Deloitte & Touche LLP,
included in the SAI.
For a Class A share outstanding throughout each period.*
<TABLE>
For the fiscal year ended December 31,
-------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $22.89 $15.21 $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) (0.07) (0.01) 0.00 0.01 0.03 0.10 0.24 0.20 0.20 0.19
Net realized and
unrealized gain
(loss) on
investments ... 2.00 8.40 1.40 1.21 (0.66) 5.90 (0.65) 2.50 0.64 1.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ...... 1.93 8.39 1.40 1.22 (0.63) 6.00 (0.41) 2.70 0.84 1.25
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment
income ......... (0.00) (0.00) (0.00) (0.01) (0.03) (0.10) (0.25) (0.19) (0.21) (0.25)
Distributions from
capital gains .. (1.47) (0.71) (1.02) (0.95) (0.12) (0.75) (0.79) (0.70) (0.00) (1.72)
Distribution in excess
of capital gains (0.00) (0.00) (0.00) (0.07) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions (1.47) (0.71) (1.02) (1.03) (0.15) (0.85) (1.04) (0.89) (0.21) (1.97)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value,
end of period .... $23.35 $22.89 $15.21 $14.83 $14.64 $15.42 $10.27 $11.72 $9.91 $9.28
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return** ..... 8.35% 55.37% 9.78% 8.51% -4.03% 59.25% -3.51% 27.40% 9.05% 12.43%
Net assets, end of
period (000
omitted) ......... $980,547 $820,783 $496,503 $446,611 $428,806 $405,380 $239,077 $247,584 $214,693 $214,828
Ratio of expenses to
average net assets 0.98% 0.93% 0.96% 0.91% 0.87% 0.85% 0.90% 0.84% 0.89% 0.81%
Ratio of net investment
income to average
net assets ....... -0.33% -0.07% 0.00% 0.06% 0.24% 0.75% 2.06% 1.73% 1.94% 1.65%
Portfolio turnover
rate ............. 33.90% 32.89% 64.39% 68.38% 45.79% 59.24% 63.86% 83.19% 60.67% 85.35%
Average commission
rate paid ........ $0.0538
*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 other
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 the telephone number listed on the inside back
cover.
<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' investment goal(s). 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).
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, the proportions of its assets that a
Fund may invest in each such type 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, a
division of The McGraw-Hill Companies, ("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,
1996, 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 37.9%
AA 9.9
A 18.4
BBB 18.6
BB 11.3
B 1.6
CCC 0.0
CC 0.0
C 0.0
D 0.0
Unrated 1.2
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 indexed securities, which
are securities the value of which varies in relation to the value 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 and Other Asset-Backed Securities are bonds backed by
specific types of assets. Mortgage-backed securities represent direct or
indirect interests in pools of underlying mortgage loans that are secured by
real property. U.S. Government mortgage-backed securities are issued or
guaranteed as to principal and interest (but not as to market value) by the
Government National Mortgage Association, Fannie Mae (formerly the Federal
National Mortgage Association), Federal Home Loan Mortgage Corporation or other
government-sponsored enterprises. Other mortgage-backed securities are
sponsored or issued by private entities, including investment banking firms and
mortgage originators.
Mortgage-backed securities may be composed of one or more classes and may
be structured either as pass-through securities or collateralized debt
obligations. Multiple-class mortgage-backed securities are referred to in this
prospectus as "CMOs" Some CMOs are directly supported by other CMOs, which in
turn are supported by mortgage pools. Investors typically receive payments out
of the interest and principal on the underlying mortgages. The portions of
these payments that investors receive, as well as the priority of their rights
to receive payments, are determined by the specific terms of the CMO class.
For example, interest-only ("IO") classes are entitled to receive all or a
portion of the interest, but none (or only a nominal amount) of the principal
payments, from the underlying mortgage assets. If the mortgage assets
underlying an IO experience greater than anticipated principal prepayments, then
the total amount of interest payments allocable to the IO class, and therefore
the yield to investors, generally will be reduced. In some instances, an
investor in an IO may fail to recoup all of his or her initial investment, even
if the security is government guaranteed or considered to be of the highest
quality. Conversely, principal-only ("PO") classes are entitled to receive all
or a portion of the principal payments, but none of the interest, from the
underlying mortgage assets. PO classes are purchased at substantial discounts
from par, and the yield to investors will be reduced if principal payments are
slower than expected. IOs, POs and other CMOs involve special risks, and
evaluating them requires special knowledge.
When interest rates go down and homeowners refinance their mortgages,
mortgage-backed bonds may be paid off more quickly than investors expect. When
interest rates rise, mortgage-backed bonds may be paid off more slowly than
originally expected. Changes in the rate or "speed" of these prepayments can
cause the value of mortgage-backed securities to fluctuate rapidly.
Other asset-backed securities are similar to mortgage-backed securities,
except that the underlying assets are different. These underlying assets may be
nearly any type of financial asset or receivable, such as motor vehicle
installment sales contracts, home equity loans, leases of various types of real
and personal property and receivables from credit cards.
The yield characteristics of mortgage-backed and asset-backed securities
differ from those of traditional debt securities. Among the major differences
are that interest and principal payments are made more frequently and that
principal may be prepaid at any time because the underlying mortgage loans or
other assets generally may be prepaid at any time. Generally, prepayments on
fixed-rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Mortgage- and
asset-backed securities may also decrease in value as a result of increases in
interest rates and, because of prepayments, may benefit less than other bonds
from declining interest rates. Reinvestments of prepayments may occur at lower
interest rates than the original investment, thus adversely affecting a Fund's
yield. Actual prepayment experience may cause the yield of a mortgage-backed
security to differ from what was assumed when the Fund purchased the security.
The market for privately issued mortgage-backed and asset-backed securities
is smaller and less liquid than the market for U.S. Government mortgage-backed
securities. CMO classes may be specially structured in a manner that provides
any of a wide variety of investment characteristics, such as yield, effective
maturity and interest rate sensitivity. As market conditions change, however,
and especially during periods of rapid or unanticipated changes in market
interest rates, the attractiveness of some CMO classes and the ability of the
structure to provide the anticipated investment characteristics may be
significantly reduced. These changes can result in volatility in the market
value, and in some instances reduced liquidity, of the CMO class.
Policies and Restrictions: Each Fund may invest in mortgage-backed, asset-
backed and 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 Securities and Illiquid Investments. 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 Corporation's 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 any class of its securities, 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.
As a fundamental policy, 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.
<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. For 1997, the
maximum for an investor and his or her spouse is $4,000 ($2,000 for each
spouse) or, if less, the couple's combined earned income for 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.
_ Savings Incentive Match Plans for Employees (SIMPLE Plans) can be established
by small employers to contribute to their employees' retirement accounts and
involve fewer administrative requirements than 401(k) or other qualified
plans generally.
- -------------------------------------------------
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 transfer 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 Prospectus has been made available on a
diskette that can be used with certain software programs that have a reader,
i.e., a voice capability feature which can convert the data on the diskette into
an oral format.
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 third-party 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 NAVs 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 other taxpayer identification number is correct and
whether you are subject to backup withholding for failing to report income to
the Internal Revenue Service.
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 Income
Fund, Accumulative Fund or Science and Technology Fund or 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. Any
person who was a holder of an uncompleted (i) United Income Investment Program,
(ii) United Periodic Investment Plan to Acquire United Accumulative Fund Shares
of United Funds, Inc., or (iii) United Periodic Investment Plan to Acquire
United Science Fund Shares of United Funds, Inc. (each a "Plan") on May 30,
1996, with a face amount of less than $12,000, may purchase Class A shares of
the Fund corresponding to such Plan (i.e., United Income Fund, United
Accumulative Fund or United Science and Technology Fund, respectively) at net
asset value ("NAV") plus a maximum sales charge of 2%, up to the amount
representing the unpaid balance of such Plan, if the purchase order is so
designated. 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. Any holder of an
uncompleted Plan on May 30, 1996, with a face amount of $12,000 or more, may
purchase Class A shares of the Fund corresponding to such Plan at NAV, up to the
amount representing the unpaid balance of the Plan, if the purchase order is so
designated. In addition, any person who was a holder of a Plan on May 30, 1996
may purchase Class A shares of the Fund corresponding to such Plan at NAV up to
the amount representing partial Plan withdrawals outstanding on May 30, 1996,
provided the purchase order is so designated. 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 stating your account number, the account registration and that you
wish to purchase Class A shares of the Fund.
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 for redemption 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 Class A shares 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, other than those purchases
made through Automatic Investment Service, and after every 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 the telephone number listed on the inside back cover
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
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 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 generally 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 original 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; see the SAI
for a more detailed discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You are urged to consult
your own tax adviser.
<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 A shares offered by this
Prospectus, the Corporation has issued and outstanding Class Y shares which are
offered by Waddell & Reed, Inc. 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 acts as the principal underwriter and distributor
for variable life insurance and variable annuity policies issued by United
Investors Life Insurance Company for which TMK/United Funds, Inc. is the
underlying investment vehicle.
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 $15.1 billion as of December 31, 1996.
Management fees for each Fund as a percent of each Fund's net assets for
the fiscal year ended December 31, 1996 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, a division of the McGraw-Hill Companies. An 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, a division of The McGraw-Hill Companies. An 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 (800) 366-5465
Independent Accountants Shareholder Servicing Agent
Deloitte & Touche LLP Waddell & Reed
Kansas City, Missouri Services Company
6300 Lamar Avenue
Investment Manager P. O. Box 29217
Waddell & Reed Investment Shawnee Mission, Kansas
Management Company 66201-9217
6300 Lamar Avenue (913) 236-2000
P. O. Box 29217 (800) 366-5465
Shawnee Mission, Kansas
66201-9217 Accounting Services Agent
(913) 236-2000 Waddell & Reed
(800) 366-5465 Services Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
<PAGE>
United Funds, Inc.
Class A Shares
PROSPECTUS
March 31, 1997
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.
NUP2000(3-97)
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, 1997. 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, 1997
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
800-366-5465
<PAGE>
Table of Contents
AN OVERVIEW OF THE FUNDS.............................................3
EXPENSES.............................................................5
FINANCIAL HIGHLIGHTS.................................................6
PERFORMANCE.........................................................10
Explanation of Terms ..............................................10
ABOUT WADDELL & REED................................................11
ABOUT THE INVESTMENT PRINCIPLES OF THE FUNDS........................12
Investment Goals and Principles ...................................12
Risk Considerations .............................................13
Securities and Investment Practices ...............................15
ABOUT YOUR ACCOUNT..................................................29
Buying Shares .....................................................29
Minimum Investments ...............................................31
Adding to Your Account ............................................31
Selling Shares ....................................................31
Telephone Transactions ............................................33
Shareholder Services ..............................................33
Personal Service ................................................33
Reports .........................................................33
Exchanges .......................................................33
Distributions and Taxes ...........................................34
Distributions ...................................................34
Taxes ...........................................................34
ABOUT THE MANAGEMENT AND EXPENSES OF THE FUNDS......................36
WRIMCO and Its Affiliates .........................................37
Breakdown of Expenses .............................................39
Management Fee ..................................................39
Other Expenses ..................................................40
APPENDIX A..........................................................41
DESCRIPTION OF BOND RATINGS .......................................41
DESCRIPTION OF PREFERRED STOCK RATINGS ............................45
<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)
Management
fees 0.44% 0.56% 0.56% 0.61%
12b-1 fees None None None None
Other expenses 0.19% 0.17% 0.19% 0.20%
Total Fund
operating
expenses 0.63% 0.73% 0.75% 0.81%4
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return5 and (2) redemption at the end of each time period:
1 Year $ 6 $ 7 $ 8 $ 8
3 Years $20 $23 $24 $ 26
5 Years $35 $41 $42 $ 45
10 Years $79 $91 $93 $100
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."
4 Expense ratios are based on the management fees and other Fund-level
expenses of the applicable Fund for the fiscal year ended December 31, 1996, and
the expenses attributable to a Fund's Class Y shares that are anticipated for
the current year based on annualization of the Class Y expenses incurred during
the fiscal year ended December 31, 1996. Actual expenses may be greater or
lesser than those shown.
5Use 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
The following information has been audited by Deloitte & Touche LLP,
independent accountants, with respect to the fiscal year ended December 31, 1996
and by Price Waterhouse LLP, independent accountants, with respect to all other
periods, and should be read in conjunction with the financial statements and
notes thereto, together with the report of Deloitte & Touche LLP, included in
the SAI.
For a Class Y share outstanding throughout each period:
For the For the
fiscal year period from
ended 6/19/95* to
12/31/96 12/31/95
---------- -----------
Net asset value,
beginning of period $6.34 $6.11
----- ----
Income from investment
operations:
Net investment income 0.40 0.21
Net realized and
unrealized gain (loss)
on investments .. (0.20) 0.22
---- ----
Total from investment
operations ....... 0.20 0.43
---- ----
Less distributions:
Dividends from net
investment income (0.40) (0.20)
Distribution from
capital gains ... (0.00) (0.00)
---- ----
Total distributions (0.40) (0.20)
---- ----
Net asset value,
end of period .... $6.14 $6.34
==== ====
Total return ....... 3.35% 7.20%
Net assets, end of
period (000
omitted) ......... $11,779 $3,032
Ratio of expenses to
average net assets 0.62% 0.63%**
Ratio of net investment
income to average
net assets ....... 6.52% 6.41%**
Portfolio turnover
rate ............. 55.74% 66.38%**
*Commencement of operations.
**Annualized.
<PAGE>
Financial Highlights
UNITED INCOME FUND
The following information has been audited by Deloitte & Touche LLP,
independent accountants, with respect to the fiscal year ended December 31, 1996
and by Price Waterhouse LLP, independent accountants, with respect to all other
periods, and should be read in conjunction with the financial statements and
notes thereto, together with the report of Deloitte & Touche LLP, included in
the SAI.
For a Class Y share outstanding throughout each period:
For the For the
fiscal year period from
ended 6/19/95* to
12/31/96 12/31/95
---------- -----------
Net asset value,
beginning of period $28.96 $27.73
----- -----
Income from investment
operations:
Net investment income 0.36 0.21
Net realized and
unrealized gain
on investments .. 5.54 2.14
----- -----
Total from investment
operations ....... 5.90 2.35
----- -----
Less distributions:
Dividends from net
investment income (0.36) (0.20)
Distribution from
capital gains ... (1.59) (0.92)
----- -----
Total distributions (1.95) (1.12)
----- -----
Net asset value,
end of period .... $32.91 $28.96
===== =====
Total return ....... 20.53% 8.45%
Net assets, end of
period (000
omitted) ......... $151,344 $107,703
Ratio of expenses to
average net assets 0.73% 0.74%**
Ratio of net investment
income to average
net assets ....... 1.17% 1.36%**
Portfolio turnover
rate ............. 22.24% 17.59%**
Average commission
rate paid ........ $0.0496
*Commencement of operations.
**Annualized.
<PAGE>
Financial Highlights
UNITED ACCUMULATIVE FUND
The following information has been audited by Deloitte & Touche LLP,
independent accountants, with respect to the fiscal year ended December 31, 1996
and by Price Waterhouse LLP, independent accountants, with respect to all other
periods, and should be read in conjunction with the financial statements and
notes thereto, together with the report of Deloitte & Touche LLP, included in
the SAI.
For a Class Y share outstanding throughout each period:
For the For the
fiscal year period from
ended 7/11/95* to
12/31/96 12/31/95
---------- -----------
Net asset value,
beginning of period $7.78 $7.84
---- ----
Income from investment
operations:
Net investment income 0.12 0.05
Net realized and
unrealized gain
on investments .. 0.82 0.87
---- ----
Total from investment
operations ....... 0.94 0.92
---- ----
Less distributions:
Dividends from net
investment income (0.12) (0.06)
Distribution from
capital gains ... (0.85) (0.92)
---- ----
Total distributions (0.97) (0.98)
---- ----
Net asset value,
end of period .... $7.75 $7.78
==== ====
Total return ....... 12.27% 11.92%
Net assets, end of
period (000
omitted) ......... $2,640 $655
Ratio of expenses to
average net assets 0.74% 0.76%**
Ratio of net investment
income to average
net assets ....... 1.45% 1.24%**
Portfolio turnover
rate ............. 240.37% 229.03%**
Average commission
rate paid ........ $0.0575
*Commencement of operations.
**Annualized.
<PAGE>
Financial Highlights
UNITED SCIENCE AND TECHNOLOGY FUND
The following information has been audited by Deloitte & Touche LLP,
independent accountants, and should be read in conjunction with the financial
statements and notes thereto, together with the report of Deloitte & Touche LLP,
included in the SAI.
For a Class Y share outstanding throughout the period:
For the
period from
2/27/96* to
12/31/96
----------
Net asset value,
beginning of period $24.05
-----
Income from investment
operations:
Net investment loss (0.02)
Net realized and
unrealized gain
on investments .. 0.82
-----
Total from investment
operations ....... 0.80
-----
Less distributions:
Dividends from net
investment income (0.00)
Distribution from
capital gains ... (1.47)
-----
Total distributions (1.47)
-----
Net asset value,
end of period .... $23.38
=====
Total return ....... 3.25%
Net assets, end of
period (000
omitted) ......... $3,090
Ratio of expenses to
average net assets 0.80%**
Ratio of net investment
income to average
net assets ....... -0.12%**
Portfolio turnover
rate ............. 33.90%**
Average commission
rate paid ........ $0.0538
*Commencement of operations.
**Annualized.
<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 other
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 the telephone number listed on the inside back
cover.
<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' investment goal(s). 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).
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, the proportions of its assets that a Fund may invest in
each such type 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, a
division of The McGraw-Hill Companies, ("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,
1996, 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 37.9%
AA 9.9
A 18.4
BBB 18.6
BB 11.3
B 1.6
CCC 0.0
CC 0.0
C 0.0
D 0.0
Unrated 1.2
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 indexed securities, which
are securities the value of which varies in relation to the value 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 and Other Asset-Backed Securities are bonds backed by
specific types of assets. Mortgage-backed securities represent direct or
indirect interests in pools of underlying mortgage loans that are secured by
real property. U.S. Government mortgage-backed securities are issued or
guaranteed as to principal and interest (but not as to market value) by the
Government National Mortgage Association, Fannie Mae (formerly the Federal
National Mortgage Association), Federal Home Loan Mortgage Corporation or other
government-sponsored enterprises. Other mortgage-backed securities are
sponsored or issued by private entities, including investment banking firms and
mortgage originators.
Mortgage-backed securities may be composed of one or more classes and may
be structured either as pass-through securities or collateralized debt
obligations. Multiple-class mortgage-backed securities are referred to in this
prospectus as "CMOs" Some CMOs are directly supported by other CMOs, which in
turn are supported by mortgage pools. Investors typically receive payments out
of the interest and principal on the underlying mortgages. The portions of
these payments that investors receive, as well as the priority of their rights
to receive payments, are determined by the specific terms of the CMO class.
For example, interest-only ("IO") classes are entitled to receive all or a
portion of the interest, but none (or only a nominal amount) of the principal
payments, from the underlying mortgage assets. If the mortgage assets
underlying an IO experience greater than anticipated principal prepayments, then
the total amount of interest payments allocable to the IO class, and therefore
the yield to investors, generally will be reduced. In some instances, an
investor in an IO may fail to recoup all of his or her initial investment, even
if the security is government guaranteed or considered to be of the highest
quality. Conversely, principal-only ("PO") classes are entitled to receive all
or a portion of the principal payments, but none of the interest, from the
underlying mortgage assets. PO classes are purchased at substantial discounts
from par, and the yield to investors will be reduced if principal payments are
slower than expected. IOs, POs and other CMOs involve special risks, and
evaluating them requires special knowledge.
When interest rates go down and homeowners refinance their mortgages,
mortgage-backed bonds may be paid off more quickly than investors expect. When
interest rates rise, mortgage-backed bonds may be paid off more slowly than
originally expected. Changes in the rate or "speed" of these prepayments can
cause the value of mortgage-backed securities to fluctuate rapidly.
Other asset-backed securities are similar to mortgage-backed securities,
except that the underlying assets are different. These underlying assets may be
nearly any type of financial asset or receivable, such as motor vehicle
installment sales contracts, home equity loans, leases of various types of real
and personal property and receivables from credit cards.
The yield characteristics of mortgage-backed and asset-backed securities
differ from those of traditional debt securities. Among the major differences
are that interest and principal payments are made more frequently and that
principal may be prepaid at any time because the underlying mortgage loans or
other assets generally may be prepaid at any time. Generally, prepayments on
fixed-rate mortgage loans will increase during a period of falling interest
rates and decrease during a period of rising interest rates. Mortgage- and
asset-backed securities may also decrease in value as a result of increases in
interest rates and, because of prepayments, may benefit less than other bonds
from declining interest rates. Reinvestments of prepayments may occur at lower
interest rates than the original investment, thus adversely affecting a Fund's
yield. Actual prepayment experience may cause the yield of a mortgage-backed
security to differ from what was assumed when the Fund purchased the security.
The market for privately issued mortgage-backed and asset-backed securities
is smaller and less liquid than the market for U.S. Government mortgage-backed
securities. CMO classes may be specially structured in a manner that provides
any of a wide variety of investment characteristics, such as yield, effective
maturity and interest rate sensitivity. As market conditions change, however,
and especially during periods of rapid or unanticipated changes in market
interest rates, the attractiveness of some CMO classes and the ability of the
structure to provide the anticipated investment characteristics may be
significantly reduced. These changes can result in volatility in the market
value, and in some instances reduced liquidity, of the CMO class.
Policies and Restrictions: Each Fund may invest in mortgage-backed, asset-
backed and 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 Securities and Illiquid Investments. 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 Corporation's 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 any class of its securities, 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.
As a fundamental policy, 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.
<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 third-party 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 NAVs 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 other taxpayer identification number is correct and
whether you are subject to backup withholding for failing to report income to
the Internal Revenue Service.
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 stating your account number, the
account registration and that you wish to purchase Class Y shares of a Fund
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 for redemption 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.
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 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 generally 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; see the SAI
for a more detailed discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You are urged to consult
your own tax adviser.
<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, the Corporation has issued and outstanding Class A shares which are
offered by Waddell & Reed, Inc. through a separate prospectus. 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 the
telephone number listed on the inside back cover 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 acts as the principal underwriter and distributor
for variable life insurance and variable annuity policies issued by United
Investors Life Insurance Company for which TMK/United Funds, Inc. is the
underlying investment vehicle.
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 $15.1 billion as of December 31, 1996.
For the fiscal year ended December 31, 1996, 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, a division of the McGraw-Hill Companies. An 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, a division of the McGraw-Hill Companies. An 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 (800) 366-5465
Independent Accountants Shareholder Servicing Agent
Deloitte & Touche LLP Waddell & Reed
Kansas City, Missouri Services Company
6300 Lamar Avenue
Investment Manager P. O. Box 29217
Waddell & Reed Investment Shawnee Mission, Kansas
Management Company 66201-9217
6300 Lamar Avenue (913) 236-2000
P. O. Box 29217 (800) 366-5465
Shawnee Mission, Kansas
66201-9217 Accounting Services Agent
(913) 236-2000 Waddell & Reed
(800) 366-5465 Services Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
<PAGE>
United Funds, Inc.
Class Y Shares
PROSPECTUS
March 31, 1997
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
NUP2000-Y(3-97)
<PAGE>
UNITED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
(913) 236-2000
March 31, 1997
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, 1997, 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 ......................... 5
Investment Management and Other Services .............. 31
Purchase, Redemption and Pricing of Shares ............ 36
Directors and Officers ................................ 50
Payments to Shareholders .............................. 56
Taxes ................................................. 58
Portfolio Transactions and Brokerage .................. 62
Other Information ..................................... 65
Financial Statements .................................. 67
<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, 1996, 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
1-1-96 to 1-1-92 to 1-1-87 to
12-31-96 12-31-96 12-31-96
----------- ----------- -----------
United Bond Fund -2.74% 6.09% 7.68%
United Income Fund 13.44 13.40 14.17
United Accumulative Fund 5.73 12.07 11.86
United Science and
Technology Fund 2.12 12.65 15.85
The average annual total return quotations for Class A shares without sales
load deducted as of December 31, 1996, 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
1-1-96 to 1-1-92 to 1-1-87 to
12-31-96 12-31-96 12-31-96
----------- ----------- -----------
United Bond Fund 3.20% 7.35% 8.32%
United Income Fund 20.36 14.76 14.85
United Accumulative Fund 12.18 13.41 12.52
United Science and
Technology Fund 8.35 13.99 16.53
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 total return quotations for Class Y shares as of December 31, 1996,
which is the most recent balance sheet included in this SAI, for the periods
shown were as follows:
One year
period Period from
ended inception* to
December 31, 1996: December 31, 1996
United Bond Fund 3.35% 6.52%
United Income Fund 20.53 19.04
United Accumulative Fund 12.27 16.72
United Science and
Technology Fund 3.25
*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 and United Science and Technology Fund commenced selling Class Y
shares on February 27, 1996.
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, 1996, the date of the most
recent balance sheet included in this SAI, is 5.70%. The yield for United Bond
Fund Class Y shares computed according to the formula for the 30-day period
ended on December 31, 1996, the date of the most recent balance sheet included
in this SAI, is 6.17%.
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.
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.
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,
Fannie Mae (formerly, the Federal National Mortgage Association), 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 by a pool of mortgage assets. 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 issued by
U.S. Government agencies or instrumentalities including, but not limited to, the
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
Mortgage-backed securities represent direct or indirect participations in,
or are secured by and payable from, mortgage loans secured by real property and
include single- and multi-class pass-through securities and collateralized
mortgage obligations. Multi-class pass-through securities and collateralized
mortgage obligations are collectively referred to in this SAI as CMOs. The U.S.
Government mortgage-backed securities in which the Fund may invest include
mortgage-backed securities issued or guaranteed as to the payment of principal
and interest (but not as to market value) by Ginnie Mae, Fannie Mae, or Freddie
Mac. Other mortgage-backed securities are issued by private issuers, generally
originators of and investors in mortgage loans, including savings associations,
mortgage bankers, commercial banks, investment bankers and special purpose
entities. Payments of principal and interest (but not the market value) of such
private mortgage-backed securities may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. Government or one of its agencies or instrumentalities, or they may
be issued without any government guarantee of the underlying mortgage assets but
with some form of non-government credit enhancement. These credit enhancements
do not protect investors from changes in market value.
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 a Fund may invest in them if WRIMCO determines they
are consistent with the Fund's goal(s) and investment policies.
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.
Asset-Backed Securities
Asset-backed securities have structural characteristics similar to
mortgage-backed securities, as discussed above. However, the underlying assets
are not first lien mortgage loans or interests therein, but include assets such
as motor vehicle installment sales contracts, other installment sale contracts,
home equity loans, leases of various types of real and personal property and
receivables from revolving credit (credit card) agreements. Such assets are
securitized through the use of trusts or special purpose corporations. Payments
or distributions of principal and interest may be guaranteed up to a certain
amount and for a certain time period by a letter of credit or pool insurance
policy issued by a financial institution unaffiliated with the issuer, or other
credit enhancements may be present. The value of asset-backed securities may
also depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the credit
enhancement. Each Fund may invest in asset-backed securities as long as WRIMCO
determines that it is consistent with the Fund's goal(s) and investment
policies.
Special Characteristics of Mortgage-Backed and Asset-Backed Securities.
The yield characteristics of mortgage- and asset-backed securities differ from
those of traditional debt securities. Among the major differences are that
interest and principal payments are made more frequently, usually monthly, and
that principal may be prepaid at any time because the underlying mortgage loans
or other obligations generally may be prepaid at any time. Prepayments on a
pool of mortgage loans are influenced by a variety of economic, geographic,
social and other factors, including changes in mortgagors' housing needs, job
transfers, unemployment, mortgagors' net equity in the mortgaged properties and
servicing decisions. Generally, however, prepayments on fixed-rate mortgage
loans will increase during a period of falling interest rates and decrease
during a period of rising interest rates. Similar factors apply to prepayments
on asset-backed securities, but the receivables underlying asset-backed
securities generally are of a shorter maturity and thus are likely to experience
substantial prepayments. Such securities, however, often provide that for a
specified time period the issuers will replace receivables in the pool that are
repaid with comparable obligations. If the issuer is unable to do so, repayment
of principal on the asset-backed securities may commence at an earlier date.
The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificateholders and to any guarantor, and due to any
yield retained by the issuer. Actual yield to the holder may vary from the
coupon rate, even if adjustable, if the mortgage-backed securities are purchased
or traded in the secondary market at a premium or discount. In addition, there
is normally some delay between the time the issuer receives mortgage payments
from the servicer and the time the issuer makes the payments on the mortgage-
backed securities, and this delay reduces the effective yield to the holder of
such securities.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. Because prepayment rates of individual pools vary widely, it is not
possible to predict accurately the average life of a particular pool. In the
past, a common industry practice has been to assume that prepayments on pools of
fixed rate 30-year mortgages would result in a 12-year average life for the
pool. At present, mortgage pools, particularly those with loans with other
maturities or different characteristics, are priced on an assumption of average
life determined for each pool. In periods of declining interest rates, the rate
of prepayment tends to increase, thereby shortening the actual average life of a
pool of mortgage-related securities. Conversely, in periods of rising interest
rates, the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. However, these effects may not be present, or may
differ in degree, if the mortgage loans in the pools have adjustable interest
rates or other special payment terms, such as a prepayment charge. Actual
prepayment experience may cause the yield of mortgage-backed securities to
differ from the assumed average life yield.
Variable or Floating Rate Instruments
Variable or floating rate instruments (including notes purchased
directly from issuers) bear variable or floating interest rates and may carry
rights that permit holders to demand payment of the unpaid principal balance
plus accrued interest from the issuers or certain financial intermediaries on
dates prior to their stated maturities. 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 the value of which varies in relation
to the value 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
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.
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 and the Commodity Futures Trading Commission (the "CFTC").
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' goal(s) and permitted by the Funds' investment limitations and applicable
regulatory authorities. The Funds' Prospectus or 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 and liquid assets with a value marked-to-market daily, sufficient 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 or liquid assets in a
segregated account with its custodian in the prescribed amount as determined
daily.
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, 1996 and December 31, 1995 were as follows:
1996 1995
---- ----
United Bond Fund 55.74% 66.38%
United Income Fund 22.24 17.59
United Accumulative Fund 240.37 229.03
United Science and
Technology Fund 33.90 32.89
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 acts as principal underwriter and
distributor for variable life insurance and variable annuity policies issued by
United Investors Life Insurance Company for which TMK/United Funds, Inc. is the
underlying investment vehicle.
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.
The management fees paid to WRIMCO for each Fund during the last three
fiscal years were as follows:
1996 1995 1994
---- ---- ----
United Bond Fund ........ $ 2,344,627 $ 2,407,401 $ 2,552,094
United Income Fund ...... 25,277,033 20,740,095 15,069,003
United Accumulative Fund 6,879,322 6,103,149 4,773,506
United Science and Technology
Fund ................. 5,667,206 4,025,985 2,777,832
----------- ---------- -----------
Total ................ $40,168,188 $33,276,630 $25,172,435
=========== =====================
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 $1.3125 ($1.0208 prior to
April 1, 1996) 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, 1996,
1995 and 1994 were as follows:
1966 1995 1994
---- ---- ----
United Bond Fund ........ $61,667 $ 65,000 $ 66,667
United Income Fund ...... 100,000 100,000 100,000
United Accumulative Fund 100,000 96,250 92,500
United Science and Technology
Fund ................. 88,750 71,667 60,000
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, 1996, 1995 and 1994 were $26,543,939, $18,952,707 and
$19,687,406, respectively, and the amounts retained by Waddell & Reed, Inc. were
$11,396,996, $8,341,305 and $8,600,788, 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,
1996, service fees paid (or accrued) with respect to Class A shares were as
follows:
1996
----
United Bond Fund......... $ 749,534
United Income Fund ...... 6,498,915
United Accumulative Fund 1,606,204
United Science and Technology
Fund .................. 1,405,418
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. Deloitte & Touche 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, 1996 was as follows:
United Bond Fund
Net asset value per Class A share (Class A
net assets divided by Class A shares
outstanding) ............................. $6.14
Add: selling commission (5.75% of offering
price) ................................... .37
-----
Maximum offering price per Class A share
(Class A net asset value divided by 94.25%) $6.51
=====
United Income Fund
Net asset value per Class A share (Class A
net assets divided by Class A shares
outstanding) ............................. $32.91
Add: selling commission (5.75% of offering
price) ................................... 2.01
------
Maximum offering price per Class A share
(Class A net asset value divided by 94.25%) $34.92
======
United Accumulative Fund
Net asset value per Class A share (Class A
net assets divided by Class A shares
outstanding) ............................. $7.75
Add: selling commission (5.75% of offering
price) ................................... .47
-----
Maximum offering price per Class A share
(Class A net asset value divided by 94.25%) $8.22
=====
United Science and Technology Fund
Net asset value per Class A share (Class A
net assets divided by Class A shares
outstanding) ............................. $23.35
Add: selling commission (5.75% of offering
price) ................................... 1.42
------
Maximum offering price per Class A share
(Class A net asset value divided by 94.25%) $24.77
======
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 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 Quotations 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 third-party pricing system. 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 options trading
on national securities exchanges is 4:10 p.m. Eastern time and the close of the
regular session for 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 such 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 an 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.
Any person who was a holder of an uncompleted (i) United Income
Investment Program, (ii) United Periodic Investment Plan to Acquire United
Accumulative Fund Shares of United Funds, Inc., or (iii) United Periodic
Investment Plan to Acquire United Science Fund Shares of United Funds, Inc.
(each a "Plan") on May 30, 1996, with a face amount of less than $12,000, may
purchase Class A shares of the Fund corresponding to such Plan (i.e., United
Income Fund, United Accumulative Fund or United Science and Technology Fund,
respectively) at net asset value ("NAV") plus a maximum sales charge of 2%, up
to the amount representing the unpaid balance of such Plan, if the purchase
order is so designated.
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.
Any holder of an uncompleted Plan on May 30, 1996, with a face amount of
$12,000 or more, may purchase Class A shares of the Fund corresponding to such
Plan at NAV, up to the amount representing the unpaid balance of the Plan, if
the purchase order is so designated. In addition, any person who was a holder
of a Plan on May 30, 1996 may purchase Class A shares of the Fund corresponding
to such Plan at NAV up to the amount representing partial Plan withdrawals
outstanding on May 30, 1996, provided the purchase order is so designated.
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 through the Flexible
Withdrawal Service (the "Service") regular monthly, quarterly, semiannual or
annual payments by redeeming on a regular basis Class A shares that you own of a
Fund or of any of the funds in the United Group. It would be a disadvantage to
an investor to make additional purchases of shares while a withdrawal program is
in effect because it would result in duplication of sales charges. Applicable
forms to start the Service are available through Waddell & Reed, Inc.
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 the value at the offering price.
You can choose to have your shares redeemed to receive:
1. a monthly, quarterly, semiannual or annual payment of $50 or more;
2. 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 select the
percentage); or
3. 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 under the
Service are made by redeeming Class A 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 to any of the other choices originally available to you. You
may 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 dividends or distributions
paid in shares 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 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. For tax years after 1996, the annual maximum is $4,000
($2,000 for each spouse) or, if less, the couple's combined earned income for
the taxable year, even if one spouse had no earned income. 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 that is
either (a) a direct rollover distribution 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. Employers can make contributions
to SEP-IRAs established for employees. An employer may contribute up to 15% of
compensation or $24,000, whichever is less, 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, an actuarial consulting company;
President, Buchanan Ranch Corporation; formerly, Professor and Chairman of
Marketing, College of Business, University of Colorado.
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*
20 West 2nd Avenue
P. O. Box 2977
Hutchinson, Kansas 67504-2977
Director of Central Bank and Trust; Director of Central Kansas Bankshares;
Director of Central Properties, Inc.; 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*
928 Glorietta Blvd.
Coronado, California 92118
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.
WILLIAM L. ROGERS
1999 Avenue of the Stars
Los Angeles, California 90067
Principal, Colony Capital, Inc., a real estate related investment company;
formerly, partner in Trivest, a private investment concern.
FRANK J. ROSS, JR.*
700 West 47th Street
Kansas City, Missouri 64112
Partner, Polsinelli, White, Vardeman & Shalton, a law firm.
ELEANOR B. SCHWARTZ
5100 Rockhill Road
Kansas City, Missouri 64113
Chancellor, University of Missouri-Kansas City; formerly, Interim
Chancellor, 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 three 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; 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, six 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. Messrs. Leslie
S. Wright, Doyle Patterson and Jay B. Dillingham retired as Directors of the
Corporation and of each of the funds in the Fund Complex effective April 1,
1996, January 1, 1997 and January 14, 1997, respectively and each has elected a
position as Director Emeritus. During the Corporation's fiscal year ended
December 31, 1996, Mr. Wright received total compensation for his service as a
Director of $44,000 from the Fund Complex and the Corporation and aggregate
compensation from the Corporation of $19,692. During the Corporation's fiscal
year ended December 31, 1996, Mr. Patterson received total compensation for his
service as a Director of $48,000 from the Fund Complex and the Corporation and
aggregate compensation from the Corporation of $21,482. During the
Corporation's fiscal year ended December 31, 1996, Mr. Dillingham received total
compensation for his service as a Director of $49,000 from the Fund Complex and
the Corporation and aggregate compensation from the Corporation of $21,929.
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, 1996, the
Corporation's Directors received the following fees for service as a director:
Compensation Table
Total
Aggregate Compensation
Compensation From Corporation
From and Fund
Director Corporation Complex*
- -------- ------------ ------------
Ronald K. Richey $ 0 $ 0
Keith A Tucker 0 0
Henry L. Bellmon 21,929 49,000
Dodds I. Buchanan 21,929 49,000
Linda Graves 21,929 49,000
John F. Hayes 21,929 49,000
Glendon E. Johnson 21,482 48,000
William T. Morgan 21,929 49,000
William L. Rogers 4,914 11,000
Frank J. Ross, Jr. 4,914 11,000
Eleanor B. Schwartz 21,482 48,000
Frederick Vogel III 21,929 49,000
Paul S. Wise 21,929 49,000
*No Fund within the Fund Complex has a bonus, profit sharing or retirement
plan.
The officers are paid by WRIMCO or its affiliates.
Shareholdings
As of February 28, 1997, 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 net
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 attributable to that difference less losses from sales of
securities at a price lower than the Fund's basis therein; 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.
A Fund pays distributions from net capital gain (the excess of net long-
term capital gain over net short-term capital loss). A Fund may or may not have
such gain, depending on whether securities are sold and at what price. If a
Fund has net capital gain, it will pay distributions once each year in the
latter part of the fourth calendar quarter except to the extent it has prior
year net capital 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 contracts or foreign currencies that are not
directly related to the Fund's principal business of investing in securities (or
options and futures contracts 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 the 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 the 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 investor 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 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 will be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain -- which
would have to be distributed to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax -- even if those earnings and gain were not
distributed to the Fund by the QEF. 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.
Pursuant to proposed regulations, 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 Contracts and Currencies
The use of hedging and option income strategies, such as writing
(selling) and purchasing options and futures contracts, 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.
Gains from the disposition of foreign currencies (except certain gains that may
be excluded by future regulations), and gains from options and futures contracts
derived by a Fund with respect to its business of investing in securities or
foreign currencies, will qualify as permissible income under the Income
Requirement. However, income from the disposition of options and futures
contracts 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 contracts 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 contracts 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 gains or losses recognized on these deemed sales, and 60% of
any net realized gains or losses from any actual sales of section 1256
contracts, are treated as long-term capital gains or losses, and the balance is
treated as short-term capital gains or losses. Section 1256 contracts also may
be marked-to-market for purposes of the Excise Tax and for other purposes. The
Fund must distribute any such gains to its shareholders even though it may not
have closed the transactions and received cash to pay the distributions.
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 accrued 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
contracts 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
Funds during the fiscal years ended December 31, 1996, 1995 and 1994. 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.
1996 1995 1994
---------- ---------- ----------
United Bond Fund ..... $ 0 $ 469 $ 0
United Income Fund ... 2,444,984 1,882,280 1,730,535
United Accumulative Fund 6,157,885 4,952,823 4,787,543
United Science and
Technology Fund ... 438,029 321,141 516,617
---------- ---------- ----------
Total ................ $9,040,898 $7,156,713 $7,034,695
========== ====================
The next table shows for each of the Fund's last fiscal year the
transactions, other than principal transactions, which were directed to broker-
dealers who provided research as well as execution and the brokerage commissions
paid. These transactions were allocated to these broker-dealers by the internal
allocation procedures described above.
Amount of Brokerage
Transactions Commissions
-------------- ----------
United Bond Fund ....................$ --- $ ---
United Income Fund .................. 1,340,802,642 1,727,912
United Accumulative Fund ............ 3,411,550,423 4,628,899
United Science and Technology Fund .. 167,432,432 246,179
-------------- ----------
Total ............................ $4,919,785,497 $6,602,990
============== ==========
As of December 31, 1996, United Accumulative Fund owned securities of
Merrill Lynch & Co., Inc. and Paine Webber Group Inc. in the amounts of
$4,977,542 and $7,031,250, respectively. Merrill Lynch & Co. and Paine Webber
Group Inc. 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. 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, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Amusement and Recreation Services - 1.97%
MGM Grand Hotel Finance Corp.,
11.75%, 5-1-99 ........................ $10,000 $ 10,437,500
Chemicals and Allied Products - 4.26%
Dow Capital BV,
9.0%, 5-15-2010 ....................... 5,000 5,729,700
Dow Chemical Company (The),
8.55%, 10-15-2009 ..................... 5,000 5,569,200
Procter & Gamble Company (The),
8.0%, 9-1-2024 ........................ 10,000 11,325,100
Total ................................. 22,624,000
Communication - 7.99%
Bell Telephone Company of Pennsylvania (The),
8.35%, 12-15-2030 ..................... 5,000 5,875,700
BellSouth Telecommunications, Inc.,
5.85%, 11-15-2045 ..................... 3,000 2,954,790
Cablevision Industries Corporation,
9.25%, 4-1-2008 ....................... 5,000 5,303,050
Centel Capital Corporation,
9.0%, 10-15-2019 ...................... 5,585 6,619,007
Continental Cablevision, Inc.,
8.5%, 9-15-2001 ....................... 5,000 5,327,350
Infinity Broadcasting Corporation,
10.375%, 3-15-2002 .................... 1,750 1,846,250
Jones Intercable, Inc.,
9.625%, 3-15-2002 ..................... 2,500 2,625,000
Tele-Communications, Inc.,
6.58%, 2-15-2005 ...................... 7,500 7,756,575
Turner Broadcasting System, Inc.,
8.375%, 7-1-2013 ...................... 4,000 4,083,240
Total ................................. 42,390,962
Depository Institutions - 9.79%
AmSouth Bancorporation,
6.75%, 11-1-2025 ...................... 6,000 5,912,520
Chevy Chase Savings Bank, F.S.B.,
9.25%, 12-1-2005 ...................... 1,500 1,530,000
Deutsche Bank Financial Inc.,
6.7%, 12-13-2006 ...................... 4,250 4,170,780
J.P. Morgan & Co. Incorporated,
7.54%, 1-15-2027 ...................... 4,250 4,153,483
Kansallis-Osake-Pankki,
10.0%, 5-1-2002 ....................... 6,000 6,809,400
NBD Bank, National Association,
8.25%, 11-1-2024 ...................... 6,000 6,757,140
NationsBank Corporation,
8.57%, 11-15-2024 ..................... 5,000 5,722,550
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (CONTINUED)
Depository Institutions (Continued)
Riggs National Corporation,
8.5%, 2-1-2006 ........................ $ 5,000 $ 5,225,000
SouthTrust Bank of Alabama, N.A.:
5.58%, 2-6-2006 ....................... 4,500 4,350,060
7.69%, 5-15-2025 ...................... 5,000 5,282,150
Sovereign Bancorp, Inc.,
8.0%, 3-15-2003 ....................... 2,000 2,027,500
Total ................................. 51,940,583
Electric, Gas and Sanitary Services - 2.01%
Arkla, Inc.,
10.0%, 11-15-2019 ..................... 8,000 8,911,680
El Paso Electric Company,
7.25%, 2-1-99 ......................... 1,750 1,745,695
Total ................................. 10,657,375
Fabricated Metal Products - 0.58%
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 3,000 3,090,000
Food and Kindred Products - 4.31%
Coca-Cola Enterprises Inc.:
0.0%, 6-20-2020 ....................... 60,000 11,680,200
6.7%, 10-15-2036 ...................... 5,000 5,046,000
Nabisco, Inc.,
6.8%, 9-1-2001 ........................ 6,000 6,133,200
Total ................................. 22,859,400
General Building Contractors - 0.78%
Del Webb Corporation,
10.875%, 3-31-2000 .................... 4,000 4,120,000
Health Services - 0.99%
Tenet Healthcare Corporation,
8.625%, 12-1-2003 ..................... 5,000 5,275,000
Hotels and Other Lodging Places - 1.77%
Marriott International, Inc.,
7.875%, 4-15-2005 ..................... 5,000 5,193,550
RHG Finance Corporation,
8.875%, 10-1-2005 ..................... 4,000 4,228,480
Total ................................. 9,422,030
Industrial Machinery and Equipment - 0.62%
Joy Technologies Inc.,
10.25%, 9-1-2003 ...................... 3,000 3,307,500
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (CONTINUED)
Insurance Carriers - 1.42%
Penn Central Corporation (The),
10.625%, 4-15-2000 .................... $ 4,000 $ 4,423,120
Reliance Group Holdings, Inc.,
9.0%, 11-15-2000 ...................... 3,000 3,090,000
Total ................................. 7,513,120
Lumber and Wood Products - 0.40%
Doman Industries Limited,
8.75%, 3-15-2004 ...................... 2,250 2,103,750
Metal Mining - 0.93%
Noranda Inc.,
7.0%, 7-15-2005 ....................... 5,000 4,936,300
Nondepository Institutions - 15.06%
Associates Corporation of North America,
7.95%, 2-15-2010 ...................... 7,250 7,937,082
Banc One Credit Card Master Trust,
Series 1994-B, Class A,
7.55%, 12-15-99 ....................... 5,000 5,071,850
Chrysler Financial Corporation,
12.75%, 11-1-99 ....................... 9,000 10,419,930
Countrywide Mortgage Backed Securities,
Inc.,
6.5%, 4-25-2024 ....................... 10,000 9,752,300
DLJ Mortgage Acceptance Corp.,
6.5%, 4-25-2024 ....................... 4,802 4,566,403
Equicon Loan Trust,
7.3%, 2-18-2013 ....................... 4,571 4,509,447
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 8,000 8,920,320
General Motors Acceptance Corporation,
8.875%, 6-1-2010 ...................... 10,000 11,572,200
Residential Asset Securities Corporation,
Mortgage Pass-Through Certificates,
1995-KS3 Class D,
8.0%, 10-25-2024 ...................... 4,000 4,031,640
Residential Funding Mortgage
Securities, Inc.,
8.0%, 8-25-2020 ....................... 8,224 8,244,742
WFS Financial 1996-B Owner Trust, Class A-2,
6.2%, 5-20-99 ......................... 4,884 4,898,600
Total ................................. 79,924,514
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (CONTINUED)
Oil and Gas Extraction - 3.70%
Anadarko Petroleum Corporation,
7.25%, 3-15-2025 ...................... $ 5,000 $ 5,181,650
Oryx Energy Company:
10.0%, 4-1-2001 ....................... 3,500 3,841,915
8.375%, 7-15-2004 ..................... 3,500 3,631,355
Seagull Energy Corporation,
7.875%, 8-1-2003 ...................... 1,250 1,260,937
Union Texas Petroleum Holdings, Inc.,
8.25%, 11-15-99 ....................... 2,250 2,319,998
YPF Sociedad Anoima,
8.0%, 2-15-2004 ....................... 3,500 3,377,500
Total ................................. 19,613,355
Paper and Allied Products - 1.26%
Boise Cascade Office Products Corporation,
9.875%, 2-15-2001 ..................... 2,500 2,646,975
Canadian Pacific Forest Products Ltd.,
9.25%, 6-15-2002 ...................... 4,000 4,063,920
Total ................................. 6,710,895
Petroleum and Coal Products - 1.06%
Coastal Corporation (The),
10.375%, 10-1-2000 .................... 5,000 5,612,450
Printing and Publishing - 1.81%
News America Holdings Incorporated,
9.125%, 10-15-99 ...................... 5,000 5,335,200
Viacom International Inc.:
9.125%, 8-15-99 ....................... 1,500 1,533,750
10.25%, 9-15-2001 ..................... 2,500 2,725,000
Total ................................. 9,593,950
Stone, Clay and Glass Products - 1.57%
Owens-Corning Fiberglas Corporation,
8.875%, 6-1-2002 ...................... 5,000 5,421,950
USG Corporation:
9.25%, 9-15-2001 ...................... 2,000 2,130,000
8.5%, 8-1-2005 ........................ 750 783,750
Total ................................. 8,335,700
Transportation Equipment - 1.75%
General Motors Corporation,
8.8%, 3-1-2021 ........................ 3,250 3,704,383
McDonnell Douglas Corporation,
9.25%, 4-1-2002 ....................... 5,000 5,584,500
Total ................................. 9,288,883
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (CONTINUED)
Wholesale Trade -- Durable Goods- 2.52%
Fisher Scientific International Inc.,
7.125%, 12-15-2005 .................... $ 3,500 $ 3,443,860
Motorola, Inc.,
8.4%, 8-15-2031 ....................... 8,500 9,956,815
Total ................................. 13,400,675
TOTAL CORPORATE DEBT SECURITIES - 66.55% $353,157,942
(Cost: $345,970,426)
OTHER GOVERNMENT SECURITIES
Canada - 4.19%
Hydro Quebec:
8.05%, 7-7-2024 ....................... 10,000 10,995,200
7.4%, 3-28-2025 ....................... 5,000 5,592,200
Province of Nova Scotia,
8.25%, 11-15-2019 ..................... 5,000 5,661,350
Total ................................. 22,248,750
Supranational - 1.08%
Inter-American Development Bank,
8.4%, 9-1-2009 ........................ 5,000 5,706,650
TOTAL OTHER GOVERNMENT SECURITIES - 5.27% $ 27,955,400
(Cost: $26,104,636)
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
6.83%, 7-3-2002 ....................... 4,500 4,473,270
7.5%, 2-15-2007 ....................... 10,000 10,240,600
7.5%, 11-15-2017 ...................... 10,000 10,231,200
7.5%, 4-15-2019 ....................... 12,741 12,486,130
7.95%, 12-15-2020 ..................... 9,000 9,210,870
Federal National Mortgage Association:
7.09%, 4-1-2004 ....................... 4,500 4,459,230
7.0%, 7-25-2006 ....................... 10,000 10,100,000
7.5%, 9-1-2009 ........................ 4,242 4,300,130
7.0%, 8-25-2021 ....................... 10,000 9,828,100
Government National Mortgage Association:
7.5%, 7-15-2023 ....................... 6,504 6,545,750
7.5%, 12-15-2023 ...................... 5,559 5,594,786
8.0%, 9-15-2025 ....................... 9,726 10,051,343
7.75%, 10-15-2031 ..................... 1,998 2,023,848
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED BOND FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES (Continued)
Tennessee Valley Authority,
5.98%, 4-1-2036 ....................... $ 5,000 $ 5,078,200
United States Treasury:
5.5%, 2-28-99 ......................... 10,000 9,915,600
6.75%, 5-31-99 ........................ 4,000 4,068,120
0.0%, 5-15-2007 ....................... 15,000 7,658,850
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 23.79% $126,266,027
(Cost: $125,180,107)
TOTAL SHORT-TERM SECURITIES - 3.45% $ 18,289,860
(Cost: $18,289,860)
TOTAL INVESTMENT SECURITIES - 99.06% $525,669,229
(Cost: $515,545,029)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.94% 4,983,182
NET ASSETS - 100.00% $530,652,411
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS
Apparel and Accessory Stores - 1.21%
Gap, Inc. (The) ........................ 2,000,000 $ 60,250,000
Apparel and Other Textile Products - 0.54%
Tommy Hilfiger Corporation* ............ 560,000 26,880,000
Building Materials and Garden Supplies - 0.77%
Home Depot, Inc. (The) ................. 765,000 38,345,625
Business Services - 4.80%
Computer Associates International, Inc. 562,500 27,984,375
Electronic Data Systems Corporation .... 1,081,000 46,753,250
Manpower Inc. .......................... 147,400 4,790,500
Microsoft Corporation* ................. 800,000 66,149,600
Oracle Systems Corporation* ............ 1,650,000 68,783,550
3Com Corporation* ...................... 350,000 25,659,200
Total ................................. 240,120,475
Chemicals and Allied Products - 16.57%
ABB AG (A) ............................. 25,000 31,102,892
Abbott Laboratories .................... 1,100,000 55,825,000
Air Products and Chemicals, Inc. ....... 1,150,000 79,493,750
Amgen Inc.* ............................ 400,000 21,774,800
Astra AB, Class A (A) .................. 600,000 29,445,172
BetzDearborn Inc. ...................... 320,000 18,720,000
Colgate-Palmolive Company .............. 600,000 55,350,000
Dow Chemical Company (The) ............. 575,000 45,065,625
du Pont (E.I.) de Nemours and Company .. 1,000,000 94,375,000
IMC Global, Inc. ....................... 600,000 23,475,000
Lilly (Eli) and Company ................ 300,000 21,900,000
Merck & Co., Inc. ...................... 700,000 55,475,000
PPG Industries, Inc. ................... 1,250,000 70,156,250
Pfizer Inc. ............................ 650,000 53,868,750
Praxair, Inc. .......................... 1,000,000 46,125,000
Procter & Gamble Company (The) ......... 600,000 64,500,000
Union Carbide Corporation .............. 875,000 35,765,625
Warner-Lambert Company ................. 350,000 26,250,000
Total ................................. 828,667,864
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Communication - 2.14%
AT&T Corporation ....................... 500,000 $ 21,750,000
MCI Communications Corporation ......... 1,875,000 61,288,125
SBC Communications Inc. ................ 460,000 23,805,000
Total ................................. 106,843,125
Depository Institutions - 4.67%
BankAmerica Corporation ................ 475,000 47,381,250
Chase Manhattan Corporation (The) ...... 525,000 46,856,250
Citicorp ............................... 550,000 56,650,000
First Bank System, Inc. ................ 500,000 34,125,000
Grupo Financiero Bancomer, S.A. de
C.V., B, CPO Shares (A)* .............. 2,000,000 800,305
Norwest Corporation .................... 1,100,000 47,850,000
Total ................................. 233,662,805
Electric, Gas and Sanitary Services - 0.39%
WMX Technologies, Inc. ................. 600,000 19,575,000
Electronic and Other Electric Equipment - 11.54%
AMP Incorporated ....................... 1,100,000 42,212,500
Analog Devices, Inc.* .................. 1,230,000 41,666,250
Duracell International Inc. ............ 1,000,000 69,875,000
Emerson Electric Co. ................... 400,000 38,700,000
General Electric Company ............... 1,200,000 118,650,000
Intel Corporation ...................... 1,530,000 200,333,610
Nokia Corporation, Series A (A) ........ 760,000 44,123,164
TRINOVA Corporation .................... 600,000 21,825,000
Total ................................. 577,385,524
Engineering and Management Services - 0.50%
Fluor Corporation ...................... 400,000 25,100,000
Food and Kindred Products - 1.94%
CPC International Inc. ................. 500,000 38,750,000
PepsiCo, Inc. .......................... 2,000,000 58,500,000
Total ................................. 97,250,000
Food Stores - 0.49%
Kroger Co. (The) ....................... 525,000 24,412,500
Forestry - 1.32%
Georgia-Pacific Corporation ............ 425,000 30,600,000
Weyerhaeuser Company ................... 750,000 35,531,250
Total ................................. 66,131,250
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Furniture and Home Furnishings Stores - 0.96%
Circuit City Stores, Inc. .............. 1,600,000 $ 48,200,000
General Merchandise Stores - 3.82%
Cifra, S.A. de C.V., Series C (A)* ..... 8,000,000 9,756,098
Dayton Hudson Corporation .............. 949,800 37,279,650
Kmart Corporation* ..................... 4,000,000 41,500,000
May Department Stores Company (The) .... 1,000,000 46,750,000
Penney (J.C.) Company, Inc. ............ 676,000 32,955,000
Wal-Mart Stores, Inc. .................. 1,000,000 22,875,000
Total ................................. 191,115,748
Health Services - 1.41%
Columbia/HCA Healthcare Corporation .... 1,192,500 48,594,375
Tenet Healthcare Corporation* .......... 1,000,000 21,875,000
Total ................................. 70,469,375
Heavy Construction, Excluding Building - 0.30%
Foster Wheeler Corporation ............. 400,000 14,850,000
Holding and Other Investment Offices - 0.44%
Grupo Financiero Banamex Accival,
S.A. de C.V., L (A)* .................. 749,775 1,424,877
Grupo Financiero Banamex Accival,
S.A. de C.V., B, CPO shares (A)*....... 9,800,000 20,690,549
Total ................................. 22,115,426
Hotels and Other Lodging Places - 0.91%
ITT Corporation* ....................... 1,050,204 45,552,598
Industrial Machinery and Equipment - 13.63%
Applied Materials, Inc.* ............... 1,730,000 62,171,010
Case Corporation ....................... 1,214,600 66,195,700
Caterpillar Inc. ....................... 1,400,000 105,350,000
cisco Systems, Inc.* ................... 1,730,000 110,178,510
Compaq Computer Corporation* ........... 350,000 25,987,500
Deere & Company ........................ 2,055,000 83,484,375
Eaton Corporation ...................... 500,000 34,875,000
Harnischfeger Industries, Inc. ......... 600,000 28,875,000
Hewlett-Packard Company ................ 850,000 42,712,500
Ingersoll-Rand Company ................. 400,000 17,800,000
Mannesmann AG (A) ...................... 65,000 28,180,046
Parker Hannifin Corporation ............ 600,000 23,250,000
United Technologies Corporation ........ 800,000 52,800,000
Total ................................. 681,859,641
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Instruments and Related Products - 1.58%
General Motors Corporation, Class H .... 176,100 $ 9,905,625
Guidant Corporation .................... 260,000 14,820,000
Medtronic, Inc. ........................ 800,000 54,400,000
Total ................................. 79,125,625
Insurance Carriers - 0.52%
Aetna Life & Casualty Company .......... 325,000 26,000,000
Miscellaneous Manufacturing Industries - 1.25%
Armstrong World Industries, Inc. ....... 900,000 62,550,000
Motion Pictures - 0.97%
Walt Disney Company (The) .............. 700,000 48,737,500
Nondepository Institutions - 2.89%
Federal Home Loan Mortgage Corporation . 700,000 77,087,500
Federal National Mortgage Association .. 1,805,800 67,266,050
Total ................................. 144,353,550
Paper and Allied Products - 1.88%
Champion International Corporation ..... 500,000 21,625,000
International Paper Company ............ 1,200,000 48,450,000
Union Camp Corporation ................. 500,000 23,875,000
Total ................................. 93,950,000
Petroleum and Coal Products - 2.04%
Mobil Corporation ...................... 400,000 48,900,000
Royal Dutch Petroleum Company .......... 300,000 51,225,000
Tosco Corporation ...................... 25,000 1,978,125
Total ................................. 102,103,125
Primary Metal Industries - 1.13%
Aluminum Company of America ............ 650,000 41,437,500
Nucor Corporation ...................... 300,000 15,300,000
Total ................................. 56,737,500
Railroad Transportation - 0.60%
Union Pacific Corporation .............. 500,000 30,062,500
Rubber and Miscellaneous Plastics Products - 1.03%
Goodyear Tire & Rubber Company (The) ... 1,000,000 51,375,000
Special Trade Contractors - 1.21%
Telefonaktiebolaget LM Ericsson,
Class B, ADR ......................... 2,000,000 60,374,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Transportation By Air - 2.77%
AMR Corporation* ....................... 400,000 $ 35,250,000
Southwest Airlines Co. ................. 1,600,000 35,400,000
USAir Group, Inc.* ..................... 2,900,000 67,787,500
Total ................................. 138,437,500
Transportation Equipment - 5.99%
AlliedSignal Inc. ...................... 700,000 46,900,000
Boeing Company (The) ................... 635,000 67,548,125
Chrysler Corporation ................... 2,200,000 72,600,000
Dana Corporation ....................... 760,000 24,795,000
Ford Motor Company ..................... 1,000,000 31,875,000
General Motors Corporation ............. 1,000,000 55,750,000
Total ................................. 299,468,125
Wholesale Trade -- Durable Goods - 0.89%
Motorola, Inc. ......................... 725,000 44,496,875
Wholesale Trade -- Nondurable Goods - 2.02%
Gillette Company (The) ................. 1,000,000 77,750,000
Safeway Inc.* .......................... 550,000 23,512,500
Total ................................. 101,262,500
TOTAL COMMON STOCKS - 95.12% $4,757,820,756
(Cost: $2,671,018,401)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Depository Institutions - 0.21%
Morgan Guaranty Trust Company of New York,
7.375%, 2-1-2002 ...................... $10,250 10,568,672
Nondepository Institutions - 0.23%
General Electric Capital Corporation,
8.3%, 9-20-2009 ....................... 10,000 11,150,400
TOTAL CORPORATE DEBT SECURITIES - 0.44% $ 21,719,072
(Cost: $19,957,223)
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED INCOME FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
6.75%, 4-30-2000 ...................... $37,000 $ 37,699,670
5.75%, 8-15-2003 ...................... 50,000 48,500,000
10.375%, 11-15-2012 ................... 8,500 10,946,385
9.0%, 11-15-2018 ...................... 20,000 25,096,800
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 2.44% $ 122,242,855
(Cost: $114,802,668)
TOTAL SHORT-TERM SECURITIES - 2.99% $ 149,369,721
(Cost: $149,369,721)
TOTAL INVESTMENT SECURITIES - 100.99% $5,051,152,404
(Cost: $2,955,148,013)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.99%) (49,389,091)
NET ASSETS - 100.00% $5,001,763,313
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS
Building Materials and Garden Supplies - 1.17%
Home Depot, Inc. (The) ................. 300,000 $ 15,037,500
Business Services - 4.90%
Automatic Data Processing, Inc. ........ 350,000 15,006,250
Broderbund Software, Inc.* ............. 200,000 5,937,400
Cerner Corporation* .................... 900,000 13,837,500
Computer Associates International, Inc. 250,000 12,437,500
Intuit Inc.* ........................... 150,000 4,762,500
Physician Computer Network* ............ 400,000 3,400,000
Shared Medical Systems Corporation ..... 125,000 6,156,250
Summit Medical Systems, Inc.* .......... 206,000 1,532,022
Total ................................. 63,069,422
Chemicals and Allied Products - 13.27%
American Home Products Corporation ..... 700,000 41,037,500
Amgen Inc.* ............................ 250,000 13,609,250
Astra AB, Class A, ADR ................. 248,900 12,196,100
Lilly (Eli) and Company ................ 250,000 18,250,000
Liposome Company, Inc. (The)* .......... 500,000 9,593,500
Pfizer Inc. ............................ 200,000 16,575,000
Schering-Plough Corporation ............ 350,000 22,662,500
SmithKline Beecham plc, ADR ............ 350,000 23,800,000
Warner-Lambert Company ................. 175,000 13,125,000
Total ................................. 170,848,850
Communication - 2.46%
Intermedia Communications of Florida,
Inc.* ................................ 400,000 10,274,800
Nokia Corporation, Series A, ADS ....... 150,000 8,643,750
360 Communications Company* ............ 550,000 12,718,750
Total ................................. 31,637,300
Depository Institutions - 17.27%
Banc One Corporation ................... 300,000 12,900,000
Bank of New York Company, Inc. (The) ... 500,000 16,875,000
Barnett Banks, Inc. .................... 400,000 16,450,000
Chase Manhattan Corporation (The) ...... 400,000 35,700,000
Dime Bancorp, Inc.* .................... 700,000 10,325,000
First American Corporation ............. 200,000 11,550,000
First Bank System, Inc. ................ 200,000 13,650,000
Glendale Federal Bank, Federal
Savings Bank* ......................... 165,400 3,845,550
Hibernia Corporation, Class A ......... 500,000 6,625,000
Long Island Bancorp, Inc. .............. 339,600 11,886,000
Mercantile Bancorporation Inc. ......... 135,200 6,945,900
Norwest Corporation .................... 300,000 13,050,000
Roosevelt Financial Group, Inc. ........ 1,000,000 20,875,000
SouthTrust Corporation ................. 225,000 7,846,875
State Street Boston Corporation ........ 150,000 9,675,000
Wells Fargo & Company .................. 90,000 24,277,500
Total ................................. 222,476,825
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Electric, Gas and Sanitary Services - 3.69%
Columbia Gas System, Inc. (The) ........ 150,000 $ 9,543,750
PanEnergy Corporation .................. 500,000 22,500,000
Sonat Inc. ............................. 300,000 15,450,000
Total ................................. 47,493,750
Engineering and Management Services - 1.45%
Fluor Corporation ...................... 175,000 10,981,250
Neurex Corporation* .................... 450,000 7,677,900
Total ................................. 18,659,150
Food and Kindred Products - 2.55%
ConAgra, Inc. .......................... 300,000 14,925,000
Heinz (H. J.) Company .................. 500,000 17,875,000
Total ................................. 32,800,000
General Merchandise Stores - 4.02%
Federated Department Stores, Inc.* ..... 425,000 14,503,125
May Department Stores Company (The) .... 500,000 23,375,000
Sears, Roebuck and Co. ................. 300,000 13,837,500
Total ................................. 51,715,625
Health Services - 2.93%
Beverly Enterprises, Inc.* ............. 711,800 9,075,450
Columbia/HCA Healthcare Corporation .... 550,000 22,412,500
MedPartners, Inc.* ..................... 300,000 6,300,000
Total ................................. 37,787,950
Holding and Other Investment Offices - 3.71%
Conseco, Inc. .......................... 500,000 31,875,000
Duke Realty Investments, Inc. .......... 200,000 7,700,000
Equity Residential Properties .......... 200,000 8,250,000
Total ................................. 47,825,000
Instruments and Related Products - 7.60%
Baxter International Inc. .............. 900,000 36,900,000
General Signal Corporation ............. 300,000 12,825,000
Raytheon Company ....................... 500,000 24,062,500
St. Jude Medical, Inc.* ................ 250,000 10,656,250
Target Therapeutics, Inc.* ............. 320,600 13,445,002
Total ................................. 97,888,752
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Insurance Carriers - 14.02%
Allstate Corporation (The) ............. 700,000 $ 40,512,500
American International Group, Inc. ..... 286,500 31,013,625
Berkley (W. R.) Corporation ............ 325,000 16,595,150
Berkshire Hathaway Inc.* ............... 450 15,345,000
Chubb Corporation (The) ................ 100,000 5,375,000
NAC Re Corporation ..................... 350,000 11,856,250
ReliaStar Financial Corp. .............. 300,000 17,325,000
TIG Holdings, Inc. ..................... 595,000 20,155,625
Trenwick Group Inc. .................... 275,000 12,787,500
Western National Corporation .......... 500,000 9,625,000
Total ................................. 180,590,650
Nondepository Institutions - 2.89%
Federal National Mortgage Association .. 1,000,000 37,250,000
Oil and Gas Extraction - 0.59%
Enron Oil & Gas Company ................ 300,000 7,575,000
Petroleum and Coal Products - 4.53%
Coastal Corporation (The) .............. 300,000 14,662,500
Exxon Corporation ...................... 300,000 29,400,000
Valero Energy Corporation .............. 500,000 14,312,500
Total ................................. 58,375,000
Railroad Transportation - 1.24%
Illinois Central Corporation, Class A .. 500,000 16,000,000
Security and Commodity Brokers - 1.15%
Lehman Brothers Holdings Inc. .......... 250,000 7,843,750
Paine Webber Group Inc. ................ 250,000 7,031,250
Total ................................. 14,875,000
Transportation By Air - 0.97%
Southwest Airlines Co. ................. 562,000 12,434,250
Transportation Equipment - 1.56%
AlliedSignal Inc. ...................... 300,000 20,100,000
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED ACCUMULATIVE FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Wholesale Trade -- Nondurable Goods - 4.12%
Johnson & Johnson ...................... 700,000 $ 34,825,000
Lockheed Martin Corporation ............ 200,000 18,300,000
Total ................................. 53,125,000
TOTAL COMMON STOCKS - 96.09% $1,237,565,024
(Cost: $1,165,068,670)
TOTAL SHORT-TERM SECURITIES - 4.64% $ 59,682,244
(Cost: $59,682,244)
TOTAL INVESTMENT SECURITIES - 100.73% $1,297,247,268
(Cost: $1,224,750,914)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.73%) (9,380,476)
NET ASSETS - 100.00% $1,287,866,792
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS
Business Services - 40.92%
Alternative Resources Corporation* ..... 350,000 $ 6,015,450
America Online, Inc.* .................. 590,000 19,617,500
Broderbund Software, Inc.* ............. 286,600 8,508,294
CKS Group, Inc.* ....................... 394,000 11,056,428
CUC International Inc.* ................ 900,000 21,375,000
Computer Associates International,
Inc. .................................. 337,500 16,790,625
DST Systems, Inc.* ..................... 200,000 6,275,000
Electronic Data Systems Corporation .... 325,000 14,056,250
First Data Corporation ................. 300,000 10,950,000
HBO & Company .......................... 702,000 41,681,250
HCIA Inc.* ............................. 385,000 13,354,495
HPR Inc.* .............................. 509,000 6,935,125
IMNET Systems, Inc.* ................... 200,000 4,800,000
Informix Corporation* .................. 600,000 12,262,200
Intuit Inc.* ........................... 288,100 9,147,175
i2 Technologies, Inc.* ................. 100,000 3,862,500
Macromedia, Inc.* ...................... 600,000 10,875,000
McAfee Associates, Inc.* ............... 235,000 10,295,820
Microsoft Corporation* ................. 200,000 16,537,400
Netscape Communications Corporation* ... 100,000 5,687,500
Objective Systems Integrators, Inc.* .... 114,800 2,719,268
Oracle Systems Corporation* ............ 500,000 20,843,500
Parametric Technology Corporation* ..... 800,000 41,149,600
PeopleSoft, Inc.* ...................... 100,000 4,793,700
Premisys Communications, Inc.* ......... 250,000 8,437,500
Pure Atria Corporation* ................ 386,700 9,498,125
Shared Medical Systems Corporation ..... 250,000 12,312,500
Summit Medical Systems, Inc.* .......... 200,000 1,487,400
Synopsys, Inc.* ........................ 400,000 18,400,000
TMP Worldwide Inc.* .................... 250,000 3,234,250
3Com Corporation* ...................... 240,000 17,594,880
USCS International, Inc.* .............. 226,500 3,878,812
Xylan Corporation* ..................... 285,100 8,018,438
Total ................................. 402,450,985
Chemicals and Allied Products - 5.77%
Abbott Laboratories .................... 250,000 12,687,500
Amgen Inc.* ............................ 200,000 10,887,400
Lilly (Eli) and Company ................ 100,000 7,300,000
Pfizer Inc. ............................ 200,000 16,575,000
Roche Holdings AG (A) .................. 1,200 9,338,713
Total ................................. 56,788,613
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Communication - 5.48%
Intermedia Communications of Florida,
Inc.* ................................. 400,000 $ 10,274,800
MFS Communications Company, Inc.* ...... 400,000 21,750,000
Nokia Corporation, Series A, ADS ....... 300,000 17,287,500
360 Communications Company* ............ 200,000 4,625,000
Total ................................. 53,937,300
Depository Institutions - 2.06%
BankAmerica Corporation ................ 100,000 9,975,000
Citicorp ............................... 100,000 10,300,000
Total ................................. 20,275,000
Electronic and Other Electric Equipment - 16.49%
Ascend Communications, Inc.* ........... 1,000,000 62,125,000
Cascade Communications Corp.* .......... 930,600 51,415,650
General Electric Company ............... 140,000 13,842,500
PairGain Technologies, Inc.* ........... 400,000 12,174,800
Tellabs* ............................... 600,000 22,612,200
Total ................................. 162,170,150
Engineering and Management Services - 0.58%
Neurex Corporation* .................... 334,300 5,703,827
Food and Kindred Products - 0.45%
Hershey Foods Corporation .............. 100,000 4,375,000
Health Services - 4.39%
Columbia/HCA Healthcare Corporation .... 200,000 8,150,000
Idexx Laboratories, Inc.* .............. 300,000 10,837,500
PhyCor, Inc.* .......................... 400,000 11,300,000
Renal Treatment Centers, Inc.* ......... 250,000 6,375,000
Tenet Healthcare Corporation* .......... 300,000 6,562,500
Total ................................. 43,225,000
Industrial Machinery and Equipment - 6.36%
cisco Systems, Inc.* ................... 751,200 47,841,674
Compaq Computer Corporation* ........... 100,000 7,425,000
Digital Link Corporation* .............. 300,000 7,331,100
Total ................................. 62,597,774
Instruments and Related Products - 5.43%
Boston Scientific Corporation* ......... 250,000 15,000,000
Medtronic, Inc. ........................ 200,000 13,600,000
STERIS Corporation* .................... 300,000 13,068,600
Target Therapeutics, Inc.* ............. 279,400 11,717,198
Total ................................. 53,385,798
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1996
Shares Value
COMMON STOCKS (Continued)
Oil and Gas Extraction - 0.97%
Noble Affiliates, Inc. ................. 200,000 $ 9,575,000
Petroleum and Coal Products - 1.16%
Valero Energy Corporation .............. 400,000 11,450,000
Wholesale Trade -- Durable Goods - 2.37%
OmniCare, Inc. ......................... 725,000 23,290,625
Wholesale Trade -- Nondurable Goods - 1.17%
Cardinal Health, Inc. .................. 196,966 11,473,270
TOTAL COMMON STOCKS - 93.60% $920,698,342
(Cost: $499,887,006)
PREFERRED STOCK - 0.57%
Business Services
SAP Aktiengesellschaft (A) ............. 40,000 $ 5,589,860
(Cost: $5,901,364)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Communication - 0.41%
GTE Corporation,
5.48%, 1-16-97 ........................ $4,060 4,050,730
Depository Institutions - 0.34%
U.S. Bancorp,
Master Note............................ 3,340 3,340,000
Electric, Gas and Sanitary Services - 0.45%
Public Service Electric & Gas Co.,
5.57%, 2-4-97 ......................... 4,485 4,461,407
Food and Kindred Products - 1.91%
General Mills, Inc.,
Master Note ........................... 345 345,000
Hercules Inc.:
5.45%, 1-10-97 ........................ 3,215 3,210,620
5.52%, 1-28-97 ........................ 3,570 3,555,220
Quaker Oats Co.,
5.63%, 1-23-97 ........................ 6,495 6,472,654
Ralston Purina Co.,
5.52%, 2-7-97 ......................... 5,275 5,245,073
Total ................................. 18,828,567
See Notes to Schedules of Investments on page .
<PAGE>
THE INVESTMENTS OF UNITED SCIENCE AND TECHNOLOGY FUND
DECEMBER 31, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Forestry - 0.42%
Weyerhaeuser Co.,
5.45%, 2-19-97 ........................ $ 4,140 $ 4,109,289
Metal Mining - 0.87%
BHP Finance (USA) Inc.:
5.35%, 1-28-97 ........................ 6,635 6,608,377
5.4%, 2-5-97 .......................... 1,975 1,964,631
Total ................................. 8,573,008
Textile Mill Products - 1.76%
Sara Lee Corporation,
Master Note ........................... 17,255 17,255,000
Transportation Equipment - 0.20%
Echlin, Inc.,
5.4%, 2-3-97 .......................... 1,965 1,955,273
Total Commercial Paper - 6.36% 62,573,274
Municipal Obligations - 0.51%
Indiana
City of Whiting, Indiana, Industrial Sewage
and Solid Waste Disposal Revenue Bonds
(Amoco Oil Company Project), Taxable
Series 1995,
5.55%, 1-13-97 ........................ 5,000 5,000,000
TOTAL SHORT-TERM SECURITIES - 6.87% $ 67,573,274
(Cost: $67,573,274)
TOTAL INVESTMENT SECURITIES - 101.04% $993,861,476
(Cost: $573,361,644)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (1.04%) (10,224,129)
NET ASSETS - 100.00% $983,637,347
See Notes to Schedules of Investments on page .
<PAGE>
UNITED FUNDS, INC.
DECEMBER 31, 1996
Notes to Schedules of Investments
*No income dividends were paid during the preceding 12 months.
(A) Listed on an exchange outside the United States.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
<TABLE>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Assets
Investment securities --
at value (Notes 1 and 3) .... $525,669,229 $5,051,152,404 $1,297,247,268 $ 993,861,476
Cash .......................... 2,169 --- 31,233 7,418
Receivables:
Dividends and interest ...... 7,703,706 7,753,902 1,382,273 254,895
Fund shares sold ............ 487,408 6,915,601 449,714 7,463,455
Prepaid insurance premium ..... 15,993 57,237 34,184 12,737
------------ -------------- -------------- --------------
Total assets .............. 533,878,505 5,065,879,144 1,299,144,672 1,001,599,981
------------ -------------- -------------- --------------
Liabilities
Payable for investment
securities purchased ........ --- 38,622,803 --- ---
Payable for Fund
shares redeemed ............. 2,917,604 22,934,409 10,638,028 17,355,079
Due to custodian ............. --- 3,711 --- ---
Accrued service fee (Note 2) .. 192,300 1,706,300 419,800 344,550
Accrued transfer agency
and dividend disbursing
(Note 2) .................... 68,296 565,456 130,177 187,232
Accrued accounting
services fee (Note 2) ....... 5,000 8,333 8,333 8,333
Other ......................... 42,894 274,819 81,542 67,440
------------ -------------- -------------- --------------
Total liabilities ......... 3,226,094 64,115,831 11,277,880 17,962,634
------------ -------------- -------------- --------------
Total net assets ........ $530,652,411 $5,001,763,313 $1,287,866,792 $ 983,637,347
============ ============== ============== ==============
Net Assets
$1.00 par value capital stock
Capital stock ............. $ 86,368,101 $ 152,004,636 $ 166,148,578 $ 42,131,690
Additional paid-in
capital ................. 459,573,882 2,678,442,344 994,196,461 500,595,912
Accumulated undistributed
income (loss):
Accumulated undistributed
net investment income ... 802,660 2,937,972 1,310,231 ---
Accumulated undistributed net
realized gain (loss) on
investment transactions . (26,216,432) 72,382,654 53,715,148 20,411,017
Net unrealized appreciation
of investments at end
of period ............... 10,124,200 2,095,995,707 72,496,374 420,498,728
------------ -------------- -------------- --------------
Net assets applicable to
outstanding units
of capital ............ $530,652,411 $5,001,763,313 $1,287,866,792 $983,637,347
============ ============== ============== ==============
Net asset value per share
(net assets divided by
shares outstanding)
Class A ..................... $6.14 $32.91 $7.75 $23.35
Class Y ..................... $6.14 $32.91 $7.75 $23.38
Capital shares outstanding
Class A ..................... 84,451,146 147,405,344 165,808,020 41,999,526
Class Y ..................... 1,916,955 4,599,292 340,558 132,164
Capital shares authorized ..... 400,000,000 600,000,000 600,000,000 200,000,000
See notes to financial statements.
</TABLE>
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended DECEMBER 31, 1996
<TABLE>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Investment Income (Loss)
Income (Note 1B):
Dividends ................. $ --- $ 66,534,296 $ 19,372,299 $ 1,673,423
Interest .................. 38,151,761 19,406,967 7,360,999 4,409,509
------------ -------------- -------------- --------------
Total income .............. 38,151,761 85,941,263 26,733,298 6,082,932
------------ -------------- -------------- --------------
Expenses (Note 2):
Investment
management fee .......... 2,344,627 25,277,033 6,879,322 5,667,206
Transfer agency and dividend
disbursing -- Class A ... 802,643 5,752,718 1,304,462 1,677,814
Service fee -- Class A .... 749,534 6,498,915 1,606,204 1,405,418
Custodian fees ............ 22,984 351,762 52,439 52,910
Accounting services fee ... 61,667 100,000 100,000 88,750
Audit fees ................ 42,966 31,245 58,740 24,290
Shareholder servicing
fee -- Class Y .......... 11,532 188,544 4,123 3,330
Legal fees ................ 4,849 41,588 11,284 8,315
Other ..................... 83,928 599,978 168,743 199,824
------------ -------------- -------------- --------------
Total expenses ............ 4,124,730 38,841,783 10,185,317 9,127,857
------------ -------------- -------------- --------------
Net investment
income (loss) ......... 34,027,031 47,099,480 16,547,981 (3,044,925)
------------ -------------- -------------- --------------
Realized and Unrealized
Gain (Loss) on Investments (Notes 1 and 3)
Realized net gain
on securities ............. 1,229,324 276,362,531 155,566,702 71,724,354
Realized net gain (loss) on foreign
currency transactions ..... 261,674 (227,240) 5,662 11,558
------------ -------------- -------------- --------------
Realized net gain
on investments .......... 1,490,998 276,135,291 155,572,364 71,735,912
Unrealized appreciation
(depreciation) in value
of investments during
the period ................ (19,287,816) 518,056,427 (28,379,142) 2,339,175
------------ -------------- -------------- --------------
Net gain (loss) on
investments ............. (17,796,818) 794,191,718 127,193,222 74,075,087
------------ -------------- -------------- --------------
Net increase in net assets
resulting from operations $16,230,213 $841,291,198 $143,741,203 $71,030,162
============ ============== ============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended DECEMBER 31, 1996
<TABLE>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment
income (loss) ........... $ 34,027,031 $ 47,099,480 $ 16,547,981 $ (3,044,925)
Realized net gain
on investments .......... 1,490,998 276,135,291 155,572,364 71,735,912
Unrealized appreciation
(depreciation) .......... (19,287,816) 518,056,427 (28,379,142) 2,339,175
------------ -------------- -------------- --------------
Net increase in net
assets resulting
from operations ......... 16,230,213 841,291,198 143,741,203 71,030,162
------------ -------------- -------------- --------------
Dividends to shareholders
from (Note 1E):*
Net investment income
Class A ................. (33,563,721) (44,582,972) (16,526,936) ---
Class Y ................. (498,286) (1,535,780) (39,149) ---
Realized net gain on
investment transactions
Class A ................. --- (223,378,753) (126,903,435) (57,680,201)
Class Y ................. --- (6,868,127) (256,540) (174,464)
------------ -------------- -------------- --------------
(34,062,007) (276,365,632) (143,726,060) (57,854,665)
------------ -------------- -------------- --------------
Capital share
transactions (Note 5) ..... (17,992,840) 353,417,280 81,068,885 149,679,267
------------ -------------- -------------- --------------
Total increase (decrease) . (35,824,634) 918,342,846 81,084,028 162,854,764
Net Assets
Beginning of period ......... 566,477,045 4,083,420,467 1,206,782,764 820,782,583
------------ -------------- -------------- --------------
End of period ............... $530,652,411 $5,001,763,313 $1,287,866,792 $983,637,347
============ ============== ============== ==============
Undistributed
net investment
income .................... $802,660 $2,937,972 $1,310,231 $---
======== ========== ========== ====
*See "Financial Highlights" on pages - .
See notes to financial statements.
</TABLE>
<PAGE>
UNITED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended DECEMBER 31, 1995 United
<TABLE>
United
United United United Science and
Bond Income Accumulative Technology
Fund Fund Fund Fund
------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase in Net Assets
Operations:
Net investment
income .................. $ 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 (Note 1E):*
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>
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,
--------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
Net asset value,
beginning of period $6.34 $5.62 $6.39 $6.31 $6.32
---- ---- ---- ---- ----
Income from investment
operations:
Net investment income 0.39 0.40 0.39 0.41 0.45
Net realized and
unrealized gain
(loss) on
investments ..... (0.20) 0.72 (0.75) 0.41 0.00
---- ---- ---- ---- ----
Total from investment
operations ....... 0.19 1.12 (0.36) 0.82 0.45
---- ---- ---- ---- ----
Less distributions:
Dividends from net
investment income (0.39) (0.40) (0.39) (0.41) (0.46)
Distribution from
capital gains ... (0.00) (0.00) (0.02) (0.33) (0.00)
---- ---- ---- ---- ----
Total distributions (0.39) (0.40) (0.41) (0.74) (0.46)
---- ---- ---- ---- ----
Net asset value,
end of period .... $6.14 $6.34 $5.62 $6.39 $6.31
===== ===== ===== ===== =====
Total return* ...... 3.20% 20.50% -5.76% 13.19% 7.50%
Net assets, end of
period (000
omitted) ......... $518,873$563,445$517,836$641,668$589,946
Ratio of expenses to
average net assets 0.77% 0.74% 0.72% 0.65% 0.64%
Ratio of net investment
income to average
net assets ....... 6.34% 6.54% 6.60% 6.14% 7.29%
Portfolio turnover
rate ............. 55.74% 66.38% 127.11%175.39% 115.17%
*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 Each Period:
For the For the
fiscal year period from
ended 6/19/95* to
12/31/96 12/31/95
---------- -----------
Net asset value,
beginning of period $6.34 $6.11
---- ----
Income from investment
operations:
Net investment income 0.40 0.21
Net realized and
unrealized gain (loss)
on investments .. (0.20) 0.22
---- ----
Total from investment
operations ....... 0.20 0.43
---- ----
Less distributions:
Dividends from net
investment income (0.40) (0.20)
Distribution from
capital gains ... (0.00) (0.00)
---- ----
Total distributions (0.40) (0.20)
---- ----
Net asset value,
end of period .... $6.14 $6.34
==== ====
Total return ....... 3.35% 7.20%
Net assets, end of
period (000
omitted) ......... $11,779 $3,032
Ratio of expenses to
average net assets 0.62% 0.63%**
Ratio of net investment
income to average
net assets ....... 6.52% 6.41%**
Portfolio turnover
rate ............. 55.74% 66.38%**
*Commencement of operations.
**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,
-------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
Net asset value,
beginning of period $28.96 $23.34 $24.77 $22.05 $20.44
----- ----- ----- ----- -----
Income from investment
operations:
Net investment income 0.33 0.36 0.36 0.40 0.46
Net realized and
unrealized gain
(loss) on
investments ..... 5.53 6.53 (0.80) 3.11 1.96
----- ----- ----- ----- -----
Total from investment
operations ....... 5.86 6.89 (0.44) 3.51 2.42
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment income (0.32) (0.35) (0.36) (0.40) (0.46)
Distribution from
capital gains ... (1.59) (0.92) (0.63) (0.39) (0.35)
----- ----- ----- ----- -----
Total distributions (1.91) (1.27) (0.99) (0.79) (0.81)
----- ----- ----- ----- -----
Net asset value,
end of period .... $32.91 $28.96 $23.34 $24.77 $22.05
====== ====== ====== ====== ======
Total return* ...... 20.36% 29.60% -1.82% 16.05% 11.96%
Net assets, end of
period (000
omitted) ......... $4,850,419$3,975,717$3,144,904$3,060,073 $2,537,161
Ratio of expenses to
average net assets 0.86% 0.83% 0.74% 0.66% 0.65%
Ratio of net investment
income to average
net assets ....... 1.03% 1.31% 1.45% 1.70% 2.19%
Portfolio turnover
rate ............. 22.24% 17.59% 18.54% 21.70% 19.25%
Average commission
rate paid ........ $0.0496
*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 Each Period:
For the For the
fiscal year period from
ended 6/19/95* to
12/31/96 12/31/95
---------- -----------
Net asset value,
beginning of period $28.96 $27.73
----- -----
Income from investment
operations:
Net investment income 0.36 0.21
Net realized and
unrealized gain
on investments .. 5.54 2.14
----- -----
Total from investment
operations ....... 5.90 2.35
----- -----
Less distributions:
Dividends from net
investment income (0.36) (0.20)
Distribution from
capital gains ... (1.59) (0.92)
----- -----
Total distributions (1.95) (1.12)
----- -----
Net asset value,
end of period .... $32.91 $28.96
===== =====
Total return ....... 20.53% 8.45%
Net assets, end of
period (000
omitted) ......... $151,344 $107,703
Ratio of expenses to
average net assets 0.73% 0.74%**
Ratio of net investment
income to average
net assets ....... 1.17% 1.36%**
Portfolio turnover
rate ............. 22.24% 17.59%**
Average commission
rate paid ........ $0.0496
*Commencement of operations.
**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,
--------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
Net asset value,
beginning of period $7.78 $6.58 $7.19 $7.50 $7.15
---- ---- ---- ---- ----
Income from investment
operations:
Net investment
income........... 0.11 0.11 0.13 0.11 0.16
Net realized and
unrealized gain
(loss) on
investments ..... 0.82 2.12 (0.13) 0.55 0.85
---- ---- ---- ---- ----
Total from investment
operations ....... 0.93 2.23 0.00 0.66 1.01
---- ---- ---- ---- ----
Less distributions:
Dividends from net
investment income (0.11) (0.11) (0.13) (0.11) (0.16)
Distribution from
capital gains ... (0.85) (0.92) (0.48) (0.84) (0.50)
Distribution in
excess of capital
gains............ (0.00) (0.00) (0.00) (0.02) (0.00)
---- ---- ---- ---- ----
Total distributions (0.96) (1.03) (0.61) (0.97) (0.66)
---- ---- ---- ---- ----
Net asset value,
end of period .... $7.75 $7.78 $6.58 $7.19 $7.50
==== ==== ==== ==== ====
Total return* ...... 12.18% 34.21% 0.04% 9.06% 14.20%
Net assets, end of
period (000
omitted) ......... $1,285,227$1,206,128$967,020$1,033,774 $992,924
Ratio of expenses to
average net assets 0.83% 0.80% 0.71% 0.65% 0.62%
Ratio of net investment
income to average
net assets ....... 1.34% 1.42% 1.76% 1.34% 2.13%
Portfolio turnover
rate ............. 240.37%229.03% 205.40%230.29% 194.41%
Average commission
rate paid ........ $0.0575
*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 Each Period:
For the For the
fiscal year period from
ended 7/11/95* to
12/31/96 12/31/95
---------- -----------
Net asset value,
beginning of period $7.78 $7.84
---- ----
Income from investment
operations:
Net investment income 0.12 0.05
Net realized and
unrealized gain
on investments .. 0.82 0.87
---- ----
Total from investment
operations ....... 0.94 0.92
---- ----
Less distributions:
Dividends from net
investment income (0.12) (0.06)
Distribution from
capital gains ... (0.85) (0.92)
---- ----
Total distributions (0.97) (0.98)
---- ----
Net asset value,
end of period .... $7.75 $7.78
==== ====
Total return ....... 12.27% 11.92%
Net assets, end of
period (000
omitted) ......... $2,640 $655
Ratio of expenses to
average net assets 0.74% 0.76%**
Ratio of net investment
income to average
net assets ....... 1.45% 1.24%**
Portfolio turnover
rate ............. 240.37% 229.03%**
Average commission
rate paid ........ $0.0575
*Commencement of operations.
**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,
--------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
Net asset value,
beginning of period $22.89 $15.21 $14.83 $14.64 $15.42
------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... (0.07) (0.01) 0.00 0.01 0.03
Net realized and
unrealized gain
(loss) on
investments ..... 2.00 8.40 1.40 1.21 (0.66)
------ ------ ------ ------ ------
Total from investment
operations ....... 1.93 8.39 1.40 1.22 (0.63)
------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.00) (0.00) (0.00) (0.01) (0.03)
Distribution from
capital gains ... (1.47) (0.71) (1.02) (0.95) (0.12)
Distribution in
excess of capital
gains ........... (0.00) (0.00) (0.00) (0.07) (0.00)
------ ------ ------ ------ ------
Total distributions (1.47) (0.71) (1.02) (1.03) (0.15)
------ ------ ------ ------ ------
Net asset value,
end of period .... $23.35 $22.89 $15.21 $14.83 $14.64
====== ====== ====== ====== ======
Total return* ...... 8.35% 55.37% 9.78% 8.51% -4.03%
Net assets, end of
period (000
omitted) ......... $980,547$820,783$496,503$446,611$428,806
Ratio of expenses to
average net assets 0.98% 0.93% 0.96% 0.91% 0.87%
Ratio of net investment
income to average
net assets ....... -0.33% -0.07% 0.00% 0.06% 0.24%
Portfolio turnover
rate ............. 33.90% 32.89% 64.39% 68.38% 45.79%
Average commission
rate paid ........ $0.0538
*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 SCIENCE AND TECHNOLOGY FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout The Period:
For the
period from
2/27/96* to
12/31/96
----------
Net asset value,
beginning of period $24.05
-----
Income from investment
operations:
Net investment loss (0.02)
Net realized and
unrealized gain
on investments .. 0.82
-----
Total from investment
operations ....... 0.80
-----
Less distributions:
Dividends from net
investment income (0.00)
Distribution from
capital gains ... (1.47)
-----
Total distributions (1.47)
-----
Net asset value,
end of period .... $23.38
=====
Total return ....... 3.25%
Net assets, end of
period (000
omitted) ......... $3,090
Ratio of expenses to
average net assets 0.80%**
Ratio of net investment
income to average
net assets ....... -0.12%**
Portfolio turnover
rate ............. 33.90%**
Average commission
rate paid ........ $0.0538
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 series of capital shares; each series 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 pricing service or 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 System) 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 Subchapter M of 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, 1996, United Science and
Technology Fund reclassified $3,033,367 between additional paid-in-capital
and undistributed net investment income. Net investment income, net
realized gains and net assets were not affected by this change.
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 $15.1 billion of
combined net assets at December 31, 1996) 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 $1.3125 for each
shareholder account which was in existence at any time during the prior month
($1.0208 per account prior to April 1, 1996), 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 $26,543,939, out of which W&R paid sales
commissions of $15,146,943 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 Class
A 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 $275,573.
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, 1996
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 $163,449,027$1,139,035,334$2,665,933,791$ 378,142,051
Purchases of U.S. Government
securities 125,145,374 --- --- ---
Purchases of short-term
securities 257,590,4362,081,228,4542,057,921,1431,209,331,008
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 168,342,799 969,708,8512,709,657,580 290,614,463
Proceeds from maturities and
sales of U.S. Government
securities 148,368,629 --- --- ---
Proceeds from maturities and sales
of short-term securities 247,302,2442,085,954,1942,068,622,3901,209,150,083
For Federal income tax purposes, cost of investments owned at December 31,
1996 and the related appreciation (depreciation) were as follows:
Aggregate
Cost AppreciationDepreciation Appreciation
-------------- --------------------------------------
United Bond Fund $515,545,029 $12,031,129$(1,906,929) $10,124,200
United Income Fund $2,955,148,013$2,113,212,126$(17,207,735)$2,096,004,391
United Accumulative
Fund $1,224,938,232 $106,704,670$(34,395,634) $72,309,036
United Science and
Technology Fund $573,361,644 $451,107,803$(30,607,971) $420,499,832
NOTE 4 -- Federal Income Tax Matters
The Corporation's income and expenses attributed to each Fund and the gains
and losses on security transactions of each Fund have been attributed to that
Fund for Federal income tax purposes as well as for accounting purposes. For
Federal income tax purposes, United Income Fund, United Accumulative Fund and
United Science and Technology Fund realized capital gain net income of
$276,362,531, $155,754,021 and $71,640,888, respectively, during the year ended
December 31, 1996, a portion of which was paid to shareholders during the period
ended December 31, 1996. Remaining capital gain net income will be distributed
to each Fund's shareholders. For Federal income tax purposes, United Bond Fund
realized capital gain net income of $1,229,324 during the year ended December
31, 1996, which was entirely offset by utilization of capital loss
carryforwards. Remaining prior year capital loss carryforwards of United Bond
Fund aggregated $26,199,056 as of December 31, 1996, and are available to offset
future capital gain net income as follows: $26,118,153 through December 31,
2002 and $80,903 through December 31, 2003.
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 commenced multiclass operations on
February 27, 1996.
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, 1996
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 ............ 6,465,124 16,133,571 8,009,525 27,427,545
Class Y ............ 1,782,344 1,298,483 379,703 139,882
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 4,659,208 7,718,525 17,504,459 2,334,666
Class Y ............ 44,921 258,999 38,631 7,370
Shares redeemed:
Class A ............ (15,509,353) (13,716,661) (14,780,542)(23,624,041)
Class Y ............ (388,283) (677,004) (161,934) (15,088)
--------- ---------- -------- ---------
Increase (decrease) in
outstanding capital
shares:
Class A ............ (4,385,021) 10,135,435 10,733,442 6,138,170
Class Y ............ 1,438,982 880,478 256,400 132,164
--------- ---------- ---------- ---------
Total for Fund .... (2,946,039) 11,015,913 10,989,842 6,270,334
========= ========== ========== =========
Value issued from sale
of shares:
Class A ............ $39,560,061 $509,911,318 $64,177,016$676,558,274
Class Y ............ 10,740,902 40,986,800 3,050,529 3,450,514
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class A ............ 28,366,563 250,527,856 133,871,990 55,192,015
Class Y ............ 272,967 8,403,907 295,689 174,465
Value redeemed:
Class A ............ (94,554,914) (435,082,498) (118,996,801)(585,325,217)
Class Y ............ (2,378,419) (21,330,103) (1,329,538) (370,784)
----------- ------------ -----------------------
Increase (decrease) in
outstanding capital:
Class A ............ (26,628,290) 325,356,676 79,052,205 146,425,072
Class Y ............ 8,635,450 28,060,604 2,016,680 3,254,195
----------- ------------ -----------------------
Total for Fund .... $(17,992,840) $353,417,280 $81,068,885$149,679,267
=========== ============ =======================
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>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Funds, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of United Bond Fund, United Income Fund, United
Accumulative Fund, and United Science and Technology Fund (collectively the
"Funds") comprising United Funds, Inc., as of December 31, 1996, the related
statements of operations and changes in net assets for the year then ended, and
the financial highlights for the year then ended. These financial statements
and the financial highlights are the responsibility of the Funds' management.
Our responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits. The financial statements and the
financial highlights of the Funds for each of the years in the four-year period
ended December 31, 1995 were audited by other auditors whose report, dated
February 8, 1996, expressed an unqualified opinion on those statements and
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
December 31, 1996 by correspondence with the custodian and brokers or other
alternative procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of each of the
respective funds comprising United Funds, Inc. as of December 31, 1996, the
results of their operations, the changes in their net assets, and their
financial highlights for the year then ended in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
February 7, 1997
<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, 1996
Statement of Assets and Liabilities
For the year ended December 31, 1996
Statements of Operations
For each of the two years in the period ended December 31, 1996
Statement of Changes in Net Assets
Schedule I -- Investment Securities as of December 31, 1996
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.
(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 filed March 28,
1996 as EX-99.B5-ufassign to the Post-Effective Amendment No. 118 to
the Registration Statement on Form N-1A*
(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 attached hereto as EX-99.B9-ufssa
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 filed March 28, 1996 as EX-99.B9-uflou
to the Post-Effective Amendment No. 118 to the Registration Statement
on Form N-1A*
(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
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.*
20. Simple IRA Plan Document attached hereto as EX-99.B14-20-simple
21. Individual Retirement Plan attached hereto as EX-99.B14-21-
crp00005
(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 average annual total return performance quotations (for
Class Y shares) attached hereto as EX-99.B16-ufaatrpq
Computation of yield performance quotation (for Class A shares) filed
March 28, 1996 as EX-99.B16-ufyield to Post-Effective Amendment No.
118 to the Registration Statement on Form N-1A*
Computation of yield performance quotation (for Class Y shares)
attached hereto as EX-99.B16-ufyieldy
(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 filed March 28, 1996 as EX-99.B18-ufmcp to Post-
Effective Amendment No. 118 to the Registration Statement on Form N-
1A*
25. Persons Controlled by or under common control with Registrant
-------------------------------------------------------------
None
26. Number of Holders of Securities
-------------------------------
Number of Record Holders as of
Title of Class February 28, 1997
-------------- ------------------------------
Class A Capital Stock 448,776
Class Y Capital Stock 1,091
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
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
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 26th
day of March, 1997.
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 26, 1997
- ---------------------- ------------------
Ronald K. Richey
/s/Keith A. Tucker* President and Director March 26, 1997
- ---------------------- (Principal Executive ------------------
Keith A. Tucker Officer)
/s/Theodore W. Howard* Vice President, March 26, 1997
- ---------------------- Treasurer and Principal ------------------
Theodore W. Howard Accounting Officer
/s/Robert L. Hechler* Vice President and March 26, 1997
- ---------------------- Principal Financial ------------------
Robert L. Hechler Officer
/s/Henry L. Bellmon* Director March 26, 1997
- ---------------------- ------------------
Henry L. Bellmon
/s/Dodds I. Buchanan* Director March 26, 1997
- --------------------- ------------------
Dodds I. Buchanan
/s/Linda Graves* Director March 26, 1997
- -------------------- ------------------
Linda Graves
/s/John F. Hayes* Director March 26, 1997
- ------------------- ------------------
John F. Hayes
/s/Glendon E. Johnson Director March 26, 1997
- ------------------- ------------------
Glendon E. Johnson
/s/William T. Morgan* Director March 26, 1997
- ------------------- ------------------
William T. Morgan
/s/William L. Rogers* Director March 26, 1997
- ------------------- ------------------
William L. Rogers
/s/Frank J. Ross, Jr.* Director March 26, 1997
- ------------------- ------------------
Frank J. Ross, Jr.
/s/Eleanor B. Schwartz Director March 26, 1997
- -------------------- ------------------
Eleanor B. Schwartz
/s/Frederick Vogel III* Director March 26, 1997
- ------------------- ------------------
Frederick Vogel III
/s/Paul S. Wise* Director March 26, 1997
- ------------------- ------------------
Paul S. Wise
*By
Sharon K. Pappas
Attorney-in-Fact
ATTEST:
Sheryl Strauss
Assistant Secretary
</TABLE>
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 5, 1997 /s/Keith A. Tucker
--------------------------
Keith A. Tucker, President
/s/Ronald K. Richey Chairman of the Board February 5, 1997
- -------------------- ----------------
Ronald K. Richey
/s/Keith A. Tucker President and Director February 5, 1997
- -------------------- (Principal Executive ----------------
Keith A. Tucker Officer)
/s/Theodore W. Howard Vice President, Treasurer February 5, 1997
- -------------------- and Principal Accounting ----------------
Theodore W. Howard Officer
/s/Robert L. Hechler Vice President and February 5, 1997
- -------------------- Principal Financial ----------------
Robert L. Hechler Officer
/s/Henry L. Bellmon Director February 5, 1997
- -------------------- ----------------
Henry L. Bellmon
/s/Dodds I. Buchanan Director February 5, 1997
- -------------------- ----------------
Dodds I. Buchanan
/s/Linda Graves Director February 5, 1997
- -------------------- ----------------
Linda Graves
/s/John F. Hayes Director February 5, 1997
- -------------------- ----------------
John F. Hayes
/s/Glendon E. Johnson Director February 5, 1997
- -------------------- ----------------
Glendon E. Johnson
/s/William T. Morgan Director February 5, 1997
- -------------------- ----------------
William T. Morgan
/s/William L. Rogers Director February 5, 1997
- -------------------- ----------------
William L. Rogers
/s/Frank J. Ross, Jr. Director February 5, 1997
- -------------------- ----------------
Frank J. Ross, Jr.
/s/Eleanor Schwartz Director February 5, 1997
- -------------------- ----------------
Eleanor Schwartz
/s/Frederick Vogel III Director February 5, 1997
- -------------------- ----------------
Frederick Vogel III
/s/Paul S. Wise Director February 5, 1997
- -------------------- ----------------
Paul S. Wise
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.
Section 11. Power to Declare Dividends and/or Distributions: The Board of
Directors, from time to time as it may deem advisable, may declare and pay
dividends and/or distributions in shares of the Fund, cash or other property of
the Corporation, as determined by resolution of the Board of Directors out of
any source available for dividends and/or distributions, to the stockholders
according to their respective rights and interests in accordance with the
provisions of the Articles of Incorporation.
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.B9-ufssa
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT, made as of the 1ST day of November, 1992, by and between
UNITED FUNDS, INC., and Waddell & Reed Services Company (the "Agent"), as
amended and restated as of April 1, 1996,
W I T N E S S E T H :
WHEREAS, The Company wishes, as applicable, to appoint the Agent or to
continue the appointment of the Agent to be its shareholder servicing agent
upon, and subject to, the terms and provisions of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree as follows:
1. Appointment of Agent as Shareholder Servicing Agent for the Company;
Acceptance.
(1) The Company hereby appoints the Agent to act as Shareholder
Servicing Agent for the Company upon, and subject to, the terms and provisions
of this Agreement.
(2) The Agent hereby accepts the appointment as Shareholder Servicing
Agent for the Company and agrees to act as such upon, and subject to, the terms
and provisions of this Agreement.
(3) The Agent may appoint an entity or entities approved by the
Company in writing to perform any portion of Agent's duties hereunder (the
"Subagent").
2. Definitions.
(1) In this Agreement -
(a) The term the "Act" means the Investment Company Act of 1940
as amended from time to time;
(b) The term "account" means the shares of the Company
registered on the books of the Company in the name of a shareholder under a
particular account registration number and includes shares subject to
instructions by the shareholder with respect to periodic redemptions and/or
reinvestment in additional shares of any dividends payable on said shares;
(c) The term "affiliate" of a person shall mean a person
controlling, controlled by, or under common control with that person;
(d) The term "Class" shall mean each separate sub-class of a
class of shares of the Company, as may now or in the future exist;
(e) The term "Fund" shall mean each separate class of shares of
the Company, as may now or in the future exist;
(f) The term "officers' instruction" means an instruction given
on behalf of the Company to the Agent and signed on behalf of the Company by any
one or more persons authorized to do so by the Company's Board of Directors;
(g) The term "prospectus" means the prospectus and Statement of
Additional Information of the applicable Fund or Class from time to time in
effect;
(h) The term "shares" means shares including fractional shares
of capital stock of the Company, whether or not such shares are evidenced by an
outstanding stock certificate issued by the Company;
(i) The term "shareholder" shall mean the owner of record of
shares of the Company;
(j) The term "stock certificate" means a certificate
representing shares in the form then currently in use by the Company.
3. Duties of the Agent.
The Agent shall perform such duties as shall be set forth in this
paragraph 3 and in accordance with the practice stated in Exhibit A of this
Agreement or any amendment thereof, any or all of which duties may be delegated
to or performed by one or more Subagents pursuant to Paragraph (3) above.
(1) Transfers.
Subject to the provisions of this Agreement the Agent hereby
agrees to perform the following functions as transfer agent for the Company:
(a) Recording the ownership, transfer, exchange and cancellation
of ownership of shares of the Company on the books of the Company;
(b) Causing the issuance, transfer, exchange and cancellation of
stock certificates;
(c) Establishing and maintaining records of accounts;
(d) Computing and causing to be prepared and mailed or otherwise
delivered to shareholders payment checks and notices of reinvestment in
additional shares of dividends, stock dividends or stock splits declared by the
Company on shares and of redemption proceeds due by the Company on redemption of
shares;
(e) Furnishing to shareholders such information as may be
reasonably required by the Company, including appropriate income tax
information;
(f) Addressing and mailing to shareholders prospectuses, annual
and semi-annual reports and proxy materials for shareholder meetings prepared by
or on behalf of the Company;
(g) Replacing allegedly lost, stolen or destroyed stock
certificates in accordance with and subject to procedures and conditions agreed
upon and set out in officers' instructions;
(h) Maintaining such books and records relating to transactions
effected by the Agent pursuant to this Agreement as are required by the Act, or
by rules or regulations thereunder, or by any other applicable provisions of
law, to be maintained by the Company or its transfer agent with respect to such
transactions; preserving, or causing to be preserved, any such books and records
for such periods as may be required by any such law, rule or regulation;
furnishing the Company such information as to such transactions and at such time
as may be reasonably required by it to comply with applicable laws and
regulations;
(i) Providing such services and carrying out such
responsibilities on behalf of the Company, or imposed on the Agent as the
Company's transfer agent, not otherwise expressly provided for in this Paragraph
3, as may be required by or be reasonably necessary to comply with any statute,
act, governmental rule, regulation or directive or court order, including,
without limitation, the requirements imposed by the Tax Equity and Fiscal
Responsibility Act of 1982 and the Income and Dividend Tax Compliance Act of
1983 relating to the withholding of tax from distributions to shareholders.
(2) Correspondence.
The Agent agrees to deal with and answer all correspondence from
or on behalf of shareholders relating to its functions under this Agreement.
4. Compensation of the Agent.
The Company agrees to pay the Agent for its services under this
Agreement in accordance with the schedule as then in effect set forth in Exhibit
B of this Agreement or any amendment thereof. In addition, the Company agrees
to reimburse the Agent for the following "out-of-pocket" expenses of the Agent
within five days after receipt of an itemized statement of such expenses, to the
extent that payment of such expenses has not been or is not to be made directly
by the Company: (i) costs of stationery, appropriate forms, envelopes, checks,
postage, printing (except cost of printing prospectuses, annual and semi-annual
reports and proxy materials) and mailing charges, including returned mail and
proxies, incurred by the Agent with respect to materials and communications sent
to shareholders in carrying out its duties to the Company under this Agreement;
(ii) long distance telephone costs incurred by the Agent for telephone
communications and microfilm and storage costs for transfer agency records and
documents; (iii) costs of all ancillary and supporting services and related
expenses (other than insurance premiums) reasonably required by and provided to
the Agent, other than by its employees or employees of an affiliate, with
respect to functions of the Company being performed by it in its capacity as
Agent hereunder, including legal advice and representation in litigation to the
extent that such payments are permitted under Paragraph 7 of this Agreement and
charges to Agent made by any Subagent; (iv) costs for special reports or
information furnished on request pursuant to this Agreement and not specifically
required by the Agent by Paragraph 3 of this Agreement; and (v) reasonable costs
and expenses incurred by the Agent in connection with the duties of the Agent
described in Paragraph (3)(1)(i). In addition, the Company agrees to promptly
pay over to the Agent any fees or payment of charges it may receive from a
shareholder for services furnished to the shareholder by the Agent.
Services and operations incident to the sale and distribution of the
Company's shares, including sales communications, confirmations of investments
(not including reinvestment of dividends) and the clearing or collection of
payments will not be for the account or at the expense of the Company under this
Agreement.
5. Right of Company to Inspect Records, etc.
The Company will have the right under this Agreement to perform on
site inspection of records and accounts and to perform audits directly
pertaining to the Company shareholder accounts serviced by the Agent hereunder
at the Agent's or any Subagent's facilities in accordance with reasonable
procedures at the frequency necessary to assure proper administration of the
Agreement. The Agent will cooperate with the Company's auditors or
representatives of appropriate regulatory agencies and furnish all reasonably
requested records and data.
6. Insurance.
The Agent now has the insurance coverage described in Exhibit C,
attached hereto, and the Agent will not take any action to eliminate or decrease
such coverage during the term of this Agreement without receiving the approval
of the Fund in advance of any change, except the Agent, after giving reasonable
notice to the Company, may eliminate or decrease any coverage if the premiums
for such coverage are substantially increased.
7. Standard of Care; Indemnification.
The Agent will at all times exercise due diligence and good faith in
performing its duties hereunder. The Agent will make every reasonable effort
and take all reasonably available measures to assure the adequacy of its
personnel and facilities as well as the accurate performance of all services to
be performed by it hereunder within, at a minimum, the time requirements of any
applicable statutes, rules or regulations or as set forth in the prospectus.
The Agent shall not be responsible for, and the Company agrees to
indemnify the Agent for any losses, damages or expenses (including reasonable
counsel fees and expenses) (i) resulting from any claim, demand, action or suit
not resulting from the Agent's failure to exercise good faith or due diligence
and arising out of or in connection with the Agent's duties on behalf of the
Company hereunder; (ii) for any delay, error or omission by reason of
circumstances beyond its control, including acts of civil or military authority,
national emergencies, labor difficulties (except with respect to the Agent's
employees), fire, mechanical breakdown beyond its control, flood or catastrophe,
acts of God, insurrection, war, riots, or failure beyond its control of
transportation, communication or power supply; or (iii) for any action taken or
omitted to be taken by the Agent in good faith in reliance on (a) the
authenticity of any instrument or communication reasonably believed by it to be
genuine and to have been properly made and signed or endorsed by an appropriate
person, (b) the accuracy of any records or information provided to it by the
Company, (c) any authorization or instruction contained in any officers'
instruction, or (d) with respect to the functions performed for the Company
listed under Paragraph 3(1) of this Agreement, any advice of counsel approved by
the Company who may be internally employed counsel or outside counsel, in either
case for the Company and/or the Agent.
In order for the rights to indemnification to apply, it is understood
that if in any case the Company may be asked to indemnify or hold the Agent
harmless, the Company shall be advised of all pertinent facts concerning the
situation in question, and it is further understood that the Agent will use
reasonable care to identify and notify the Company promptly concerning any
situation which presents or appears likely to present a claim for
indemnification against the Company. The Company shall have the option to
defend the Agent against any claim which may be the subject of this
indemnification and, in the event that the Company so elects, it will so notify
the Agent and thereupon the Company shall take over complete defense of the
claim and the Agent shall sustain no further legal or other expenses in such
situation for which the Agent shall seek indemnification under this paragraph.
The Agent will in no case confess any claim or make any compromise in any case
in which the Company will be asked to indemnify the Agent except with the
Company's prior written consent.
8. Term of the Agreement; Taking Effect; Amendments.
This Agreement shall become effective at the start of business on the
date hereof and shall continue, unless terminated as hereinafter provided, for a
period of one year and from year to year thereafter, provided that such
continuance shall be specifically approved as provided below.
This Agreement shall go into effect, or may be continued, or may be
amended or a new agreement between the Company and the Agent covering the
substance of this Agreement may be entered into only if the terms of this
Agreement, such continuance, the terms of such amendment or the terms of such
new agreement have been approved by the Board of Directors of the Company,
including the vote of a majority of the directors who are not "interested
persons," as defined in the Act, of either party to this Agreement or of Waddell
& Reed Investment Management Company, cast in person at a meeting called for the
purpose of voting on such approval. Such a vote is hereinafter referred to as a
"disinterested director vote."
Any disinterested director vote shall include a determination that (i)
the Agreement, amendment, new agreement or continuance in question is in the
best interests of the Company and its shareholders; (ii) the services to be
performed under the Agreement, the Agreement as amended, new agreement or
agreement to be continued, are services required for the operation of the
Company; (iii) the Agent can provide services the nature and quality of which
are at least equal to those provided by others offering the same or similar
services; and (iv) the fees for such services are fair and reasonable in the
light of the usual and customary charges made by others for services of the same
nature and quality.
9. Termination.
(1) This Agreement may be terminated by the Agent at any time without
penalty upon giving the Company 120 days' written notice (which notice may be
waived by the Company) and may be terminated by the Company at any time without
penalty upon giving the Agent sixty (60) days' written notice (which notice may
be waived by the Agent), provided that such termination by the Company shall be
directed or approved by the vote of a majority of the Board of Directors of the
Company in office at the time or by the vote of the holders of a majority (as
defined in or under the Act) of the outstanding shares of the Company.
(2) On termination, the Agent will deliver to the Company or its
designee all files, documents and records of the Company used, kept or
maintained by the Agent in the performance of its services hereunder, including
such of the Company's records in machine readable form as may be maintained by
the Agent, as well as such summary and/or control data relating thereto used by
or available to the Agent.
(3) In the event of any termination which involves the appointment of
a new shareholder servicing agent, including the Company's acting as such on its
own behalf, the Company shall have the non-exclusive right to the use of the
data processing programs used by the Agent in connection with the performance of
its duties under this Agreement without charge.
(4) In addition, on such termination or in preparation therefore, at
the request of the Company and at the Company's expense the Agent shall provide
to the extent that its capabilities then permit such documentation, personnel
and equipment as may be reasonably necessary in order for a new agent or the
Company to fully assume and commence to perform the agency functions described
in this Agreement with a minimum disruption to the Company's activities.
10. Construction; Governing Law.
The headings used in this Agreement are for convenience only and shall
not be deemed to constitute a part hereof. Whenever the context requires, words
denoting singular shall be read to include the plural. This Agreement and the
rights and obligations of the parties hereunder, shall be construed and
interpreted in accordance with the laws of the State of Kansas, except to the
extent that the laws of the State of Maryland apply with respect to share
transactions.
11. Representations and Warranties of Agent.
Agent represents and warrants that it is a corporation duly organized
and existing and in good standing under the laws of the State of Missouri, that
it is duly qualified to carry on its business in the State of Kansas and
wherever its duties require, that it has the power and authority under laws and
by its Articles of Incorporation and Bylaws to enter into this Shareholder
Servicing Agreement and to perform the services contemplated by this Agreement.
12. Entire Agreement.
This Agreement and the Exhibits annexed hereto constitutes the entire
and complete agreement between the parties hereto relating to the subject matter
hereof, supersedes and merges all prior discussions between the parties hereto,
and may not be modified or amended orally.
IN WITNESS WHEREOF, the parties have hereto caused this Agreement to
be duly executed on the day and year first above written.
UNITED FUNDS, INC.
By:_________________________________
Sharon K. Pappas, Vice President
ATTEST:
By:____________________________
Sheryl Strauss, Assistant Secretary
WADDELL & REED SERVICES COMPANY
By:__________________________________
Robert L. Hechler, President
ATTEST:
By:___________________________
Sharon K. Pappas, Secretary
<PAGE>
EXHIBIT A
A. DUTIES IN SHARE TRANSFERS AND REGISTRATION
1. The Agent in carrying out its duties shall follow general commercial
practices and the Rules of the Stock Transfer Association, Inc. except as they
may conflict or be inconsistent with the specific provisions of the Company's
Articles of Incorporation and Bylaws, prospectus, applicable Federal and state
laws and regulations and this Agreement.
2. The Agent shall not require that the signature of the appropriate
person be guaranteed, witnessed or verified in order to effect a redemption,
transfer, exchange or change of address except as may from time to time be
directed by the Company as set forth in an officers' instruction. In the event
a signature guarantee is required by the Company, the Agent shall not inquire as
to the genuineness of the guarantee.
3. The Agent shall not replace a lost, stolen or misplaced stock
certificate without requiring and being furnished with an open penalty surety
bond protecting the Company and the Agent against loss.
B. The practices, procedures and requirements specified in A above may be
modified, altered, varied or supplemented as from time to time may be mutually
agreed upon by the Company and the Agent and evidenced on behalf of the Company
by an officers' instruction. Any such change shall not be deemed to be an
amendment to the Agreement within the meaning of Paragraph 8 of the Agreement.
<PAGE>
EXHIBIT B
COMPENSATION
Class A Shares
An amount payable on the first day of each month of $1.3125 for each account of
the Company which was in existence during any portion of the immediately
preceding month and, in addition, to pay to the Agent the sum of $0.30 for each
account for which, during such month, a record date was established for payment
of a dividend, in cash or otherwise (which term includes a distribution),
irrespective of whether such dividend was payable in that month or later or was
payable directly or was to be reinvested.
Class Y Shares
An amount payable on the first day of each month equal to 1/12 of .15 of 1% of
the average daily net assets of the Class for the preceding month.
<PAGE>
EXHIBIT C
Bond or
Name of Bond Policy No. Insurer
Investment Company 87015196B ICI Mutual
Blanket Bond Form Insurance
Company
Fidelity $18,500,000
Audit Expense 500,000
On Premises 18,500,000
In Transit 18,500,000
Forgery or Alteration 18,500,000
Securities 18,500,000
Counterfeit Currency 18,500,000
Uncollectible Items of Deposit 25,000
Total Limit 18,500,000
Directors and Officers/ 87015196D ICI Mutual
Errors and Omissions Liability Insurance
Insurance Form Company
Total Limit $ 5,000,000
Blanket Lost Instrument Bond 30S100639551 Aetna Life
& Casualty
Blanket Undertaking Lost Instrument
and Waiver of Probate 42SUN339806 Hartford
Casualty
Insurance
EX-99.B9-ufappca
Waddell & Reed, Inc.
P.O. Box 29217 United Group of Funds Division Office Stamp
Shawnee Mission, Kansas 66201-9217 APPLICATION
I (We) make application for an account to be established as follows:
___________________________________________________________________________
REGISTRATION TYPE (one only) Trans Code: _________
Date Transmitted: ____________
___________________________________________________________________________
NON RETIREMENT PLAN
[ ] Single Name [ ] Joint Tenants W/ROS [ ] Declaration of Trust Revocable
(Attach CUF0022)
[ ] Uniform Gifts (Transfers) To Minors [ ] Other: ______________________
(Use this section for
Retirement Plans with
Custodians other than
Fiduciary Trust Co.)
___________________________________________________________________________
RETIREMENT PLAN (Fiduciary Trust Co. -- Cust., except for 457 Plans) See
Retirement Plan and Custody Agreement for annual custodian fees
[ ] Individual IRA
[ ] Spousal IRA [ ] Keogh Participant (Profit Sharing Plan)
[ ] Rollover (Qual. plan lump [ ] Keogh Participant (Money Purchase Plan)
sum distr.) (For a new Plan, tear out page 2 of
[ ] Simplified Pension Plan Adoption Agreement in MRP1182)
(For a new Plan, tear out
Page 1 of Adoption Agreement
in MRP1166)
[ ] TSA or [ ] 457
(If billing is required, ____________________________________
attach form #CUF1417) Employer's Name (Do Not Abbreviate)
_____________________________________________________
Street City State Zip
[ ] If Tri-Vest, enter Partnership name _____________________________ Amt
$______
(Attach subscription Agreement and
Confidential Questionnaire CRP1186)
United Fund to receive partnership distributions: ______________________
Fund Name
Note: If Partnership not available W&R is authorized to place
investments in United Cash Management (a Fund of The United
Group of Funds) until next partnership is available.
___________________________________________________________________________
REGISTRATION [ ]NEW ACCOUNT or [ ]NEW FUND FOR EXISTING ACCOUNT:
[][][][][][][]-[]
(Must have same ownership) Date of Birth
___________________________________________________________________________
Individual Name (exactly as desired) If spousal IRA, name of working spouse
______________________
______________________
Month Day Year
___________________________________________________________________________
Joint Name (if any, exactly as desired) If spousal IRA, name of non-working
spouse
______________________ ______________
Month Day Year Relationship (For grouping purposes)
___________________________________________________________________________
Mailing Address
________________ ____________ ____________ _____/_____-___________
City State Zip Telephone
Social Security #:[][][]-[][]-[][][][] or Taxpayer Identification #:
[][]-[][][][][][][]
___________________________________________________________________________
INVESTMENTS: Make check payable to Waddell & Reed
Code Code
621 - Income 626 - Gold & Government
622 - Science and Technology 627 - Continental Income
623 - Accumulative 628 - High Income
624 - Bond 629 - Vanguard
625 - International Growth 630 - New Concepts
Code Code
634 - High Income II 760 - Municipal Bond (not
680 - Retirement Shares available for Ret. Plans)
684 - Asset Strategy 762 - Municipal High Income (not
750 - Cash Management available for Reg. Plan)
___________________________________________________________________________
OPEN ACCOUNT
If Retirement Plan
FUND Amount Trade Yr. Deductible or
(enter code) Enclosed Number of Contr. Non-Deductible
[][][] $__________ _________ 19_____ __________
[][][] $__________ _________ 19_____ __________
[][][] $__________ _________ 19_____ __________
[][][] $__________ _________ 19_____ __________
[][][] $__________ _________ 19_____ __________
Total $__________
Monthly DIV/C.G. Distr** Certificate
TOP From AIS* (Assumes RR) Desired
Another Carrier (if any) RR CC CR (Specify)
[] $______________ [] [] [] _________
[] $______________ [] [] [] _________
[] $______________ [] [] [] _________
[] $______________ [] [] [] _________
[] $______________ [] [] [] _________
$______________
___________________________________________________________________________
*Attach AIS Authorization Form #CUF0714 **RR=Reinvest Div/Cap Gain CC=Cash
Div/Reinvest Cap Gain
INVESTMENT PROGRAM
Fund Completion Amount If IRA, Yr.
(enter code) Amount Enclosed of Contribution
[] [] [] $_______ $_______ 19____
(621,625,629)
Deductible or Monthly AIS*
Non-Deductible (If any)
__________ $_________
___________________________________________________________________________
OPEN ACCOUNTS ONLY
This purchase entitled to a reduced sales load charge for the following reason:
[ ] Statement of Intention to Invest $____________ [ ] (600 products)
[ ] New SOI (Attach CUF0671 [ ] Existing SOI [ ] (700 products)
[ ] Rights of Accumulation With Accounts ___, ___, ___ or Group [][][][][][][]
[ ] Identify Other Accounts Being Established at This Time:
________________________
___________________________________________________________________________
CHECK SERVICE Send information to establish redemption checking account for:
[ ] United Government Securities [ ] United Cash Management
___________________________________________________________________________
EXPEDITED REDEMPTION: For United Cash Management Only.
Complete items below:
_________________________________________________________
Name and Address of Bank/Broker/Savings & Loan
_________________________________________________________
Street
_________________________________________________________
City State Zip
_________________________________________________________
Account Number
If Account is with a Broker or Savings and Loan, provide
_________________________________________________________
Name of Its Commercial Bank
_________________________________________________________
Street
_________________________________________________________
City State Zip
_________________________________________________________
Its Account # with Its Commercial Bank
On United Cash Management Accounts where expedited redemption is requested,
Waddell & Reed, Inc. is authorized to honor telephonic, telegraphic or written
requests from anyone for redemption of all or any fund shares so long as the
proceeds are transmitted to the identified account. All wires must be
transmitted exactly as registered on the United Cash Management Fund Account.
___________________________________________________________________________
BENEFICIARY: For Retirement Plan Accounts Only.
Full Name of Beneficiary Tax Identification No. Relationship Percent
________________________ ______________________ ____________ _______%
________________________ ______________________ ____________ _______%
________________________ ______________________ ____________ _______%
________________________ ______________________ ____________ _______%
CONFIDENTIAL DATA (Must be completed on New Accounts/New Products)
1. Gross Family Income: $____ 2. Taxable Income $_____ 3. Number of Dependents
____ 4. Occupation:_________________________ 5. Employer Name:
________________________ 6. Employer Address: ____________________________
7. Savings and Liquid Assets: $_____ 8. Other Assets (excluding home,
furnishings, cars): $_____ 9. Net Worth (Assets minus liabilities): $___ 10. Are
you associated with an NASD Member? Yes ___ No ___
11. Investment Objectives (mark all that apply):
[ ] Retirement Savings [ ] Children's College [ ] Income
[ ] Other needs/goals (specify in Special Remarks)
12. Special Remarks/Considerations:
_______________________________________________
___________________________________________________________________________
13. Residence Address:
___________________________________________________________________________
(if different from Street City State Zip
Mailing Address on
Reverse Side)
___________________________________________________________________________
ACKNOWLEDGMENT
* I (we) have received a copy of the current prospectus of the Funds
selected.
* If purchasing an IRA, I (we) certify that I (we) have read the
Retirement Plan and Custody Agreement and agree to the terms and
conditions set forth therein, and do hereby establish the Individual
Retirement Plan.
* Under penalties of perjury, I certify that the social security number
or other taxpayer identification number shown on reverse side is
correct and (strike the following if not true) that I am not subject
to tax withholding because I have not been notified by the IRS that I
am subject to withholding as a result of a failure to report all
interest and dividends or I was subject to withholding and the IRS
has notified me that I am no longer subject to withholding.
* Since a major portion of the sales charge for Variable Investment
Programs is deducted from payments made in the first year, I
understand that a loss will undoubtedly result if I withdraw or
discontinue payments during the early years of the program.
Signature(s) of Purchaser (all joint purchasers must sign). Sign exactly as
name(s) appear in registration.
______________________ _________________________ _________________________
(Signature) (Printed Name) (Title, if any)
______________________ _________________________ _________________________
(Signature) (Printed Name) (Title, if any)
______________________ _________________________ _________________________
(Signature) (Printed Name) (Title, if any)
_________________________ ____________________________
Date Representative Signature
[OSJ: (H.O.USE) ] [] [] [] [] []
Representative Number
Fiduciary Trust Company of New Hampshire accepts
appointment as Custodian in accordance with the
Custody Agreement:
By: ____________________________________________
Fiduciary Trust Company Authorized Signature
Check Any Items Enclosed With Application
[] Declaration Trust Revocable (CUF0022)
[] Partnership Subscription Agreement
[] Partnership Confidential Questionnaire (CRP1186)
[] Statement of Intention (CUF0671)
[] AIS Authorization (CUF0714)
[] Funds Plus (CUF1444)
[] Additional Applications ____________________________________
[] Check enclosed $___________________________
[] Other _____________________________________
CAP0001(11/94)
EX-99.B11-ufconsnt
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Post-Effective Amendment No. 119 to Registration
Statement #2-21867 of our report dated February 7, 1997 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectuses, which also are a part of such Registration
Statement.
Deloitte & Touche LLP
Kansas City, Missouri
March 26, 1997
EX-99.B11-ufpwcon
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 119 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 8, 1996, relating to the statement of changes in net assets for the
year ended December 31, 1995 and the financial highlights for each of the nine
years in the period ended December 31, 1995 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 constitutes part of this Registration Statement. We
also consent to the reference to us under the heading "Financial Highlights" in
the Class A Shares Prospectus and the Class Y Shares Prospectus.
Price Waterhouse LLP
Kansas City, Missouri
March 26, 1997
EX-99.B11-ufpwopin
Report of Independent Accountants
To the Board of Directors and Shareholders of
United Funds, Inc.
In our opinion, the accompanying statement of changes in net assets and the
financial highlights present fairly, in all material respects, the changes in
the net assets and financial highlights 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. (the "Corporation") for the year
ended December 31, 1995, and for each of the nine years in the period ended
December 31, 1995, respectively, in conformity with generally accepted
accounting principles. This statement of changes in net assets 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. We have not audited the
financial statements of the United Funds, Inc. for the twelve-month period ended
December 31, 1996.
Price Waterhouse LLP
Kansas City, Missouri
February 8, 1996
EX-99.B14-20-simple
Instructions for Establishing
the SIMPLE IRA Plan
These instructions are designed to help you, the employer, along with your
attorney and/or tax advisor, establish your SIMPLE IRA plan. The instructions
are meant to be used only as a general guide and are not intended as a
substitute for qualified legal or tax advice.
ADOPTION AGREEMENT
If you wish to have us, the financial organization sponsoring this prototype
Plan, help you fill out the Adoption Agreement, we will do so. However, we
recommend that you obtain the advice of your legal or tax advisor before you
sign the Adoption Agreement.
SECTION 1 EMPLOYER INFORMATION
Fill in the requested information.
SECTION 2 EFFECTIVE DATES
This SIMPLE IRA plan is either a new plan (an initial adoption) or an
amendment and restatement of an existing plan.
If this is a new plan, check Option A and fill in the effective date.
The effective date is usually the first day of the plan year in which
this Adoption Agreement is signed. For example, if this Adoption
Agreement is signed on September 24, 1997, the effective date would be
January 1, 1997.
If the reason you are adopting this Plan is to amend and replace an
existing SIMPLE IRA plan, check Option B. The existing plan which
will be replaced is called a "prior plan." You will need to know the
effective date of the prior plan. The best way to determine its
effective date is to refer to the prior plan Adoption Agreement. The
effective date of this amendment and restatement must be the first day
of the plan year in which the Adoption Agreement is signed.
SECTION 3 ELIGIBILITY REQUIREMENTS
NOTE: Section 3 should be completed even if you do not have
employees.
Within limits, you as the Employer can specify the compensation your
employees must earn from you over a period of years before they are
eligible to participate in this Plan. Note that the eligibility
requirements which you set up for the Plan also apply to you.
For example, if you establish a service requirement requiring
employees to earn at least $5,000 in compensation from you during any
2 preceding years and require that employees be expected to earn at
least $5,000 during the current year, only those employees (including
yourself) would be eligible to participate in this Plan.
Part A. Compensation Requirement
Fill in the amount of annual compensation required for participation.
In addition, provide the number of preceding years participants are
required to satisfy the minimum compensation requirement.
Part B. Class of Employees Eligible to Participate
All employees will be eligible to become participants unless indicated
otherwise in the Adoption Agreement. To exclude a particular class of
employee, select the class(es) of employees you wish to exclude from
participating in this Plan. The following describes the employees
which may be excluded.
1. Employees covered by the terms of a collective bargaining
agreement (e.g., a union agreement) where retirement benefits were
bargained for.
2. Employees who are non-resident aliens without any U.S. income.
SECTION 4. ELECTIVE DEFERRALS
Contributing Participants may specify a percentage of compensation
which they wish to contribute to this Plan. There are no blanks to be
completed in Section 4.
SECTION 5. EMPLOYER CONTRIBUTIONS
Each year you must make Matching or Nonelective Contributions to the
SIMPLE IRAs of participants in accordance with the Basic Plan
Document. Fill in the amount of annual compensation required for
participants to be eligible to receive Nonelective Contributions
should they be made.
SECTION 6. USE OF DESIGNATED FINANCIAL INSTITUTION
A Designated Financial Institution may be named for this Plan. If a
Designated Financial Institution will be named, select Option 1 and
list the name, address and phone number of such institution where all
SIMPLE IRA plan contributions will be made.
SECTION 7. EMPLOYER SIGNATURE
An authorized representative of the Employer must sign and date the
Adoption Agreement. In addition, the prototype sponsor must provide
its name, address and telephone number.
OTHER ITEMS
* Provide a Participation Notice & Summary Description to each
employee eligible to participate in this Plan.
* Make sure that all eligible employees have established SIMPLE
IRAs.
* Distribute Elective Deferral Agreements to all eligible employees
for completion.
1/97 1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SIMPLE Savings Incentive Match Plan For Employees
IRA PLAN Basic Plan Document
________________________________________________________________________________
SECTION ONE ESTABLISHMENT AND PURPOSE OF PLAN
1.01 PURPOSE: The purpose of this Plan is to provide, in accordance
with its provisions, a SIMPLE IRA plan providing benefits upon
retirement for the individuals who are eligible to participate
hereunder.
1.02 INTENT TO QUALIFY: It is the intent of the Employer that this
Plan shall be for the exclusive benefit of its Employees and shall
qualify for approval under Section 408(p) of the Internal Revenue
Code, as amended from time to time (or corresponding provisions of
any subsequent Federal law at that time in effect) as a SIMPLE IRA
plan. This document is intended to conform with the applicable
rules and procedures of the Internal Revenue Service that apply to
prototype SIMPLE IRA plans. It is further intended that it
comply, to the extent applicable, with the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA) as amended
from time to time. In case of any ambiguity, it shall be
interpreted to accomplish the foregoing intentions.
1.03 EXCLUSIVE PLAN REQUIREMENT: An Employer cannot maintain this Plan
for any Year if the Employer (or a predecessor employer)
maintained a qualified plan with respect to which contributions
were made, or benefits were accrued, for service in any Year in
the period beginning with the Year this Plan became effective and
ending with the Year for which the determination is being made.
For purposes of this Section 1.03, the term "qualified plan" means
a plan, contract, pension or trust described in subparagraph (A)
or (B) of Section 219(g)(5) of the Code.
1.04 USE WITH SIMPLE IRA: This prototype SIMPLE IRA Plan must be used
with a SIMPLE IRA.
1.05 FOR MORE INFORMATION. To obtain more information concerning the
rules governing this Plan, contact the Prototype Sponsor listed in
Section 7 of the Adoption Agreement.
SECTION TWO DEFINITIONS
2.01 ADOPTION AGREEMENT Means the document executed by the Employer
through which it adopts the Plan and thereby agrees to be bound by
all terms and conditions of the Plan.
2.02 CODE Means the Internal Revenue Code of 1986 as amended.
2.03 COMPENSATION Compensation shall mean all of a Participant's wages
and certain elective deferrals as described in paragraphs (3) and
(8) of Section 6051(a) of the Code.
For any Self-Employed Individual covered under the Plan,
Compensation will mean Earned Income.
Compensation shall include only that Compensation which is
actually paid to the Participant during the Year.
For purposes of the 2% Nonelective Contribution described in
Section 4.02(C), the annual Compensation of each Employee taken
into account under the Plan shall not exceed $160,000, as adjusted
by the Internal Revenue Service for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Code. The
cost-of-living adjustment in effect for a calendar year applies to
any period, not exceeding 12 months, over which Compensation is
determined (determination period) beginning in such calendar year.
If a determination period consists of fewer than 12 months, the
annual Compensation limit will be multiplied by a fraction, the
numerator of which is the number of months in the determination
period, and the denominator of which is 12.
2.04 CONTRIBUTING PARTICIPANT Means a person who has met the
participation requirements and who has enrolled as a Contributing
Participant pursuant to Section 3.04 and on whose behalf the
Employer is contributing Elective Deferrals.
2.05 DESIGNATED FINANCIAL INSTITUTION Means the financial organization
specified in the Adoption Agreement which is the trustee,
custodian or issuer of the SIMPLE IRAs to which Plan contributions
will be made. Use of a Designated Financial Institution is not
required under this Plan.
2.06 EARNED INCOME Means the net earnings from self-employment in the
trade or business with respect to which the Plan is established,
determined under Section 1402(a) of the Code prior to subtracting
any contributions made pursuant to this Plan on behalf of the
individual.
2.07 EFFECTIVE DATE Means the date the Plan becomes effective as
indicated in the Adoption Agreement.
2.08 ELECTION PERIOD Means the period during which a Participant may
enroll as a Contributing Participant. The Election Period shall
be the 60-day period immediately before the beginning of any Year.
However, for the Year in which a Participant becomes eligible to
participate, the period during which a Participant may enroll as a
Contributing Participant is a 60-day period that includes either
the date the Participant becomes eligible to participate or the
day before that date or any other period as may be allowed under
rules or procedures promulgated by the Internal Revenue Service.
2.09 ELECTIVE DEFERRAL AGREEMENT Means an agreement, on a form
provided by the Employer, pursuant to which a Contributing
Participant may elect to have his or her Compensation reduced and
paid as an Elective Deferral to his or her SIMPLE IRA by the
Employer. No Elective Deferral Agreement may apply to
Compensation that a Contributing Participant received, or had a
right to immediately receive, before execution of the Elective
Deferral Agreement.
2.10 ELECTIVE DEFERRALS Means contributions made by the Employer to
the Plan on behalf of a Contributing Participant pursuant to
Section 4.01.
2.11 EMPLOYEE Means any person who is employed by the Employer as a
common law employee and if the Employer is a sole proprietorship
or partnership, any Self-Employed Individual who performs services
with respect to the trade or business of the Employer. Further,
any employee of any other employer required to be aggregated under
Section 414(b), (c), (m), or (o) of the Code and any leased
employee required to be treated as an employee of the Employer
under Section 414(n) of the Code shall also be considered an
Employee.
2.12 EMPLOYER Means any corporation, partnership or sole
proprietorship named in the Adoption Agreement and any successor
who by merger, consolidation, purchase or otherwise assumes the
obligations of the Plan, provided such entity meets the
eligibility requirement described in this Section 2.12. A
partnership is considered to be the Employer of each of the
partners and a sole proprietorship is considered to be the
Employer of the sole proprietor.
An Employer meets the eligibility requirement and therefore will
be eligible to maintain this Plan with respect to any Year only if
the Employer had no more than 100 Employees who received at least
$5,000 of Compensation from the Employer for the preceding Year.
An eligible Employer who establishes and maintains a SIMPLE IRA
plan for one or more Years and who fails to be an eligible Employer
for any subsequent Year shall be treated as an eligible Employer
for the two Years following the last Year the Employer was an
eligible Employer. If such failure is due to any acquisition,
disposition, or similar transaction involving an eligible Employer,
the preceding sentence shall apply only in accordance with rules
similar to the rules of Section 410(b)(6)(C)(i) of the Code.
2.13 EMPLOYER CONTRIBUTION Means the amount contributed by the
Employer to this Plan.
2.14 MATCHING CONTRIBUTION Means an Employer Contribution made
pursuant to this Plan on behalf of a Contributing Participant on
account of an Elective Deferral made by such Contributing
Participant, as described in Section 4.02(B).
2.15 NONELECTIVE CONTRIBUTION Means an Employer Contribution made
pursuant to this Plan as described in Section 4.02(C).
2.16 PARTICIPANT Means any Employee who has met the eligibility
requirements of Section 3.01 and who may enroll as a Contributing
Participant and who is or may become eligible to receive an
Employer Contribution.
2.17 PLAN Means this plan document plus the corresponding Adoption
Agreement as completed and signed by the Employer.
2.18 PRIOR PLAN Means a SIMPLE IRA plan which was amended or replaced
by adoption of this plan document, as indicated in the Adoption
Agreement.
2.19 PROTOTYPE SPONSOR Means the entity specified in the Adoption
Agreement which sponsors this prototype Plan.
2.20 SELF-EMPLOYED INDIVIDUAL Means an individual who has Earned
Income for a Plan Year from the trade or business for which the
Plan is established; also, an individual who would have had Earned
Income but for the fact that the trade or business had no net
profits for the Plan Year.
2.21 SIMPLE IRA Means the Individual Retirement Account or Individual
Retirement Annuity, which satisfies the requirements of Section
408(a) or 408(b) of the Code, and, with respect to which, the only
contributions allowed are contributions under a SIMPLE IRA plan.
2.22 YEAR Means the calendar year.
SECTION THREE ELIGIBILITY AND PARTICIPATION
3.01 ELIGIBILITY REQUIREMENTS Except for those Employees excluded
pursuant to Section 3.02, each Employee of the Employer who
fulfills the eligibility requirements specified in the Adoption
Agreement shall become a Participant. Each Participant must
establish a SIMPLE IRA to which Employer Contributions under this
Plan will be made.
3.02 EXCLUSION OF CERTAIN EMPLOYEES
A. Collective Bargaining Unit Employees
If the Employer has so indicated in the Adoption Agreement the
following Employees will not be eligible to become
Participants in the Plan:
Those employees included in a unit of Employees covered by a
collective bargaining agreement between the Employer and
Employee representatives, if retirement benefits were the
subject of good faith bargaining and if two percent or less of
the Employees who are covered pursuant to that agreement are
professionals as defined in Section 1.410(b)-9 of the Treasury
Regulations. For this purpose, the term "employee
representatives" does not include any organization more than
half of whose members are Employees who are owners, officers,
or executives of the Employer.
B. Non-Resident Aliens
If the Employer has so indicated in the Adoption Agreement the
following Employees will not be eligible to become
Participants in the Plan:
Those Employees who are non-resident aliens (within the
meaning of Section 7701(b)(1)(B) of the Code) and who received
no earned income (within the meaning of Section 911(d)(2) of
the Code) from the Employer which constitutes income from
sources within the United States (within the meaning of
Section 861(a)(3) of the Code).
3.03 ADMITTANCE AS A PARTICIPANT
A. Notification of Eligibility - The Employer shall notify each
Employee who becomes a Participant of his or her status as a
Participant in the Plan and of his or her duty to establish a
SIMPLE IRA to which Employer Contributions may be made.
Unless the Employer elects to make all Plan contributions to a
Designated Financial Institution, the Employer must permit
each eligible Employee to select the financial institution
that will serve as trustee, custodian or issuer of the SIMPLE
IRA to which the Employer will make all contributions on
behalf of that Employee.
B. Establishment of a SIMPLE IRA - If a Participant fails to
establish a SIMPLE IRA for whatever reason, the Employer may
execute any necessary documents to establish a SIMPLE IRA on
behalf of the Participant.
3.04 CONTRIBUTING PARTICIPANT
A. Requirements to Enroll as a Contributing Participant
Each Employee who becomes a Participant may enroll as a
Contributing Participant. A Participant who desires to enroll
as a Contributing Participant must complete, sign and deliver
to the Employer an Elective Deferral Agreement during the
Election Period. In addition, the Employer in a uniform and
nondiscriminatory manner may provide additional opportunities
for Participants to enroll as Contributing Participants in
accordance with procedures established by the Employer.
B. Modification of Elective Deferrals
A Contributing Participant may modify his or her Elective
Deferral Agreement to increase or decrease the amount of his
or her Compensation deferred into his or her SIMPLE IRA under
the Plan. A Contributing Participant who desires to make such
a modification shall complete, sign and file a new Elective
Deferral Agreement with the Employer during the Election
Period. In addition, if the Employer in a uniform and
nondiscriminatory manner permits, a Contributing Participant
may modify his or her Elective Deferral Agreement more
frequently in accordance with procedures established by the
Employer.
C. Withdrawal as a Contributing Participant
A Participant may withdraw as a Contributing Participant at any
time during the Year by revoking his or her authorization to
the Employer to make Elective Deferrals on his or her behalf.
A Participant who desires to withdraw as a Contributing
Participant shall give written notice of withdrawal to the
Employer. A Participant shall cease to be a Contributing
Participant upon his or her termination of employment, or on
account of termination of the Plan.
D. Return as Contributing Participant after Withdrawal
A Participant who has withdrawn as a Contributing Participant
may not again become a Contributing Participant until the
first day of the first Year following the effective date of
his or her withdrawal as Contributing Participant, unless the
Employer, in a uniform and nondiscriminatory manner, permits
withdrawing Participants to resume their status as
Contributing Participants sooner.
3.05 DETERMINATIONS UNDER THIS SECTION The Employer shall determine
the eligibility of each Employee to be a Participant. This
determination shall be conclusive and binding upon all persons
except as otherwise provided herein or by law.
3.06 LIMITATION RESPECTING EMPLOYMENT Neither the fact of the
establishment of the Plan nor the fact that a common-law employee
has become a Participant shall give to that common-law employee
any right to continued employment; nor shall either fact limit the
right of the Employer to discharge or to deal otherwise with a
common-law employee without regard to the effect such treatment
may have upon the Employee's rights under the Plan.
SECTION FOUR CONTRIBUTIONS AND ALLOCATIONS
4.01 ELECTIVE DEFERRALS At the election of a Contributing
Participant, the Employer shall contribute Elective Deferrals to
the SIMPLE IRA of such Contributing Participant. Elective
Deferrals for a Contributing Participant must be deposited to the
SIMPLE IRA of such Contributing Participant by the Employer as of
the earliest date on which such Elective Deferrals can reasonably
be segregated from the Employer's general assets, but in no event
later than the close of the 30-day period following the last day
of the month with respect to which the contributions are to be
made. Thus, for example, amounts that a Contributing Participant
elects to defer with respect to the month of March of a Year must
be contributed by the Employer to the Contributing Participant's
SIMPLE IRA not later than the following April 30th.
4.02 REQUIRED EMPLOYER CONTRIBUTIONS
A. Employer Must Make Certain Contributions
Each Year, the Employer shall make either the Matching
Contribution described in Section 4.02(B) or the Nonelective
Contribution described in Section 4.02(C) to the SIMPLE IRAs
of Participants. Such contributions for any Year shall be
made not later than the due date for filing the Employer's tax
return for such Year (including extensions).
B. Matching Contribution
The Employer may satisfy the requirement set forth in Section
4.02(A) by making a Matching Contribution to the SIMPLE IRA of
each Contributing Participant for any Year in an amount equal
to so much of the amount of the Contributing Participant's
Elective Deferral as does not exceed 3% of the Contributing
Participant's Compensation for the Year (the "Matching
Contribution percentage"). Instead of the 3% Matching
Contribution percentage referred to in the previous sentence,
the Employer may elect to apply a lower Matching Contribution
percentage (not less than 1%) for any Year for all Contributing
Participants if the Employer notifies the Employees eligible to
participate in the Plan of such lower Matching Contribution
percentage within a reasonable period of time before the
Election Period for such Year. The Employer may not elect a
lower Matching Contribution percentage for any Year if that
election would result in the Matching Contribution percentage
being lower than 3% in more than 2 of the Years in the 5-Year
period ending with such Year. If any Year in the 5-Year period
described in the preceding sentence is a Year prior to the
first Year for which this SIMPLE IRA plan or a (Prior Plan) is
in effect with respect to the Employer (or any predecessor
employer), the Employer shall be treated as if the Matching
Contribution percentage was equal to 3% of Compensation for
such prior Year.
C. Nonelective Contribution
The Employer may satisfy the requirement set forth in Section
4.02(A) by making a Nonelective Contribution of 2% of
Compensation to the SIMPLE IRA of each Participant who has at
least $5,000 of Compensation (or such lesser amount of
Compensation as may be specified in the Adoption Agreement)
from the Employer for the Year provided the Employer notifies
the Employees eligible to participate in the Plan that the
Employer will be making a Nonelective Contribution within a
reasonable period of time before the Election Period for such
Year.
4.03 NO OTHER CONTRIBUTIONS The Employer shall make no contributions
to the SIMPLE IRAs of Participants other than Elective Deferrals
made pursuant to Section 4.01 and those contributions required
under Section 4.02. Nothing herein shall prevent an Employee from
rolling over or transferring funds from another SIMPLE IRA to a
SIMPLE IRA maintained under this Plan.
4.04 VESTING AND WITHDRAWAL RIGHTS All Employer Contributions made
under the Plan on behalf of Employees shall be fully vested and
nonforfeitable at all times. Each Employee shall have an
unrestricted right to withdraw at any time all or a portion of the
Employer Contributions made on his or her behalf. However,
withdrawals taken are subject to the taxation and penalty
provisions of the Code which are applicable to distributions from
SIMPLE IRAs.
4.05 SIMPLIFIED EMPLOYER REPORTS The Employer shall furnish reports,
relating to account activity under the Plan, in the time and
manner and containing the information prescribed by the Secretary
of the Treasury. The Employer shall furnish information to the
trustee, custodian or issuer of SIMPLE IRAs of Participants as
such trustee, custodian or issuer may reasonably request to enable
it to fulfill its reporting and other responsibilities in
connection with this SIMPLE IRA plan or the SIMPLE IRAs of
Participants.
4.06 USE OF DESIGNATED FINANCIAL INSTITUTION This Section 4.06 shall
apply if the Employer has indicated in the Adoption Agreement that
the Employer will make all Plan contributions at the Designated
Financial Institution specified in the Adoption Agreement and if
the financial organization agrees to act as the Designated
Financial Institution. Upon request of any Plan Participant, the
Designated Financial Institution agrees to transfer the
Participant's balance in his or her SIMPLE IRA established under
this Plan to another individual retirement account or individual
retirement annuity without cost or penalty to the Participant
subject to rules provided by the Designated Financial Institution.
SECTION FIVE AMENDMENT OR TERMINATION OF PLAN
5.01 AMENDMENT BY EMPLOYER The Employer reserves the right to amend
the elections made or not made on the Adoption Agreement by
executing a new Adoption Agreement and delivering a copy of the
same to the Prototype Sponsor. The Employer shall not have the
right to amend any nonelective provision of the Adoption Agreement
nor the right to amend provisions of this plan document. If the
Employer adopts an amendment to the Adoption Agreement or plan
document in violation of the preceding sentence, the Plan will be
deemed to be an individually designed plan and may no longer
participate in this prototype Plan.
5.02 AMENDMENT BY PROTOTYPE SPONSOR By adopting this Plan, the
Employer delegates to the Prototype Sponsor the power to amend or
replace the Adoption Agreement of the Plan to conform them to the
provisions of any law, regulations or administrative rulings
pertaining to SIMPLE IRA plans and to make such other changes to
the Plan, which, in the judgment of the Prototype Sponsor, are
necessary or appropriate. The Employer shall be deemed to have
consented to all such amendments; provided however, that no
changes may be made without the consent of the Employer if the
effect would be to substantially change the costs or benefits
under the Plan. The Prototype Sponsor shall not have the
obligation to exercise or not to exercise the power delegated to
it nor shall the Prototype Sponsor incur liability of any nature
for any act done or failed to be done by the Prototype Sponsor in
good faith in the exercise or nonexercise of the power delegated
hereunder. The Prototype Sponsor shall notify the Employer should
it discontinue sponsorship of the Plan. For purposes of Prototype
Sponsor amendments, the mass submitter shall be recognized as the
agent of the Prototype Sponsor. The Prototype Sponsor's duties
are limited to those expressly assigned to it under the terms of
this Plan together with any requirements of prototype sponsors of
SIMPLE IRA plans that may be set forth from time to time by the
Internal Revenue Service under its rules and procedures. The
Prototype Sponsor shall not be responsible for any duties assigned
to the Employer.
5.03 LIMITATIONS ON POWER TO AMEND No amendment by either the Employer
or the Prototype Sponsor shall reduce or otherwise adversely
affect any benefits of a Participant acquired prior to such
amendment unless it is required to maintain compliance with any
law, regulation or administrative ruling pertaining to SIMPLE IRA
plans.
5.04 TERMINATION While the Employer expects to continue the Plan
indefinitely, the Employer shall not be under any obligation or
liability to continue contributions or to maintain the Plan for
any given length of time. The Employer may terminate this Plan at
any time by appropriate action of its managing body. This Plan
shall terminate on the occurrence of any of the following events:
A. Delivery to the Prototype Sponsor of a notice of termination
executed by the Employer specifying the effective date of the
Plan's termination.
B. Adjudication of the Employer as bankrupt or the liquidation or
dissolution of the Employer.
5.05 NOTICE OF AMENDMENT OR TERMINATION Any amendment or termination
shall be communicated by the Employer to all appropriate parties
as required by law. Amendments made by the Prototype Sponsor
shall be furnished to the Employer and communicated by the
Employer to all appropriate parties as required by law. Any
filings required by the Internal Revenue Service or any other
regulatory body relating to the amendment or termination of the
Plan shall be made by the Employer.
5.06 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER A successor of the
Employer may continue the Plan and be substituted in the place of
the present Employer. The successor and present Employer (or if
deceased, the executor of the estate of a deceased Self-Employed
Individual who was the Employer) must execute a written instrument
authorizing such substitution and the successor must complete and
sign a new Adoption Agreement.
5.07 SENDING OF NOTICES BY U.S. MAIL Any notice required under this
Plan may be provided by U.S. mail. If mailed, a notice will be
considered effective at the time it is mailed to the last known
address of the intended recipient which is on file with the
provider of the notice.
5.08 LIMITATION OF LIABILITY The Prototype Sponsor, trustee, custodian
or issuer of a SIMPLE IRA shall not be liable for any losses
incurred by the SIMPLE IRA by any direction to invest communicated
by the Employer, or any Participant or beneficiary. It is
specifically understood that the Prototype Sponsor, trustee,
custodian or issuer shall have no duty or responsibility with
respect to the determination of the adequacy of contributions to
the Plan and enforcing the payment of such contributions. In
addition, it is specifically understood that the Prototype
Sponsor, trustee, custodian or issuer shall have no duty or
responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become a
Participant or remain a Participant hereunder, the amount of
benefit to which a Participant or beneficiary shall be entitled to
receive hereunder or whether a distribution to Participant or
beneficiary is appropriate under the terms of the Plan; it being
understood that all such responsibilities under the Plan are
vested in the Employer.
#619 (1/97) 1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SIMPLE Savings Incentive Match Plan For Employees
IRA Plan ADOPTION AGREEMENT
SECTION 1. EMPLOYER INFORMATION
Name of Employer ___________________________________________
Address ____________________________________________________
City ______________________ State ____________ Zip _________
Telephone ______________
Employer's Federal Tax Identification Number _______________
Income Tax Year End ________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A: [ ] This is the initial adoption of a SIMPLE IRA plan by the
Employer.
The Effective Date of this Plan is ________________
NOTE: The effective date is usually the first day of the Year in which
this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing SIMPLE
IRA plan (a Prior Plan).
The Prior Plan was initially effective on
_________________________________________.
The Effective Date of this amendment and restatement is
January 1, _________.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A and B
Part A. Service Requirement: For any Year, an Employee will be eligible to
become a Participant in the Plan provided the Employee has received
at least $_____________ (enter a dollar amount no greater than
$5,000) in Compensation from the Employer during any _______ (enter
0, 1 or 2) preceding Years and is reasonably expected to receive at
least such amount in Compensation during the Year.
Part B. Exclusion of Certain Classes of Employees: All Employees will be
eligible to become Participants in the Plan except (Check any that
apply):
[ ] Collective bargaining unit Employees as described in Section
3.02(A) of the Plan.
[ ] Non-resident aliens as described in Section 3.02(B) of the
Plan.
SECTION 4. ELECTIVE DEFERRALS
A Contributing Participant may elect under an elective deferral
agreement to have his or her Compensation reduced by a percentage.
The amount of such reduction shall be contributed by the Employer
under the Plan to a SIMPLE IRA on behalf of the Contributing
Participant. For any Year, a Contributing Participant's Elective
Deferrals shall not exceed $6,000 (indexed for cost-of-living
increases in accordance with Section 408(p)(2)(E) of the Code).
SECTION 5. EMPLOYER CONTRIBUTIONS
Each Year the Employer shall make the Matching Contributions or
Nonelective Contributions to the SIMPLE IRA of Participants in
accordance with the rules described in Section 4.02 of the Plan. For
any Year the Employer makes Nonelective Contributions, such
contributions will be made on behalf of each Participant who has at
least $____________ (enter a dollar amount no less than the amount
entered in Section 3, Part A above and no greater than $5,000) of
Compensation for such Year.
SECTION 6. USE OF DESIGNATED FINANCIAL INSTITUTION
NOTE: Waddell & Reed, Inc. does not serve as a "Designated Financial
Institution" as defined in Section 2.05 of the SIMPLE IRA Basic Plan
Document, and all Plan provisions regarding a "Designated Financial
Institution" are inapplicable. Plan contributions may only be
invested in products approved by Waddell & Reed, Inc. as selected by
each participant upon completion of Application form #CAP001 or form
#WRF3000.
Will the Employer make all Plan contributions at a Designated Financial
Institution? (See Section 4.06 of the Plan)
Option 1: [ ] Yes (Enter name and address of Designated
Financial Institution below)
Option 2: [ ] No
Note: If no option is selected, Option 2 will be deemed to
be selected.
Name of Designated Financial Institution ____________________
Phone _______________________________________________________
Address _____________________________________________________
Signature for Designated Financial Institution ______________
SECTION 7.EMPLOYER SIGNATURE
The Sole Proprietor, Senior Partner or, if a Corporation, the
Authorized Officer acknowledges receipt of the current prospectus(es)
of the investment companies or other securities designated by the
Employer for its initial investments under the Plan and represents
that it has delivered a copy thereof to each participant in the Plan,
and that it will deliver to each Participant making contributions and
each new Participant, a copy of the then current prospectus(es of such
investment companies or other securities.
Note to Employer: Before signing this Adoption Agreement, you should obtain
the advice of a qualified attorney and tax advisor regarding its completion
and the legal and tax implications of adopting this Plan.
Signature for Employer ______________________ Date Signed _______
(Type Name) _____________________________________________________
Name of Prototype Sponsor ______________________ Phone __________
Address _________________________________________________________
Note to Employer: Before signing this Adoption Agreement, you should obtain the
advice of a qualified attorney and tax advisor regarding its completion and the
legal and tax implications of adopting this Plan.
#618(1/97) 1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SIMPLE PARTICIPATION NOTICE & SUMMARY DESCRIPTION
IRA PLAN IMPORTANT: Carefully read and consider the information on
both sides of this notice before you decide whether to start,
continue or change your elective deferral agreement.
SECTION A GENERAL INFORMATION
Employer Name of Employer _________________________________
Information Address___________________________________________
City________________State _________Zip ___________
Trustee/Custodian/ Name of Trustee, Custodian or Issuer
Issuer Information ________________________________________
Address ________________________________
City __________State _____Zip __________
________________________________________________________________________________
SECTION B ELIGIBILITY REQUIREMENTS
Opportunity To This form is intended, in part, to notify you of
Participate your right to choose, during the Election Period, to make
Elective Deferrals under the Savings Incentive Match Plan for
Employees (SIMPLE IRA Plan) established by your Employer. The
Election Period is generally the 60-day period before the
beginning of each Year and the 60-day period before the first day
you become eligible to participate. This notice includes a
Summary Description of your Employer's SIMPLE IRA Plan.
Eligible Except as provided below, you will be eligible to
Employees participate in this Plan unless you are covered by a collective
bargaining agreement (unless the collective bargaining agreement
specifies that you will participate) or unless you are a
nonresident alien and you receive no earned income from your
Employer.
In spite of the preceding paragraph, you will be eligible to
participate in your Employer's SIMPLE IRA Plan even if you are:
[ ] covered by a collective bargaining
agreement
[ ] a non-resident alien with no earned income
from your Employer
Compensation To become eligible to participate in the Plan, you
& Service must have earned $5,000 during any 2 preceding
years and you must be reasonably expected to earn such amount
during the current year, unless otherwise specified below.
You are required to earn at least $___________ (may not exceed
$5,000) during any _______ (may not exceed 2) preceding years to
be eligible to participate in the Plan.
SECTION C PLAN CONTRIBUTIONS
Financial Your Employer [ ] has [ ] has not elected to
Institution make all contributions to a Designated Financial Institution.
If contributions are not required to be made to a Designated
Financial Institution, you must select the financial organization
that will serve as trustee, custodian or issuer of your SIMPLE
IRA and notify your Employer by providing a completed Elective
Deferral Agreement.
If contributions are required to be made to a Designated
Financial Institution, you may transfer the balance in your
SIMPLE IRA, without cost or penalty, from the Designated
Financial Institution to a SIMPLE IRA at the financial
organization of your choice. To do so, you must request a
transfer during the Election Period or during any other period as
allowed by the Designated Financial Institution. Upon request,
the Designated Financial Institution will periodically transfer
your balance.
Elective By completing an Elective Deferral Agreement, you
Deferrals agree to make Elective Deferrals to this Plan. Your compensation
will be reduced each pay period by an amount equal to the
percentage of your compensation you specify on the Elective
Deferral Agreement. In no event, however, may your Elective
Deferrals exceed $6,000 during any calendar year.
You may change the amount of your Elective Deferrals by
completing and signing a revised Elective Deferral Agreement
during the Election Period or any other period specified below.
_________________________________________________
_________________________________________________
You may discontinue making Elective Deferrals at any time during
the Year by completing and signing a revised Elective Deferral
Agreement. You are allowed to commence making Elective Deferrals
the first day of the Year following the Year you cease deferring
unless specified otherwise below.
_________________________________________________
_________________________________________________
Employer For calendar year ______, your Employer will make
Contributions Matching Contributions equal to 100% of your
Elective Deferrals which do not exceed 3% of your compensation
unless your Employer elects to make either the alternative
Matching Contribution or the Nonelective Contribution described
in Options 1 and 2 below.
Option 1 [ ] Matching Contributions in an amount equal to your Elective
Deferrals which do not exceed ____% (must not be less than
1%).
Option 2 [ ] Nonelective Contributions equal to 2% of compensation on
behalf of each Participant who earns at least $5,000 during
the year unless a different dollar amount is specified below.
You are required to earn at least $________ (may not exceed
$5,000) during the year to be eligible to receive Nonelective
Contributions.
SECTION D DISTRIBUTIONS
The following is a summary of the rules applicable to
distributions from SIMPLE IRAs. You are advised to refer to your
SIMPLE IRA documents and/or seek the assistance of a qualified
tax advisor if you have additional questions.
Procedures SIMPLE IRA assets are fully vested and may be withdrawn at any
time subject to taxes and penalties as explained below. The
trustee, custodian or issuer of your SIMPLE IRA, and not your
Employer, is responsible for making distributions to you upon
your request.
Federal Income Distributions from SIMPLE IRAs are taxed as
Tax ordinary income in the year in which you receive them. In
addition, federal income tax withholding will be applied to your
distribution at a rate of 10% unless you specify a higher rate or
waive your right to withholding.
Penalties Early Distribution Penalty - A 25 percent early withdrawal
penalty applies to SIMPLE IRA distributions taken within two
years of your initial participation in the Plan, unless you are
age 59 1/2 or older or can claim an exemption from the early
distribution penalty described in Internal Revenue Code (IRC)
Sec. 72(t)(6). If you are under age 59 1/2, have satisfied the
two-year requirement and receive a distribution, you will be
subject to a 10 percent early distribution penalty.
Excess Distribution Penalty - You will be taxed an additional 15
percent on any amount received and included in income during a
calendar year from IRAs, SIMPLE IRAs and other retirement plans
which exceeds $160,000 (indexed for the cost of living). The
excess distribution penalty, however, does not apply for tax
years 1997, 1998 or 1999. Certain other exceptions may apply.
Rollovers SIMPLE IRA distributions may be rolled over to other SIMPLE IRAs.
Rollovers from regular IRAs are not permitted. If a SIMPLE IRA
distribution is properly rolled over, your rollover amount will
be excluded when determining the amount of your federal income
tax, early distribution penalty or excess distribution. You may
roll over SIMPLE IRA distributions to regular IRAs. However, you
must generally wait two years from the date you become a
participant before doing so.
Required You are generally required to begin taking
Minimum minimum distributions from your SIMPLE IRA upon
Distributions attainment of age 70 1/2 in accordance with IRS regulations.
Procedures For If you wish to take a distribution from your
Withdrawal SIMPLE IRA, you must complete a withdrawal statement provided by
the trustee, custodian or issuer of your SIMPLE IRA. In
addition, the following procedures apply to you upon requesting a
distribution.
_______________________________________________
_______________________________________________
_______________________________________________
Special The following additional rules and procedures
Procedures apply to transfers of your balance in your SIMPLE
Regarding IRA.
Transfers __________________________________________________
__________________________________________________
__________________________________________________
#617 1/97 1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SIMPLE ELECTIVE DEFERRAL AGREEMENT
IRA PLAN IMPORTANT: Be sure to read all sections of this Elective Deferral
Agreement before signing it.
SECTION A GENERAL INFORMATION
Employer and Name of Plan __________________________________
Plan Name of Employer ______________________________
Information Address _______________________________________
City ______________State ____________ Zip _____
Employee Name __________________________________________
Information Employee No. __________________________________
Home Address _______________________ SSN. _____
City ____________ State ____________ Zip ______
SECTION B TERMS OF AGREEMENT - To Be Completed By the Employer
Limits On Subject to the requirements of the Employer's
Elective SIMPLE IRA Plan, each employee who is eligible to
Deferrals enroll as a Contributing Participant may set aside a percentage
of his or her pay into the Plan (Elective Deferrals) by signing
this Elective Deferral Agreement. This Elective Deferral
Agreement replaces any earlier agreement and will remain in
effect as long as the employee remains an eligible employee or
until he or she provides the Employer with a new Elective
Deferral Agreement as permitted by the Plan. A participant's
Elective Deferrals may not exceed $6,000 in any calendar year.
Changing This An employee may change the percentage of pay he or
Agreement she is setting aside into the Plan. Any employee who wishes to
make such a change must complete and sign a new Elective Deferral
Agreement and give it to the employer during the Election Period
or any other period the Employer specifies on the Participation
Notice & Summary Description.
Terminating An employee may terminate this Elective Deferral
Agreement Agreement. After terminating this Agreement, an employee cannot
again enroll as a Contributing Participant until the first day of
the Year following the Year of termination or any other date the
Employer specifies on the Participation Notice & Summary
Description.
Effective Date This Agreement will be effective for the pay period which begins
___________________________.
-----------------------------------------------------------------
---------------------------------------------------------------
SECTION C AUTHORIZATION AND INVESTMENT SELECTION
Elective I, the undersigned employee, wish to set
Deferral aside, as Elective Deferrals, ______% or
Agreement $__________ (which equals ______% of my current rate of pay) into
my Employer's SIMPLE IRA Plan by way of payroll deduction.
I agree that my pay will be reduced in the manner I have
indicated above, and I affirmatively elect to have this amount
contributed to the investments listed below. This Elective
Deferral Agreement will continue to be effective while I am
employed, unless I change or terminate it as explained in Section
B above. I acknowledge that I have read this entire agreement, I
understand it and I agree to its terms. Furthermore, I
acknowledge that I have received a copy of the Participation
Notice & Summary Description.
Name and Address of ________________________
SIMPLE IRA provider: ________________________
________________________
Investment Options
(select one) [ ] ________________________
[ ] ________________________
[ ] ________________________
Signatures _________________________________________________
Signature of Employee____________________________
Date ______
Authorized Signature for Employer_________________
Title ____________________________________________
Date _____________________________________________
#616(1/97) 1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
About The Savings Incentive Match Plan for Employees
WHAT IS A SIMPLE?
A savings incentive match plan for employees (SIMPLE) is a type of retirement
plan which allows you, the employer, to provide an important employee benefit to
the employees of your business (including yourself if you perform services for
the business). An `` employer'' may be a sole proprietor,
partnership or
corporation. Amounts you contribute for your employees under a SIMPLE IRA plan
are deposited into your employees' SIMPLE IRAs.
WHAT ARE THE BENEFITS OF A SIMPLE?
Tax Advantages: SIMPLE IRA plan contributions you make to your own SIMPLE IRA
and your employees' SIMPLE IRAs are tax deductible to you, the employer.
Because SIMPLE contributions are placed in SIMPLE IRAs, all earnings are tax-
sheltered, meaning the earnings are not taxed until they are withdrawn. In
addition, a SIMPLE IRA plan helps you attract and retain quality employees as
you help meet the increasing need for financial security at retirement.
Eligibility Requirements: Not all employees have to be covered under a SIMPLE
IRA plan. At your option, you can exclude employees who have not earned at
least $5,000 during any 2 preceding years and are not expected to earn at least
$5,000 during the current year. In addition, you may exclude employees who are
non-resident aliens and certain union members.
Contributions: Each employee can specify the percentage of pay he or she wants
you to withhold and contribute to the Plan. The maximum amount which
participants may defer each year is limited to $6,000. In addition, you must
make either matching contributions, generally equal to the amount of each
participant's elective deferrals up to 3% of his or her compensation, or
nonelective contributions equal to 2% of each participant's compensation.
You have until the due date for filing your business's tax return (plus
extensions) to make matching and nonelective contributions under your SIMPLE IRA
plan.
Place of Deposit: All contributions made under the Plan must be deposited
directly into each eligible employee's SIMPLE IRA.
Distributions: Once SIMPLE IRA plan contributions are made, the normal IRA
rules generally apply. For example, all earnings are tax-sheltered until they
are withdrawn from the SIMPLE IRA. In addition, distributions must begin by
April 1 of the year following the year the SIMPLE IRA holder reaches age 70.
WHAT ABOUT SET UP?
A SIMPLE IRA plan is easy to set up and administer. To establish a SIMPLE IRA
plan, you must sign an adoption agreement. Once the Plan is set up, all
eligible employees (including yourself) establish SIMPLE IRAs to receive
contributions. All eligible employees must complete and sign an Elective
Deferral Agreement to indicate the percentage of pay they wish to contribute to
the plan.
Maintaining a SIMPLE IRA plan is also easy. Unlike qualified plans and Keoghs,
no extra reporting is required. You simply take a deduction on your tax return
for the SIMPLE IRA plan contributions and notify employees of the contribution
and of the Plan's general provisions.
EMPLOYEE COMMUNICATIONS
Employee Information: If you have employees, provide each eligible employee
with a Participation Notice Summary Description.
Establish SIMPLE IRAs: Make sure all participating employees have established
SIMPLE IRAs.
Elective Deferral Agreements: Have all eligible employees complete and sign
Elective Deferral Agreements.
SUMMARY
If you are interested in establishing this SIMPLE IRA plan, consult your tax and
legal advisors for guidance in selecting the Plan features which best suit your
business's needs. Once you are ready to adopt the Plan, refer to the
instructions for completing the enclosed forms and properly establishing your
Plan.
(1/97) 1997 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
ELIGIBILITY FORM
The following questions are designed to help you, the employer,
along with your attorney and tax advisor, determine if you are
eligible to adopt a SIMPLE IRA plan. Answer the following
questions:
YES NO
REQUIREMENTS[ ][ ] 1. Do you own or control a business from which your
personal services are an income producing factor?
If the answer is NO, STOP. You are not eligible to
establish this Plan.
[ ][ ] 2. Do you have more than 100 employees who received at
least $5,000 of compensation from you in the previous
calendar year?
If the answer is YES, STOP. You are not eligible to
establish this Plan.
[ ][ ] 3. Have you maintained any other qualified plan during
the current calendar year in which contributions were
made or benefits were accrued? If the answer is YES,
STOP. You are not eligible to establish this Plan.
[ ][ ] 4. Is the business a member of a controlled group of
corporations, businesses, or trades, (whether or not
incorporated) within the meaning of IRC Section 414(b)
or 414(c)?
[ ][ ] 5. Is the business a member of an affiliated service
group within the meaning of IRC Section 414(m)?
[ ][ ] 6. Does the business use the services of leased
employees within the meaning of IRC Section 414(n)?
If you answered any of the above questions 4 through 6 YES, you may
have to include the leased employees and/or employees of the other
business(es) in the Plan. Consult your tax advisor to determine
what additional action, if any, you must take.
SIGNATURE IMPORTANT: Please read before signing:
I certify 1. I am an authorized representative
that: of the employer and the employer is eligible to
establish the SIMPLE IRA plan of the Prototype Sponsor.
2. In determining my eligibility to adopt this Plan, I
relied solely upon the advice of my own advisors.
3. I agree not to hold the Prototype Sponsor responsible
for any liabilities I may suffer as a result of being
found ineligible to establish this Plan.
DATE EXECUTED ____________________________________
TYPE NAME OF EMPLOYER ____________________________
SIGNATURE OF EMPLOYER ____________________________
#615 (1/97) 1997 Universal Pensions, Inc., Brainerd, MN 56401
EX-99.B14-21-crp00005
INDIVIDUAL
RETIREMENT
PLAN
A Prototype Plan Sponsored by United Funds, Inc.
IRS Serial Number D19O430b
Individual Retirement Account (IRA)
Spousal IRA
Rollover IRA
Simplified Employee Pension Plan IRA
SIMPLE IRA
Transfer IRA
Waddell & Reed
FINANCIAL SERVICES
<PAGE>
INDIVIDUAL
RETIREMENT PLAN
TABLE OF CONTENTS
Plan Provisions.........................................................
Custody Agreement.......................................................
Important Disclosures...................................................
Application Instructions................................................
IRA Rollover Statement of Distribution..................................
<PAGE>
PROTOTYPE INDIVIDUAL RETIREMENT PLAN
Sponsored by United Funds, Inc.
Section 1-INTRODUCTION
WHEREAS, the sponsor established a Prototype Retirement Plan and Custody
Agreement forming a part thereof (IRS serial number Dl9O430b) under the
Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, the Economic Recovery Tax Act of 1981, the Tax Equity
and Fiscal Responsibility Act of 1982, the Tax Reform Act of 1986, and the
Unemployment Compensation Amendments of 1992, in order to permit
participating Individuals to establish an account for the exclusive benefit
of the Individual or his Beneficiary to create a fund out of which benefits
shall be paid exclusively to the Individual adopting this Plan upon his
retirement, disability, or other termination of employment, or in the event
of death, to his Beneficiaries; and
WHEREAS, certain amendments to the Retirement Plan and Custody Agreement
are necessary in order to conform the same to the requirements of the Small
Business Job Protection Act of 1996, and the regulation and procedures
promulgated with respect thereto; and,
WHEREAS, the Sponsor deems it expedient to amend and completely restate the
Retirement Plan for the purpose of conforming the same to the requirements
of the Small Business Job Protection Act of 1996, and for other purposes;
NOW, THEREFORE, the Sponsor hereby amends and completely restates the
Retirement Plan and Custody Agreement effective January 1, 1997, as
follows:
Section 2-DEFINITIONS
2.1 Individual: Any person who adopts this Plan. Except in section 4.2, the
term Individual shall also include the Non-Working Spouse.
2.2 Plan: This Individual Retirement Plan together with any and all amendments.
2.3 Plan Year: The calendar year in which this Plan is established, and any
subsequent calendar year in which a contribution is made.
2.4 Earned Income: The net earnings derived by a self-employed Individual, to
the extent such net earnings constitute remuneration for personal services
actually rendered.
2.5 Compensation: Wages, salaries, professional fees, or other amounts derived
from or received for personal services actually rendered (including, but
not limited to commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums, tips,
and bonuses) and includes Earned Income, as defined in Code Section
401(c)(2) (reduced by the deduction the self-employed individual takes for
contributions made to a self-employed retirement plan). For purposes of
this definition, Code Section 401(c)(2) shall be applied as if the term
"trade or business" for purpose of Code Section 1402 included service
described in subsection (c)(6). Compensation does not include amounts
derived from or received as earnings or profits from property (including,
but not limited to, interest and dividends) or amounts not includible in
gross income. Compensation also does not include any amount received as a
pension or annuity or as deferred compensation. The term "Compensation"
shall include any amount includible in the individual's gross income under
Code Section 71 with respect to a divorce or separation instrument
described in Code Section 71(b)(2)(A).
2.6 Custodial Account or Account: The Custodial Account or Accounts established
under this Plan.
2.7 Custodian: The Custodian of a Custodial Account or any successor thereto.
2.8 Beneficiary: The person or persons designated by the Individual pursuant to
section 11.3.
2.9 Code: The Internal Revenue Code of 1986, as amended.
2.10 Non-Working Spouse: The spouse of the Individual adopting this Plan,
providing such Non-Working Spouse:
a) Is married to the Individual as of the last day of a Plan Year,
b) The amount of compensation (if any) includible in the individual's gross
income for the tax year is less than the compensation includible in the
gross income of the individual's spouse for the tax year. (Code Section
219(c)(2)(B))
c) Files a joint return (pursuant to Code Section 60 (b)) with the Individual
for the Plan Year.
2.11 Rollover Account: An Account established pursuant to section 5 of this Plan
with a contribution described in Code Section 402(c), 403(a)(4), 403(b)(8)
or 408(d)(3) of the Code.
Except in the case of a Rollover Contribution, no contributions will be
accepted unless they are in cash and the total of such contributions shall
not exceed the limitations described in sections 4, 6, or 7.
2.12 Qualified Retirement Plan:
a) A plan described in Code Section 401(a) including a trust exempt from tax
under Code Section 501(a).
b) A qualified annuity plan described in Code Section 402(a).
c) Any annuity plan described in Code Section 403(b), regardless of whether
the Individual's rights to benefits under such annuity plan are forfeitable
or nonforfeitable, or
d) A qualified bond purchase plan described in Code Section 405(a).
2.13 Simplified Employee Pension Plan: An arrangement described in Code Section
408(k), through which the Individual's employer contributes directly to the
Account established for the Individual.
2.14 IRA Plan: An Individual Retirement Account or Individual Retirement Annuity
established and maintained pursuant to Code Section 408.
2.15 Investment: Any investment medium approved by Waddell & Reed, Inc.
2.16 Investment Company: An Investment which is defined in the Investment
Company Act of 1940, and which may be used to fund retirement plans.
2.17 Sponsor or Sponsoring Organization: United Funds, Inc.
2.18 Savings Incentive Match Plans for Employees (SIMPLE) IRA: An arrangement
described in Code Section 408(p) where eligible employees may elect to have
the employer make contributions on their behalf under a "qualified salary
reduction arrangement."
Section 3-ELIGIBILITY
3.1 Contributions by an Individual: An Individual shall be eligible to
establish this Plan and make contributions pursuant to section 4, provided
he receives Earned Income or Compensation during the Plan Year, and will
not attain age 70 1/2 during the Plan Year.
3.2 Rollovers and Transfers: An Individual shall be eligible to establish this
Plan and make contributions pursuant to sections 5 and 6, provided that if
he has attained age 70 1/2 he will immediately begin receiving withdrawal
payments pursuant to section 11.4.
3.3 Simplified Employee Pension or SIMPLE IRA: An Individual shall be eligible
to establish this Plan and have contributions made on his behalf pursuant
to section 7, provided he receives Earned Income or Compensation during the
Plan Year, and if he has attained age 70 1/2, provided he will immediately
begin receiving withdrawal payments pursuant to section 11.4.
Section 4-CONTRIBUTIONS BY AN INDIVIDUAL
4.1 On Behalf of the Individual: Each Plan Year, an Individual may contribute
in cash to his Account the lesser of:
a) 100 percent of the Individual's Compensation, or
b) $2,000.00, or such other amount specified in the Code.
The limitations in (a) and (b) above shall be further reduced by the amount
contributed to other IRA Plans by the Individual for the Plan Year. Such
contributions shall be made to the Custodian on or before the last date
authorized by the Internal Revenue Service.
4.2 On Behalf of the Individual and his Non-Working Spouse: Each Plan Year, an
Individual may contribute in cash to his Account and to the Account of his
Non-Working Spouse, the lesser of:
a) the sum of:
(i) the compensation includible in the individual's gross income for the
tax year, plus;
(ii) the compensation includible in the gross income of the individual's
spouse for the tax year reduced by the amount allowed as a deduction to the
spouse for a contribution to the spouse's own IRA for such tax year, or,
b) $4,000, or such other amount specified in the Code, provided, however, the
amount of each contribution must be clearly allocated between his Account
and the Account of his Non-Working Spouse, and the amount allocated to
either Account cannot exceed the limitations described in section 4.1.
Such contributions shall be made to the Custodian on or before the last
date authorized by the Internal Revenue Service.
Section 5-ROLLOVER CONTRIBUTIONS
5.1 Form of Contributions: An Individual shall be eligible to establish a
Rollover Account under this Plan by contributing or by having contributed
on his behalf:
a) That portion of a lump sum distribution from a Qualified Retirement Plan
which is attributable to employer contributions and any earnings, or
b) A distribution to the Individual of all assets held in a prior IRA Plan,
providing that none of the amounts held in such prior IRA Plan represent a
Rollover Contribution to such plan made within the preceding twelve (12)
calendar months, or
c) A distribution to the Individual of all assets held in a prior IRA Plan
established for the benefit of such Individual's deceased spouse, or
d) A distribution from a SIMPLE Retirement Account (SRA) provided two years
have passed since he first participated in his employer's SIMPLE salary
reduction arrangement.
5.2 Time Requirement and Documentation: A contribution to an Individual's
Rollover Account must either be made by direct rollover or, if received by
the Individual, be made within sixty days after the Individual receives a
distribution described in section 5.1, and must be accompanied by a
statement, which verifies the requirements of section 5.1.
5.3 Property Other Than Cash: If the Individual receives property other than
cash in a distribution described in section 5.1, the property shall be
converted to cash and contributed to the Plan, unless the property is an
Investment, in which case it may be contributed directly to the Plan, or
unless the property has been issued in the name of the Custodian or its
nominee, in which case the property may be contributed directly to the Plan
at the discretion of the Custodian, for the purpose of converting the
property to an Investment.
Section 6-TRANSFER OF BENEFITS
6.1 Assets Eligible for Transfer: An Individual may direct the transfer of
assets (excluding amounts deemed to be Excess Contributions) from a prior
IRA Plan to this Plan, provided that the contribution shall be made in the
same method as described in section 5.3.
6.2 Form of Transfer: A transfer of assets must be made directly between the
custodian, trustee, or carrier of a prior IRA Plan, and the Custodian.
Section 7-CONTRIBUTIONS MADE PURSUANT TO A SIMPLIFIED EMPLOYEE PENSION PLAN AND
SIMPLE IRA PLAN
7.1 Employer Contributions: The Individual may establish this Plan and provide
for cash contributions to it by the Individual's employer pursuant to a
Simplified Employee Pension Plan or SIMPLE IRA account established by the
Individual's employer.
7.2 Contributions by the Individual: In addition to such employer
contributions, in any Plan Year, the Individual may also make contributions
pursuant to section 4, 5, or 6.
Section 8-EXCESS CONTRIBUTIONS
8.1 Excess Contributions Defined: An Excess Contribution is the amount of a
contribution which exceeds the maximum allowable contribution allowed under
section 4, 5, 6 or 7. If a contribution is deemed to be an Excess
Contribution, the Individual will be required to pay an excise tax, as
determined by the Internal Revenue Service, on the greater of:
a) The amount of the excess, or
b) The value of the assets purchased by the amount of the excess plus any
earnings attributable thereto.
The excise tax is applied to the Plan Year the Excess Contribution was made
and to every succeeding Plan Year until the Excess Contribution is
eliminated.
8.2 Elimination of Excess Contributions: The Individual shall direct the
Custodian, in writing, to dispose of any Excess Contribution in either of
the following manners:
a) By repayment to the Individual of the Excess Contribution, or
b) By carrying the Excess Contribution over to the following Plan Year to be
applied to reduce the allowable contribution for the Plan Year and for each
subsequent Plan Year until the total Excess Contribution has been
eliminated.
Section 9-CUSTODIAL ACCOUNT
9.1 Establishment of Account: Each contribution made pursuant to this Plan
shall be paid over to the Custodian who shall establish a Custodial Account
for the benefit of the Individual. Unless otherwise directed in writing by
the Individual:
a) A Rollover Contribution made pursuant to section 5 shall be applied to a
segregated Account for the benefit of the Individual.
b) A Simplified Employee Pension or SIMPLE IRA Contribution made pursuant to
section 7 shall be applied to a segregated Account for the benefit of the
Individual.
c) All other contributions made pursuant to sections 4 and 6 shall be applied
to the Account established for the benefit of the Individual.
9.2 Ownership of Account: The Custodian or its nominee shall be the owner of
record of the assets held in the Account for the benefit of the Individual.
9.3 Investment of Contributions: The Custodian shall apply each cash
contribution made pursuant to this plan for the purchase of Investments
designated by the Individual in the Application, and shall accept and hold
contributions made in property other than cash pursuant to sections 5 and
6. The Individual may change the Investment designation with respect to
future contributions from time to time by executing the appropriate
application materials for the new Investment(s) and forwarding such
materials, together with written instructions, to the Custodian directing
that future contributions be applied to such new Investment.
9.4 Conversion of Investment: If the Individual wishes to convert certain of
the Investments held in the Custodial Account to another Investment, he
must execute the appropriate application materials for such new Investment
and forward such materials together with written directions to the
Custodian describing the portion to be converted. The Custodian shall
convert such portion to cash subject to the following restrictions:
a) The Custodian shall convert Investments held in the Account solely for the
purpose of acquiring shares of an Investment Company or units in an
Investment in a limited partnership program, and
b) The Custodian shall convert units of an Investment in a limited partnership
program only if a ready market is available for such units.
9.5 Nonforfeitability of Account: The Individual's interest in the assets held
in the Account shall immediately become, and at all times remain, fully
vested and nonforfeitable.
9.6 Life Insurance: No part of the Custodial Account shall be invested in life
insurance contracts.
9.7 Collectibles: If the Custodial Account acquires collectibles within the
meaning of Code Section 408(m), after December 31, 1981, such Custodial
Account assets will be treated as a distribution in an amount equal to the
cost of the collectible.
Section 10-PROHIBITED TRANSACTIONS
10.1 Prohibited Transactions: Neither the Custodian, nor the Individual,
directly or indirectly, shall engage in any transaction which either:
a) Lends any part of the corpus or income of this Plan,
b) Pays any compensation for personal services rendered to this Plan,
c) Makes any part of its services available on a preferential basis, or
d) Acquires for this Plan any property from or sells any property to the
Individual, any member of the Individual's family or a corporation
controlled by the Individual through the ownership, directly or indirectly,
of 50 percent or more of the total combined voting power of all classes of
stock entitled to vote, or 50 percent or more of the total value of the
shares of all classes of stock of the corporation.
If the Custodian Account acquires collectibles within the meaning of Code
Section 408(m) after December 31, 1981, such assets will be treated as a
taxable distribution in an amount equal to the cost of such collectible and
taxed as such.
10.2 Penalty for Prohibited Transactions: If during any Plan Year, an Individual
engages directly or indirectly in any of the prohibited transactions listed
in section l0.l, his participation in this Plan shall no longer be
qualified under the Code as of the first day of the Plan Year in which the
prohibited transaction occurs. In the event of such disqualification, all
assets under the Plan shall be included in gross income.
In any taxable year in which an Individual engages directly or indirectly
in any such prohibited transaction prior to attaining age 59 1/2, the fair
market value of the assets held under the Plan shall be included in gross
income, and shall be considered as a premature distribution subject to the
tax penalties provided for in Code Section 408(e)(2)(B).
Section 11-DISTRIBUTION OF BENEFITS
11.1 Retirement Benefits: An Individual may receive partial distributions from
his Account, or begin receiving retirement benefits in accordance with
section 11.5, after attaining age 59 1/2, provided however, that he must
begin to receive his benefits in accordance with any of the methods
described in section ll.5, no later than the Plan Year in which he attains
age 70 1/2.
11.2 Disability Benefits: An Individual is eligible to receive disability
benefits if he is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which
can be expected to result in death or to be of long-continued or indefinite
duration. Upon receipt of written notification from the Individual (or
such other person as may be legally authorized to represent such
Individual) of such disability, the Custodian shall distribute the benefits
in accordance with section 11.4.
11.3 Designation of Beneficiary: Each Individual shall have the right by written
notice, on a form approved by the Custodian, to designate or to change the
Beneficiary or Beneficiaries to receive the benefit amount payable by
reason of the Individual's death. Such benefit amount shall consist of the
balance of the Individual's Account, and, except as otherwise herein
provided, shall be paid or commenced to be paid to the Beneficiaries within
thirty days of the Custodian's receipt of proper notification of the
person(s) entitled thereto.
Executed Designation of Beneficiary forms shall be legally valid only when
submitted to the Custodian fully complete and duly executed, and only if on
file with the Custodian at the time of the Individual's death. Any such
designation may be revoked upon receipt by the Custodian of a subsequent,
valid Designation of Beneficiary Form bearing a later execution date. If
more than one Beneficiary shall have been designated, the amount of the
benefit shall be paid to the Beneficiaries as provided in the Designation
of Beneficiary form, otherwise in equal parts. However, no part of any
death benefit shall be paid to a Beneficiary who is not living at the time
of the Individual's death. If any Beneficiary is then deceased, the parts
to which the living Beneficiaries are entitled shall be increased
proportionately. If a Beneficiary entitled to a distribution under the
provisions of this section should die before receiving full distribution of
the amount to which he is entitled, the remaining balance shall be
distributed in a single payment to the deceased Beneficiary's legal spouse,
children, or personal representative, in accordance with the class
description and preference order as set forth in the next following
paragraph. In all such cases, the Custodian shall determine the person(s)
to be paid, in the manner and with the same immunities as provided
elsewhere in this section respecting determinations by the custodian of
persons entitled to death benefits.
If no Beneficiary should survive the Individual, or in the absence of a
valid Designation of Beneficiary in effect at the time of an Individual's
death, the Custodian shall, upon receipt of a certified copy of the Death
Certificate or other appropriate evidence of the fact of death satisfactory
to the Custodian, make distribution of the deceased Individual's Account to
the person or persons of the following class and in the following order of
preference:
a) The deceased Individual's legal spouse; but if no such legal spouse shall
survive the Individual, then to
b) The surviving natural and adoptive children of the deceased Individual in
equal shares per capita and not per stirpes; but if there should be no such
surviving child or children, then to
c) The personal representative of the deceased Individual.
The Custodian may conclusively rely upon the accuracy of all matters
reported to it by any source ordinarily presumed to be knowledgeable
respecting the matters so reported. The Custodian shall have no higher
duty than the exercise of good faith, and shall incur no liability by
reason of any action taken in reliance upon inaccurate or fraudulent
information reported by any source assumed to be reliable, or by reason of
incomplete information in its possession at the time of such distribution.
Any distribution of the Account of an Individual may be made in cash or in
shares (or partly in both), at the sole discretion of the Custodian, and
shall commence within thirty days following receipt by the Custodian of
information deemed by it sufficient upon which to base such distribution,
provided, however, that the Custodian shall incur no liability respecting
fluctuations in the value of the Account of a deceased Individual in the
event of a delay occasioned by the Custodian's good faith decision to await
additional evidence or information bearing on the Beneficiary or
Beneficiaries.
Upon full and complete distribution of the Individual's Account pursuant to
the provisions of this section, the Custodian shall be fully discharged
from all liability respecting such account. In the event of reasonable
doubt respecting the proper course of action to be taken, the Custodian may
in its sole and absolute discretion, resolve such doubt by judicial
determination, which shall be binding on all parties claiming any interest
in the Account of the deceased Individual. In such event, all court costs,
legal expenses, reasonable compensation for time expended by the Custodian
in the performance of its duties, and other appropriate and pertinent
expenses and costs, shall be collected by the Custodian from the deceased
Individual's Account.
11.4 Death Benefits:
a) Distributions Beginning Before Death: If the Individual dies after
distribution of his or her interest has begun, the remaining portion of
such interest will continue to be distributed at least as rapidly as under
the method of distribution being used prior to the Individual's death.
b) Distributions Beginning After Death: If the Individual dies before
distribution of his or her interest begins, distribution of the
Individual's entire interest shall be completed by December 31 of the
calendar year containing the fifth anniversary of the Individual's death,
except to the extent that an election is made to receive distributions in
accordance with (1) or (2) below:
1) If the Individual's interest is payable to a designated beneficiary, then
the entire interest of the Individual may be distributed over the life or
over a period not greater than the life expectancy of the designated
Beneficiary commencing on or before December 31 of the calendar year
immediately following the calendar year in which the Individual died.
2) If the designated Beneficiary is the Individual's surviving spouse, the
date distributions are required to begin in accordance with (1) above is
described in section 11.5.
3) If the designated Beneficiary is the Individual's surviving spouse, the
spouse may treat the Account as his or her own IRA. This election will be
deemed to have been made if such surviving spouse makes a regular IRA
contribution to the Plan, makes a rollover to or from the Plan, or fails to
elect any of the above provisions.
(c) Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations. For
purposes of distributions beginning after the Individuals death, unless
otherwise elected by the surviving spouse by the time distributions are
required to begin, life expectancies shall be recalculated annually. Such
election shall be irrevocable by the surviving spouse and shall apply to
all subsequent years. In the case of any other designated Beneficiary,
life expectancies shall be calculated using the attained age of such
beneficiary during the calendar year in which distributions are required to
begin pursuant to this section, and payments for any subsequent calendar
year shall be calculated based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
(d) Distributions under this section are considered to have begun if the
distributions are made on account of the Individual reaching his or her
required beginning date. If the Individual receives distributions prior to
the required beginning date and the Individual dies, distributions will not
be considered to have begun.
11.5 Distribution Options: At such time benefits are paid in accordance with
section 11.1 or 11.2, the entire value of the Account of the Individual for
whose benefit the Custodial Account is maintained will be distributed or
commence to be distributed, no later than the first day of April following
the calendar year in which such Individual attains age 70 1/2 (required
beginning date) over:
a) the life of such Individual, or the lives of such Individual and his or her
designated beneficiary, or
b) a period not extending beyond the life expectancy of such Individual or the
life expectancy of such Individual and his or her designated beneficiary.
The amount to be distributed each year, beginning with the first calendar
year for which distributions are required shall not be less than the
quotient obtained by dividing the entire interest of the Individual in the
Custodial Account at the beginning of each year by the lesser of: (1) the
applicable life expectancy, or (2) if the Individual's spouse is not the
designated beneficiary, the applicable divisor determined from the table
set forth in Q&A-4 or Q&A-5, as applicable of Section 1.402(a)(9)-2 of the
Proposed Income Tax Regulation. Distributions after the death of the
Individual shall be distributed using the applicable life expectancy as the
relevant divisor without regard to Proposed Regulations Section
1.401(a)(9)-2.
Life expectancy is computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the Individual or beneficiary by the time
distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable by the
Individual and shall apply to all subsequent years. The life expectancy of
a non-spouse beneficiary may not be recalculated. Instead, life expectancy
will be calculated using the attained age of such beneficiary during the
calendar year in which the Individual attains age 70 1/2, and payments for
subsequent years shall be calculated based on such life expectancy reduced
by one for each calendar year which has elapsed since the calendar year
life expectancy was first calculated.
11.6 Penalty on Insufficient Distributions: If during any Plan Year, after the
Individual attains the age of 70 1/2, the amount distributed from his
account is less than the minimum amount required to be distributed under
section 11.5, the Individual shall be subject to an excise tax as provided
for in Code Section 4974.
Section 12-AMENDMENT AND TERMINATION OF PLAN
12.1 Amendment by the Sponsoring Organization: The Sponsoring Organization may
at any time and from time to time modify and amend the Plan as is necessary
to conform the Plan to the provisions and requirements of the Code with
respect to qualified plans for Individuals. In the event of any such
amendment by the Sponsoring Organization, notice of such amendment will be
delivered to the Individual and the Custodian.
12.2 Amendment by the Individual: Any option set out in the Application may be
amended at any time and from time to time by the Individual by delivery to
the Custodian and Sponsoring Organization of the amendment specifying the
change or changes in the selection of options permitted in the Application
or by execution of a new Application. Any amendment of this Plan by an
Individual in other respects than as permitted by the preceding sentence
shall cause the Plan of such Individual to be deemed an individually
designed plan not covered by the Internal Revenue Service letter or letters
issued under this Prototype Plan. A copy of such Amendment shall be
delivered to, and approved by the Custodian prior to its becoming
effective.
12.3 Individual's Rights: No amendment shall operate to deprive an Individual of
any right to benefits vested irrevocably in him under this Plan.
12.4 Termination of Plan: This Plan may be terminated at any time by the
Individual by notifying the Custodian in writing, and will automatically be
terminated in the event of the death of the Individual. Upon termination
of the Plan, any and all assets remaining in the Custodial Account shall be
distributed by the Custodian to the Individual or in the event of his
death, to his Beneficiary. Such distribution shall be in cash or kind in
one or more of the ways provided by section 11.5. Upon completion of such
distribution, the Custodian shall be relieved from all further liability
with respect to all amounts so paid.
Section 13-MISCELLANEOUS PROVISIONS
13.1 Allocation of Charges: Any income taxes or other taxes of any kind
whatsoever that may be levied or assessed upon, or in respect of, the
assets of the Plan, or the income arising there from, any transfer taxes
incurred in connection with the investment and reinvestment of such assets,
all other administrative expenses incurred by the Custodian in the
performance of its duties including fees for legal services rendered by the
Custodian, and the Custodian's compensation shall be paid as provided in
the Custody Agreement.
13.2 Condition of Plan and Custody Agreement: It is a condition of this Plan and
the Custody Agreement, and each Individual by participating herein
expressly agrees, that he shall look solely to the assets of the Custodial
Account for the payment of any benefit to which he is entitled under the
Plan.
13.3 Necessity of Qualification: This Plan and each participating Individual's
Plan is established with the intent that it shall qualify and continue to
qualify under Code Sections 401 and 408.
13.4 Inalienability of Benefits: The benefits provided hereunder shall not be
subject to alienation, assignment, garnishment, attachment, execution or
levy of any kind, and any attempt to cause such benefits to be so subjected
shall not be recognized, except to such extent as may be required by law.
13.5 Prohibited Diversion: No part of the contributions under this Plan shall be
used for, or diverted to, purposes other than for the exclusive benefit of
the Individual and his Beneficiaries.
13.6 Administration: This Individual Retirement Plan shall be administered by
the Individual, who shall have the sole authority to enforce the Plan and
the Custody Agreement and shall be responsible for the operation of the
Plan in accordance with its terms.
13.7 Construction: Wherever used in the Plan the masculine gender shall include
the feminine gender and singular shall include plural, unless the context
indicates otherwise.
13.8 Governing Law: This Plan and the Custody Agreement shall be construed,
administered, and enforced according to the laws of the State of Kansas.
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CUSTODY AGREEMENT
Establishing Custodial Account for Investing Contribution
Under the Accompanying Retirement Plan
The individual named in the Application has established a Retirement Plan
(attached hereto) for his benefit pursuant to the Internal Revenue Code of
1986, as amended. As part of the Plan, the Individual hereby requests
Fiduciary Trust Company of New Hampshire (The "Custodian") to establish a
Custodial Account for the investment of contributions under the Plan in the
shares of the Investment Company designated in the Application upon the
terms and conditions set forth in this Agreement.
Section 1: ESTABLISHMENT OF CUSTODIAL ACCOUNT
The Custodian shall open and maintain Custodial Account(s) for the
Individual named in the accompanying Application. The assets of the
Custodial Account will not be commingled with other property except in a
common trust fund or other common investment fund. Separate records will
be maintained for the interest of each Individual.
Section 2: RECEIPT OF CONTRIBUTIONS
The Custodian shall accept and hold in the Custodial Account(s)
contributions on behalf of the Individual as it may receive from time to
time. All such contributions shall be made in cash or in property as
described in sections 4, 5, 6 and 7 of the Plan. The minimum aggregate
contribution which may be made at any one time shall be the minimum amount
required for the Investment designated in the Application attached hereto,
or designated in subsequent written instructions from the Individual.
Section 3: INVESTMENT OF ACCOUNT ASSETS
The amount of each cash contribution credited to an Individual's Account
shall be applied only to the purchase of the Investment(s) designated in
the Application, which shall be credited to such Account with a notation as
to cost. All dividend, interest, or capital gains distributions realized
from the Investment(s) (other than those automatically reinvested), all
proceeds realized from the conversion of Investments as described in
section 9.4 of the Plan, all proceeds realized from the conversion of
property into an Investment (following the Custodian's receipt and
acceptance of property that has been issued to the Custodian as described
in section 5.3 of the Plan), and all residual cash acquired by the
Custodian in connection with the reduction of Investments to cash described
in section 4, or the payment of Custodial Fees described in section 7,
shall be invested in one or more of the mutual funds designated in the
Application. Sales Charges attributable to the acquisition of shares of
such funds or incurred upon the redemption of shares of such funds shall be
charged to the Account for which such shares are acquired.
All Investments acquired by the Custodian shall be registered in the name
of the Custodian or of its registered nominee as defined in the Internal
Revenue Code and any regulations of the Treasury Department issued
thereunder exempting such transaction from liability for stock transfer
taxes. Such Investments may not be commingled with other property except
in a common investment fund or trust fund.
Section 4: DISTRIBUTIONS FROM THE CUSTODIAL ACCOUNT
On receipt of a written order from the Individual (or such other person as
may be legally authorized to represent such Individual) certifying that his
benefit is payable pursuant to the Plan, the Custodian shall transfer all
Investments credited to such Individual's Account (or such portion as the
Individual or his authorized representative may direct) into the name of
such Individual and distribute such Investment to the Individual, provided,
however, that if any order for payment of a benefit so directs, the
Custodian may pay the same by reducing all Investments credited to such
Individual's Account (or such portion as the Individual or his authorized
representative may direct) to cash and distributing the proceeds to such
Individual. If the Individual's written direction for a partial
distribution in cash fails to indicate the specific Investment to be
reduced to cash, the Custodian shall reduce the Investments according to
the following order of preference:
a) Shares of Investment Company(ies) not included in the United Group of Funds
or Waddell & Reed Funds;
b) Investments listed on a national securities exchange;
c) Investments in a limited partnership program (if a ready market is
available);
d) Other Investments; and
e) Shares of mutual funds in the United Group of Funds or Waddell & Reed
Funds.
On receipt of written notice of the death of the Individual, the Custodian
shall distribute all Investments credited to such Individual's Account in
accordance with section 11.3 of the Plan and in the manner described in the
above paragraph.
If the Custodian should at any time receive notice from the Individual that
any contribution made by or on behalf of the Individual exceeded the
limitations described in the Plan, the Custodian shall dispose of such
Excess Contribution in accordance with section 8.2 of the Plan. Any
repayment made pursuant to section 8.2(a) of the Plan shall be made as soon
as practical after the receipt of direction from the Individual and in the
same manner as provided with respect to benefits as described in the first
paragraph of this section 4.
If the Custodian should receive notice from the Internal Revenue Service
that the Plan has been disqualified, the Custodian shall promptly
distribute to such Individual all Investment(s) credited to his account.
Section 5: VOTING AND OTHER ACTION
The Custodian shall deliver, or cause to be delivered, to the Individual
all notices, prospectuses, financial statements, proxies and proxy
soliciting materials relating to such shares. The Custodian shall not
exercise any voting rights attributable to any Investment held hereunder
except in accordance with the written instructions of the Individual.
Section 6: REPORTS OF THE CUSTODIAN AND INDIVIDUAL
The Custodian shall keep accurate and detailed records of all receipts,
investments, disbursements and other transactions hereunder. Not later
than sixty days after the close of each Plan Year (or after the Custodian's
resignation or removal pursuant to section 10 hereof), the Custodian shall
file with the Individual a written report or reports reflecting the
receipts, disbursements and other transactions effected by it during such
year (or period ending with such resignation or removal) and the status of
the Account as of the end of such period, including the assets and
liabilities of the Custodial Account at the close of the period. Upon the
expiration of a sixty-day period, commencing immediately following the date
on which such report is filed with the Individual, the Custodian shall be
forever released and discharged from all liability and accountability to
anyone with respect to its acts, transactions, duties, obligations or
responsibilities as shown in or reflected by such report, except with
respect to any such acts or transactions as to which the Individual shall
have filed written objections with the Custodian within such sixty-day
period.
The Individual shall file with the Internal Revenue Service, and the
Custodian shall furnish to the Individual, such information relevant to the
Plan and Custodial Account as may be required under the Code and any
regulations issued or forms adopted by the Treasury Department thereunder.
The Custodian shall keep such records, make such indemnifications, and file
with the Internal Revenue Service such returns and other information
concerning the Custodial Account as may be required of it under the Code
and any regulations issued or forms adopted by the Treasury Department
thereunder.
Section 7: CUSTODIAN'S FEES AND EXPENSES OF THE ACCOUNT
Any income taxes or other taxes of any kind whatsoever that may be levied
or assessed upon or in respect of, the Custodial Account shall be paid from
the assets of the Account. Any transfer taxes incurred in connection with
the investment and reinvestment of the assets of the Custodial Account, all
other administrative expenses incurred by the Custodian in the performance
of its duties including fees for legal services rendered to the Custodian,
and such compensation to the Custodian as may be established by the
Custodian shall be paid by the Individual, and until paid shall constitute
a charge upon the assets of the Custodial Account.
Each calendar year, the Custodian shall collect from the assets of the
Account any charges which were not paid by the Individual during that year.
In so doing, the Custodian shall convert such portion of the Investment(s)
as is necessary, to cash, in the same order of preference as set forth in
section 4.
Charges connected with benefit payments, or the complete termination of the
Plan shall be collected by the Custodian in the manner as described in the
above paragraph at the time each such payment or such termination occurs.
Section 8: CONCERNING THE CUSTODIAN
The Custodian shall not be responsible in any way for the collection of
contributions provided for under the Plan, the purpose or propriety of any
distribution made pursuant to section 4 hereof, or any other action or non-
action taken at the Individual's request. The Individual shall at all
times fully indemnify and save harmless the Custodian, its successors and
assigns, from any and all other liability whatsoever which may arise in
connection with this Agreement, except liability arising from the
negligence or willful misconduct of the Custodian. The Custodian shall be
under no duty to take any action other than as herein specified with
respect to the Custodial Account unless the Individual shall furnish the
Custodian with instructions in proper form and such instructions shall have
been specifically agreed to by the Custodian in writing; or to defend or
engage in any suit with respect to the Custodial Account unless the
Custodian shall first have agreed in writing to do so and shall have been
fully indemnified to the satisfaction of the Custodian. The Custodian may
conclusively rely upon and shall be protected in acting upon any written
order from the Individual or any other notice, request, consent certificate
or other instrument or paper believed by it to be genuine and to have
properly executed, and, so long as it acts in good faith, in taking or
omitting to take any other action. The Custodian shall not be liable for
interest on any cash or cash balances maintained in the Custodial Account.
The Individual shall have the sole authority to enforce this Agreement on
behalf of any and all persons having or claiming any interest in the
Custodial Account by virtue of this Agreement or the Plan. To protect the
Custodial Account from the expenses which might otherwise be incurred, it
is imposed as a condition to the acquisition of any interest in the
Custodial Account, and it is hereby agreed, that no person other than the
Individual may institute or maintain any action or proceeding against the
Custodian in the absence of written authority from the Individual or a
determination of a court of competent jurisdiction that in refusing such
authority the Individual has acted fraudulently or in bad faith.
Section 9: AMENDMENT
The Custodian reserves the right to amend this Agreement in any respect on
at least forty-five days notice in writing to the Individual.
Section 10: RESIGNATION OR REMOVAL OF CUSTODIAN
The Custodian may resign at any time upon thirty days notice in writing to
the Individual, or may be removed by the Individual at any time upon thirty
days notice in writing to the Custodian. Upon such resignation or removal,
the Individual or Sponsor shall appoint a successor Custodian, which
successor shall meet the requirements of the Code so as to permit the Plan
to continue as qualified under Code Section 408 et seq. Upon receipt by
the Custodian of written acceptance of such appointment by the successor
Custodian, the Custodian shall transfer and pay over to such successor the
assets of the Custodial Account and all records pertaining thereto. The
Custodian is authorized, however, to reserve such sum of money or shares as
it may deem advisable for payment of all its fees, compensation costs and
expenses, or for payment of any other liabilities constituting a charge on
or against the assets of the Custodial Account or on or against the
Custodian, with any balance of such reserve remaining after the payment of
all such items to be paid over to the successor Custodian. The successor
Custodian shall hold the assets paid over to it under terms similar to
those of this Agreement that will qualify it under Code Section 408(h).
If within thirty days after the Custodian's resignation or removal the
Individual or Sponsor has not appointed a successor Custodian which has
accepted such appointment, the Custodian shall, unless it elects to
terminate the Custodial Account pursuant to section 11, appoint such
successor itself.
Fiduciary Trust Company shall substitute another Custodian if it receives
notice from the Commissioner of Internal Revenue that such substitution is
required because it has failed to comply with the requirements of Section
1.401-(12)(n) of the Income Tax Regulations.
Section 11: TERMINATION OF ACCOUNT
The Custodian may elect to terminate the Custodial Account if within thirty
days after its resignation or removal pursuant to section 10 the Individual
has not appointed a successor Custodian which has accepted such
appointment. The Custodian shall terminate the Account upon receiving
notice of the Individual's death. Termination of the Custodial Account
shall be effected by distributing all assets thereof to the Individual or
his designated Beneficiaries pursuant to section 11 of the Plan. Upon such
distribution, the Custodian shall be relieved from all further liability
with respect to all amounts so paid.
Section 12: MISCELLANEOUS
At no time shall it be possible for any part of the assets of the Custodial
Account to be used for, or diverted to, purposes other than for the
exclusive benefit of the Individual and his Beneficiary.
Any notice from the Custodian to the Individual provided for in this
Agreement shall be effective if sent to him at his last address of record.
In the event of any conflict between the provisions of the Plan and those
of this Agreement, the former shall prevail.
This agreement shall be construed in accordance with the laws of the State
of Kansas.
IMPORTANT DISCLOSURES
Individual Retirement Plan
Sponsored by United Funds, Inc.
NONDEDUCTIBLE CONTRIBUTIONS
IRA Plan contributions may not be deductible from Adjusted Gross Income (AGI),
as determined on individual tax filing Forms 1040,1040A or 104OEZ, as described
below:
If employee (or If employee (or
spouse) is not spouse) is
covered by a covered by a
pension plan: pension plan:
Over $50,000 AGI No Deduction
($35,000 single)
Full Deduction $40,000-$50,000 AGI
up to $4,000 ($25,000-$35,000 Reducing
($2,000 single) single) Reduction
Under $40,000 AGI Full Deduction
($25,000 single) up to $4,000
($2,000 single)
If either spouse is covered by a Retirement Plan, both are considered covered.
Important: All IRA contributions continue to generate tax sheltered earnings
until withdrawn. For this reason, "Nondeductible" contributions are still
extremely valuable to those qualifying for an annual contribution.
IMPORTANT DISCLOSURES
An Individual Retirement Account (IRA) established under the prototype
Individual Retirement Plan sponsored by United Funds, Inc., is a Custodial
Account for the exclusive benefit of the Individual establishing the Account, or
his Beneficiaries. Fiduciary Trust Company of New Hampshire acts as Custodian.
The Individual Retirement Plan and Custody Agreement were submitted to the
Internal Revenue Service and received approval as a prototype plan, with
assignment of Serial Number D190430b.
An Individual's interest in his Account is fully vested and non-forfeitable.
The assets held in the Account may be invested in one or more of the investments
offered by Waddell & Reed, Inc. The assets may not be invested in life
insurance contracts and may not be commingled with other property except in a
common investment fund.
Right of Revocation: An Individual who has established an Individual Retirement
Plan may revoke the Plan by so notifying Fiduciary Trust Company, in writing, at
P. 0. Box 29219, Shawnee Mission, Kansas, 66201-9219, Attention: Customer
Service, at any time within seven days after the Account under the Plan has been
established, and receive the entire amount paid including sales charges and
other fees.
Contribution Limitations: Any Individual who has not attained age 70 1/2, may
make contributions to his IRA as follows (see "Nondeductible Contributions"):
Individual-the lesser of $2,000 or 100% of Earned Income or Compensation;
Individual and Non-Working Spouse-the lesser of $4,000 or the sum of:
(1) the compensation includible in the individual's gross income for the tax
year, plus;
(2) the compensation includible in the gross income of the individual's spouse
for the tax year reduced by the amount allowed as a deduction to the spouse for
a contribution to the spouse's own IRA for such tax year. The Contribution may
be allocated between the spouse's IRA in any proportion, provided that neither
spouse's IRA receives more than $2,000.
Simplified Employee Pension-If an IRA is established prior to January 1, 1997
under a Simplified Employee Pension Plan, the Individual may authorize salary
reductions (limited to the amount specified in Section 402(g) of the Code), or
the Individual's Employer may make contributions (provided the total of salary
reductions plus Employer contributions does not exceed the lesser of $30,000 or
15% of the Individual's Compensation). In addition, the Individual may also
contribute to his IRA, or for the IRA of his Non-Working Spouse, as described in
the above two paragraphs.
Savings Incentive Match Plans for Employees-If a SRA is established under a
SIMPLE, the individual may authorize salary reductions (limited to the amounts
specified in Section 408(p) of the Code), and the Employer may make either a
matching contribution, or a nonelective contribution as described in Section
408(p) of the Code.
Rollover IRA: An Individual may contribute all or any portion of the amount of a
distribution from another retirement plan, less any employee contributions, to
his IRA within 60 days from the date received, or to avoid 20% mandatory tax
withholding, authorize the Employer to contribute the distribution directly to
his IRA. If any property is received, the same property must be rolled over,
provided that employer stock certificates must be issued in the name of the
Individual, and not in the name of the Custodian. A rollover of assets from one
IRA to another is permitted only once in a 12 month period.
Deduction of Contributions: An Individual claiming a deduction must indicate the
amount on his Form 1040 at the time he files his tax return. Although no tax
deduction is allowed for a rollover contribution to an IRA, the tax deferred
status of the assets is preserved.
Distribution of Benefits: Generally, distributions from an IRA will be taxed as
ordinary income. Except in the case of death or disability, none of the assets
may be distributed until the Individual reaches age 59 1/2. Distributions must
commence not later than April 1 of the year following the calendar year in which
the Individual attains age 70 1/2.
The assets can be distributed either in one lump sum, or in substantially equal
installments, made at least annually, and spread over a period of time which
cannot exceed the life expectancy of the Individual or the joint life
expectancies of the Individual and his spouse.
TAX PENALTIES
Excess contributions to an IRA are subject to a cumulative 6% penalty tax.
However, this tax often can be avoided if the Individual withdraws the excess
contribution, and any income earned by the excess contribution, on or before the
due date of his return for the year when the excess contribution was made.
Premature distributions are subject to a 10% penalty tax. Unless he is disabled
or elects "life expectancy" payments, any distribution from an IRA to the
Individual, before he has reached age 59 1/2, will be considered a premature
distribution. The 10% penalty tax is applied to the amount of the distribution
which is included in gross income, and must be paid in addition to any increase
in income tax which may result from including the distribution in gross income.
Exception to 10% penalty: Beginning January 1, 1997, withdrawals prior to age 59
1/2, may be made to pay medical expenses in excess of 7.5% of your Adjusted
Gross Income. Also, an exception is made for a distribution to pay medical
premiums for an individual who has separated from employment and has received
unemployment compensation (under federal and state programs) for 12 consecutive
weeks.
Prohibited Transactions: If an Individual engages in a prohibited transaction
(as defined in Code Section 4975), the IRA will lose its exemption from taxation
and the Individual will be deemed to have received the fair market value (as of
the first day of the taxable year) of all assets in the Account. That amount
will be included in the Individual's gross income for the year and may also be
subject to a 10% tax on premature distributions.
Excess Distributions from an IRA are subject to an additional 15% tax. A 15%
excise tax is imposed on distributions, which exceed $112,500 (indexed), from
qualified retirement plans, tax-sheltered annuities and IRAs. However, the
excess distribution penalty tax will not apply for 1997, 1998 and 1999.
Pledging Account as Security: If an IRA or any portion of it is pledged as
security for a loan, that portion will be treated as though it were distributed
to the Individual and may be subject to a 10% tax on premature distributions.
Minimum Distribution Rules: Failure to satisfy the minimum distribution rules
can result in significant tax consequences to the Individual, such as being
taxed on the entire IRA account balance and paying other tax penalties. The
rules affect various forms of distributions as follows:
Pre-Death Distributions: The minimum distribution rules require that in the
Individual's "70 1/2 year," and each year thereafter, the Individual must make
withdrawals from the IRA that are at least equal to the "minimum distribution."
The Individual's 70 1/2 year is the calendar year that contains the date sixth
months after the Individual's 70th birthday. The amount of the minimum
distribution is usually determined by dividing the account balance of the IRA,
as of December 31 of the prior year, by a divisor that is based on the
Individual's life expectancy or the joint life expectancy for the Individual and
his or her beneficiary. There are, however, a number of rules that determine
how the calculation of the Individual's minimum distribution should be made,
including special exceptions that may apply to the Individual. These are
discussed in IRS Publication 590, Individual Retirement Arrangements.
Generally, the Individual must withdraw an amount at least equal to the minimum
distribution by December 31 of each year. However, for the Individual's 70 1/2
year, the Individual may wait to withdraw the minimum distribution until April 1
of the following year. This means that if the Individual waits until April 1 of
the following year, the Individual's total withdrawal in that year must equal
the minimum distributions for two years a withdrawal by April 1 that is equal to
the minimum distribution for the 70 1/2 year and a second withdrawal by December
31 that is equal to the minimum distribution for that year. In each year
thereafter, the Individual must withdraw the minimum distribution for the year
by December 31.
Distributions After Death: If an Individual is the beneficiary of a deceased IRA
owner, the minimum distribution rules also apply. Specific information on how
the minimum distribution rules apply to beneficiaries of an IRA is contained in
IRS Publication 590, Individual Retirement Arrangements. In general, however,
the amount that the beneficiary must withdraw in each year depends upon whether
the IRA owner reached age 70 1/2 before death and whether the beneficiary is the
surviving spouse of the IRA owner.
If the IRA owner was age 70 1/2 before death, then regardless of the
beneficiary's age, the beneficiary must withdraw an amount in each year that is
at least equal to the amount that the IRA owner would have been required to
withdraw. This rule also applies if the beneficiary is the surviving spouse of
the IRA owner. If the IRA owner was not age 70 1/2 before death and the
beneficiary is not the surviving spouse, there are two possible options. Under
the first option, the beneficiary must withdraw the entire IRA account by
December 3l of the fifth year following the year of the IRA owner's death.
Under the second option, the beneficiary must, by December 31 of the year
following the year of the IRA owner's death and in each year thereafter,
withdraw an amount that is at least equal to the IRA account balance divided by
the beneficiary's life expectancy. If the beneficiary is the surviving spouse,
the same two options apply, but additional options are available to a spouse
beneficiary for satisfying the minimum distribution requirements.
Other Rules: If the Individual has more than one IRA, the Individual can satisfy
the minimum distribution rules by withdrawing from one IRA the amount required
to satisfy the minimum distribution requirement for all of the IRAs.
This explanation only summarizes the minimum distribution rules. Other rules
and exceptions may apply to the Individual that are not discussed in this
summary, including rules which, in some cases, would prevent the Individual from
using certain options described above. An Individual should consult with his or
her personal tax advisor or IRS Publication 590, Individual Retirement
Arrangements for more detailed information.
ADDITIONAL INFORMATION
Estate Tax Treatment: The assets held in an IRA are not excludable from an
Individual's estate for Federal Estate tax purposes unless they are distributed
to a spouse Beneficiary.
Explanation of Charges: The charges, if any, incurred in connection with the
acquisition of any of the Investments offered by Waddell & Reed, Inc. shall be
set forth in the prospectus required for such Investments. Each year, the Plan
Custodian charges certain fees as outlined on Page 11 of this booklet. Such
fees will be deducted from the assets held in the Account unless paid directly
by the Individual.
Computation and Allocation of Annual Earnings: Each of the Mutual Funds intends
to pay to its shareholders, as dividends, substantially all of its net
investment income, if any, and to pay a distribution before the end of its
fiscal year of substantially all realized capital gains, if any. Such dividends
and capital gains paid on the shares held in the Account will be reinvested in
additional shares without a sales charge.
The payment of dividends and capital gains, and the growth in the value of the
assets in the Account cannot be projected or guaranteed.
Further Information on Individual Retirement Accounts can be obtained from any
Internal Revenue Service District Office, or from IRS Publication 590. This
publication is available from your local IRS office or by calling 1-800-TAX-
FORMS.
<PAGE>
INDIVIDUAL RETIREMENT PLAN
Application Instructions
Establishment of Plan
The Individual whose signature is inscribed on Application Form CAP 1 or WRF3000
has read the attached Retirement Plan and Custody Agreement of which the
Application is a part and agrees to the terms and conditions set forth therein,
and by execution of the Application does establish his or her Individual
Retirement Plan, appointing as Custodian, in accordance with the Custody
Agreement, Fiduciary Trust Company of New Hampshire, and directs that
contributions be applied to the Investment(s) designated on the Application.
Such Investment(s) may require additional application materials as specified by
Waddell & Reed, Inc. All dividend, capital gain, and interest distributions on
Investment(s) (other than those automatically reinvested) shall be invested in
the United Group of Funds or Waddell & Reed Funds as designated on the
Application.
Custodian Fees
The Custodian Fees under the Individual Retirement Plan sponsored by United
Funds, Inc. (other than Tri-Vest Plans) will be as follows:
Annual Fee for Maintenance of Plan
$15.00
Annual Fee for Maintenance of each Additional Account (e.g. SEP, SIMPLE or
Spousal) $10.00
(No charge for separate Rollover Account)
Distributions - each - This includes cash payments, distributions of
shares,
and return of excess contributions. Excludes periodic payments
$ 5.00
Periodic Payments of Cash and Periodic Distributions of Shares - each
$ 2.00
If a Tri-Vest Plan is selected, the Custodian Fees will be as follows:
Annual fee for Maintenance of Plan 0.5% of
assets;
minimum $35.00, maximum $75.00
Annual Fee for Maintenance of each Additional Account (e.g. SEP, SIMPLE or
Spousal) $10.00
(No charge for separate Rollover Account)
Distributions - each - This includes cash payments, distributions of
shares, and return of excess contributions. Excludes periodic payments
$ 5.00
Withdrawals - this includes partial or periodic payments of benefits
or excess contributions $ 2.00
Extraordinary services resulting from unusual administrative responsibilities
not contemplated by the above schedule will be subject to such additional
charges as will reasonably compensate the Custodian for the services involved.
The Custodian may change the foregoing schedule of fees in respect to all
calendar years beginning at least 45 days after the Custodian gives the
Individual written notice of such change, and such schedule may also be changed
at any time by mutual agreement between the Individual and the Custodian.
Designation of Beneficiary
Pursuant to the Individual Retirement Plan and Custody Agreement, the Individual
has the right to designate the Beneficiary(ies) to whom any benefits payable on
account of death are to be paid, and, at any time prior to receipt of full
interest, to revoke or amend any designation previously made. Subject to the
provisions of the Plan, the Individual designates the person(s) named on the
Application as the Beneficiary(ies) to whom any benefits payable on account of
death shall be paid. The benefits shall be paid to the named Beneficiary(ies)
who survives the Individual. If any Beneficiary should not survive him or her,
the parts to which living Beneficiaries are entitled shall be increased
proportionately. If no proportion is indicated, the payment shall be made in
equal shares.
The Individual understands that under the terms of the Plan, he or she has the
right, at any time prior to receipt of full interest under the Plan, to revoke
or amend this designation in any manner and to designate any other person(s) as
substitute Beneficiary(ies), by an appropriate instrument, in writing, filed
with the Custodian as provided in the Plan, and such right is expressly
reserved.
IF CONTINGENT BENEFICIARIES ARE DESIRED, THE INDIVIDUAL MUST COMPLETE
DESIGNATION OF BENEFICIARY FORM MRP972.
Custodian Acceptance
Upon acceptance of the Application by the Custodian, the Individual Retirement
Plan is deemed effective as of the date of the Individual's Authorized
Signature.
<PAGE>
IRA ROLLOVER
Application Supplement
Statement of Distribution from a Retirement Plan
Qualified Under Section 401(a), 402(a), 403(b), 405(a), or 408 of the Internal
Revenue Code
___ Direct Rollover to Fiduciary Trust Co. NH ___ Rollover Paid to
Recipient*
*If 20% mandatory tax withheld, recipient must make up withheld amount out-of-
pocket to Rollover full amount
NAME OF RECIPIENT ____________________________________________________________
________________________________________________________________________________
NAME OF PLAN _________________________________________________________________
________________________________________________________________________________
DISTRIBUTION BREAKDOWN:
A. This is to confirm a total distribution of
___________________________________________
(Shares/Dollars)
B. Which was made on _________________________________________________________
(date).
C. Amount of non-qualified employee contributions was
____________________________________
(Shares/Dollars)
D. Amount of qualified employee contributions was
________________________________________
(Shares/Dollars)
REASON FOR DISTRIBUTION:
___ Disability
___ Retirement
___ Termination of Employment __________________________________________________
(date)
Date Recipient Entered Plan
__________________________________________________ (date)
___ Termination of Qualified Plan
_________________________________________________ (date)
Date Recipient Entered Plan
__________________________________________________ (date)
AUTHORIZED SIGNATURE: ________________________________________________________
(Signature of Trustee, Employer or Plan Administrator)
(NOT required if copy of
Form 1099R or Facsimile
Form issued by Plan Admin-
istrator is attached)
___________________________________________________________________
(Title)
SEE REVERSE SIDE FOR INSTRUCTIONS
ADDITIONAL INFORMATION
IRA ROLLOVER APPLICATION SUPPLEMENT (Form CRP5A) EXPLANATION
- -- Name of Recipient: Indicate full name of recipient as it appears in
retirement plan account.
- -- Name of Plan: Indicate complete name of plan from which distribution was
made.
- -- Distribution Breakdown: Complete Items A, B, C, and D, indicating shares or
dollars. If shares are received as part of the distribution, attach a copy of
the final valuation statement of the distribution.
- -- Reason for Distribution: Indicate one of four reasons for distribution.
- -- Authorized Signature: In the case of a plan qualified under Section 401(a)
(i.e., Corporate Retirement Plan or Keogh), enter signature of Plan Trustee,
Employer, or Plan Administrator. In the case of plans qualified under Sections
402(a), 403(b), 405(a), or 408, please enter the signature of the Individual.
NOTE: If Form 1099R or Facsimile Form is submitted with Application, no
Authorized Signature is required.
TRANSFER OF ASSETS - Assets held in existing IRA plan(s) may be transferred to
the United Funds, Inc. IRA Plan by completing all items except the Custodian
Approval section of a Transfer of Proceeds Form CRP644, and mailing all four
copies to the Home Office with the IRA Plan Application.
If Assets must be cashed out of pre-established IRA Plan and paid directly to
the Individual, complete the following portions of Form CRP5A and submit with
check endorsed over to "Fiduciary Trust Co." to verify transfer of proceeds.
- -- Name of Recipient
- -- Name of Plan
- -- Distribution Breakdown: items A and B only
- -- Authorized Signature of Individual
BILLING STATEMENTS are available for Employer Sponsored Payroll Deduction IRA
Plans, SIMPLE IRA Plans and Simplified Employee Pension Plans. If an IRA Plan
is intended as an addition to an existing Billing, please indicate the
Employer's billing account number under "Special Remarks" on the Plan
Application.
Helping People make the Most
of Their Financial Future
Waddell
& Reed
FINANCIAL SERVICES
A Torchmark Company CRP0005(1/97)
<PAGE>
UNITED INCOME FUND
The formula used to calculate the total return is:
n
P(1 + T) = ERV
Where : P = $1,000 initial payment
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of the $1,000 investment for the
periods shown.
For the one year period from January 1, 1996 to
December 31, 1996:
P = $1,000
n = 1
ERV = $1,205.33
T = 20.53%
For the period from June 19, 1995 to
December 31, 1996:
P = $1,000
n = 1.537
ERV = $1,307,15
T = 19.04%
<PAGE>
UNITED ACCUMULATIVE FUND
The formula used to calculate the total return is:
n
P(1 + T) = ERV
Where : P = $1,000 initial payment
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of the $1,000 investment for the
periods shown.
For the one year period from January 1, 1996 to
December 31, 1996:
P = $1,000
n = 1
ERV = $1,122.73
T = 12.27%
For the period from July 11, 1995 to
December 31, 1996:
P = $1,000
n = 1.477
ERV = $1,256.53
T = 16.72%
<PAGE>
UNITED SCIENCE AND TECHNOLOGY FUND
The formula used to calculate the total return is:
n
P(1 + T) = ERV
Where : P = $1,000 initial payment
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of the $1,000 investment for the
periods shown.
For the period from February 27, 1996 to
December 31, 1996:
P = $1,000
n = 0.844
ERV = $1,032.51
T = 3.87%
<PAGE>
UNITED BOND FUND
The formula used to calculate the total return is:
n
P(1 + T) = ERV
Where : P = $1,000 initial payment
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of the $1,000 investment for the
periods shown.
For the one year period from January 1, 1996 to
December 31, 1996:
P = $1,000
n = 1
ERV = $1,027.86
T = 2.79%
For the period from June 19, 1995 to
December 31, 1996:
P = $1,000
n = 1.537
ERV = $1,101.88
T = 6.52%
<PAGE>
<TABLE>
1FDCSY2 PAGE
1
RUN DATE: 03/24/97, TIME: 13:42:49
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/96 THROUGH 12/31/96
UNITED BOND FUND 000000000000024
<S> <C> <C> <C> <C> <C> <C>
SECURITY SHORT NAME METHOD INCOME ANNUAL RATE COMMENT CALCULATION ERROR
- --------- ------------------------- -------- ------------- --------------- -------------------- --------------------
032165AD4 AMSOUTH BANCORP P05 SUB YTM 34,077.78 6.86577020 STANDARD YTM
032511AH0 ANADARKO PETROLEUM P00 YTM 30,576.43 6.95317580 STANDARD YTM
041237AJ7 ARKLA INC DEB YTM-CALL 52,674.12 7.13670770 STANDARD YTM
046003EJ4 ASSOC CORP N.A. P98 DEB YTM 45,992.27 6.84283070 STANDARD YTM
05545ANP9 BHP FINANCE (USA) FBC ACTUAL 24,737.83 5.35000000
05545ANU8 BHP FINANCE (USA) FBC ACTUAL 3,503.81 5.35000000
05916RNQ1 BALTIMORE GAS & ELECT MLP ACTUAL 11,547.08 5.35000000
05944QAC4 BANC ONE CREDIT CARD MAST YTM 29,560.08 7.01055840 STANDARD YTM
078167AZ6 BELL TEL PA P97/00/02 YTM-CALL 46,104.00- 8.75920110- STANDARD YTM NEGATIVE YTM
079867AN7 BELLSOUTH TELECOM P00 DEB YTM 14,711.08 5.94450310 STANDARD YTM
097383AM5 BOISE CASCADE DEBENTURES YTM-CALL 15,362.69 6.84722090 STANDARD YTM
126690YL4 CWMBS 1994-G A5 YTM 54,551.78 6.69780220 STANDARD YTM
126915AF4 CABLEVISION IND SERIES B YTM-CALL 38,336.37 8.44375710 STANDARD YTM
13642NAB2 CAN PAC FOREST PROD DEB YTM 27,727.97 8.87252860 STANDARD YTM
15133KAC7 CENTEL CAPITAL P99 DEB YTM 40,787.55 7.31671120 STANDARD YTM
166784AE8 CHEVY CHASE SAVINGS BANK YTM-CALL 11,915.61 9.57122080 STANDARD YTM
171205AU1 CHRYSLER FIN CORP YTM 56,831.20 6.55474230 STANDARD YTM
190441AJ4 COASTAL CORP YTM 31,431.48 6.62828150 STANDARD YTM
191219AV6 COCA COLA ENTER P00 YTM 69,284.17 7.09479700 STANDARD YTM
191219AX2 COCA COLA ENT P03 YTM 28,232.11 6.63293540 STANDARD YTM
20279TNQ7 COMMONWEALTH EDISON JPM ACTUAL 6,987.49 5.67000000
20600ANM7 CONAGRA INC MLP ACTUAL 7,943.01 5.64000000
211177AH3 CONTL CABLEVISION SR NT YTM 30,456.83 6.84553320 STANDARD YTM
2166933 CANADIAN GOVT YTM 5,180.12 6.04597560 STANDARD YTM
23321PJA7 DLJMA 1994-3 A13 YTM 26,355.88 6.89955820 STANDARD YTM INC BASED ON EFF DT
251529AE3 DEUTSCHE BK FINL BK GUAR YTM 15,260.34 6.96203360 STANDARD YTM
257039AB3 DOMAN INDUSTRIES YTM 16,768.62 8.74567290 TAX EXEMPT MKT DISC
260540AA7 DOW CAPITAL YTM 34,727.68 7.27335990 STANDARD YTM
260543AY9 DOW CHEMICAL P99 NOTES YTM 33,483.38 7.17314530 STANDARD YTM
283677AQ5 EL PASO ELEC 1ST MORTGAGE YTM 10,877.78 7.37444240 STANDARD YTM
29356AMT0 ENRON CORP GSC ACTUAL 12,766.15 5.50000000
294418AE8 EQUICON LOAN TRUST 1993-1 YTM 27,991.82 7.44431000 STANDARD YTM
312907FT0 FHR 1142 H MORTGAGE 57,701.61 7.95000000 NO PAYDOWN
312910BS0 FHR 1290 F MORTGAGE 60,483.87 7.50000000 NO PAYDOWN
312910V25 FHR 1322 G REMIC PAC-1 MORTGAGE 60,483.87 7.50000000 NO PAYDOWN
312911SC5 FHR 1349 PN MORTGAGE 77,078.39 7.50000000 PRIOR PERIOD PAYDOWN
3134A0DG4 FED HOME LOAN MTGE YTM 26,528.26 6.96146060 STANDARD YTM
31358RVR1 FNR 1992-209 H MORTGAGE 56,451.61 7.00000000 NO PAYDOWN
31358RYH0 FNR G92-65 H MORTGAGE 56,451.61 7.00000000 NO PAYDOWN
31364AQ54 FED NATL MORTGAGE MTN YTM 27,224.45 7.24999040 STANDARD YTM
31373J2W1 FNMA #295189 MORTGAGE 25,894.76 7.50000000
338032AB1 FISHER SCIENTIFIC NOTES YTM 21,301.57 7.37204420 STANDARD YTM PAGE 1
36203UFV9 GNMA 359380 MORTGAGE 39,336.55 7.50000000 NO GAIN/LOSS
36204LEF4 GNMA 372834 SEMORTGAGEIS 34,190.74 UR 7.50000000 IL
1FDCSY2 PAGE
2
RUN DATE: 03/24/97, TIME: 13:42:49
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/96 THROUGH 12/31/96
UNITED BOND FUND 000000000000024
SECURITY SHORT NAME METHOD INCOME ANNUAL RATE COMMENT CALCULATION ERROR
- --------- ------------------------- -------- ------------- --------------- -------------------- --------------------
36206YZ61 GNPL #425665 (223A7) FOMORTGAGERI 12,493.68 HR 7.75000000
36225AHY9 GNMA 780247 MORTGAGE 62,710.10 8.00000000
369622CB9 GE CAP CP NT P98 YTM 56,116.64 6.92312820 STANDARD YTM
370334MN1 GENERAL MILLS, INC ACTUAL 746.00 0.00000000
370424FV0 GMAC P00/05 YTM 67,655.38 7.04349700 STANDARD YTM
370442AJ4 GENERAL MOTORS DEB P98 YTM-CALL 14,001.01- 2.86439240- STANDARD YTM NEGATIVE YTM
42307JP79 HEINZ (HJ) CO JPM YTM/ACTL 2,413.03 5.65000000 STANDARD YTM
44881HEU4 HYDRO-QUEBEC MTN STEP/P00 YTM 30,565.26 6.47963080 STANDARD YTM
448814EJ8 HYDRO QUEBEC P06 YTM-CALL 61,992.92 6.62354520 STANDARD YTM
456626AC4 INFINITY BROAD SR SUB NOT YTM-CALL 11,840.73 8.18881800 STANDARD YTM
458182BS0 INTERAMER DEV BANK P99/04 YTM-CALL 12,312.55 2.86055280 STANDARD YTM
46623PAA2 JP MORGAN CAP TRUST BONDS YTM-CALL 25,321.72 7.86715340 STANDARD YTM
480206AJ0 JONES INTERCABLE YTM 19,260.80 8.41378200 STANDARD YTM
481206AD2 JOY TECHNOLOGIES YTM-CALL 19,908.70 6.60672500 STANDARD YTM
484610AB6 KANSALLIS - OSAKE YTM 39,104.29 6.92856510 STANDARD YTM
553010AA7 MGM GRAND HTL 1ST MG DFSD YTM-CALL 49,200.47 4.28870730 STANDARD YTM
570387AG5 MARK IV INDUST SR SUB NOT YTM 21,120.41 8.12409100 STANDARD YTM
571900AB5 MARRIOTT INTL SENIOR NOTE YTM 31,573.04 7.24308340 STANDARD YTM
580169AL4 MCDONNELL DOUGLAS YTM 31,017.78 6.57763910 STANDARD YTM
620076AC3 MOTOROLA INC DEB (PUT 01) YTM 59,972.53 7.06744080 STANDARD YTM
628931AB3 NBD BANK N.A. P04 YTM 40,803.24 7.19334500 STANDARD YTM
629527AF9 NABISCO INC P97 YTM 32,403.07 6.24166300 STANDARD YTM
63858SAA7 NATIONSBANK CORP MTN P04 YTM 35,189.08 7.34344310 STANDARD YTM
652478AD0 NEWS AMER HLDGS YTM 28,744.71 6.45525500 STANDARD YTM
655422AN3 NORANDA INC. NOTES YTM 30,200.71 7.20153240 STANDARD YTM
669827DH7 NOVA SCOTIA P01 YTM 33,503.15 7.07355410 STANDARD YTM
68763FAF7 ORYX ENERGY CO DEB YTM 12,818.50 7.28147690 STANDARD YTM
68763FAK6 ORYX ENERGY CO SENIOR NTS YTM 23,969.37 7.70845580 STANDARD YTM
690734AH1 OWENS CORNING FIBER YTM 31,201.44 6.97598490 STANDARD YTM
69511JM38 PACIFICORP BAS ACTUAL 967.29 5.28000000
707271AL6 PENN CENTRAL CORP SUB NOT YTM 27,038.38 6.96590820 STANDARD YTM
742718BG3 PROCTOR & GAMBLE P04/14 YTM 66,503.77 6.91739770 STANDARD YTM
74740ANQ6 QUAKER OATS CO JPM ACTUAL 5,540.38 5.62000000
749928AA5 RHG FINANCE (CO GUARAN) YTM 28,292.67 7.95324980 STANDARD YTM
759464AG5 RELIANCE GROUP HOLDINGS YTM 21,222.21 8.07783110 STANDARD YTM
7609203W6 RFMSI 1992-S33 A7 YTM 56,985.15 7.97646820 STANDARD YTM INC BASED ON EFF DT
76110WAG1 RASC 1995-KS3 CLASS A4-1 YTM 26,710.84 7.92944770 STANDARD YTM
766570AD7 RIGGS NATIONAL SUB DEBENT YTM-CALL 32,668.28 8.02027060 STANDARD YTM
803111MN0 SARA LEE CORP ACTUAL 415.43 0.00000000 PAGE 1
812007AC6 SEAGULL ENERGY YTM 8,314.31 7.70103620 STANDARD YTM
8447HAAH7 SOUTHTRUST BK AL P01 SR NSEYTM IS 22,279.34 UR 6.06077960 ILSTANDARD YTM
8447HBAA0 SOUTHTRUST BK OF BIRM P05 YTM 31,940.01 7.21872120 STANDARD YTM PAGE 2
84603AAA0 SOVEREIGN BANCRP SUB NTS YTM 13,142.55 7.71332450 STANDARD YTM
87924FAU0 TELECOMM STEP/ P99 SEYTM IS 39,404.42 UR 6.03958000 ILSTANDARD YTM
1FDCSY2 PAGE
3
RUN DATE: 03/24/97, TIME: 13:42:49
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/96 THROUGH 12/31/96
UNITED BOND FUND 000000000000024
SECURITY SHORT NAME METHOD INCOME ANNUAL RATE COMMENT CALCULATION ERROR
--------- ------------------------- -------- ------------- --------------- -------------------- --------------------
88033GAC4 TENET HEALTHCARE FOYTM RI 33,340.41 HR 7.58665020 STANDARD YTM
880591CK6 TENN VALLEY AUTH P98/06 YTM 25,177.93 5.87682970 STANDARD YTM
900262AR7 TURNER BROADCASTING YTM 28,735.69 8.14347940 STANDARD YTM
903293AN8 USG CORP. YTM 13,547.65 7.57749980 STANDARD YTM
903293AP3 USG CORP YTM 5,217.57 7.77014110 STANDARD YTM
908640AD7 UNION TEXAS PETROLEUM SR YTM 21,115.34 7.03082080 STANDARD YTM
911596MN1 U S BANCORP ACTUAL 190.58- 0.00000000
912827J45 US TREASURY NOTE YTM 2,518.66 5.57475940 STANDARD YTM
912827P22 US TREASURY NOTE YTM 48,916.96 5.91703490 STANDARD YTM
912827Q21 US TREASURY NOTE YTM 14,743.22 5.97901130 STANDARD YTM
912833GA2 US TREASURY STRIP YTM 51,395.73 6.58634420 STANDARD YTM
925526AG0 VIACOM INTERNATIONAL YTM 18,813.35 7.91673980 STANDARD YTM
925526AH8 VIACOM INTERNATIONAL YTM 10,831.59 8.14826100 STANDARD YTM
928951AH5 WFS FIN OWNR TR 96-B A2 YTM 24,746.30 6.06375790 STANDARD YTM
947423AD1 WEBB DEL SENIOR NOTES YTM-CALL 4,044.10 1.06414430- STANDARD YTM NEGATIVE YTM
949740BU7 WELLS FARGO & CO YTM 0.00 0.00000000 STANDARD YTM
984245AA8 YPF SA YTM 23,955.34 7.99724420 TAX EXEMPT MKT DISC
1FDCSY2 PAGE 4
RUN DATE: 03/24/97, TIME: 13:42:49
SEC ADVERTISING YIELD SECURITY INCOME DETAIL
FOR THE PERIOD 12/01/96 THROUGH 12/31/96
UNITED BOND FUND 000000000000024
S U M M A R Y D A T A CLASS 03
TOTAL INCOME.................. 64,992.85
TOTAL EXPENSES................ 5,112.68-
AVERAGE SHARES................ 1,923,765.9486
MAXIMUM OFFERING PRICE........ 6.140000
EXPONENT USED IN FORMULA...... 6
SEC ADVERTISED YIELD.......... 6.160986
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT TO
SHAREHOLDERS DATED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000217420
<NAME> UNITED FUNDS, INC.
<SERIES>
<NUMBER> 01
<NAME> UNITED INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 2,955,148,013
<INVESTMENTS-AT-VALUE> 5,051,152,404
<RECEIVABLES> 14,669,503
<ASSETS-OTHER> 57,237
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,065,879,144
<PAYABLE-FOR-SECURITIES> 38,622,803
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,493,028
<TOTAL-LIABILITIES> 64,115,831
<SENIOR-EQUITY> 152,004,636
<PAID-IN-CAPITAL-COMMON> 2,678,442,344
<SHARES-COMMON-STOCK> 152,004,636
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 2,937,972
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 72,382,654
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,095,995,707
<NET-ASSETS> 5,001,763,313
<DIVIDEND-INCOME> 66,534,296
<INTEREST-INCOME> 19,406,967
<OTHER-INCOME> 0
<EXPENSES-NET> (38,841,783)
<NET-INVESTMENT-INCOME> 47,099,480
<REALIZED-GAINS-CURRENT> 276,135,291
<APPREC-INCREASE-CURRENT> 518,056,427
<NET-CHANGE-FROM-OPS> 841,291,198
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (46,118,752)
<DISTRIBUTIONS-OF-GAINS> (230,246,880)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17,432,054
<NUMBER-OF-SHARES-REDEEMED> (14,393,665)
<SHARES-REINVESTED> (7,977,524)
<NET-CHANGE-IN-ASSETS> 918,342,846
<ACCUMULATED-NII-PRIOR> 2,184,484
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25,277,033
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38,841,783
<AVERAGE-NET-ASSETS> 4,540,330,040
<PER-SHARE-NAV-BEGIN> 28.96
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> 5.53
<PER-SHARE-DIVIDEND> (0.32)
<PER-SHARE-DISTRIBUTIONS> (1.59)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 32.91
<EXPENSE-RATIO> 0.86
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000217420
<NAME> UNITED FUNDS, INC.
<SERIES>
<NUMBER> 02
<NAME> UNITED ACCUMULATIVE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,224,750,914
<INVESTMENTS-AT-VALUE> 1,297,247,268
<RECEIVABLES> 1,831,987
<ASSETS-OTHER> 34,184
<OTHER-ITEMS-ASSETS> 31,233
<TOTAL-ASSETS> 1,299,144,672
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11,277,880
<TOTAL-LIABILITIES> 11,277,880
<SENIOR-EQUITY> 166,148,578
<PAID-IN-CAPITAL-COMMON> 994,196,461
<SHARES-COMMON-STOCK> 166,148,578
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,310,231
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 53,715,148
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 72,496,374
<NET-ASSETS> 1,287,866,792
<DIVIDEND-INCOME> 19,372,299
<INTEREST-INCOME> 7,360,999
<OTHER-INCOME> 0
<EXPENSES-NET> (10,185,317)
<NET-INVESTMENT-INCOME> 16,547,981
<REALIZED-GAINS-CURRENT> 155,527,364
<APPREC-INCREASE-CURRENT> (28,379,142)
<NET-CHANGE-FROM-OPS> 143,741,203
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,566,085)
<DISTRIBUTIONS-OF-GAINS> (127,159,975)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,389,228
<NUMBER-OF-SHARES-REDEEMED> (14,942,476)
<SHARES-REINVESTED> 17,543,090
<NET-CHANGE-IN-ASSETS> 81,084,028
<ACCUMULATED-NII-PRIOR> 1,322,673
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,879,322
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,185,317
<AVERAGE-NET-ASSETS> 1,234,829,470
<PER-SHARE-NAV-BEGIN> 7.78
<PER-SHARE-NII> .11
<PER-SHARE-GAIN-APPREC> .82
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> (.85)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.75
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000217420
<NAME> UNITED FUNDS, INC.
<SERIES>
<NUMBER> 03
<NAME> UNITED SCIENCE AND TECHNOLOGY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 573,361,644
<INVESTMENTS-AT-VALUE> 993,861,476
<RECEIVABLES> 7,718,350
<ASSETS-OTHER> 12,737
<OTHER-ITEMS-ASSETS> 7,418
<TOTAL-ASSETS> 1,001,599,981
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,962,634
<TOTAL-LIABILITIES> 17,962,634
<SENIOR-EQUITY> 42,131,690
<PAID-IN-CAPITAL-COMMON> 500,595,912
<SHARES-COMMON-STOCK> 42,131,690
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 20,411,017
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 420,498,728
<NET-ASSETS> 983,637,347
<DIVIDEND-INCOME> 1,673,423
<INTEREST-INCOME> 4,409,509
<OTHER-INCOME> 0
<EXPENSES-NET> (9,127,857)
<NET-INVESTMENT-INCOME> (3,044,925)
<REALIZED-GAINS-CURRENT> 71,735,912
<APPREC-INCREASE-CURRENT> 2,339,175
<NET-CHANGE-FROM-OPS> 71,030,162
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (57,854,665)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 27,567,427
<NUMBER-OF-SHARES-REDEEMED> (23,639,129)
<SHARES-REINVESTED> 2,342,036
<NET-CHANGE-IN-ASSETS> 162,8554,764
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5,667,206
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,127,857
<AVERAGE-NET-ASSETS> 933,944,337
<PER-SHARE-NAV-BEGIN> 22.89
<PER-SHARE-NII> (.07)
<PER-SHARE-GAIN-APPREC> 2.00
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.47)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.35
<EXPENSE-RATIO> .98
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000217420
<NAME> UNITED FUNDS, INC.
<SERIES>
<NUMBER> 04
<NAME> UNITED BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 515,545,029
<INVESTMENTS-AT-VALUE> 525,669,229
<RECEIVABLES> 8,191,114
<ASSETS-OTHER> 15,993
<OTHER-ITEMS-ASSETS> 2,169
<TOTAL-ASSETS> 533,878,505
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,226,094
<TOTAL-LIABILITIES> 3,226,094
<SENIOR-EQUITY> 83,368,101
<PAID-IN-CAPITAL-COMMON> 459,573,882
<SHARES-COMMON-STOCK> 86,368,101
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 802,660
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (26,216,432)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10,124,200
<NET-ASSETS> 530,652,411
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 38,151,761
<OTHER-INCOME> 0
<EXPENSES-NET> (4,124,730)
<NET-INVESTMENT-INCOME> 34,027,031
<REALIZED-GAINS-CURRENT> 1,490,998
<APPREC-INCREASE-CURRENT> (19,287,816)
<NET-CHANGE-FROM-OPS> 16,230,213
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (34,062,007)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 8,247,468
<NUMBER-OF-SHARES-REDEEMED> (15,897,636)
<SHARES-REINVESTED> 4,704,129
<NET-CHANGE-IN-ASSETS> (35,824,634)
<ACCUMULATED-NII-PRIOR> 575,962
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,344,627
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,124,730
<AVERAGE-NET-ASSETS> 536,895,373
<PER-SHARE-NAV-BEGIN> 6.34
<PER-SHARE-NII> .39
<PER-SHARE-GAIN-APPREC> (.20)
<PER-SHARE-DIVIDEND> (.39)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.14
<EXPENSE-RATIO> .77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
March 26, 1997
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N. W.
Judiciary Plaza
Washington, D. C. 20549
Re: United Funds, Inc.
Post-Effective Amendment No. 119
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:fr
