File No. 811-2922
File No. 2-64526
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. 28
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 23
UNITED CASH MANAGEMENT, INC.
(Exact Name as Specified in Charter)
6300 Lamar Avenue, Shawnee Mission, Kansas 66202-4200
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (913) 236-2000
Sharon K. Pappas, P. O. Box 29217, Shawnee Mission, Kansas 66201-9217
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
_____ immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
__X__ 60 days after filing pursuant to paragraph (a)(i)
_____ on (date) pursuant to paragraph (a)(i)
_____ 75 days after filing pursuant to paragraph (a)(ii)
_____ on (date) pursuant to paragraph (a)(ii) 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(a)(1). Notice for the Registrant's
fiscal year ended June 30, 1994 was filed on August 23, 1994.
<PAGE>
UNITED CASH MANAGEMENT, 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 Fund
(c) ..................... An Overview of the Fund
3(a) ..................... Financial Highlights
(b) ..................... Financial Highlights
(c) ..................... Performance
(d)...................... *
4(a) ..................... About the Investment Principles of the Fund; About
the Management and Expenses of the Fund
(b) ..................... About the Investment Principles of the Fund; About
the Management and Expenses of the Fund
(c) ..................... About the Management and Expenses of the Fund
5(a) ..................... About the Management and Expenses of the Fund
(b)...................... Inside Back Cover; About the Management and
Expenses of the Fund
(c) ..................... Inside Back Cover; About the Management and
Expenses of the Fund
(d) ..................... Inside Back Cover; About the Management and
Expenses of the Fund
(e) ..................... Inside Back Cover; About the Management and
Expenses of the Fund
(f) ..................... About the Management and Expenses of the Fund
(g)(i)................... *
(g)(ii).................. About the Management and Expenses of the Fund
5A........................ *
6(a) ..................... About the Management and Expenses of the Fund
(b) ..................... *
(c) ..................... *
(d) ..................... *
(e) ..................... About the Management and Expenses of the Fund
(f)...................... About Your Account
(g) ..................... About Your Account
7(a) ..................... Inside Back Cover; About the Management and
Expenses of the Fund
(b) ..................... About Your Account
(c) ..................... About Your Account
(d) ..................... About Your Account
(e) ..................... *
(f) ..................... About Your Account
8(a) ..................... Redemption
(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) ..................... Investment Objective and Policies
(b) ..................... Investment Objective and Policies
(c) ..................... Investment Objective and Policies
(d) ..................... Investment Objective and Policies
14(a) ..................... Directors and Officers
(b) ..................... Directors and Officers
(c) ..................... *
15(a) ..................... *
(b) ..................... Directors and Officers
(c) ..................... Directors and Officers
16(a)(i) .................. Investment Management and Other Services
(a)(ii) ................. Directors and Officers
(a)(iii) ................ Investment Management and Other Services
(b) ..................... Investment Management and Other Services
(c) ..................... *
(d) ..................... Investment Management and Other Services
(e) ..................... *
(f) ..................... Investment Management and Other Services
(g) ..................... *
(h) ..................... Investment Management and Other Services
(i) ..................... *
17(a) ..................... Portfolio Transactions and Brokerage
(b) ..................... *
(c) ..................... Portfolio Transactions and Brokerage
(d) ..................... *
(e) ..................... *
18(a) ..................... Other Information
(b) ..................... *
19(a) ..................... Purchase, Redemption and Pricing of Shares
(b) ..................... Purchase, Redemption and Pricing of Shares
(c) ..................... Purchase, Redemption and Pricing of Shares
20 ........................ Payments to Shareholders; Taxes
21(a) ..................... Investment Management and Other Services
(b) ..................... *
(c) ..................... *
22(a) ..................... Performance Information
(b)(i) .................. *
(b)(ii) ................. *
(b)(iii) ................ *
(b)(iv) ................. Performance Information
23 ........................ Financial Statements
- ---------------------------------------------------------------------------
*Not Applicable or Negative Answer
<PAGE>
SUBJECT TO COMPLETION -- Information contained herein pertaining to the Class
B shares of the Fund is subject to completion or amendment. A post-effective
amendment to the registration statement relating to, among other things, the
Class B shares of the Fund has been filed with the Securities and Exchange
Commission. Class B shares of the Fund may not be sold nor may offers to buy
Class B shares of the Fund be accepted before the time the post-effective
amendment to the registration statement becomes effective. This Prospectus
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of the Class B shares of the Fund in any state in which
such offer, solicitation or sale would be unlawful before registration or
qualification under the securities laws of any such state.
Please read this Prospectus before investing, and keep it on file for future
reference. It sets forth concisely the information about the Fund 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 September 5, 1995. The SAI is available free upon request to the Fund or
Waddell & Reed, Inc., the Fund's 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.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE.
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.
United Cash Management, Inc.
This Fund seeks maximum current income to the extent consistent with stability
of principal by investing in a portfolio of money market instruments meeting
specified quality standards.
This Prospectus describes two classes of shares of the Fund -- Class A Shares
and Class B Shares.
Prospectus
September 5, 1995
UNITED CASH MANAGEMENT, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
<PAGE>
Table of Contents
An Overview of the Fund..................................4
Expenses.................................................6
Financial Highlights.....................................8
Performance..............................................9
Explanation of Terms................................9
About Waddell & Reed.....................................11
About the Investment Principles of the Fund..............12
Investment Goals and Principles.....................12
Securities and Investment Practices.................12
About Your Account.......................................18
Ways to Set Up Your Account.........................18
Buying Shares.......................................19
Minimum Investments.................................21
Adding to Your Account..............................22
Selling Shares......................................22
Telephone Transactions..............................28
Shareholder Services................................28
Personal Service...............................29
Reports........................................29
Exchanges......................................29
Automatic Transactions.........................29
Dividends, Distributions, and Taxes.................30
Distributions..................................30
Taxes..........................................31
About the Management and Expenses of the Fund............32
WRIMCO and Its Affiliates...........................33
Breakdown of Expenses...............................34
Management Fee.................................34
Other Expenses.................................35
<PAGE>
An Overview of the Fund
The Fund: This Prospectus describes the Class A shares and the Class B shares
of United Cash Management, Inc., an open-end, diversified management investment
company.
Goals and Strategies: United Cash Management, Inc. (the "Fund") seeks to
maximize current income to the extent consistent with stability of principal.
The Fund seeks to achieve this goal by investing in a portfolio of money market
instruments. See "About the Investment Principles of the Fund" for further
information.
Management: Waddell & Reed Investment Management Company ("WRIMCO") provides
investment advice to the Fund and manages the 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
Fund" for further information about management fees.
Distributor: Waddell & Reed, Inc. acts as principal underwriter and distributor
of the shares of the Fund.
Purchases: You may buy Class A shares of the Fund through Waddell & Reed, Inc.
and its account representatives or through registered broker-dealers. You may
buy Class B shares of the Fund only by exchange of corresponding shares of
Waddell & Reed Funds, Inc. The price to buy a share of the Fund is the net
asset value of a share of the Class you are purchasing. There is no sales
charge incurred upon purchase of shares of the Fund, but Class B shares are
subject to a contingent deferred sales charge if redeemed within a certain
period of time. See "About Your Account" for information on how to purchase
shares of the Fund.
Redemptions: You may redeem your Class A shares at net asset value. You may
redeem your Class B shares at net asset value less a deferred sales charge, if
any. The deferred sales charge will vary with the length of time you have held
your Class B shares and the Waddell & Reed Funds, Inc. shares for which they
were exchanged. When you sell your shares, they may be worth more or less than
what you paid for them. See "About Your Account" for a description of
redemption procedures.
Who May Want to Invest: The Fund offers an investment goal that is compatible
with different investment decisions by investors seeking current income and
stability of principal. You should consider whether the Fund fits with your
particular investment objectives.
<PAGE>
Expenses
Class Class
A B
Shareholder Transaction Expenses
are charges you pay when you buy
or sell shares of a fund.
Maximum sales
load on
purchases None None
Maximum sales load
on reinvested dividends None None
Maximum contingent
deferred sales
load None 3%1
Redemption fees None None
Exchange fee None None
Annual Fund Operating Expenses
(as a percentage of average net assets)2.
Management
fees 0.__% 0.__%
12b-1 fees None 1.00%3
Other expenses 0.__% 0.__%
Total Fund
operating
expenses4 0.__% 0.__%
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 $ $
3 years $ $
5 years $ Not applicable
10 years $ Not applicable
Example: You would pay the
following expenses on a $1,000
investment in the Class B shares
of the Fund, assuming (1) 5% annual
return5 and (2) no redemption at the
end of each time period:
1 year $
3 years $
The purpose of this table is to assist you in understanding the various costs
and expenses that a shareholder of a Class of shares of the Fund will bear
directly or indirectly. The example should not be considered a representation
of past or future expenses; actual expenses may be greater or lesser than those
shown. For a more complete discussion of certain expenses and fees, see
"Breakdown of Expenses."
1The contingent deferred sales charge, which is imposed on redemption proceeds,
declines 1% annually from 3% of the amount invested during the first calendar
year to 0% after 4 years. See "About Your Account" for further information
about he contingent deferred sales charge.
2For the Class B shares, expense ratios are based on the management fees and
other Fund-level expenses for the fiscal year ended June 30, 1995, and the
expenses attributable to a Fund's Class B shares that are anticipated for the
current year. Actual expenses may be greater or lesser than those shown.
3It is possible that long-term shareholders of the Class B shares of the Fund
may bear 12b-1 distribution fees that are more than the maximum front-end sales
charge permitted under the rules of the National Association of Securities
Dealers, Inc. See "Breakdown of Expenses."
4Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.
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
The following information has been audited by Price Waterhouse LLP, independent
accountants, and should be read in conjunction with the financial statements and
notes thereto, together with the report of Price Waterhouse LLP, included in the
SAI.
For a Class A share outstanding throughout each period:*
<TABLE>
For the fiscal year ended June 30,
- -------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----- ----- ----- ----- ----- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period .......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- ----- ----- ----- ----
Net investment
income .......... 0.0252 0.0251 0.0434 0.0665 0.0786 0.0805 0.0626 0.0555 0.0707
Less dividends
declared ........ (0.0252) (0.0251) (0.0434) (0.0665) (0.0786) (0.0805) (0.0626) (0.0555) (0.0707)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ...... 2.55% 2.57% 4.41% 6.89% 8.18% 8.33% 6.46% 5.68% 7.27%
Net assets, end of
period (000
omitted) ........ $316,920 $350,624 $448,127 $579,944 $563,893 $445,156 $298,162 $242,084 $283,937
Ratio of expenses
to average net
assets .......... 1.04% 1.06% 0.99% 0.95% 0.95% 1.00% 1.07% 1.08% 1.07%
Ratio of net investment
income to average net
assets .......... 2.51% 2.56% 4.36% 6.65% 7.86% 8.14% 6.27% 5.54% 7.04%
Financial Highlights for Class B shares are not included because the Fund did
not offer Class B shares during the fiscal year ended June 30, 1995.
*On September 5, 1995, the Fund began offering Class B shares to the public.
Fund shares outstanding prior to that date were designated Class A shares.
</TABLE>
<PAGE>
Performance
Money market fund performance is commonly measured as yield. The Fund may also
advertise its performance by showing performance rankings. Performance
information is calculated and presented separately for each class of Fund
shares.
Explanation of Terms
Current Yield refers to the income generated by an investment in the Fund over a
stated seven-day period, expressed as an annual percentage rate.
Effective Yield is the income generated by an investment in the Fund over a
stated seven-day period that, when annualized, is assumed to be reinvested.
Effective yield is slightly higher than current yield because of the compounding
effect of the assumed reinvestment.
Current yield and effective yield figures are based on historical earnings and
are not intended to indicate future performance. An investment in Fund shares
is not insured and these yields are not fixed or guaranteed. Yield information
cannot necessarily be used to compare Fund shares with investment alternatives
that provide fixed yields, such as money market instruments or bank accounts
that may also be insured.
Performance Rankings are comparisons of the 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. The 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 the 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 the Fund's
shares when redeemed may be more or less than their original cost.
The Fund's recent performance and holdings will be detailed twice a year in the
Fund's annual and semiannual reports, which are sent to all Fund shareholders.
<PAGE>
About Waddell & Reed
Since 1937, Waddell & Reed has been helping people make the most of their
financial future by helping them take advantage of various financial services.
Today, Waddell & Reed has over 2500 account representatives located throughout
the United States. Your primary contact in your dealings with Waddell & Reed
will be your local account representative. However, the Waddell & Reed
shareholder services department, which is part of the Waddell & Reed
headquarters operations in Overland Park, Kansas is available to assist you and
your Waddell & Reed account representative. You may speak with a customer
service representative by calling 913-236-2000.
<PAGE>
About the Investment Principles of the Fund
Investment Goals and Principles
The goal of the Fund is to seek maximum current income to the extent consistent
with stability of principal. The Fund seeks to achieve this goal by investing
in a portfolio of money market instruments. There is no assurance that the Fund
will achieve its goal.
Subject to the diversification requirements of Rule 2a-7 under the Investment
Company Act of 1940 ("Rule 2a-7"), the Fund may invest only in the following
money market obligations and instruments, which must be denominated in U.S.
dollars: U.S. Government obligations (including obligations of U.S. Government
agencies and instrumentalities); bank obligations and instruments secured by
bank obligations, such as letters of credit; commercial paper obligations,
including variable amount master demand notes; Canadian Government obligations;
and certain other obligations guaranteed as to principal and interest by a bank
in whose obligations the Fund may invest or a corporation in whose commercial
paper the Fund may invest.
The Fund may invest only in instruments that are rated in one of the two highest
rating categories by the requisite nationally recognized statistical rating
organization(s) or are comparable unrated securities. Standard & Poor's Ratings
Group ("S&P") and Moody's Investors Service, Inc. ("MIS") are among the
nationally recognized statistical rating organizations. See Appendix A to the
SAI for a description of some of these ratings.
While Rule 2a-7 allows the Fund to invest in securities with a remaining
maturity of not more than thirteen months, as a fundamental policy, the Fund may
only invest in securities with a remaining maturity of not more than one year.
Securities and Investment Practices
The following pages contain more detailed information about the types of
instruments in which the Fund may invest and strategies WRIMCO may employ in
pursuit of the Fund's investment goal. A summary of the 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 the Fund's investment policies and restrictions
unless it believes that doing so will help the Fund achieve its goal. As a
shareholder, you will receive annual and semiannual reports detailing the Fund's
holdings.
Certain of the investment policies and restrictions of the Fund are also stated
below. A fundamental policy of the Fund may not be changed without the approval
of the shareholders of the Fund. Operating policies may be changed by the Board
of Directors without the approval of the shareholders. The goal of the Fund,
the type of money market securities in which the Fund may invest and the
required maturities of these securities are matters of fundamental policy;
unless otherwise indicated, the types of other assets in which the Fund may
invest and other policies are operating policies.
Policies and limitations are typically considered at the time of purchase; the
sale of instruments is usually not required in the event of a subsequent change
in circumstances.
Please see the SAI for further information concerning the following instruments
and associated risks and the Fund's investment policies and restrictions.
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 the 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.
Policies and Restrictions: The Fund intends to invest in U.S. Government
obligations when there is a limited availability of other obligations and
instruments.
Bank Obligations are instruments issued by financial institutions evidencing
financial obligations. Bank obligations include, among other instruments, time
deposits, certificates of deposit, and bankers acceptances. Instruments secured
by bank obligations, such as letters of credit, are also eligible for investment
by the Fund.
Policies and Restrictions: As a fundamental policy, the Fund may invest only in
obligations of a bank subject to regulation by the U.S. Government (including
obligations issued by foreign branches of such banks) or obligations of a
foreign bank having total assets equal to at least U.S. $500,000,000, and
instruments secured by any such obligation.
Commercial Paper is a short-term, unsecured promissory note used 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, a date within nine
months of the date of issue.
Commercial paper has varying levels of sensitivity to interest rates and varying
degrees of quality. Longer-term commercial paper is generally more sensitive to
interest-rate changes than shorter term commercial paper. The quality of
commercial paper depends upon the probability of timely repayment. S&P ratings
are graded into several categories, ranging from A-1 for the highest quality to
D for the lowest. MIS employs the designations of Prime 1, Prime 2 and Prime 3,
all judged to be investment grade, to indicate the relative repayment capacity
of rated issuers.
Policies and Restrictions: As a fundamental policy, the Fund may invest only in
commercial paper rated A-1 or A-2 by S&P or Prime-1 or Prime-2 by MIS or, if not
rated, issued by a corporation whose debt obligations are rated at least A by
S&P or MIS.
Corporate Debt Obligations. Bonds and other 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.
Corporate debt obligations have varying levels of sensitivity to 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.
Policies and Restrictions: As a fundamental policy, the Fund may invest only in
corporate debt obligations rated at least A by S&P or MIS.
The Fund may not purchase the securities of any company that has a record of
less than three years of continuous operation, including the operation of any
predecessor.
Foreign Securities. Foreign securities can involve significant risks in addition
to the risks inherent in U.S. investments. These risks include currency
fluctuations, exchange regulations, risks relating to political or economic
conditions in the foreign country, and the potentially less stringent investor
protection, accounting, auditing, financial and disclosure standards of foreign
markets. These factors could make foreign investments more volatile.
Policies and Restrictions: As a fundamental policy, the foreign securities in
which the Fund may invest are: Canadian Government obligations, which are
obligations issued or guaranteed by the Government of Canada, a Province of
Canada or any agency, instrumentality or political subdivision of the Canadian
Government or any Province; obligations issued by foreign banks with total
assets equal to at least U.S. $500,000,000; and obligations issued by foreign
branches of U.S. banks. Such obligations must be denominated in U.S. dollars.
Subject to the diversification requirements of Rule 2a-7, the Fund may not
invest more than 10% of its total assets in Canadian Government obligations.
The Fund does not intend to invest more than 25% of its total assets in a
combination of foreign bank obligations and the obligations of foreign branches
of domestic banks.
Indexed Securities. Subject to the requirements of Rule 2a-7, the Fund may
purchase and sell indexed securities, which are securities whose prices are
indexed to the prices of other securities, securities indices, currencies,
precious metals or other commodities, or other financial indicators, as long as
the indexed securities are denominated in U.S. dollars. 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 U.S. 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.
Repurchase Agreements. In a repurchase agreement, the Fund purchases 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.
Restricted and Illiquid Securities. Restricted securities are securities that
are subject to legal or contractual restrictions on resale. Restricted
securities may be illiquid due to restrictions on their resale. Certain types
of restricted securities may be deemed to be liquid in accordance with
guidelines adopted by the Fund'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 the
Fund.
Policies and Restrictions: As a fundamental policy, the Fund may not purchase
restricted securities except commercial paper that is exempt from registration
under Section 4(2) of the Securities Act of 1933.
The Fund may not purchase a security if, as a result, more than 10% of its net
assets would consist of illiquid securities.
Diversification. Diversifying the 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, the Fund may not invest in
a security if, as a result, it would own more than 10% of the total value of the
issuer's outstanding securities, or if more than 5% of the Fund's total assets
would be invested in securities of that issuer. U.S. Government obligations and
bank obligations and instruments are not included in this limit.
As a fundamental policy, the Fund may not buy a security if, as a result, more
than 25% of the Fund's total assets would then be invested in securities of
companies in any one industry. U.S. Government obligations and bank obligations
and instruments are not included in this limit.
The Fund may not invest more than 5% of its assets in securities rated in the
second highest rating category by the requisite nationally recognized
statistical rating organization(s) or comparable unrated securities, with
investments in such securities of any one issuer (except U.S. Government
Securities) being limited to the greater of 1% of the Fund's assets or
$1,000,000.
Borrowing. If the Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off.
If the Fund makes additional investments while borrowings are outstanding, this
may be considered a form of leverage.
Policies and Restrictions: As a fundamental policy, the Fund may borrow only
from banks to meet redemptions, as a temporary measure or for extraordinary or
emergency purposes, up to 10% of its total assets.
Lending. Securities loans may be made on a short-term or a long-term basis for
the purpose of increasing the Fund's income. This practice could result in a
loss or a delay in recovering the Fund's securities. Loans will be made only to
parties deemed by WRIMCO to be creditworthy.
Policies and Restrictions: As a fundamental policy, such loans must be on a
collateralized basis in accordance with certain regulatory requirements.
As a fundamental policy, the Fund may not lend securities representing more than
one-third of its total asset value.
<PAGE>
About Your Account
The different ways to set up (register) your account are listed below.
Ways to Set Up Your Account
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Individual or Joint Tenants
For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).
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Business or Organization
For investment needs of corporations, associations, partnerships, institutions,
or other groups
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Retirement
To shelter your retirement savings from taxes
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible.
_ Individual Retirement Accounts (IRAs) allow anyone of legal age and under
70 1/2 with earned income to invest up to $2,000 per tax year. The maximum is
$2,250 if the investor's spouse has less than $250 of earned income in the
taxable year.
_ Rollover IRAs retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
_ Simplified Employee Pension Plans (SEP - IRAs) provide small business
owners or those with self-employed income (and their eligible employees) with
many of the same advantages as a Keogh, but with fewer administrative
requirements.
_ Keogh Plans allow self-employed individuals to make tax-deductible
contributions for themselves up to 25% of their annual earned income, with a
maximum of $30,000 per year.
_ 401(k) Programs allow employees of corporations of all sizes to contribute
a percentage of their wages on a tax-deferred basis. These accounts need to be
established by the administrator or trustee of the plan.
_ 403(b) Custodial Accounts are available to employees of public school
systems or certain types of charitable organizations.
_ 457 Accounts allow employees of state and local governments and certain
charitable organizations to contribute a portion of their compensation on a tax-
deferred basis.
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Gifts or Transfers to a Minor (UGMA, UTMA)
To invest for a child's education or other future needs
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
Federal gift tax. Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA).
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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.
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Buying Shares
You may buy Class A shares of the Fund through Waddell & Reed, Inc. and its
account representatives or through registered broker-dealers. Broker-dealers
may charge a fee for this service. You may buy Class B shares of the Fund by
exchange of your corresponding shares of Waddell & Reed Funds, Inc. To open
your account you must complete and sign an application. Your Waddell & Reed
account representative can help you with any questions you might have.
The price to buy a share of the Fund, called the offering price, is calculated
every business day.
The offering price of a share of the Fund (price to buy one share) is the net
asset value ("NAV") of the Class of shares you are buying. The Fund's shares
are sold without a sales charge.
To purchase Class A shares by wire, you must first obtain an account number by
calling 1-800-366-5465, then fax or mail a completed application to Waddell &
Reed, Inc., P.O. Box 29217, Shawnee Mission, Kansas 66201-9217, 913-236-5044.
Instruct your bank to wire the amount you wish to invest to UMB Bank, n.a., ABA
Number 101000695, United K.C., for United Cash Management, Inc., FBO Customer
Name and Account Number.
To purchase Class A shares by check, make your check, money order, Federal
Reserve draft or other negotiable bank draft payable to Waddell & Reed, Inc.
Mail the check, money order or draft, along with your completed application, to
Waddell & Reed, Inc., P.O. Box 29217, Shawnee Mission, Kansas 66201-9217.
The NAV of each Class of shares of the Fund is the value of a single share of
that Class. The NAV of a Class is computed by adding with respect to that Class
the value of the Fund's investments, cash, and other assets, subtracting its
liabilities, and then dividing the result by the number of shares of that Class
outstanding. The NAV of each Class will normally remain fixed at $1.00 per
share. See the SAI for a discussion of extraordinary circumstances that could
result in a change in this fixed share value.
The NAV per share is based on a valuation of the Fund's investments at amortized
cost. The amortized cost method of valuation is accomplished by valuing a
security at its cost and thereafter assuming a constant amortization rate to
maturity of any discount or premium.
The Fund is open for business each day the New York Stock Exchange ("NYSE") is
open. The Fund normally calculates the net asset values of its shares as of the
close of business of the NYSE, normally 4 p.m. Eastern time.
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.
_ Shares are not issued until the Fund has federal funds available to it;
federal funds are monies of a member bank of the Federal Reserve System held in
deposit at a Federal Reserve Bank.
_ 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 Fund does not issue certificates representing Class B shares of the
Fund and does not normally issue certificates representing Class A shares.
When you sign your account application, you will be asked to certify that your
Social Security or taxpayer identification number is correct and whether you are
subject to backup withholding for failing to report income to the IRS.
Waddell & Reed, Inc. reserves the right to reject any purchase orders, including
purchases by exchange, and it and the Fund reserve the right to discontinue
offering Fund shares for purchase.
Minimum Investments
To Open a Class A
Account $1,000
To Open a Class B
Account $100
For certain exchanges
into Class A accounts$100
For certain Class A retirement accounts and Class A accounts opened with
Automatic Investment Service $50
For certain Class A retirement accounts and Class A accounts opened through
payroll deductions for or by employees of WRIMCO, Waddell & Reed, Inc. and their
affiliates $25
To Add to an Account
For Class B accounts and certain exchanges into Class A accounts $100
For Automatic Investment Service (Class A Accounts Only) $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 Class A 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, United K.C., for United Cash Management, Inc., FBO
Customer Name and Account Number.
To add to your Class A account by mail: Make your check, money order, Federal
Reserve draft or other negotiable bank draft payable to Waddell & Reed, Inc.
Mail the check, money order or other draft, along with a letter showing your
account number, the account registration and stating the fund whose shares you
wish to purchase to:
Waddell & Reed, Inc.
P.O. Box 29217
Shawnee Mission, Kansas
66201-9217
Selling Shares
You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares.
The redemption price (price to sell one share) is the NAV of the Class of shares
you are selling. Class B shares are subject to the contingent deferred sales
charge discussed herein.
Deferred
Date of Sales
Redemption Charge
any time during the
calendar year of
investment and
the first full
calendar year after
the calendar year
of investment 3%
second full
calendar year 2%
third full
calendar year 1%
after third full
calendar year 0%
The deferred sales charge will be applied to the total amount invested during a
calendar year to acquire shares or the value of the shares redeemed, whichever
is less. All investments made during a calendar year are deemed a single
investment during that calendar year for purposes of calculating the deferred
sales charge.
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 will send a check to the address on
the account.
To sell Class A shares by check: If you have elected this method in your
application or by subsequent authorization, the Fund will provide you with forms
of checks drawn on UMB Bank, n.a. You may make these checks payable to the
order of any payee in any amount of $250 or more.
Special Requirements for Selling Shares
Account Type Special
Requirements
Individual or Joint The written
Tenant instructions must be
signed by all persons
required to sign for
transactions, exactly
as their names appear
on the account.
Sole Proprietorship The written
instructions must be
signed by the
individual owner of
the business.
UGMA, UTMA The custodian must
sign the written
instructions
indicating capacity as
custodian.
Retirement account The written
instructions must 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
Organization authorized by
corporate resolution
to act on the account
must sign the written
instructions.
Conservator, Guardian The written
or Other Fiduciary instructions must be
signed by the person
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
redemption price calculated after your request is received and accepted by
Waddell & Reed, Inc. at its home office. Note the following:
_ Written requests for redemption must be in good order, which requires that
if more than one person owns the shares, each owner must sign the written
request.
_ If you hold a certificate, it must be properly endorsed and sent to the
Fund.
_ If you recently purchased the shares by check, the 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.
_ Redemption by telephone, fax or check writing is not available for shares
represented by certificates. Redemption by check writing is not available for
certain retirement plan accounts.
_ There is no additional charge for maintaining the check writing privilege
or for processing checks.
_ If you have elected the check writing privilege, the Fund's Custodian Bank
will request that the Fund redeem a sufficient number of full and fractional
shares in your account to cover the amount of the check when a check is
presented to the Bank for payment. You will continue to receive dividends on
those shares equaling the amount being redeemed until such time as the check is
presented to the Bank for payment. No "stop-payment" order can be placed
against the checks. Checks may be dishonored if shares were recently purchased
as discussed above or if the net asset value per share has declined so that
there are insufficient shares to be redeemed to cover the amount of the check.
_ As with any redemption of shares, redemption by check writing will, for
Federal income tax purposes, result in a capital gain or loss on shares
redeemed.
The Fund reserves the right to require a signature guarantee on certain
redemption requests. This requirement is designed to protect you and Waddell &
Reed from fraud. The 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.
The 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.
Contingent Deferred Sales Charge. A contingent deferred sales charge may be
assessed against your Class B redemption amount and paid to Waddell & Reed, Inc.
(the "Distributor"), subject to the limitation described under "Other Expenses"
and as further described below. The purpose of the deferred sales charge is to
compensate the Distributor for the costs incurred by it in connection with the
sale of the Fund's Class B shares. The deferred sales charge will not be
imposed on shares representing payment of dividends or distributions or on
amounts which represent an increase in the value of a shareholder's account
resulting from capital appreciation above the amount paid for shares purchased
during the deferred sales charge period.
For purposes of determining the applicability and rate of any deferred sales
charge, it will be assumed that a redemption is made first of shares purchased
during the deferred sales charge period representing capital appreciation, next
of shares purchased during the deferred sales charge period representing payment
of dividends and distributions and then to shares held by the shareholder for
the longest period of time.
Unless instructed otherwise, the Fund, when requested to redeem a specific
dollar amount, will redeem additional shares equal in value to the deferred
sales charge. For example, should you request a $1,000 redemption and the
applicable deferred sales charge is $27, the Fund will redeem shares having an
aggregate net asset value of $1,027, absent different instructions.
The deferred sales charge will not apply in the following circumstances:
in connection with redemptions of shares requested within one year of the
shareholder's death or disability, provided the Fund is notified of the death
or disability at the time of the request and furnished proof of such event
satisfactory to the Distributor.
in connection with redemptions of shares that are made to effect a
distribution from a qualified retirement plan following retirement, a
required minimum distribution from an individual retirement account, Keogh
plan or Internal Revenue Code section 403(b)(7) custodial account, or a tax-
free return of an excess contribution, or that otherwise results from the
death or disability of the employee, as well as in connection with
redemptions by any tax-exempt employee benefit plan for which, as a result of
a subsequent law or legislation, the continuation of its investment would be
improper.
in connection with redemptions of shares purchased by current or retired
directors of the Fund, or current or retired officers or employees of the
Fund, WRIMCO, the Distributor or their affiliated companies, registered
representatives of Waddell & Reed, Inc., and by the members of immediate
families of such persons.
in connection with redemptions of shares made pursuant to a shareholder's
participation in any systematic withdrawal plan adopted for a Fund.
in connection with redemptions the proceeds of which are reinvested in the
Class B shares of the Fund within thirty days after such redemption.
in connection with the exercise of certain exchange privileges.
on redemptions effected pursuant to the Fund's right to liquidate a
shareholder's shares of a Fund if the aggregate net asset value of those
shares is less than $250.
in connection with redemptions effected by another registered investment
company by virtue of a merger or other reorganization with a Fund or by a
former shareholder of such investment company of shares of a Fund acquired
pursuant to such reorganization.
These exceptions may be modified or eliminated by the Fund at any time without
prior notice to shareholders, except with respect to redemptions effected
pursuant to the Fund's right to liquidate a shareholder's shares, which requires
certain notices.
The Fund reserves the right to redeem at NAV all shares of the Fund owned by you
or held in your account, except in the case of retirement plan accounts, having
an aggregate NAV of less than $250. The Fund will give you notice of its
intention to redeem your shares and a 60-day opportunity to purchase a
sufficient number of additional shares to bring the aggregate NAV of your
account to $250. The Fund has the right to charge a fee of $1.75 per month on
all accounts with a NAV of less than $250, except for retirement plan accounts
and accounts with an increase or decrease in NAV within 60 days of such
determination.
Telephone Transactions
The Fund and its agents will not be liable for following instructions
communicated by telephone that they reasonably believe to be genuine. The Fund
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If the Fund fails to do so, the Fund 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)
To reduce expenses, only one copy of most annual and semiannual reports will be
mailed to your household, even if you have more than one account with the Fund.
Call 913-236-2000 if you need copies of annual or semiannual reports or
historical account information.
Exchanges
You may sell your Class A shares and buy corresponding shares of other funds in
the United Group. You may sell your Class B shares and buy corresponding shares
of other funds in Waddell & Reed Funds, Inc. without payment of a deferred sales
charge. The time period with respect to the deferred sales charge will continue
to run.
You may exchange only into funds that are legally registered for sale in your
state of residence. Note that exchanges out of the Fund may have tax
consequences for you. Before exchanging into a fund, read its prospectus.
The Fund reserves 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 Class A Fund
account 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.
Dividends, Distributions, and Taxes
Distributions
The Fund distributes substantially all of its net income and capital gains to
shareholders each year. Ordinarily, dividends are declared daily and paid on
the 27th day of each month or on the last business day prior to the 27th if the
27th falls on a weekend or holiday. Dividends are distributed from the Fund's
net investment income, which includes accrued interest, earned discount,
dividends and other income earned on portfolio assets less expenses. The Fund
distributes its net short-term capital gains annually but may make more frequent
distributions of such gains if necessary to maintain its net asset value per
share at $1.00. The Fund may make additional distributions if necessary to
avoid Federal income or excise taxes on undistributed income and capital gains.
The Fund does not expect to realize net long-term capital gains and, thus, does
not anticipate payment of any long-term capital gains distributions. When
shares are redeemed, any declared but unpaid dividends on those shares will be
paid with the next regular dividend payment and not at the time of redemption.
Distribution Options. When you open an account, specify on your application how
you want to receive your distributions. The Fund offers three options:
1. Share Payment Option. Your dividend and capital gains distributions will be
automatically paid in additional shares of the Fund of the same Class as that
with respect to which they were paid. 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 shares of the Fund of the same Class as that with respect
to which they were paid, but you will be sent a check for each dividend
distribution.
3. Cash Option. You will be sent a check for your dividends and capital gains
distributions.
For retirement accounts, all distributions are automatically paid in shares of
the Fund of the same Class as that with respect to which they were paid.
Taxes
The Fund has qualified and intends to continue to qualify for treatment as a
regulated investment company under the Code so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of net investment income, net short-term capital gains and
net gains from certain foreign currency transactions) and net capital gains (the
excess of net long-term capital gain over net short-term capital loss) that are
distributed to its shareholders.
There are tax requirements that the Fund must follow in order to avoid Federal
taxation. In its effort to adhere to these requirements, the Fund may have to
limit its investment activity in some types of instruments.
As with any investment, you should consider how your investment in the 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 the Fund's investment company taxable
income are taxable to you as ordinary income whether received in cash or paid in
additional Fund shares. Distributions of the Fund's realized net capital gains,
when designated as such, are taxable to you as long-term capital gains, whether
received in cash or reinvested in additional Fund shares and regardless of the
length of time you have owned your shares. The Fund notifies you after each
calendar year-end as to the amounts of dividends and distributions paid (or
deemed paid) to you for that year.
Withholding. The Fund is required to withhold 31% of all dividends,
distributions and redemption proceeds payable to individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate from dividends and
distributions also is required for such shareholders who otherwise are subject
to backup withholding.
The foregoing is only a summary of some of the important Federal tax
considerations generally affecting the Fund and its shareholders. There may be
other Federal, state or local tax considerations applicable to a particular
investor. You are urged to consult your own tax adviser.
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About the Management and Expenses of the Fund
United Cash Management, Inc. is a mutual fund: an investment that pools
shareholders' money and invests it toward a specified goal. In technical terms,
the Fund is an open-end management investment company organized as a corporation
under Maryland law on February 13, 1979.
The Fund 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 Fund has two classes of shares. Prior to September 5, 1995, the Fund
offered only one class of shares to the public. Shares outstanding on that date
were designated as Class A shares.
The Fund 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
the 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 Fund are met. There will normally be no meeting of
the shareholders for the purpose of electing directors until such time as less
than a majority of directors holding office have been elected by shareholders,
at which time the directors then in office will call a shareholders' meeting for
the election of directors. To the extent that Section 16(c) of the Investment
Company Act of 1940, as amended ("1940 Act"), applies to the Fund, the directors
are required to call a meeting of shareholders for the purpose of voting upon
the question of removal of any director when requested in writing to do so by
the shareholders of record of not less than 10% of the Fund's outstanding
shares.
Each share (regardless of Class) has one vote. All shares of the Fund vote
together as a single Class, except as to any matter for which a separate vote of
any Class is required by the 1940 Act, and except as to any matter which affects
the interests of one or more particular Classes, in which case only the
shareholders of the affected Classes are entitled to vote, each as a separate
Class. Shares are fully paid and nonassessable when purchased.
WRIMCO and Its Affiliates
The Fund is managed by WRIMCO, subject to the authority of the Fund's Board of
Directors. WRIMCO provides investment advice to the Fund and supervises the
Fund's investments. Waddell & Reed, Inc. and its predecessors served as
investment manager to each of the registered investment companies in the United
Group of Mutual Funds, except United Asset Strategy Fund, Inc., since 1940 or
the inception of the company, whichever was later, and to TMK/United Funds, Inc.
since that fund's inception, until January 8, 1992, when it assigned its duties
as investment manager and assigned its professional staff for investment
management services to WRIMCO. WRIMCO has also served as investment manager for
Waddell & Reed Funds, Inc. since its inception in September 1992, Torchmark
Government Securities Fund, Inc. and Torchmark Insured Tax-Free Fund, Inc. since
each commenced operations in February 1993 and United Asset Strategy Fund, Inc.
since it commenced operations in March 1995.
Richard K. Poettgen is primarily responsible for the day-to-day management of
the Fund. Mr. Poettgen has held his Fund responsibilities since January 1989.
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. Poettgen has served as the portfolio manager for investment companies
managed by Waddell & Reed, Inc. and its successor, WRIMCO, since January 1989
and has been an employee of Waddell & Reed, Inc. and its successor, WRIMCO,
since April 1968. Other members of WRIMCO's investment management department
provide input on market outlook, economic conditions, investment research and
other considerations relating to the Fund's investments.
Waddell & Reed, Inc. serves as the Fund's underwriter and as underwriter for
each of the other funds in the United Group of Mutual Funds and Waddell & Reed
Funds, Inc., and serves as the distributor for TMK/United Funds, Inc.
Waddell & Reed Services Company acts as transfer agent ("Shareholder Servicing
Agent") for the Fund 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 Fund and pricing daily
the value of its shares.
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 the Fund and in doing so may
consider sales of shares of the Fund 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 Fund pays fees related to its daily operations.
Expenses paid out of the Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts.
The Fund pays a management fee to WRIMCO for providing investment advice and
supervising its investments. The Fund also pays other expenses, which are
explained below.
Management Fee
The management fee of the Fund is a pro rata participation based on the relative
net asset size of the 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%
The management fee is accrued and paid to WRIMCO daily.
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 $_____ billion as of June 30, 1995. Management fees for the
fiscal year ended June 30, 1995 were ____% of the Fund's average net assets,
which during that period consisted only of the Fund's Class A shares.
Other Expenses
While the management fee is a significant component of the Fund's annual
operating costs, the Fund has other expenses as well.
The Fund pays the Accounting Services Agent a monthly fee based on the average
net assets of the Fund for accounting services. The Fund pays the Shareholder
Servicing Agent a monthly fee for each account that was in existence at any time
during the month and, with respect to Class A shares, a fee for each shareholder
check it processes.
Distribution. The Fund, pursuant to Rule 12b-1 of the 1940 Act and as
authorized under a Distribution and Service Plan (the "Plan"), may finance the
distribution of the Class B shares.
The Plan provides that the Fund, with respect to the Class B shares, may
compensate the Distributor in an amount calculated and payable daily up to 1%
annually of the Fund's average daily net assets. There are two parts to this
fee: up to 0.75% may be paid to the Distributor for distribution services and
distribution expenses including commissions paid by the Distributor to its sales
representatives and managers (the "distribution fee") with respect to the
distribution of the Class B shares, and up to 0.25% may be paid to reimburse the
Distributor for continuing payments made to the Distributor's account
representatives and managers, its administrative costs in overseeing these
payments, and the expenses of Waddell & Reed Services Company in providing
certain personal services to shareholders.
The service fee of 0.25% annually of the Fund's daily net asset value is paid to
the Distributor for providing personal services to shareholders through the
Distributor's sales representatives and sales managers and to maintain
shareholder accounts. Up to 0.05% of the 0.25% service fee may be paid by the
Distributor to Waddell & Reed Services Company to cover its costs in providing
the services to shareholders in order to maintain shareholder accounts. These
ongoing payments will be made only in amounts sufficient to constitute
reimbursement for expenses actually incurred and will cease if the Plan and
Underwriting Agreement with the Distributor terminate.
In addition to these fees, the Distributor may be compensated for distribution
of the Class B shares by the deferred sales charge imposed at the time of
redemption. See "About Your Account."
The distribution fee and the deferred sales charge are designed to allow
investors to purchase Class B shares without a front-end sales charge and at the
same time to allow the Distributor to pay commissions to its field sales force
and pay other expenses of distribution, including the cost of prospectuses for
prospective investors, sales literature, advertising, sales office expenses and
overhead. In this respect, the distribution fee and deferred sales charge are
comparable to a front-end sales charge. See "Breakdown of Expenses" for the
amount of these charges and the service fee that may be paid over certain
periods. The distribution fee would be the equivalent of a 6.25% and 7.25%
front-end sales charge after 9 and 10.5 years, respectively, assuming a 5%
growth rate. These are the maximum sales charges permitted under rules of the
National Association of Securities Dealers, Inc. ("NASD") for asset-based sales
charges and front-end sales charges, respectively, were the Class B shares
offered with such charges.
No payment of the distribution fee will be made, and no deferred sales charge
will be paid, to the Distributor by the Fund if, and to the extent that, the
aggregate of the distribution fees paid by the Fund and the deferred sales
charges received by the Distributor would exceed the maximum amount of such
charges that the Distributor is permitted to receive under NASD rules as then in
effect. During any one period of time, the amount paid by the Distributor in
commissions to its sales force and attendant promotional and overhead costs may
exceed the amount it receives from the distribution fees and deferred sales
charges. Although such fees and charges are paid to reimburse the Distributor
for such expenses, the expenses are not a liability of the Fund, and the Fund,
at any time, may on written notice terminate the Plan and the Underwriting
Agreement with the Distributor without penalty and without further payment of
the distribution fee. In such event, the deferred sales charge may remain in
effect as to investments made prior to termination.
The total expenses for the fiscal year ended June 30, 1995 for the Fund's Class
A shares were ____% of the average net assets of the Fund's Class A shares.
<PAGE>
United Cash Management, 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 M Street, N. W. (913) 236-2000
Washington, D. C. 20036
Shareholder Servicing
Independent Accountants Agent
Price Waterhouse LLP Waddell & Reed
Kansas City, Missouri Services Company
6300 Lamar Avenue
Investment Manager P. O. Box 29217
Waddell & Reed Investment Shawnee Mission, Kansas
Management Company 66201-9217
6300 Lamar Avenue (913)236-2000
P. O. Box 29217
Shawnee Mission, Kansas Accounting Services
66201-9217 Agent
(913) 236-2000 Waddell & Reed Services
Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000
<PAGE>
United Cash Management, Inc.
PROSPECTUS
September 5, 1995
The United Group of Mutual Funds
United Asset Strategy Fund, Inc.
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Funds, Inc.
United Bond Fund
United Income Fund
United Accumulative Fund
United Science and Technology Fund
United Gold & Government Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Vanguard Fund, Inc.
NUP1010(9-95)
printed on recycled paper
<PAGE>
UNITED CASH MANAGEMENT, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
(913) 236-2000
September 5, 1995
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information (the "SAI") is not a
prospectus. Investors should read this SAI in conjunction with the prospectus
("Prospectus") of United Cash Management, Inc. (the "Fund") dated September 5,
1995, which may be obtained from the Fund or its underwriter, Waddell & Reed,
Inc., at the address or telephone number shown above.
TABLE OF CONTENTS
Performance Information............................. 2
Investment Objective and Policies................... 3
Investment Management and Other Services............ 11
Purchase, Redemption and Pricing of Shares.......... 14
Directors and Officers.............................. 22
Payments to Shareholders............................ 26
Taxes .............................................. 28
Portfolio Transactions and Brokerage................ 28
Other Information................................... 30
Appendix A.......................................... 31
<PAGE>
PERFORMANCE INFORMATION
Waddell & Reed, Inc., the Fund's underwriter, or the Fund may from time to
time publish the Fund's yield, effective yield and performance rankings in
advertisements and sales materials. Yield information is also available by
calling the Shareholder Servicing Agent at the telephone number shown on the
inside back cover of the Prospectus.
There are two methods by which yield is calculated for a specified time
period for a Class of shares of the Fund. The first method, which results in an
amount referred to as the "current yield," assumes an account containing exactly
one share of the applicable Class at the beginning of the period. The net asset
value of this share will be $1.00 except under extraordinary circumstances. The
net change in the value of the account during the period is then determined by
subtracting this beginning value from the value of the account at the end of the
period which will include all dividends accrued for a share of such Class;
however, capital changes are excluded from the calculation, i.e., realized gains
and losses from the sale of securities and unrealized appreciation and
depreciation. However, so that the change will not reflect the capital changes
to be excluded, the dividends used in the yield computation may not be the same
as the dividends actually declared, as certain realized gains and losses and,
under unusual circumstances, unrealized gains and losses (see "Purchase,
Redemption and Pricing of Shares"), will be taken into account in the
calculation of dividends actually declared. Instead, the dividends used in the
yield calculation will be those which would have been declared if the capital
changes had not affected the dividends.
This net change in the account value is then divided by the value of the
account at the beginning of the period (i.e., normally $1.00 as discussed above)
and the resulting figure (referred to as the "base period return") is then
annualized by multiplying it by 365 and dividing it by the number of days in the
period with the resulting current yield figure carried to at least the nearest
hundredth of one percent.
The second method results in a figure referred to as the "effective yield."
This represents an annualization of the current yield with dividends reinvested
daily. Effective yield is calculated by compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result and rounding the result to the nearest hundredth of one
percent according to the following formula:
365/7
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)] - 1
The yield for the Fund's Class A shares as calculated above for the
seven days ended June 30, 1995, the date of the most recent balance sheet
included in the Prospectus, was ____% and its effective yield calculated for the
same period was ____%.
Changes in yields (calculated on either basis) primarily reflect different
interest rates received by the Fund as its portfolio securities change. These
different rates reflect changes in current interest rates on money market
instruments. Both yields are affected by portfolio quality, portfolio maturity,
type of instruments held and operating expense ratio.
Performance Rankings
Waddell & Reed, Inc. or the Fund 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 the 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 the Fund advertises or includes in sales
material is historical in nature and is not intended to represent or guarantee
future results. The value of Fund shares when redeemed may be more or less than
their original cost.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Fund are described in the
Prospectus, which refers to the following investment methods and practices.
The Fund may invest only in the money market obligations and instruments
listed below. In addition, as a money market fund and in order for the Fund to
use the "amortized cost method" of valuing its portfolio securities, the Fund
must comply with Rule 2a-7 under the Investment Company Act of 1940 ("Rule 2a-
7"). Under Rule 2a-7, investments are limited to those that are denominated in
U.S. dollars and that are rated in one of the two highest rating categories by
the requisite nationally recognized statistical rating organizations(s)
("NRSRO(s)") or are comparable unrated securities. See the Appendix to this SAI
for a description of some of these ratings. In addition, Rule 2a-7 limits
investments in securities of any one issuer (except U.S. Government Securities)
to no more than 5% of the Fund's assets. Investments in securities rated in the
second highest rating category by the requisite NRSRO(s) or comparable unrated
securities are limited to no more than 5% of the Fund's assets, with investment
in such securities of any one issuer (except U.S. Government Securities) being
limited to the greater of 1% of the Fund's assets or $1,000,000. While Rule 2a-
7 allows the Fund to invest in securities with a remaining maturity of not more
than thirteen months, as a matter of fundamental policy, the Fund may only
invest in securities with a remaining maturity of not more than one year. See
discussion under "Determination of Offering Price."
(1) U.S. Government Obligations: Obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities. These include securities
issued by the U.S. Government, which in turn include Treasury Bills (which
mature within one year of the date they are issued) and Treasury Notes and Bonds
(which are issued with longer maturities). All Treasury securities are backed
by the full faith and credit of the United States.
U.S. Government agencies and instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Housing Administration,
Federal National Mortgage Association, Farmers Home Administration, Export-
Import Bank of the United States, Small Business Administration, Government
National Mortgage Association, General Services Administration, Central Bank for
Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
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 the Federal National Mortgage
Association, are supported only by the credit of the instrumentality and not by
the Treasury. If the securities are not backed by the full faith and credit of
the United States, the owner of the securities must look principally to the
agency issuing the obligation for repayment and may not be able to assert a
claim against the United States in the event that the agency or instrumentality
does not meet its commitment. The Fund will invest in securities of agencies
and instrumentalities only if WRIMCO is satisfied that the credit risk involved
is minimal.
(2) Bank Obligations and Instruments Secured Thereby: Subject to the
limitations described above, time deposits, certificates of deposit, bankers'
acceptances and other bank obligations if they are obligations of a bank subject
to regulation by the U.S. Government (including obligations issued by foreign
branches of these banks) or obligations issued by a foreign bank having total
assets equal to at least U.S. $500,000,000, and instruments secured by any such
obligation; in this SAI, a "bank" includes commercial banks and savings and loan
associations. Time deposits are monies kept on deposit with U.S. banks or other
U.S. financial institutions for a stated period of time at a fixed rate of
interest. At present, bank time deposits are not considered by the Board of
Directors or WRIMCO to be readily marketable. There may be penalties for the
early withdrawal of such time deposits, in which case, the yield of these
investments will be reduced.
(3) Commercial Paper Obligations Including Variable Amount Master Demand
Notes: Commercial paper rated A-1 or A-2 by Standard & Poor's Ratings Group
("S&P") or Prime-1 or Prime-2 by Moody's Investors Service, Inc. ("MIS") or, if
not rated, issued by a corporation in whose debt obligations the Fund may invest
(see 4 below). S&P and MIS are among the NRSRO's under Rule 2a-7. See Appendix
A for a description of some of these ratings. A variable amount master demand
note represents a borrowing arrangement under a letter agreement between a
commercial paper issuer and an institutional lender.
(4) Corporate Debt Obligations: Corporate debt obligations if they are
rated at least A by S&P or MIS. See Appendix A for a description of some of
these debt ratings.
(5) Canadian Government Obligations: Obligations of, or guaranteed by,
the Government of Canada, a Province of Canada or any agency, instrumentality or
political subdivision of that Government or any Province; however, the Fund may
not invest in Canadian Government obligations if more than 10% of the value of
its total assets would then be so invested, subject to the diversification
requirements of Rule 2a-7. The Fund may not invest in Canadian Government
obligations if they are denominated in Canadian dollars. See "Determination of
Offering Price."
(6) Certain Other Obligations: Obligations other than those listed in 1
through 5 above only if such other obligation is guaranteed as to principal and
interest by either a bank in whose obligations the Fund may invest (see 2 above)
or a corporation in whose commercial paper the Fund may invest (see 3 above) and
otherwise permissible under Rule 2a-7.
The value of the obligations and instruments in which the Fund invests will
fluctuate depending in large part on changes in prevailing interest rates. If
these rates go up after the Fund buys an obligation or instrument, its value may
go down; if these rates go down, its value may go up. Changes in value and
yield based on changes in prevailing interest rates may have different effects
on short-term debt obligations than on long-term obligations. Long-term
obligations (which often have higher yields) may fluctuate in value more than
short-term ones. Changes in interest rates will be more quickly reflected in
the yield of a portfolio of short-term obligations than in the yield of a
portfolio of long-term obligations.
Mortgage-Backed Securities
The Fund may invest in mortgage-backed securities as long as WRIMCO
determines that it is consistent with the Fund's investment goal and policies
and subject to the requirements of Rule 2a-7. Mortgage-backed securities may
include pools of mortgages, such as collateralized mortgage obligations and
stripped mortgage-backed securities. The value of these securities may be
significantly affected by changes in interest rates, the market's perception of
the issuers, and the creditworthiness of the parties involved.
The yield characteristics of mortgage-backed securities differ from those
of traditional debt securities. Among the major differences are that interest
and principal payments are made more frequently on mortgage-backed securities
and that principal may be prepaid at any time because the underlying mortgage
loans generally may be prepaid at any time. As a result, if the Fund purchases
these securities at a premium, a prepayment rate that is faster than expected
will reduce yield to maturity while a prepayment rate that is slower than
expected will have the opposite effect of increasing yield to maturity.
Conversely, if the Fund purchases these securities at a discount, faster than
expected prepayments will increase, while slower than expected prepayments will
reduce, yield to maturity. Accelerated prepayments on securities purchased by
the Fund at a premium also impose a risk of loss of principal because the
premium may not have been fully amortized at the time the principal is repaid in
full.
Timely payment of principal and interest on pass-through securities of the
Government National Mortgage Association (but not the Federal Home Loan Mortgage
Corporation or the Federal National Mortgage Association) is guaranteed by the
full faith and credit of the United States. This is not a guarantee against
market decline of the value of these securities or shares of the Fund. It is
possible that the availability (i.e., liquidity) of these securities could be
adversely affected by actions of the U.S. Government to tighten the availability
of its credit.
Stripped Securities
The Fund may invest in stripped securities as long as WRIMCO determines
that it is consistent with the Fund's investment goal and policies and subject
to the requirements of Rule 2a-7. Stripped securities are the separate income
or principal components of a debt instrument. These involve risks that are
similar to those of other debt securities, although they may be more volatile.
The prices of stripped mortgage-backed securities may be particularly affected
by changes in interest rates.
When-Issued and Delayed Delivery Transactions
The 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. 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 the Fund's yield.
When purchasing securities on a delayed-delivery basis, the Fund assumes
the rights and risks of ownership, including the risk of price and yield
fluctuations. When the Fund has sold a security on a delayed-delivery basis,
the Fund does not participate in further gains or losses with respect to the
security. If the other party to the delayed-delivery transaction fails to
deliver or pay for the securities, the Fund could miss a favorable price or
yield opportunity, or could suffer a loss.
Lending Securities
The Fund may lend its securities but may not lend securities
representing more than one third of its total asset value. If the 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 Fund also receives additional compensation.
Any securities loans which the Fund makes must be collateralized in
accordance with applicable regulatory requirements (the "Guidelines"). Under
the present Guidelines, the collateral must consist of cash and/or U.S.
Government Obligations. If the Fund lends its securities, the borrower must put
up collateral equal to the then market value to secure the loan. 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. This policy of 100%
collateralization and the limitation on the amount of securities which the Fund
may lend are fundamental policies which can be changed only by shareholder
vote.
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 both types of collateral. The second method is to receive
interest on the investment of the cash collateral or to receive interest on the
U.S. Government Obligations used as collateral. Part of the interest received
in either case may be shared with the borrower.
WRIMCO, subject to the direction and control of the Board of Directors,
has adopted additional rules concerning lending of securities which may be
changed without shareholder approval. At present, under these rules, the Fund
will lend securities only to creditworthy broker-dealers and financial
institutions. The Fund will make loans only under rules of the New York Stock
Exchange ("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.
The Fund may pay reasonable finder's, administrative and custodian fees in
connection with loans of securities.
Some, but not all, of the Fund's 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
how the Fund may invest cash collateral.
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. The investments made with cash
collateral received are also subject to market value fluctuations.
Repurchase Agreements
The Fund may purchase securities subject to repurchase agreements. A
repurchase agreement is an instrument under which the 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 the 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
the 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 Fund's repurchase
agreements will be structured so as to fully collateralize the loans, i.e., the
value of the securities subject to the repurchase agreement, which will be held
by the Fund's custodian bank or by a third party that qualifies as a custodian
under section 17(f) of the Investment Company Act of 1940, as amended ("1940
Act"), will be 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.
Restricted Securities
The Fund may purchase commercial paper that is issued in reliance on the
so-called "private placement" exemption from registration which is afforded by
Section 4(2) of the Securities Act of 1933 ("Section 4(2) paper"). Section 4(2)
paper is subject to legal or contractual restrictions on resale under the
federal securities laws. It is generally sold to institutional investors such
as the Fund who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper is normally resold to other
institutional investors through or with the assistance of investment dealers who
make a market in the Section 4(2) paper, thus providing liquidity. Any such
paper purchased must meet the credit, maturity and other criteria that apply to
other securities in which the Fund invests. Although WRIMCO is of the opinion
that this type of paper is nearly as liquid as other commercial paper in which
the Fund invests, there is no assurance that a market will exist for Section
4(2) paper which the Fund may own. WRIMCO will determine the liquidity of
Section 4(2) paper in accordance with procedures approved by the Board of
Directors.
These restricted securities will be valued in the same manner that other
commercial paper held by the Fund is valued. See "Portfolio Valuation." The
Fund does not anticipate adjusting for any diminution in value of these
securities on account of their restrictive feature because of the existence of
an active market which creates liquidity and because of the availability of
actual market quotations for these restricted securities. In the event that
there should cease to be an active market for these securities or actual market
quotations become unavailable, they will be valued at fair value as determined
in good faith by the Board of Directors.
Illiquid Investments
The Fund has an operating policy which may be changed without
shareholder approval, which provides that due to their possible limited
liquidity, the Fund may not make certain investments if as a result of such
investment more than 10% of its net assets would consist of such investments.
The instruments currently considered to be illiquid include: (i) repurchase
agreements not terminable within seven days; (ii) fixed time deposits subject to
withdrawal penalties other than overnight deposits; (iii) securities for which
market quotations are not readily available; and (iv) Section 4(2) paper not
determined to be liquid pursuant to guidelines established by the Fund's Board
of Directors. However, this 10% limit does not include any obligations payable
at principal amount plus accrued interest on demand or within seven days after
demand.
Foreign Obligations and Instruments
Subject to the diversification requirements applicable to the Fund under
Rule 2a-7, the Fund may invest up to 10% of its assets in Canadian Government
obligations and may also invest in foreign bank obligations and obligations of
foreign branches of domestic banks. Each of these obligations must be payable
in U.S. dollars. Although there is no fundamental policy limiting the Fund's
investment in foreign bank obligations and obligations of foreign branches of
domestic banks, it does not intend to invest more than 25% of its total assets
in a combination of these obligations.
Purchasing these securities presents special considerations: reduction of
income by foreign taxes; changes in currency rates and controls (e.g., currency
blockage); currency exchange transaction charges; lack of public information;
lack of uniform accounting, auditing and financial reporting standards; less
volume on foreign exchanges; less liquidity; greater volatility; less regulation
of issuers, exchanges and brokers; greater difficulties in commencing lawsuits;
possibilities in some countries of expropriation, confiscatory taxation, social
instability or adverse diplomatic developments; and differences (which may be
favorable or unfavorable) between the U.S. economy and foreign economies.
Uncertificated foreign securities will be purchased only if permissible under
the custodianship provisions of the 1940 Act.
Investment Restrictions
Certain of the Fund's 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 restrictions, the Fund may not:
(i) Buy commodities or commodity contracts, voting securities, any mineral
related programs or leases, or oil or gas leases, any shares of other
investment companies or any warrants, puts, calls or combinations
thereof;
(ii) Buy real estate nor any nonliquid interest in real estate investment
trusts; however, the Fund may buy obligations or instruments which it
may otherwise buy even though the issuer invests in real estate or
interests in real estate;
(iii) Buy the securities of any company if it would then own more than 10% of
the total value of its outstanding securities; or buy the securities
(not including U.S. Government Obligations) of any company if more than
5% of the Fund's total assets (valued at market value) would then be
invested in that company; or buy the securities of companies in any one
industry if more than 25% of the Fund's total assets would then be in
companies in that industry; U.S. Government Obligations and bank
obligations and instruments are not included in this limit (but see
"Foreign Obligations and Instruments");
(iv) Make loans other than certain limited types of loans described herein;
the Fund can buy debt securities which it is permitted to purchase; it
can also lend its portfolio securities (see "Lending Securities" above)
or, except as provided above, enter into repurchase agreements (see
"Repurchase Agreements" above);
(v) Invest for the purpose of exercising control or management of other
companies;
(vi) Buy or continue to hold securities if the Fund's Directors or officers
or certain others own a certain percentage of the same securities; if
any one of these individuals owns more than .5 of 1% of the shares of a
company and if the individuals who own that much or more own 5% of that
company's shares, the Fund cannot buy that company's shares or continue
to own them;
(vii) Participate on a joint, or a joint and several, basis in any trading
account in any securities;
(viii) Sell securities short or buy securities on margin; also, the Fund may
not engage in arbitrage transactions;
(ix) Engage in the underwriting of securities or invest in restricted
securities, which are securities which are restricted as to disposition
under the Federal securities laws, except commercial paper which is
exempt from registration under Section 4(2) of the Securities Act of
1933; or
(x) Borrow to increase income, but only to meet redemptions so it will not
have to sell portfolio securities for this purpose. The Fund may borrow
money from banks as a temporary measure or for extraordinary or
emergency purposes but only up to 10% of its total assets. It can
mortgage or pledge its assets in connection with such borrowing but only
up to the lesser of the amounts borrowed or 5% of the value of the
Fund's assets. Interest on borrowing would reduce the Fund's income.
Portfolio Turnover
In general, the Fund purchases investments with the expectation of holding
them to maturity. However, the Fund may engage in short-term trading to attempt
to take advantage of short-term market variations. The Fund may also sell
securities prior to maturity to meet redemptions or as a result of a revised
management evaluation of the issuer. The Fund has high portfolio turnover due
to the short maturities of its investments, but this should not affect its net
asset value or income, as brokerage commissions are not usually paid on the
investments which the Fund makes. In the usual calculation of portfolio
turnover, securities of the type in which the Fund invests are excluded.
Consequently, the high turnover which it will have is not comparable to the
turnover rates of most investment companies.
Portfolio Valuation
Under Rule 2a-7, the Fund is permitted to use the "amortized cost
method" for valuing its portfolio securities provided it meets certain
conditions. See "Purchase, Redemption and Pricing of Shares." The conditions
imposed under Rule 2a-7 relating to the Fund's portfolio investments are that
(i) the Fund must not maintain a dollar weighted average portfolio maturity in
excess of 90 days; (ii) it must limit its investments, including repurchase
agreements, to those instruments which are denominated in U.S. dollars and which
WRIMCO, pursuant to guidelines established by the Fund's Board of Directors,
determines present minimal credit risks and which are rated in one of the two
highest rating categories by the requisite nationally recognized statistical
rating organization(s) ("NRSRO(s)"), as defined in Rule 2a-7 or, in the case of
any instrument that is not rated, of comparable quality as determined by the
Fund's Board of Directors; (iii) it must limit its investments in the securities
of any one issuer (except U.S. Government Securities) to no more than 5% of its
assets; (iv) it must limit its investments in securities rated in the second
highest rating category by the requisite NRSRO(s) or comparable unrated
securities to no more than 5% of its assets; (v) it must limit its investments
in the securities of any one issuer which are rated in the second highest rating
category by the requisite NRSRO(s) or comparable unrated securities to the
greater of 1% of its assets or $1,000,000; and (vi) it must limit its
investments to securities with a remaining maturity of not more than thirteen
months; however, the Fund is required as a matter of fundamental policy to limit
its investments to securities with a remaining maturity of not more than one
year. Rule 2a-7 sets forth the method by which the maturity of a security is
determined.
INVESTMENT MANAGEMENT AND OTHER SERVICES
The Management Agreement
The Fund has an Investment Management Agreement (the "Management
Agreement") with Waddell & Reed, Inc. On January 8, 1992, subject to the
authority of the Fund's Board of Directors, Waddell & Reed, Inc. assigned the
Management Agreement and all related investment management duties (and related
professional staff) to WRIMCO, a wholly-owned subsidiary of Waddell & Reed, Inc.
Under the Management Agreement, WRIMCO is employed to supervise the investments
of the Fund and provide investment advice to the Fund. 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 Fund's underwriter.
The Management Agreement permits Waddell & Reed, Inc. or an affiliate of
Waddell & Reed, Inc. to enter into a separate agreement for transfer agency
services ("Shareholder Servicing Agreement") and a separate agreement for
accounting services ("Accounting Services Agreement") with the Fund. The
Management Agreement contains detailed provisions as to the matters to be
considered by the Fund's Board of Directors prior to approving any Shareholder
Servicing Agreement or Accounting Services Agreement.
Torchmark Corporation and United Investors Management Company
WRIMCO is a wholly-owned subsidiary of Waddell & Reed, Inc. Waddell &
Reed, Inc. is a wholly-owned subsidiary of Waddell & Reed Financial Services,
Inc., a holding company. Waddell & Reed Financial Services, Inc. is a wholly-
owned subsidiary of United Investors Management Company. United Investors
Management Company is a wholly-owned subsidiary of Torchmark Corporation.
Torchmark Corporation is a publicly held company. The address of Torchmark
Corporation and United Investors Management Company is 2001 Third Avenue South,
Birmingham, Alabama 35233.
Waddell & Reed, Inc. and its predecessors served as investment manager to
each of the registered investment companies in the United Group of Mutual Funds,
except United Asset Strategy Fund, Inc., since 1940 or the company's inception
date, whichever was later, and to TMK/United Funds, Inc. since that fund's
inception, until January 8, 1992 when it assigned its duties as investment
manager for these funds (and the related professional staff) to WRIMCO. WRIMCO
has also served as investment manager for Waddell & Reed Funds, Inc. since its
inception in September 1992, Torchmark Government Securities Fund, Inc. and
Torchmark Insured Tax-Free Fund, Inc. since they each commenced operations in
February 1993 and United Asset Strategy Fund, Inc. since it commenced operations
in March 1995. Waddell & Reed, Inc. serves as principal underwriter for the
investment companies in the United Group of Mutual Funds and Waddell & Reed
Funds, Inc. and serves as distributor for the TMK/United Funds, Inc.
Shareholder Services
Under the Shareholder Servicing Agreement entered into between the Fund
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 Fund and handling of shareholder inquiries. A new
Shareholder Servicing Agreement, or amendments to the existing one, may be
approved by the Fund's Board of Directors without shareholder approval.
Accounting Services
Under the Accounting Services Agreement entered into between the Fund
and the Agent, the Agent provides the Fund with bookkeeping and accounting
services and assistance, including maintenance of the Fund's records, pricing of
the Fund's shares, and preparation of prospectuses for existing shareholders,
proxy statements and certain reports. A new Accounting Services Agreement, or
amendments to an existing one, may be approved by the Fund's Board of Directors
without shareholder approval.
Payments by the Fund for Management, Accounting and Shareholder Services
Under the Management Agreement, for WRIMCO's management services, the
Fund pays WRIMCO a fee as described in the Prospectus.
The management fees paid to WRIMCO during the fiscal years ended June 30,
1995, 1994 and 1993 were $________, $1,372,977 and $1,668,435, respectively.
For purposes of calculating the daily fee the Fund does not include money
owed to it by Waddell & Reed, Inc. for shares which it has sold but not yet paid
the Fund. The Fund accrues and pays this fee daily.
Under the Shareholder Servicing Agreement, the Fund pays the Agent a
monthly fee of $1.75 for each shareholder account which was in existence at any
time during the prior month, and $.75 for each shareholder check it processes.
The Fund 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, the 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 Level
------------------------- -------------------
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 June 30, 1995, 1994 and
1993 were $_______, $50,000 and $60,000, respectively.
The state of California imposes limits on the amount of certain expenses
the Fund can pay. If these expense amounts are exceeded, WRIMCO is required to
reduce the amount of such expenses to the extent they exceed the expense
limitation. The State of California has granted the Fund a variance from the
expense limitation to allow the Fund to exclude from its aggregate annual
expenses transfer agency fees, professional fees and report costs to the extent
that the Fund's expense ratio for each of these expenses exceeds what its
expense ratio for such expenses would be if its average account size was equal
to or greater than the industry average account size for money market funds as
reported by the Investment Company Institute. Other expenses excluded from
aggregate annual expenses include interest, taxes, brokerage commissions and
extraordinary expenses, such as litigation. The Fund will notify shareholders
of any change in the variance.
Since the Fund 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 Fund under the Shareholder Servicing Agreement
are described above. Waddell & Reed, Inc. and affiliates pay the Fund's
Directors and officers who are affiliated with WRIMCO and its affiliates. The
Fund pays the fees and expenses of the Fund's other Directors.
These and other sales expenses of Waddell & Reed, Inc. are not covered by
any sales charge on Fund shares. On those funds in the United Group whose
shares are sold with sales charges and in the sale of certain unit investment
trusts, a major portion of the sales charge is paid to Waddell & Reed, Inc.'s
account representatives and managers. Waddell & Reed, Inc. may compensate its
account representatives as to purchases for which there is no sales charge.
The Fund pays all of its other expenses. These include the costs of
materials sent to shareholders, audit and outside legal fees, taxes, brokerage
commissions, interest, insurance premiums, custodian fees, fees payable by the
Fund under Federal or other securities laws and to the Investment Company
Institute and nonrecurring and extraordinary expenses, including litigation and
indemnification relating to litigation.
Distribution Arrangement
Waddell & Reed, Inc. (the "Distributor") acts as principal underwriter and
distributor of the Fund's shares pursuant to an underwriting agreement
("Agreement"). The Agreement requires the Distributor to use its best efforts
to sell the shares of the Fund but is not exclusive, and permits and recognizes
that the Distributor also distributes shares of other investment companies and
other securities. Shares are sold on a continuous basis. Under this agreement,
Waddell & Reed, Inc. pays the costs of sales literature, including the costs of
shareholder reports used as sales literature, and the costs of printing the
prospectus furnished to it by the Fund.
Under a Distribution and Service Plan for Class B shares (the "Plan")
adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act, the Fund pays the
Distributor daily a distribution fee at the annual rate of up to 0.75% of the
Fund's net assets attributable to Class B shares and a service fee of up to
0.25% of the Fund's net assets attributable to Class B shares.
The Distributor offers the Class B shares of the Fund through its
registered representatives and sales managers (sales force). In distributing
shares through its sales force, the Distributor will pay commissions and
incentives to the sales force at or about the time of sale and will incur other
expenses including for prospectuses, sales literature, advertisements, sales
office maintenance, processing of orders and general overhead with respect to
its efforts to distribute the Fund's shares. The Plan and the Agreement
contemplate that the Distributor may be compensated for these distribution
efforts with respect to Class B shares through the distribution fee. The sales
force may be paid continuing compensation based on the value of the Class B
shares held by shareholders to whom the member of the sales force is assigned to
provide personal services, and the Distributor or its subsidiary, Waddell & Reed
Services Company, may also provide services to Class B shareholders through
telephonic means and written communications. The amounts actually paid by the
Distributor in providing these services to Class B shareholders are reimbursed
by the service fee, subject to the limitations set forth in the Plan. A service
fee is not payable, however, unless the amounts have actually been expended by
the Distributor in providing these continuing services.
The Plan and Agreement were approved by the Fund's Board of Directors,
including the Directors who are not interested persons of the Fund or of the
Distributor 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 Distributor as the sole
shareholder of the Class B shares of the Fund at the time. The Plan will be
submitted for approval by the applicable shareholders at the first meeting of
shareholders following the commencement of the public distribution of the Fund's
Class B shares.
Among other things, the Plan provides that (i) the Distributor will submit
to the Directors at least quarterly, and the Directors will review, reports
regarding all 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 are approved
by the Directors including the Plan Directors acting in person at a meeting
called for that purpose, (iii) payments by the Fund under the Plan shall not be
materially increased without the affirmative vote of the holders of a majority
of the outstanding shares of the affected Class, and (iv) while the Plan remains
in effect, the selection and nomination of the Directors who are Plan Directors
shall be committed to the discretion of the Plan Directors.
In approving the Plan and the Agreement, the Directors, including the Plan
Directors, considered that investors will be offered an alternative to
purchasing shares of a mutual fund with a front end sales charge and considered
the incentive provided by the service fee to the Distributor, and particularly
to its sales force, to provide continuing service to shareholders in maintaining
their investments in Class B shares of the Fund. In addition, these Directors
considered the features of the distribution system including (i) the conditions
under which the deferred sales charge would be imposed and the amount thereof,
(ii) the advantage to investors of having the entire amount of their purchase
payment immediately invested in the Fund's shares, (iii) the Distributor's
belief that the ability of the sales force to receive sales commissions when the
shares are sold and continuing service fees thereafter will prove attractive to
the sales force, resulting in the greater growth of the Fund than might
otherwise be the case, (iv) the advantages to shareholders of the Fund of the
economies of scale resulting from growth of the Fund's assets and the ability to
achieve greater diversification of Fund investments than if the Fund's assets
were limited, (v) the services provided to the Fund and its Class B shareholders
by the Distributor and its affiliates, (vi) the Distributor's expenses and costs
in promoting the sale of Class B shares of the Fund and particularly the
payments of commissions and incentives to its sale force and (vii) the indirect
costs to shareholders of the distribution and service fees. The Directors also
recognized the Distributor's willingness to undertake the distribution expenses
without the concomitant receipt of an initial front end sales charge and without
any guarantee that the compensation under the Plan will not unilaterally be
terminated by the Fund before the Distributor can recover its expenses. The
Directors also considered all the fees that would be payable to the Distributor
and its affiliates for the various services provided to the Fund and its
shareholders, which fees would increase if the Plan is successful and the Fund
attained and maintained significant asset levels.
Custodial and Auditing Services
The Fund's Custodian is UMB Bank, n.a., Kansas City, Missouri. In
general, the Custodian is responsible for holding the Fund's cash and
securities. The Fund may place and maintain its foreign securities and cash
with a foreign custodian in accordance with Rule 17f-5 of the 1940 Act. Price
Waterhouse LLP, Kansas City, Missouri, the Fund's independent accountants,
audits the Fund's financial statements.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Determination of Offering Price
The value of each share of a Class of the Fund is the net asset value of
the applicable Class. The Fund is designed so that the value of each share of
each Class of the Fund (the net asset value per share) will remain fixed at
$1.00 per share except under extraordinary circumstances, although this may not
always be possible. This net asset value per share is what you pay for shares
and what you receive when you redeem them.
The net asset value per share is computed once each day that the NYSE is
open for trading as of the close of the regular session of the NYSE (ordinarily,
4:00 P.M. Eastern time). 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 Years 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 Fund operates under Rule 2a-7 which permits it to value its portfolio
on the basis of amortized cost. The amortized cost method of valuation is
accomplished by valuing a security at its cost and thereafter assuming a
constant amortization rate to maturity of any discount or premium, and does not
reflect the impact of fluctuating interest rates on the market value of the
security. This method does not take into account unrealized gains or
losses.
While the amortized cost method provides some degree of certainty in
valuation, there may be periods during which value, as determined by amortized
cost, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield on the
Fund's shares may tend to be higher than a like computation made by a fund with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for all of its portfolio instruments and changing
its dividends based on these changing prices. Thus, if the use of amortized
cost by the Fund resulted in a lower aggregate portfolio value on a particular
day, a prospective investor in the Fund's shares would be able to obtain a
somewhat higher yield than would result from investment in such a fund, and
existing investors in the Fund's shares would receive less investment income.
The converse would apply in a period of rising interest rates.
Under Rule 2a-7, the Fund's Board of Directors must establish procedures
designed to stabilize, to the extent reasonably possible, the Fund's price per
share as computed for the purpose of sales and redemptions at $1.00. Such
procedures must include review of the Fund's portfolio holdings by the Board at
such intervals as it may deem appropriate and at such intervals as are
reasonable in light of current market conditions to determine whether the Fund's
net asset value calculated by using available market quotations (see below)
deviates from the per share value based on amortized cost.
For the purpose of determining whether there is any deviation between the
value of the Fund's portfolio based on amortized cost and that determined on the
basis of available market quotations, if there are readily available market
quotations, investments are valued at the mean between the bid and asked prices.
If such market quotations are not available, the investments will be valued at
their fair value as determined in good faith under procedures established by and
under the general supervision and responsibility of the Fund's Board of
Directors, including being valued at prices based on market quotations for
investments of similar type, yield and duration.
Under Rule 2a-7, if the extent of any deviation between the net asset value
per share based upon "available market quotations" (see above) and the net asset
value per share based on amortized cost exceeds one-half of 1%, the Board must
promptly consider what action, if any, will be initiated. When the Board
believes that the extent of any deviation may result in material dilution or
other unfair results to investors or existing shareholders, it is required to
take such action as it deems appropriate to eliminate or reduce to the extent
reasonably practicable such dilution or unfair results. Such actions could
include the sale of portfolio securities prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity, withholding dividends
or payment of distributions from capital or capital gains, redemptions of shares
in kind, or establishing a net asset value per share using available market
quotations.
The procedures which the Fund's Board of Directors has adopted include
changes in the dividends payable by the Fund under specified conditions, as
further described under "Taxes" and "Payments to Shareholders." The purpose of
this portion of the procedures is to provide for the automatic taking of one of
the actions which the Board of Directors might take should it otherwise be
required to consider taking appropriate action.
Minimum Initial and Subsequent Investments
For Class A shares, initial investments must be at least $1,000 with the
exceptions described in this paragraph. A $50 minimum initial investment
pertains to 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 $25 minimum initial investment pertains to
purchases made through payroll deduction for or by employees of Waddell & Reed,
Inc., WRIMCO, their affiliates or certain retirement plan accounts. With the
exception of automatic withdrawals from a shareholder's bank account, a
shareholder may make subsequent investments of any amount. See "Exchanges."
For Class B shares, initial and subsequent investments must be at least
$100. See "Exchanges."
How to Open an Account
If you are purchasing Class A shares, you can make an initial investment
of $1,000 or more in any of the following ways:
1) By Mail. Complete an application form and mail it to Waddell & Reed,
Inc. at the address indicated on the form. Accompany the form with a check,
money order, Federal Reserve draft or other negotiable bank draft payable to
Waddell & Reed, Inc.
2) By Wire. (a) Telephone Waddell & Reed, Inc. (toll-free phone number
on the inside back cover of the Prospectus) and provide the account
registration, address and social security or tax identification number, the
amount being wired, the name of the wiring bank and the name and telephone
number of the person to be contacted in connection with the order. You will
then be provided with an order number; (b) instruct your bank to wire by the
Federal Reserve Wire Order System the specified amount, along with the order
number and registration to the UMB Bank, n.a.; 101000695, United K.C.; for
United Cash Management, Inc.; (c) complete an application form and mail it to
Waddell & Reed, Inc.
3) Through Broker-dealers. You may, if you wish, purchase your shares
through registered broker-dealers, which may charge their customers a fee for
this service. There is no such fee for investments made by mail or wire, as
described above, or for additional investments made by mail or wire. No such
service fee will be charged for shares purchased through Waddell & Reed, Inc.
If you are purchasing Class B shares, you can make an initial investment
of $100 or more only by exchange of your corresponding shares of Waddell & Reed
Funds, Inc.
How to Make Additional Investments
You may make additional investments in Class A shares in any amount
through broker-dealers as described above or in either of the following
ways:
1) By Mail. Mail a check, money order, Federal Reserve draft or other
negotiable bank draft payable to Waddell & Reed, Inc. at P.O. Box 29217, Shawnee
Mission, Kansas 66201-9217, accompanied by either (i) the detachable form which
accompanies the confirmation of a prior purchase by you, or (ii) a letter
showing your account number and registration and stating that you wish the
enclosed check, etc. to be used for the purchase of shares of United Cash
Management, Inc.
2) By Wire. Instruct your bank to wire the specified amount along with
the account number and registration to the UMB Bank, n.a.; 101000695, United
K.C.; for United Cash Management, Inc.
You may make additional investments of $100 or more in Class B shares only
by exchange of your corresponding shares of Waddell & Reed Funds, Inc.
Purchase of the Fund's shares are effective after (i) one of the methods
for purchasing the Fund's shares indicated above has been properly completed and
(ii) UMB Bank, n.a. (the "Bank") has Federal funds available to it which are
thus available to the Fund for investment. Federal funds are monies of a member
bank with the Federal Reserve System held in deposit at a Federal Reserve Bank.
They represent immediately available cash. If payment is made by check or
otherwise than in Federal funds, it will be necessary to convert investors'
payments into Federal funds, and orders for the purchase of the Fund's shares,
if accepted by Waddell & Reed, Inc., will become effective on the day Federal
funds are received for value by the Bank; this is normally anticipated to be two
business days following receipt of payment by Waddell & Reed, Inc. The Fund's
shares are issued at their net asset value next determined after the
effectiveness of the purchase (i.e., at $1.00 per share except under
extraordinary circumstances as described above).
If you wish to insure that shares will be issued on the same day on which
your payment is made so that dividends on these shares will be declared on the
next day, you should (i) place your order by wire so that it will be received by
the Bank prior to 3:00 P.M. Kansas City time, and (ii) before wiring the order,
phone Waddell & Reed, Inc. at the number on the inside back cover of the
Prospectus to make sure that the wire order as described above is properly
identified.
Special arrangements may be made by Waddell & Reed, Inc. with other broker-
dealers to permit shares ordered by such broker-dealers to be issued on the day
of such order. Under these arrangements, the orders, including registration
information, must be received by Waddell & Reed, Inc. at its Overland Park,
Kansas office prior to 3:00 P.M. Overland Park, Kansas time; and the broker-
dealer must guarantee that the Bank will have Federal funds for the purchase
price of the shares ordered by at least 11:00 A.M. on the following business
day. Such arrangements will not be made on Fridays or on any day that precedes
a holiday.
Waddell & Reed, Inc. has the right not to accept any purchase order for
the Fund's shares. Certificates are not normally issued but may be requested
for Class A shares. Shareholdings are recorded on the Fund's books whether or
not a certificate is issued.
Redemptions
The Prospectus gives information as to expedited and regular redemption
procedures. Redemption payments are made within seven days unless delayed
because of certain emergency conditions determined by the Securities and
Exchange Commission, 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 redemption of shares of the Fund may be made in
portfolio securities when the Fund'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 Fund, 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.
Flexible Withdrawal Service
If you qualify, you may arrange to receive regular monthly, quarterly,
semiannual or annual payments by redeeming shares on a regular basis through the
Flexible Withdrawal Service (the "Service").
If you own Class A shares, to qualify for the Service you must have
invested at least $10,000 in Class A or corresponding shares which you still own
of any of the funds in the United Group; or, you must own Class A or
corresponding shares having a value of at least $10,000. The value for this
purpose is not the net asset value but the value at the offering price, i.e.,
the net asset value plus the sales charge.
If you own Class B shares, to qualify for the Service you must have
invested at least $10,000 in Class B or corresponding shares which you still own
of the Fund or any of the funds in Waddell & Reed Funds, Inc. or you must own
Class B or corresponding shares of the Fund or any of the funds in Waddell &
Reed Funds, Inc. having a value of at least $10,000.
To start the Service, you must fill out a form (available from Waddell &
Reed, Inc.), advising Waddell & Reed, Inc. how you want your shares redeemed to
make the payments. You have three choices:
First. To get a monthly, quarterly, semiannual or annual payment of $50 or
more;
Second. To get a monthly payment, which will change each month, equal to
one-twelfth of a percentage of the value of the shares in the Account; you fix
the percentage; or
Third. To get a monthly or quarterly payment, which will change each month
or quarter, by redeeming a number of shares fixed by you (at least five shares).
Shares are redeemed on the 20th day of the month in which the payment is to
be made (or on the prior business day if the 20th is not a business day).
Payments are made within five days of the redemption.
Retirement plan accounts may be subject to a fee imposed by the plan
custodian for use of their service.
If you have a share certificate for the shares you want to make available
for the Service, you must enclose the certificate with the form initiating the
Service.
The dividends and distributions on shares you have made available for the
Service are reinvested in additional shares of the Fund of the same Class as
that with respect to which they were paid. All payments are made by redeeming
shares, which may involve a gain or loss for tax purposes. To the extent that
payments exceed dividends and distributions, the number of shares you own will
decrease. When all of the shares in your account are redeemed, you will not
receive any further payments. Thus, the payments are not an annuity or an
income or return on your investment.
You may, at any time, change the manner in which you have chosen to have
shares redeemed, you can change to any one of the other choices originally
available to you. For example, if you started out with a $50 monthly payment,
you could change to a $200 quarterly payment. You can at any time redeem part
or all of the shares in your account; if you redeem all of the shares, the
Service is terminated. The Fund can also terminate the Service by notifying you
in writing.
After the end of each calendar year, information on shares redeemed will be
sent to you to assist you in completing your Federal income tax return.
Exchanges
Class A Share Exchanges
If you own the Class A shares of the Fund which you have acquired by
exchange for Class A or corresponding shares of one or more other funds in the
United Group, whose shares are sold with a sales charge, you may exchange these
shares (and any shares received in payment of dividends on those shares) for
Class A or corresponding shares of any of the other funds in the United Group.
If you decide to make this change, you can get these shares without any
additional sales charge.
In addition, you may specify a dollar amount of Class A shares of the Fund
to be exchanged each month into Class A or corresponding shares of any other
fund in the United Group. The shares which you designate for exchange into any
fund must be worth at least $100 or you must own Class A or corresponding shares
of the fund in the United Group into which you want to exchange. The minimum
value of shares that you may designate for monthly exchange is $100, which may
be allocated among funds in the United Group, provided each fund receives a
value of at least $25. A minimum daily balance of $750 is required in order to
maintain such automatic exchange privileges.
Class B Share Exchanges
You may exchange Class B shares for Class B or corresponding shares of
Waddell & Reed Funds, Inc. without charge. You may also have a specific dollar
amount of Class B or corresponding shares of any of the funds of Waddell & Reed
Funds, Inc. redeemed and invested in Class B shares of the Fund. The Class B or
corresponding shares that you designate for exchange must be worth at least
$100. The exchange will be made at the net asset values next determined after
receipt and acceptance of your written request. When you exchange shares, the
total shares you receive will have the same aggregate net asset value as the
total shares you exchange.
The redemption of Class B shares of the Fund as part of an exchange is not
subject to the deferred sales charge. For purposes of computing the deferred
sales charge, if any, applicable to the redemption of Class B or corresponding
shares acquired in the exchange, those acquired shares are treated as having
been purchased when the original redeemed shares were purchased.
General Exchange Information
When you exchange shares, the total shares you receive will have the same
aggregate net asset value as the 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 other funds in
the United Group or Waddell & Reed Funds, Inc. can in most instances be
eliminated or modified at any time and any such exchange may not be
accepted.
Retirement Plans
As described in the Prospectus, your account may be set up as a funding
vehicle for a retirement plan. For individual taxpayers meeting certain
requirements, Waddell & Reed, Inc. offers prototype documents for the following
retirement plans. All of these plans involve investment in shares of the Fund
(or shares of certain other funds in the United Group or Waddell & Reed Funds,
Inc.).
Individual Retirement Accounts (IRAs). Investors having earned income may
set up a plan that is commonly called an IRA. Under an IRA, an investor can
contribute each year up to 100% of his or her earned income, up to an annual
maximum of $2,000. The annual maximum is $2,250 if an investor's spouse has
earned income of $250 or less in a taxable year. If an investor's spouse has at
least $2,000 of earned income in a taxable year, the annual maximum is $4,000
($2,000 for each spouse). The contributions are deductible unless the investor
(or, if married, either spouse) is an active participant in a qualified
retirement plan or if, notwithstanding that the investor or one or both spouses
so participate, their adjusted gross income does not exceed certain levels.
An investor may also use an IRA to receive a rollover contribution which is
either (a) a direct rollover from an employer's plan or (b) a rollover of an
eligible distribution paid to the investor from an employer's plan or another
IRA. To the extent a rollover contribution is made to an IRA, the distribution
will not be subject to Federal income tax until distributed from the IRA. A
direct rollover generally applies to any distribution from an employer's plan
(including a custodial account under Section 403(b)(7) of the Code, but not an
IRA) other than certain periodic payments, required minimum distributions and
other specified distributions. In a direct rollover, the eligible rollover
distribution is paid directly to the IRA, not to the investor. If, instead, an
investor receives payment of an eligible rollover distribution, all or a portion
of that distribution generally may be rolled over to an IRA within 60 days after
receipt of the distribution. Because mandatory Federal income tax withholding
applies to any eligible rollover distribution which is not paid in a direct
rollover, investors should consult their tax advisers or pension consultants as
to the applicable tax rules. If you already have an IRA, you may have the
assets in that IRA transferred directly to an IRA offered by Waddell & Reed,
Inc.
Simplified Employee Pension (SEP) plans and Salary Reduction SEP (SARSEP)
plans. Employers can make contributions to SEP-IRAs established for employees.
An employer may contribute up to 15% of compensation, not to exceed $22,500, per
year for each employee.
Keogh Plans. Keogh plans, which are available to self-employed
individuals, are defined contribution plans that may be either a money purchase
plan or a profit sharing plan. As a general rule, an investor under a defined
contribution Keogh plan can contribute each year up to 25% of his or her annual
earned income, with an annual maximum of $30,000.
457 Plans. If an investor is an employee of a state or local government or
of certain types of charitable organizations, he or she may be able to enter
into a deferred compensation arrangement in accordance with Section 457 of the
Code.
TSAs - Custodial Accounts and Title I Plans. If an investor is an employee
of a public school system or of certain types of charitable organizations, he or
she may be able to enter into a deferred compensation arrangement through a
custodian account under Section 403(b) of the Code. Some organizations have
adopted Title I plans, which are funded by employer contributions in addition to
employee deferrals.
401(k) Plans. With a 401(k) plan, employees can make tax-deferred
contributions into a plan to which the employer may also contribute, usually on
a matching basis. An employee may defer each year up to 25% of compensation,
subject to certain annual maximums, which may be increased each year based on
cost-of-living adjustments.
More detailed information about these arrangements and applicable forms are
available from Waddell & Reed, Inc. These plans may involve complex tax
questions as to premature distributions and other matters. Investors should
consult their tax adviser or pension consultant.
Mandatory Redemption of Certain Small Accounts
The Fund has the right to compel the redemption of shares held under any
account or any plan if the aggregate net asset value of such shares (taken at
cost or value as the Board of Directors may determine) is less than $500. The
Board intends to compel redemptions of accounts, except for retirement plan
accounts, in which the total net asset value is less than $250. Shareholders
have 60 days from the date on which the net asset value falls below $250 to
bring the net asset value above $250 in order to avoid mandatory redemption. A
shareholder may also avoid mandatory redemption by initiating a transaction
which either increases or decreases the net asset value of the account. A
dividend payment does not constitute a shareholder initiated transaction for the
purpose of avoiding mandatory redemption.
DIRECTORS AND OFFICERS
The day-to-day affairs of the Fund are handled by outside organizations
selected by the Board of Directors. The Board of Directors has responsibility
for establishing broad corporate policies for the Fund and for overseeing
overall performance of the selected experts. It has the benefit of advice and
reports from independent counsel and independent auditors.
The principal occupation during at least the past five years of each
Director and officer is given below. Each of the persons listed through and
including Mr. Wright is a member of the Fund's Board of Directors. The other
persons are officers but not Board members. For purposes of this section, the
term "Fund Complex" includes each of the registered investment companies in the
United Group of Mutual Funds, Waddell & Reed Funds, Inc., TMK/United Funds,
Inc., Torchmark Government Securities Fund, Inc. and Torchmark Insured Tax-Free
Fund, Inc. Each of the Fund's Directors is also a Director of each of the other
funds in the Fund Complex and each of its officers 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; formerly, Chairman of the Board of
Directors of Waddell & Reed, Inc.
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; formerly, partner in Trivest, a private investment
concern; formerly, Director of Atlantis Group, Inc., a diversified company.
HENRY L. BELLMON
Route 1
P. O. Box 26
Red Rock, Oklahoma 74651
Rancher; Professor, Oklahoma State University; formerly, Governor of
Oklahoma; prior to his current service as Director of the funds in the United
Group, TMK/United Funds, Inc., Waddell & Reed Funds, Inc., Torchmark Government
Securities Fund, Inc. and Torchmark Insured Tax-Free Fund, Inc., he served in
such capacity for the funds in the United Group and TMK/United Funds, Inc.
DODDS I. BUCHANAN
905 13th Street
Boulder, Colorado 80302
Advisory Director, The Hand Companies; President, Buchanan Ranch Corp.;
formerly, Senior Vice President and Director of Marketing Services, The Meyer
Group of Management Consultants; formerly, Chairman, Department of Marketing,
Transportation and Tourism, University of Colorado; formerly, Professor of
Marketing, College of Business, University of Colorado.
JAY B. DILLINGHAM
926 Livestock Exchange Building
Kansas City, Missouri 64102
Formerly, President and Director of Kansas City Stock Yards Company;
formerly, Partner in Dillingham Farms, a farming operation.
JOHN F. HAYES*
335 N. Washington
Suite 260
Hutchinson, Kansas 67504-2977
Director of Central Bank and Trust; Director of Central Financial
Corporation; formerly, President of Gilliland & Hayes, P.A., a law firm.
GLENDON E. JOHNSON
7300 Corporate Center Drive
P. O. Box 020270
Miami, Florida 33126-1208
Director and Chief Executive Officer of John Alden Financial Corporation
and subsidiaries.
WILLIAM T. MORGAN*
1799 Westridge Road
Los Angeles, California 90049
Retired; formerly, Chairman of the Board of Directors and President of
the Fund and each fund in the Fund Complex then in existence. (Mr. Morgan
retired as Chairman of the Board of Directors and President of the funds in the
Fund Complex then in existence on April 30, 1993); formerly, President, Director
and Chief Executive Officer of WRIMCO and Waddell & Reed, Inc.; formerly,
Chairman of the Board of Directors of Waddell & Reed Services Company; formerly,
Director of Waddell & Reed Asset Management Company, United Investors Management
Company and United Investors Life Insurance Company, affiliates of Waddell &
Reed, Inc.
DOYLE PATTERSON
1030 West 56th Street
Kansas City, Missouri 64113
Associated with Republic Real Estate, engaged in real estate management and
investment; formerly, Director of The Vendo Company, a manufacturer and
distributor of vending machines.
FREDERICK VOGEL III
1805 West Bradley Road
Milwaukee, Wisconsin 53217
Retired.
PAUL S. WISE
P. O. Box 5248
8648 Silver Saddle Drive
Carefree, Arizona 85377
Director of Potash Corporation of Saskatchewan.
LESLIE S. WRIGHT
2302 Brookshire Place
Birmingham, Alabama 35213
Chancellor of Samford University; formerly, Director of City Federal
Savings and Loan Association; formerly, President of Samford University.
Robert L. Hechler
Vice President and Principal Financial Officer of the 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.
John M. Holliday
Vice President of the Fund and nine other funds in the Fund Complex;
Senior Vice President of WRIMCO; Senior Vice President of Waddell & Reed Asset
Management Company; formerly, Senior Vice President of Waddell & Reed, Inc.
Richard Poettgen
Vice President of the Fund and one other fund in the Fund Complex; Vice
President of WRIMCO; formerly, Vice President of Waddell & Reed, Inc.
The address of each person is 6300 Lamar Avenue, P.O. Box 29217, Shawnee
Mission, Kansas 66201-9217 unless a different address is given.
As of the date of this SAI, four of the Fund's Directors may be deemed
to be "interested persons" 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 he has no
authority or responsibility with respect to management of the Fund. Currently,
no person serves as Director Emeritus.
The funds in the United Group (with the exception of United Asset Strategy
Fund, Inc.), TMK/United Funds, Inc. and Waddell & Reed Funds, Inc. pay to each
Director a total of $40,000 per year, plus $1,000 for each meeting of the Board
of Directors attended (prior to January 1, 1995, the fee was $500 for each
meeting of the Board of Directors attended) and $500 for each committee meeting
attended which is not in conjunction with a Board of Directors' meeting, other
than Directors who are affiliates of Waddell & Reed, Inc. The fees to the
Directors who receive them are divided among the funds in the United Group (with
the exception of United Asset Strategy Fund, Inc.), TMK/United Funds, Inc. and
Waddell & Reed Funds, Inc. based on their relative size. During the Fund's
fiscal year ended June 30, 1995, the Fund's Directors received the following
fees for service as a director:
COMPENSATION TABLE
Pension
or Retirement Total
Aggregate Benefits Compensation
Compensation Accrued As From Fund
From Part of Fund and Fund
Director Fund Expenses Complex
- -------- ------------ -------------- ------------
Ronald K. Richey $ 0 $0 $ 0
Keith A Tucker 0 0 0
Henry L. Bellmon
Dodds I. Buchanan
Jay B. Dillingham
John F. Hayes
Glendon E. Johnson
William T. Morgan
Doyle Patterson
Frederick Vogel III
Paul S. Wise
Leslie S. Wright
The officers are paid by Waddell & Reed, Inc. or its affiliates.
Shareholdings
As of August 31, 1995, all of the Fund's Directors and officers as a
group owned less than 1% of the outstanding shares of the Fund. As of such date
no person owned of record or was known by the Fund to own beneficially 5% or
more of the Fund's outstanding shares.
PAYMENTS TO SHAREHOLDERS
General
There are two sources for the payments the Fund makes to you as a
shareholder of a Class of shares of the Fund, other than payments when you
redeem your shares. The first source is the Fund's net investment income, which
is derived from the interest and earned discount on the securities it holds,
less expenses (which will vary by Class) and amortization of any premium. The
second source is realized capital gains, which are derived from the proceeds
received from the sale of securities at a price higher than the Fund's tax basis
(usually cost) in such securities; these gains are expected to be short-term
capital gains. Payments from either net investment income or net short-term
capital gains are called dividends.
On each day, including a Saturday, Sunday or other holiday, a dividend of
all of the net investment income and realized net capital gains of a Class will
be declared. The shares whose holders are entitled to receive dividends are
those held on the Fund's books at the close of business on the prior day. Thus,
dividends are paid on shares starting on the day after they are issued and on
shares the day they are redeemed. See "How to Open An Account" for information
on when shares are issued.
Under the procedures that the Fund's Board of Directors has adopted
relating to "amortized cost" valuation, the calculation of the daily dividend of
a Class will change from that indicated above under certain circumstances. If
on any day there is a deviation of .3 of 1% or more between the net asset value
of a share of a Class of the Fund computed on the amortized cost basis and that
computed on an available market price basis, the amount of the deviation will be
added to or subtracted from the dividend for that Class for that day if
necessary to reduce the per-share value to within .3 of 1% of $1.00.
If on any day there is insufficient net income to absorb any such
reduction, the Fund's Board of Directors would be required under Rule 2a-7 to
consider taking other action if the deviation after eliminating the dividend for
that day exceeds one-half of 1%. See "Determination of Offering Price." One of
the actions that the Board of Directors might take could be the elimination or
reduction of dividends for more than one day.
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 reinvested in shares of the Fund of the same Class as that with
respect to which they were paid, or (iii) you want cash for your dividends and
want your distributions reinvested in shares of the 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 (if
any) will be reinvested in shares of the Fund of the same Class as that with
respect to which they were paid. All reinvestments are at net asset value. The
net asset value used for this purpose is that computed as of the payment date
for the dividend, although this could be changed by the Board of Directors.
Even if you get dividends and distributions in cash, you can thereafter
reinvest them (or distributions only) in shares of the Fund of the same Class as
that with respect to which they were paid at net asset value 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, the Fund must distribute to its shareholders for
each taxable year at least 90% of its investment company taxable income
(consisting generally of net investment income, net short-term capital gains and
net gains from certain foreign currency transactions) and must meet several
additional requirements. 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, futures contracts or forward 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 -- (i) options,
futures contracts or forward contracts or (ii) foreign currencies (or options,
futures contracts or forward contracts thereon) that are not directly related to
the Fund's principal business of investing in securities (or in 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, 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 Government Securities or the securities of
other RICs) of any one issuer.
The 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 gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
It is the Fund's policy to make sufficient distributions each year to avoid
imposition of the Excise Tax.
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
the Fund. Purchases are made directly from issuers or from underwriters,
dealers or banks. Purchases from underwriters include a commission or
concession paid by the issuer to the underwriter. Purchases from dealers will
include the spread between the bid and the asked price. 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 Fund has not effected transactions through
brokers and does not anticipate doing so. The individual who manages the 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 the Fund, WRIMCO is authorized to
engage brokers-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 is expected to allocate orders
to brokers or dealers consistent with the interests and policies of the Fund.
Subject to review by the Board of Directors, such policies include the selection
of brokers or dealers which provide research services and other services
including pricing or quotation services directly or through others ("services").
If the execution and price offered by more than one dealer are comparable, the
order may be allocated to a dealer which has provided such 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.
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 or dealer) 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 Fund's portfolio, WRIMCO may consider sales
of shares of the Fund and other funds managed by WRIMCO and its affiliates in
the United Group 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 the allocation of Fund orders for portfolio
securities. As of June 30, 1995, the Fund owned __________________ debt
securities in the aggregate amount of $__________. __________________________
is a regular broker of the Fund.
The Fund, 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
The Fund and one or more of the other funds in the United Group, TMK/United
Funds, Inc., Waddell & Reed Funds, Inc., Torchmark Government Securities Fund,
Inc. and Torchmark Insured Tax-Free Fund, Inc. or accounts over which Waddell &
Reed Asset Management Company exercises investment discretion frequently buy or
sell the same securities at the same time. If this happens, the amount of each
purchase or sale is divided. This is done on the basis of the amount of
securities each fund or account wanted to buy or sell. Sharing in large
transactions could affect the price the 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 Fund
The Fund offers two Classes of shares: Class A and Class B. Prior to
September 5, 1995, the Fund offered only one Class of shares to the public.
Shares outstanding on that date were designated as Class A shares. Each Class
represents 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 B shares are subject to a contingent
deferred sales charge and to an ongoing distribution and service fee; each Class
may bear differing amounts of certain Class-specific expenses; and each Class
has a separate exchange privilege. The Fund does not anticipate that there will
be any conflicts between the interests of holders of the different Classes of
shares of the 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 the 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 B
shares are expected to be lower than for Class A shares of the Fund. Each
fractional share of a Class has the same rights, in proportion, as a full share
of that Class.
<PAGE>
APPENDIX A
The following are descriptions of some of the ratings of securities which
the Fund may use. The Fund may also use ratings provided by other nationally
recognized statistical rating organizations in determining the securities
eligible for investment.
DESCRIPTION OF BOND RATINGS
Standard & Poor's Ratings Group. A Standard & Poor's ("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.
The top three rating categories of S&P are described below:
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.
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.
Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service, Inc. ("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.
DESCRIPTION OF NOTE RATINGS
Standard and Poor's Rating's Group. A S&P note rating reflects the
liquidity factors and market access risks unique to notes. Notes maturing in 3
years or less will likely receive a note rating. Notes maturing beyond 3 years
will most likely receive a long-term debt rating. The following criteria will
be used in making that assessment.
--Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue is to be treated as a note).
--Source of Payment (the more the issue depends on the market for its
refinancing, the more likely it is to be treated as a note.)
The note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term
of the notes.
SP-3 Speculative capacity to pay principal and interest.
Moody's Investors Service, Inc. MIS ratings for state and municipal short-
term obligations will be designated Moody's Investment Grade (MIG). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of major
importance in bond risk are of lesser importance over the short run. Rating
symbols and their meanings follow:
MIG 1 -- This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2 -- This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3 -- This designation denotes favorable quality. All security elements
are accounted for but this is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
MIG 4 -- This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Standard & Poor's Ratings Group commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. Ratings are graded into several categories, ranging from
A-1 for the highest quality obligations to D for the lowest. Issuers rated A
are further referred to by use of numbers 1, 2 and 3 to indicate the relative
degree of safety. Issues assigned an A rating (the highest rating) are regarded
as having the greatest capacity for timely payment. An A-1 designation
indicates that the degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
with a plus sign (+) designation. An A-2 rating indicates that capacity for
timely payment is satisfactory; however, the relative degree of safety is not as
high as for issues designated A-1.
Moody's Investors Service, Inc. commercial paper ratings are opinions of
the ability of issuers to repay punctually promissory obligations not having an
original maturity in excess of nine months. MIS employs the designations of
Prime 1, Prime 2 and Prime 3, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers. Issuers rated Prime 1 have a
superior capacity for repayment of short-term promissory obligations and
repayment capacity will normally be evidenced by (1) lending market positions in
well established industries; (2) high rates of return on Funds employed; (3)
conservative capitalization structures with moderate reliance on debt and ample
asset protection; (4) broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and (5) well established access to a
range of financial markets and assured sources of alternate liquidity. Issuers
rated Prime 2 also have a strong capacity for repayment of short-term promissory
obligations as will normally be evidenced by many of the characteristics
described above for Prime 1 issuers, but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation;
capitalization characteristics, while still appropriate, may be more affected by
external conditions; and ample alternate liquidity is maintained.
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
BANK OBLIGATIONS
Certificates of Deposit
Domestic - 2.95%
PNC Bank, N.A.:
3.55%, 1-20-95 ........................ $ 5,000 $ 4,999,327
5.7%, 4-20-95 ......................... 5,000 4,994,011
Total ................................. 9,993,338
Eurodollar - 2.95%
NationsBank Corp. Europe,
5.4%, 5-19-95 ......................... 10,000 9,993,094
Yankee - 1.48%
Credit Suisse, New York,
4.03%, 2-17-95......................... 5,000 4,999,270
Total Certificates of Deposit - 7.38% 24,985,702
Notes - 5.16%
Abbey National Treasury Services plc,
7.4%, 12-15-95 ........................ 9,500 9,500,000
Comerica Bank,
5.83%, 10-27-95 ....................... 8,000 7,996,186
Total ................................. 17,496,186
TOTAL BANK OBLIGATIONS - 12.54% $ 42,481,888
(Cost: $42,481,888)
CORPORATE OBLIGATIONS
Commercial Paper
Building - 1.74%
Weyerhaeuser Company,
5.9%, 1-23-95 ......................... 5,900 5,878,727
Consumer Electronics and Appliances - 2.95%
TDK (USA) Corp.,
6.05%, 1-17-95 ........................ 10,000 9,973,111
Financial - 5.44%
Merrill Lynch & Co., Inc.,
5.72%, 1-17-95 ........................ 10,000 9,974,578
Nestle Capital Corp.,
5.9%, 1-31-95 ......................... 8,500 8,458,208
Total ................................. 18,432,786
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Food and Related - 10.04%
General Mills, Inc.,
Master Note ........................... $13,520 $ 13,520,000
Quaker Oats Co.:
6.18%, 1-4-95 ......................... 2,000 1,998,970
5.75%, 1-17-95 ........................ 4,500 4,488,500
Sara Lee Corporation,
Master Note ........................... 14,005 14,005,000
Total ................................. 34,012,470
Paper - 1.38%
Kimberly-Clark Corp.,
5.9%, 1-23-95 ......................... 4,700 4,683,054
Public Utilities - Electric - 8.60%
Pacific Gas and Electric Co.,
6.0%, 1-13-95 ......................... 10,000 9,980,000
Pacificorp,
5.72%, 1-11-95 ........................ 10,000 9,984,111
Southern California Edison Company,
6.05%, 1-20-95 ........................ 9,200 9,170,624
Total ................................. 29,134,735
Telecommunications - 2.79%
Southwestern Bell Capital Corp.,
6.04%, 2-2-95 ......................... 9,500 9,448,996
Tobacco - 2.95%
Philip Morris, Incorporated,
5.72%, 1-19-95 ........................ 10,000 9,971,400
Total Commercial Paper - 35.89% 121,535,279
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (backed by irrevocable
bank letter of credit)
Automotive - 3.09%
Hyundai Motor Finance Co. (Bank
of America NT & SA),
6.0%, 1-17-95 ......................... $10,500 $ 10,472,000
Financial - 2.21%
Spiegel Funding Corp. (Dresdner
Bank A.G.),
5.75%, 1-17-95 ........................ 7,500 7,480,834
Total Commercial Paper (backed by irrevocable
bank letter of credit) - 5.30% 17,952,834
Notes
Beverages - 2.96%
PepsiCo, Inc.,
5.845%, 1-3-95 ........................ 10,000 10,000,000
Financial - 5.31%
AVCO Financial Services Inc.,
5.87%, 1-3-95 ......................... 10,000 10,000,000
American Express Credit Corp.,
5.95%, 1-27-95 ........................ 8,000 8,007,438
Total 18,007,438
Public Utilities - Electric - 2.80%
Georgia Power Co.,
5.125%, 9-1-95 ........................ 9,500 9,459,339
Total Notes - 11.07% 37,466,777
TOTAL CORPORATE OBLIGATIONS - 52.26% $176,954,890
(Cost: $176,954,890)
MUNICIPAL OBLIGATIONS
California - 2.69%
City of Anaheim, California, Certificates
of Participation (1993 Arena Financing
Project), Municipal Adjustable Rate
Taxable Securities (Credit Suisse),
5.78%, 2-1-95 ......................... 9,100 9,100,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
Georgia - 3.01%
Development Authority of Richmond
County (Georgia), Taxable Industrial
Revenue Bonds (NutraSweet Project),
Series 1990 (Union Bank of Switzerland),
5.71%, 6-2-95 ......................... $10,200 $ 10,200,000
Michigan - 3.54%
Michigan Underground Storage Tank Financial
Assurance Authority, State of Michigan,
Series 1 (Canadian Imperial Bank of Commerce),
6.4%, 1-11-95 ......................... 12,000 11,978,667
Missouri - 1.28%
Missouri Economic Development, Export
and Infrastructure Board, Taxable
Industrial Development Revenue Bonds
(Heilig-Meyers Company Project),
Series 1992 (AmSouth Bank N.A.),
6.25%, 1-4-95 ......................... 3,000 3,000,000
The Industrial Development Authority
of the County of St. Louis,
Missouri, Series 1991B (Citibank
of New York),
6.6%, 1-5-95 .......................... 1,335 1,335,000
Total ................................. 4,335,000
New Hampshire - 2.66%
The Industrial Development Authority
of the State of New Hampshire,
Pollution Control Revenue Bonds
(Public Service Company of New
Hampshire Project-1991 Taxable
Series D and E) (Barclays Bank),
6.45%, 2-14-95 ........................ 9,000 9,000,000
New York - 5.46%
Health Insurance Plan of Greater New York
(Morgan Guaranty Trust Company of New York),
6.45%, 1-4-95 ......................... 18,500 18,500,000
Texas - 2.94%
Metrocrest Hospital Authority, Series 1989A
(The Bank of New York),
6.118%, 1-20-95 ....................... 10,000 9,967,710
TOTAL MUNICIPAL OBLIGATIONS - 21.58% $ 73,081,377
(Cost: $73,081,377)
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT OBLIGATIONS
Federal Home Loan Banks,
5.9%, 1-9-95 .......................... $14,000 $ 14,000,000
Federal Home Loan Mortgage Corporation,
5.95%, 3-7-95 ......................... 10,000 10,000,000
Federal National Mortgage Association,
5.9%, 3-20-95 ......................... 9,500 9,500,000
Student Loan Management Association,
5.94%, 1-3-95 ......................... 13,900 13,900,000
TOTAL UNITED STATES GOVERNMENT
OBLIGATIONS - 14.00% $ 47,400,000
(Cost: $47,400,000)
TOTAL INVESTMENT SECURITIES - 100.38% $339,918,155
(Cost: $339,918,155)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.38%) (1,302,774)
NET ASSETS - 100.00% $338,615,381
Notes to Schedule of Investments
Cost of investments owned is the same as that used for Federal income tax
purposes.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
<PAGE>
UNITED CASH MANAGEMENT, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1994
Assets
Investment securities - at value (Note 1) ........ $339,918,155
Cash ............................................ 829,456
Receivables:
Interest ........................................ 2,073,421
Fund shares sold ................................ 888,817
Prepaid insurance premium ........................ 21,426
------------
Total assets .................................. 343,731,275
------------
Liabilities
Payable for Fund shares redeemed ................. 4,906,106
Accrued transfer agency and dividend disbursing .. 133,870
Dividends payable ................................ 41,830
Accrued accounting services fee .................. 4,167
Other ............................................ 29,921
------------
Total liabilities ............................. 5,115,894
------------
Total net assets ............................. $338,615,381
============
Net Assets
$0.01 par value capital stock, authorized --
5,000,000,000; shares outstanding -- 338,615,381
Capital stock ................................... $ 3,386,154
Additional paid-in capital ...................... 335,229,227
------------
Net assets applicable to outstanding
units of capital ............................. $338,615,381
============
Net asset value, redemption and offering price
per share ........................................ $1.00
=====
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended DECEMBER 31, 1994
Investment Income
Interest ......................................... $8,302,803
----------
Expenses (Note 2):
Transfer agency and dividend disbursing ......... 773,522
Investment management fee ....................... 681,473
Custodian fees .................................. 25,865
Accounting services fee ......................... 25,000
Audit fees ...................................... 12,751
Legal fees ...................................... 4,328
Other ........................................... 88,877
----------
Total expenses ................................ 1,611,816
----------
Net investment income ........................ 6,690,987
----------
Net increase in net assets resulting
from operations ........................... $6,690,987
==========
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
December 31, June 30,
1994 1994
------------ ------------
Increase (Decrease) in Net Assets
Operations:
Net investment income ..............$ 6,690,987 $ 8,253,754
------------ ------------
Net increase in net assets
resulting from operations ....... 6,690,987 8,253,754
------------ ------------
Dividends to shareholders
from net investment income* ........ (6,690,987) (8,253,754)
------------ ------------
Capital share transactions:
Proceeds from sale of shares
(328,331,191 and 421,971,836
shares, respectively) ............ 328,331,191 421,971,836
Proceeds from reinvestment of
dividends (6,603,301 and
8,072,255 shares, respectively) ... 6,603,301 8,072,255
Payments for shares redeemed
(313,238,751 and 463,748,538
shares, respectively) ............(313,238,751) (463,748,538)
------------ ------------
Net increase (decrease) in net
assets resulting from capital
share transactions .............. 21,695,741 (33,704,447)
------------ ------------
Total increase (decrease) ....... 21,695,741 (33,704,447)
Net Assets
Beginning of period ................. 316,919,640 350,624,087
------------ ------------
End of period ....................... 338,615,381 316,919,640
============ ============
Undistributed net investment
income ........................... $--- $---
==== ====
*See "Financial Highlights" on page .
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six
months For the fiscal year ended June 30,
ended---------------------------------------------
12/31/94 1994 1993 1992 1991 1990
------- ------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- ------- -------
Net investment
income ........... 0.0204 0.0252 0.0251 0.0434 0.0665 0.0786
Less dividends
declared ......... (0.0204)(0.0252)(0.0251)(0.0434)(0.0665)(0.0786)
------- ------- ------- ------- ------- -------
Net asset value,
end of period .... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= =======
Total return........ 2.10% 2.55% 2.57% 4.41% 6.89% 8.18%
Net assets, end of
period (000
omitted) .........$338,615$316,920$350,624$448,127$579,944$563,893
Ratio of expenses to
average net
assets ........... 0.99%* 1.04% 1.06% 0.99% 0.95% 0.95%
Ratio of net
investment income
to average net
assets ........... 4.10%* 2.51% 2.56% 4.36% 6.65% 7.86%
*Annualized.
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1 -- Significant Accounting Policies
United Cash Management, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Security valuation -- The Fund invests only in money market securities with
maturities or irrevocable put options within one year. The Fund uses the
amortized cost method of security valuation which is accomplished by
valuing a security at its cost and thereafter assuming a constant
amortization rate to maturity of any discount or premium.
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, if any, are calculated on
the identified cost basis. Interest income is recorded on the accrual
basis.
C. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code.
Accordingly, no provision has been made for Federal income taxes.
D. Dividends to shareholders -- All of the Fund's net income is declared and
recorded by the Fund as dividends on each day to shareholders of record at
the time of the previous determination of net asset value. Dividends are
declared from the total of net investment income, plus or minus realized
gains or losses on portfolio securities. Since the Fund does not expect to
realize any long-term capital gains, it does not expect to pay any capital
gains distributions.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of a "Group" fee computed each day on the combined net asset values of
all of the funds in the United Group of mutual funds (approximately $11.0
billion of combined net assets at December 31, 1994) at annual rates of .51% of
the first $750 million of combined net assets, .49% on that amount between $750
million and $1.5 billion, .47% between $1.5 billion and $2.25 billion, .45%
between $2.25 billion and $3 billion, .43% between $3 billion and $3.75 billion,
.40% between $3.75 billion and $7.5 billion, .38% between $7.5 billion and $12
billion, and .36% of that amount over $12 billion. The Fund accrues and pays
this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund 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
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund 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 Level
------------------------- -------------------
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
At present, the Fund operates under state expense requirements which limit
the amount of aggregate annual expenses, adjusted for certain excess expenses,
that the Fund may incur during its fiscal year. The Manager will reimburse the
Fund for any expenses in excess of the limitation. No such reimbursement is
required for the period ended December 31, 1994.
The Fund also pays WARSCO a monthly per account charge of $1.75 for each
shareholder account which was in existence at any time during the prior month
and $0.75 for each shareholder check it processed. The Fund also reimburses W&R
and WARSCO for certain out-of-pocket costs.
The Fund paid Directors' fees of $5,806.
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.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United Cash Management, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United Cash Management, Inc. (the
"Fund") at December 31, 1994, the results of its operations for the six months
then ended and the changes in its net assets and the financial highlights for
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1994 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Kansas City, Missouri
January 31, 1995
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1994
Principal
Amount in
Thousands Value
BANK OBLIGATIONS
Certificates of Deposit
Domestic - 6.31%
NationsBank of N. C., Charlotte,
5.4%, 5-19-95 ......................... $10,000 $ 9,999,931
PNC Bank, N.A.:
3.75%, 8-2-94 ......................... 5,000 5,000,000
3.55%, 1-20-95 ........................ 5,000 4,996,468
Total ................................. 19,996,399
Yankee - 1.58%
Credit Suisse, New York,
4.03%, 2-17-95 ........................ 5,000 5,000,925
TOTAL BANK OBLIGATIONS - 7.89% $ 24,997,324
(Cost: $24,997,324)
CORPORATE OBLIGATIONS
Commercial Paper
Aerospace - 2.45%
United Technologies Corp.,
4.26%, 7-28-94 ........................ 7,800 7,775,079
Chemicals Major - 3.15%
Air Products and Chemicals, Inc.,
4.27%, 7-12-94 ........................ 10,000 9,986,953
Drugs and Hospital Supply - 0.47%
Ciba-Geigy Ltd.,
4.37%, 7-19-94 ........................ 1,500 1,496,722
Electronics - 1.58%
Intel Corporation,
4.3%, 7-1-94 .......................... 5,000 5,000,000
Financial - 7.88%
B.A.T. Capital Corp.,
4.25%, 7-5-94 ......................... 5,000 4,997,639
Deere (John) Credit Co.,
4.37%, 7-18-94 ........................ 10,000 9,979,364
PHH Corp.,
4.26%, 7-18-94 ........................ 10,000 9,979,883
Total ................................. 24,956,886
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1994
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Food and Related - 0.14%
Sara Lee Corporation,
Master Note ........................... $ 440 $ 440,000
Leisure Time - 3.10%
Grand Metropolitan Investment Corp.,
4.8%, 11-15-94 ........................ 10,000 9,817,334
Machinery - 1.99%
Cooper Industries, Inc.,
4.25%, 7-11-94......................... 6,300 6,292,563
Public Utilities - Electric - 8.03%
Duke Power Co.,
4.25%, 7-5-94 ......................... 5,000 4,997,639
Pacific Gas and Electric Co.,
4.3%, 7-26-94 ......................... 10,000 9,970,139
Potomac Electric Power Co.,
4.35%, 7-11-94 ........................ 5,500 5,493,354
Southern California Edison Company,
4.33%, 7-6-94 ......................... 5,000 4,996,993
Total ................................. 25,458,125
Public Utilities - Gas - 3.15%
Questar Corp.:
4.28%, 7-22-94 ........................ 4,500 4,488,765
4.32%, 7-29-94 ........................ 5,500 5,481,520
Total ................................. 9,970,285
Tobacco - 3.15%
Philip Morris, Incorporated,
4.25%, 7-6-94 ......................... 10,000 9,994,098
Total Commercial Paper - 35.09% 111,188,045
Commercial Paper (backed by irrevocable
bank letter of credit)
Automotive - 3.16%
Hyundai Motor Finance Co. (Bank of
America NT & SA),
4.25%, 7-5-94 ......................... 10,000 9,995,278
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1994
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (backed by irrevocable
bank letter of credit) (Continued)
Computers and Office Equipment - 2.11%
Comdisco Inc. (Series BAB)
(Barclays Bank PLC),
4.27%, 7-5-94 ......................... $ 6,700 $ 6,696,821
Financial - 1.13%
Mission Funding Co. (Barclays
Bank PLC),
4.3%, 7-27-94 ......................... 3,100 3,090,373
Spiegel Funding Corp. (Dresdner
Bank A.G.),
4.27%, 7-6-94 ......................... 500 499,703
Total ................................. 3,590,076
Leisure Time - 3.16%
Paragon Communications (Credit
Lyonnais):
4.325%, 7-14-94 ....................... 6,008 5,998,617
4.325%, 7-19-94 ....................... 4,036 4,027,272
Total ................................. 10,025,889
Total Commercial Paper (backed by irrevocable
bank letter of credit) - 9.56% 30,308,064
Notes
Beverages - 3.15%
PepsiCo, Inc.,
4.37%, 7-6-94 ......................... 10,000 10,000,000
Financial - 14.67%
AT&T Capital Corp.,
3.48%, 9-23-94 ........................ 9,200 9,200,000
American Express Credit Corp.,
5.95%, 1-27-95 ........................ 8,000 8,063,569
Avco Financial Services Inc.,
4.46%, 7-6-94 ......................... 10,000 10,000,000
Merrill Lynch & Co., Inc.,
4.8%, 8-15-94 ......................... 10,000 10,000,000
Mobil Australia Finance Co.,
8.0%, 7-25-94 ......................... 9,200 9,226,215
Total ................................. 46,489,784
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1994
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Notes (Continued)
Public Utilities - Electric - 1.61%
Florida Power Corp.,
8.4%, 12-1-94 ......................... $ 5,000 $ 5,097,766
Total Notes - 19.43% 61,587,550
TOTAL CORPORATE OBLIGATIONS - 64.08% $203,083,659
(Cost: $203,083,659)
MUNICIPAL OBLIGATIONS
California - 2.90%
City of Anaheim, California, Certificates of
Participation (1993 Arena Financing Project),
Adjustable Rate Taxable Securities
(Credit Suisse),
4.375%, 7-5-94 ........................ 9,200 9,200,000
Georgia - 3.15%
Development Authority of Richmond
County (Georgia), Taxable
Industrial Revenue Bonds
(NutraSweet Project), Series
1990 (Union Bank of Switzerland),
5.71%, 6-2-95 ......................... 10,000 10,000,000
Missouri - 0.95%
Missouri Economic Development, Export
and Infrastructure Board, Taxable
Industrial Development Revenue Bonds
(Heilig-Meyers Company Project),
Series 1992 (AmSouth Bank N.A.),
4.55%, 7-6-94 ......................... 3,000 3,000,000
New York - 5.84%
Health Insurance Plan of Greater New York
(Morgan Guaranty Trust Company of New York),
4.5%, 7-6-94 (A) ...................... 18,500 18,500,000
TOTAL MUNICIPAL OBLIGATIONS - 12.84% $ 40,700,000
(Cost: $40,700,000)
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1994
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT OBLIGATIONS
Federal Home Loan Banks,
4.65%, 7-8-94 ......................... $14,000 $ 14,000,000
Federal Home Loan Mortgage Corporation,
4.70%, 9-7-94 ......................... 10,000 10,000,000
Federal National Mortgage Association,
4.65%, 9-20-94 ........................ 9,500 9,500,000
Student Loan Management Association,
4.83%, 7-6-94 ......................... 13,900 13,900,000
TOTAL UNITED STATES GOVERNMENT
OBLIGATIONS - 14.96% $ 47,400,000
(Cost: $47,400,000)
TOTAL INVESTMENT SECURITIES - 99.77% $316,180,983
(Cost: $316,180,983)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.23% 738,657
NET ASSETS - 100.00% $316,919,640
Notes to Schedule of Investments
(A) Security is subject to an irrevocable put option.
Cost of investments owned is the same as that used for Federal income tax
purposes.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
<PAGE>
UNITED CASH MANAGEMENT, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1994
Assets
Investment securities - at value (Note 1) ........ $316,180,983
Cash ............................................ 579,156
Receivables:
Interest ........................................ 2,037,706
Fund shares sold ................................ 1,282,629
Prepaid insurance premium ........................ 26,567
------------
Total assets .................................. 320,107,041
------------
Liabilities
Payable for Fund shares redeemed ................. 2,911,901
Accrued transfer agency and dividend disbursing .. 146,117
Dividends payable ................................ 113,385
Accrued accounting services fee .................. 4,167
Other ............................................ 11,831
------------
Total liabilities ............................. 3,187,401
------------
Total net assets ............................. $316,919,640
============
Net Assets
$0.01 par value capital stock, authorized --
5,000,000,000; shares outstanding -- 316,919,640
Capital stock ................................... $ 3,169,196
Additional paid-in capital ...................... 313,750,444
------------
Net assets applicable to outstanding
units of capital ............................. $316,919,640
============
Net asset value, redemption and offering price
per share ........................................ $1.00
=====
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended JUNE 30, 1994
Investment Income
Interest ......................................... $11,658,916
-----------
Expenses (Note 2):
Transfer agency and dividend disbursing ......... 1,757,449
Investment management fee ....................... 1,372,977
Custodian fees .................................. 57,975
Accounting services fee ......................... 50,000
Audit fees ...................................... 20,500
Legal fees ...................................... 5,133
Other ........................................... 141,128
-----------
Total expenses ................................ 3,405,162
-----------
Net investment income ........................ 8,253,754
-----------
Net increase in net assets resulting
from operations ........................... $ 8,253,754
===========
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended
June 30,
-------------------------
1994 1993
------------- ------------
Decrease in Net Assets
Operations:
Net investment income ..............$ 8,253,754 $ 10,085,867
------------ ------------
Net increase in net assets
resulting from operations ....... 8,253,754 10,085,867
------------ ------------
Dividends to shareholders
from net investment income* ........ (8,253,754) (10,085,867)
------------ ------------
Capital share transactions:
Proceeds from sale of shares
(421,971,836 and 420,866,621
shares, respectively) ............ 421,971,836 420,866,621
Proceeds from reinvestment of
dividends (8,072,255 and
9,862,502 shares, respectively) ... 8,072,255 9,862,502
Payments for shares redeemed
(463,748,538 and 528,231,957
shares, respectively) ............(463,748,538) (528,231,957)
------------ ------------
Net decrease in net assets
resulting from capital
share transactions .............. (33,704,447) (97,502,834)
------------ ------------
Total decrease .................. (33,704,447) (97,502,834)
Net Assets
Beginning of period ................. 350,624,087 448,126,921
------------ ------------
End of period .......................$316,919,640 $350,624,087
============ ============
Undistributed net investment
income ........................... $--- $---
==== ====
*See "Financial Highlights" on page .
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the fiscal year ended June 30,
---------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
Net asset value,
beginning of
period ........... $1.00 $1.00 $1.00 $1.00 $1.00
------- ------- ------- ------- -------
Net investment
income ........... 0.0252 0.0251 0.0434 0.0665 0.0786
Less dividends
declared ......... (0.0252)(0.0251)(0.0434)(0.0665)(0.0786)
------- ------- ------- ------- -------
Net asset value,
end of period .... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total return........ 2.55% 2.57% 4.41% 6.89% 8.18%
Net assets, end of
period (000
omitted) .........$316,920$350,624$448,127$579,944$563,893
Ratio of expenses to
average net
assets ........... 1.04% 1.06% 0.99% 0.95% 0.95%
Ratio of net
investment income
to average net
assets ........... 2.51% 2.56% 4.36% 6.65% 7.86%
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994
NOTE 1 -- Significant Accounting Policies
United Cash Management, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Security valuation -- The Fund invests only in money market securities with
maturities or irrevocable put options within one year. The Fund uses the
amortized cost method of security valuation which is accomplished by
valuing a security at its cost and thereafter assuming a constant
amortization rate to maturity of any discount or premium.
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, if any, are calculated on
the identified cost basis. Interest income is recorded on the accrual
basis.
C. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code.
Accordingly, no provision has been made for Federal income taxes.
D. Dividends to shareholders -- All of the Fund's net income is declared and
recorded by the Fund as dividends on each day to shareholders of record at
the time of the previous determination of net asset value. Dividends are
declared from the total of net investment income, plus or minus realized
gains or losses on portfolio securities. Since the Fund does not expect to
realize any long-term capital gains, it does not expect to pay any capital
gains distributions.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of 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 $10.5
billion of combined net assets at June 30, 1994) at annual rates of .51% of the
first $750 million of combined net assets, .49% on that amount between $750
million and $1.5 billion, .47% between $1.5 billion and $2.25 billion, .45%
between $2.25 billion and $3 billion, .43% between $3 billion and $3.75 billion,
.40% between $3.75 billion and $7.5 billion, .38% between $7.5 billion and $12
billion, and .36% of that amount over $12 billion. The Fund accrues and pays
this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund 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
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund 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 Level
------------------------- -------------------
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
At present, the Fund operates under state expense requirements which limit
the amount of aggregate annual expenses, adjusted for certain excess expenses,
that the Fund may incur during its fiscal year. The Manager will reimburse the
Fund for any expenses in excess of the limitation. No such reimbursement is
required for the period ended June 30, 1994.
The Fund also pays WARSCO a monthly per account charge of $1.75 for each
shareholder account which was in existence at any time during the prior month
and $0.75 for each shareholder check it processed. The Fund also reimburses W&R
and WARSCO for certain out-of-pocket costs.
The Fund paid Directors' fees of $12,587.
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.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United Cash Management, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United Cash Management, Inc. (the
"Fund") at June 30, 1994, the results of its operations for the year then ended
and the changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund'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 June
30, 1994 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
Kansas City, Missouri
July 29, 1994
<PAGE>
REGISTRATION STATEMENT
PART C
OTHER INFORMATION
24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements -- United Cash Management, Inc.
Included in Part B:
-------------------
As of June 30, 1994 and December 31, 1994
Statement of Assets and Liabilities
For the year ended June 30, 1994 and the six months ended December 31,
1994
Statement of Operations
For each of the two years ended June 30, 1994 and the six months ended
December 31, 1994
Statement of Changes in Net Assets
Schedule I -- Investment Securities as of June 30, 1994 and December
31, 1994
Report of Independent Accountants
Included in Part C:
-------------------
Articles of Incorporation, as amended, attached hereto as EX-99.B1-
charter
By-Laws, (refiling by EDGAR) attached hereto as EX-99.B2-cmbylaw
Amendment to By-Laws dated December 6, 1989, (refiling by EDGAR)
attached hereto as EX-99.B2-cmbylam
Amendment to By-Laws dated September 12, 1990, (refiling by EDGAR)
attached hereto as EX-99.B2-cmbylam2
Investment Management Agreement, as amended, attached hereto as EX-
99.B5-cmima
Assignment of Investment Management Agreement, (refiling by EDGAR)
attached hereto as EX99.B5-cmassign
Underwriting Agreement, attached hereto as EX-99.B6-cmua
Custodian Agreement, as amended, (refiling by EDGAR) attached hereto
as EX-99.B8-cmca
Shareholder Servicing Agreement, attached hereto as EX-99.B9-cmssa
Fund Class A Application, attached hereto as EX-99.B9-cmappca
Fund NAV Application, attached hereto as EX-99.B9-cmappnav
Accounting Services Agreement (refiling by EDGAR), attached hereto as
EX-99.B9-cmasa
Consent of Independent Accountants, attached hereto as EX-99.B11-
cmconsnt
Service Plan, attached hereto as EX-99.B15-cmspcb
Financial Data Schedule, attached hereto as EX-27.B17-cmfds
Multiple Class Plan, attached hereto as EX-99.B18-cmmcp
Other schedules prescribed by Regulation S-X are not filed because the
required matter is not present or is insignificant.
<PAGE>
(b) Exhibits:
(1) Articles of Incorporation, as amended, (refiling by EDGAR)
attached hereto
(2) Bylaws, (refiling by EDGAR) attached hereto
Amendment to Bylaws, (refiling by EDGAR) attached hereto
Amendment to Bylaws, (refiling by EDGAR) attached hereto
(3) Not applicable
(4) Article FIFTH, Article SEVENTH and Article EIGHTH of the Articles
of Incorporation of the Registrant, attached hereto; Article I,
Article IV and Article VIII of the Bylaws of the Registrant,
attached hereto
(5) Investment Management Agreement, as amended, attached hereto
Assignment of the Investment Management Agreement, (refiling by
EDGAR) attached hereto
(6) Underwriting Agreement, attached hereto
(7) Not applicable
(8) Custodian Agreement, as amended, attached hereto
(9) Shareholder Servicing Agreement, attached hereto
Fund Class A Application, attached hereto
Fund NAV Application, attached hereto
Accounting Services Agreement, (refiling by EDGAR) attached
hereto
(10) Not applicable
(11) Consent of Independent Accountants, attached hereto
(12) Not applicable
(13) Not applicable
(14) 1. Qualified Retirement Plan and Trust-Defined Contribution
Basic Plan Document filed December 16, 1994 as EX-99.B14-1-
03bpd to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A of United Asset Strategy Fund, Inc.*
2. Qualified Retirement Plan-Summary Plan Description filed
December 16, 1994 as EX-99.B14-2-03spd to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A
of United Asset Strategy Fund, Inc.*
3. Employer Contribution 403(b)-Adoption Agreement filed
December 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-
- ---------------------------------
*Incorporated herein by reference
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.*
(15) Service Plan, attached hereto
(16) Not Applicable
(17) Financial Data Schedule, attached hereto
- ---------------------------------
*Incorporated herein by reference
(18) Multiple Class Plan, attached hereto
25. Persons Controlled by or under common control with Registrant
-------------------------------------------------------------
None
26. Number of Holders of Securities
-------------------------------
Number of Record Holders as of
Title of Class June 30, 1994
-------------- ------------------------------
Capital Stock 64,317
27. Indemnification
---------------
Reference is made to Article SEVENTH paragraph 6(b) through 6(f) of the
Articles of Incorporation, as amended, of Registrant, attached hereto, and
to Article IV of the Underwriting Agreement, attached hereto, each of which
provides 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 a corporation which 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 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. 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. It is also the
principal underwriter to the following investment companies:
United Funds, Inc.
United International Growth Fund, Inc.
- ---------------------------------
*Incorporated herein by reference
United Continental Income Fund, Inc.
United Vanguard Fund, Inc.
United Retirement Shares, Inc.
United Municipal Bond Fund, Inc.
United High Income Fund, Inc.
United Government Securities Fund, Inc.
United New Concepts Fund, Inc.
United Gold & Government Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund II, Inc.
United Asset Strategy Fund, Inc.
TMK/United Funds, Inc.
Waddell & Reed Funds, Inc.
and is depositor of the following unit investment trusts:
United Periodic Investment Plans to acquire shares of United Science
and Energy Fund
United Periodic Investment Plans to acquire shares of United
Accumulative Fund
United Income Investment Programs
United International Growth Investment Programs
United Continental Income Investment Programs
United Vanguard Investment Programs
(b) The information contained in the underwriter's application on form BD,
under the Securities Exchange Act of 1934, is herein incorporated by
reference.
(c) No compensation was paid by the Registrant to any principal
underwriter who is not an affiliated person of the Registrant or any
affiliated person of such affiliated person.
30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act and
rules promulgated thereunder are under the possession of Mr. Robert L.
Hechler and Ms. Sharon K. Pappas, as officers of the Registrant, each of
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 listed in response to Items (b)(9) and
(b)(15) hereof.
32. Not applicable
--------------
(a) Not applicable
(b) Not applicable
(c) Not applicable
(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).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
rule 485(a) of the Securities Act of 19933, and the Registrant 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 7th day of July, 1995.
UNITED CASH MANAGEMENT, 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 July 7, 1995
- ---------------------- ------------------
Ronald K. Richey
/s/Keith A. Tucker* President and Director July 7, 1995
- --------------------- (Principal Executive Officer) ------------------
Keith A. Tucker
/s/Theodore W. Howard* Vice President, Treasurer July 7, 1995
- ---------------------- and Principal Accounting ------------------
Theodore W. Howard Officer
/s/Robert L. Hechler* Vice President and July 7, 1995
- ---------------------- Principal Financial ------------------
Robert L. Hechler Officer
/s/Henry L. Bellmon* Director July 7, 1995
- ---------------------- ------------------
Henry L. Bellmon
/s/Dodds I. Buchanan* Director July 7, 1995
- --------------------- ------------------
Dodds I. Buchanan
/s/Jay B. Dillingham* Director July 7, 1995
- -------------------- ----------------
Jay B. Dillingham
/s/John F. Hayes* Director July 7, 1995
- ------------------- ------------------
John F. Hayes
/s/Glendon E. Johnson Director July 7, 1995
- ------------------- ------------------
Glendon E. Johnson
/s/William T. Morgan* Director July 7, 1995
- ------------------- ------------------
William T. Morgan
/s/Doyle Patterson* Director July 7, 1995
- ------------------- ------------------
Doyle Patterson
/s/Frederick Vogel, III* Director July 7, 1995
- ------------------- ----------------
Frederick Vogel, III
/s/Paul S. Wise* Director July 7, 1995
- ------------------- ------------------
Paul S. Wise
/s/Leslie S. Wright* Director July 7, 1995
- ------------------- ------------------
Leslie S. Wright
*By
Sharon K. Pappas
Attorney-in-Fact
ATTEST:
Amy D. Eisenbeis
Assistant Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That each of the undersigned, UNITED FUNDS,
INC., UNITED INTERNATIONAL GROWTH FUND, INC., UNITED MUNICIPAL BOND FUND, INC.,
UNITED VANGUARD FUND, INC., UNITED HIGH INCOME FUND, INC., UNITED CASH
MANAGEMENT, INC., UNITED NEW CONCEPTS FUND, INC., UNITED GOVERNMENT SECURITIES
FUND, INC., UNITED MUNICIPAL HIGH INCOME FUND, INC., UNITED GOLD & GOVERNMENT
FUND, INC., UNITED HIGH INCOME FUND II, INC., UNITED CONTINENTAL INCOME FUND,
INC., UNITED RETIREMENT SHARES, INC. UNITED ASSET STRATEGY FUND, INC.,
TMK/UNITED FUNDS, INC., WADDELL & REED FUNDS, INC., TORCHMARK INSURED TAX-FREE
FUND, INC. AND TORCHMARK GOVERNMENT SECURITIES FUND, INC. (each hereinafter
called the "Corporation"), and certain directors and officers for the
Corporation, do hereby constitute and appoint KEITH A. TUCKER, ROBERT L.
HECHLER, and SHARON K. PAPPAS, and each of them individually, their true and
lawful attorneys and agents to take any and all action and execute any and all
instruments which said attorneys and agents may deem necessary or advisable to
enable each Corporation to comply with the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended, and any rules, regulations, orders
or other requirements of the United States Securities and Exchange Commission
thereunder, in connection with the registration under the Securities Act of 1933
and/or the Investment Company Act of 1940, as amended, including specifically,
but without limitation of the foregoing, power and authority to sign the names
of each of such directors and officers in his behalf as such director or officer
has indicated below opposite his signature hereto, to any amendment or
supplement to the Registration Statement filed with the Securities and Exchange
Commission under the Securities Act of 1933 and/or the Investment Company Act of
1940, as amended, and to any instruments or documents filed or to be filed as a
part of or in connection with such Registration Statement; and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
Date: September 1, 1994 /s/Keith A. Tucker*
---------------------
Keith A. Tucker, President
/s/Ronald K. Richey* Chairman of the Board September 1, 1994
- -------------------- ---------------
Ronald K. Richey
/s/Keith A. Tucker* President and Director September 1, 1994
- -------------------- (Principal Executive Officer) ---------------
Keith A. Tucker
/s/Theodore W. Howard* Vice President, Treasurer September 1, 1994
- -------------------- and Principal Accounting ---------------
Theodore W. Howard Officer
/s/Robert L. Hechler* Vice President and September 1, 1994
- -------------------- Principal Financial ---------------
Robert L. Hechler Officer
/s/Henry L. Bellmon* Director September 1, 1994
- -------------------- ---------------
Henry L. Bellmon
/s/Dodds I. Buchanan* Director September 1, 1994
- -------------------- ---------------
Dodds I. Buchanan
/s/Jay B. Dillingham* Director September 1, 1994
- -------------------- ---------------
Jay B. Dillingham
/s/John F. Hayes* Director September 1, 1994
- -------------------- ---------------
John F. Hayes
/s/Glendon E. Johnson Director September 1, 1994
- -------------------- ---------------
Glendon E. Johnson
/s/William T. Morgan* Director September 1, 1994
- -------------------- ---------------
William T. Morgan
/s/Doyle Patterson* Director September 1, 1994
- -------------------- ---------------
Doyle Patterson
/s/Frederick Vogel, III* Director September 1, 1994
- -------------------- ---------------
Frederick Vogel, III
/s/Paul S. Wise* Director September 1, 1994
- -------------------- ---------------
Paul S. Wise
/s/Leslie S. Wright* Director September 1, 1994
- -------------------- ---------------
Leslie S. Wright
Attest:
/s/Sharon K. Pappas*
- --------------------
Sharon K. Pappas, Vice President
and Secretary
EX-99.B1-charter
ARTICLES OF INCORPORATION
OF
UNITED CASH MANAGEMENT, INC.
(as amended)
THIS IS TO CERTIFY:
FIRST: THE UNDERSIGNED, Rodney O. McWhinney, whose post office address is
One Crown Center, Kansas City, Missouri 64141, being of full legal age, does
under and by virtue of the General Laws of the State of Maryland authorizing the
formation of corporations, act as incorporator with the intention of forming a
corporation.
SECOND: The name of the corporation is United Cash Management, Inc.
(hereinafter called the "Corporation").
THIRD: The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, carried on and promoted by it, are as
follows:
(1) To hold, invest and reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire, hold for investment or otherwise, sell, assign,
negotiate, transfer, exchange or otherwise dispose of or turn to account or
realize upon, securities (which term "securities" shall for the purposes of
these Articles of Incorporation, without limitation of the generality
thereof, be deemed to include any stocks, shares, bonds, debentures, notes,
mortgages or other obligations, and any certificates, receipts, warrants or
other instruments representing rights to receive, purchase, or subscribe
for the same, or evidencing or representing any other rights or interests
therein, or in any property or assets) created or issued by any issuer
(which term "issuer" shall for the purposes of these Articles of
Incorporation, without limitation of the generality thereof, be deemed to
include any persons, firms, associations, corporations, syndicates,
combinations, organizations, governments, or subdivisions thereof); and to
exercise as owner or holder of any securities, all rights, powers and
privileges in respect thereof; and to do any and all acts and things for
the preservation, protection, improvement and enhancement in value of any
or all such securities.
(2) To issue and sell shares of its own capital stock in such amounts
and on such terms and conditions, for such purposes and for such amount or
kind of consideration (including without limitation thereto, securities)
now or hereafter permitted by the laws of Maryland and by these Articles of
Incorporation, as its Board of Directors may determine.
(3) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its stock of any class or
series, in any manner and to the extent now or hereafter permitted by the
laws of said State and by these Articles of Incorporation.
(4) To conduct its business in all its branches at one or more
offices in Maryland and elsewhere in any part of the world, without
restriction or limit as to extent.
(5) To carry out all or any of the foregoing objects and purposes as
principal or agent, and alone or with associates or, to the extent now or
hereafter permitted by the laws of Maryland, as a member of, or as the
owner or holder of any stock of, or shares of interest in, any issuer, and
in connection therewith to make or enter into such deeds or contracts with
any issuers and to do such acts and things and to exercise such powers, as
a natural person could lawfully make, enter into, do or exercise.
(6) To do any and all such further acts and things and to exercise
any and all such further powers as may be necessary, incidental, relative,
conducive, appropriate or desirable for the accomplishment, carrying out or
attainment of all or any of the foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise expressly
provided, be in no way limited or restricted by reference to, or inference from
the terms of any other clause of this or any other Article of these Articles of
Incorporation, and shall each be regarded as independent, and construed as
powers as well as objects and purposes, and the enumeration of specific
purposes, objects and powers shall not be construed to limit or restrict in any
manner the meaning of general terms or the general powers of the Corporation now
or hereafter conferred by the laws of the State of Maryland, nor shall the
expression of one thing be deemed to exclude another, though it be of like
nature, not expressed; provided, however, that the Corporation shall not have
power to carry on within the State of Maryland any business whatsoever the
carrying on of which would preclude it from being classified as an ordinary
business corporation under the laws of said State; nor shall it carry on any
business, or exercise any powers, in any other state, territory, district or
country except to the extent that the same may lawfully be carried on or
exercised under the laws thereof.
FOURTH: The post office address of the place at which the principal office
of the Corporation in the State of Maryland will be located is First Maryland
Building, 25 South Charles Street, Baltimore, Maryland 21201.
The Corporation's resident agent is The Corporation Trust Incorporated,
whose post office address is First Maryland Building, 25 South Charles Street,
Baltimore, Maryland 21201. Said resident agent is a corporation of the State of
Maryland.
FIFTH: (1) The total number of shares of stock of all classes (which
term, as used herein shall include a class designated as a "Series" as set forth
below) which the Corporation has authority to issue is 5,000,000,000 shares.
The number of the shares of stock of each class is such number, if any, of
shares of unissued stock as is classified or reclassified into such class by the
Corporation's Board of Directors pursuant to the authority contained in Section
2-105 of the Maryland General Corporation Law (or any successor provision). The
par value of the shares of stock of each class is $.01 per share. The aggregate
par value of all the shares of all classes is $50,000,000. A description of
each class, including any preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemptions is set forth below. Unless and until the
Corporation's Board of Directors classifies unissued stock into one or more
classes which are in addition to a single outstanding class, or after the Board
has reclassified issued stock of one or more classes into a single class, all
shares of stock of the Corporation shall be of a single class designated as
"Capital Stock".
The Board of Directors of the Corporation may classify unissued shares into one
or more additional classes which shall, together with the issued shares of stock
of the Corporation, have such designations as the Board shall determine
(provided that such designation shall include the word "Class"), and which shall
be treated for all purposes other than as to dividends as if all shares were
shares of one class. The dividends payable to the holders of each such class
shall, subject to any applicable rule, regulation or order of the Securities and
Exchange Commission or other applicable law or regulation, be determined by the
Board and need not be individually declared but may be declared and paid in
accordance with a formula adopted by the Board. The Board of Directors of the
Corporation may in the alternative classify unissued shares into one or more
additional classes, which shall, together with the issued shares of stock of the
Corporation, have such designations as the Board may determine (provided that
such designation shall include the word "Series"), and shall, subject to any
applicable rule, regulation or order of the Securities and Exchange Commission
or other applicable law or regulation, have the following characteristics.
(a) All consideration received by the Corporation for the issue or
sale of shares of stock of each such class, together with all income,
earnings, profits, and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation thereof, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to the class of shares of stock with
respect to which such assets, payments, or funds were received by the
Corporation for all purposes, subject only to the rights of creditors, and
shall be so handled upon the books of account of the Corporation. Such
assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof, any asset
derived from any reinvestment of such proceeds, in whatever form the same
may be, are herein referred to as "assets belonging to" such class.
(b) Dividends or distributions on shares of any such class of stock,
whether payable in stock or cash, shall be paid only out of earnings,
surplus or other assets belonging to such class and need not be
individually declared but may be declared and paid in accordance with a
formula adopted by the Board of Directors of the Corporation.
(c) In the event of the liquidation or dissolution of the
Corporation, shareholders of each such class shall be entitled to receive,
as a class, out of the assets of the Corporation available for distribution
to shareholders, but other than general assets not belonging to any
particular class of stock, the assets belonging to such class; and the
assets so distributable to the shareholders of any such class shall be
distributed among such shareholders in proportion to the number of shares
of such class held by them and recorded on the books of the Corporation.
In the event that there are any general assets not belonging to any
particular class of stock and available for distribution, such distribution
shall be made to the holders of stock of all classes in proportion to the
asset value of the respective classes.
(d) The assets belonging to any such class of stock shall be charged
with the liabilities in respect to such class and shall also be charged
with its share of the general liabilities of the Corporation, in proportion
to the asset value of the respective classes. The determination of the
Board of Directors shall be conclusive as to the amount of liabilities,
including accrued expenses and reserves, and as to the allocation of the
same as to a given class, and as to whether the same, or general assets of
the Corporation, are allocable to one or more classes. The liabilities so
allocated to a class are herein referred to as "liabilities belonging to"
such class.
(e) At all meetings of stockholders each stockholder of each share of
stock of each such class of the Corporation shall be entitled to one vote
for each share of stock irrespective of the class standing in his name on
the books of the Corporation, except that where a vote of the holders of
the shares of stock of any class, or of more than one class, voting by
class, is required by the Investment Company Act of 1940 and/or Maryland
law as to any proposal, only the holders of such class or classes, voting
by class, shall be entitled to vote upon such proposal and the holders of
any other class or classes shall not be entitled to vote thereon. Any
fractional share, if any such fractional shares are outstanding, shall
carry proportionately all the rights of a whole share, including the right
to vote and the right to receive dividends.
(f) The provisions of paragraph (5) of this Article FIFTH relating to
voting shall apply when the Corporation has only one class of shares
outstanding or when the Corporation has more than one class of shares
outstanding but which differ only as to their dividend rights.
(g) When the Corporation has more than one class of shares
outstanding having separate assets and liabilities: (i) the redemption
rights provided to the holders of the Corporation's shares shall be deemed
to apply only to the assets belonging to the class of stock in question;
and (ii) the net asset value per share computation as provided for in
Article SEVENTH shall be applied as if each such class of shares were the
Corporation as referred to in such computation, but with its assets limited
to the assets belonging to such class and its liabilities limited to the
liabilities belonging to such class.
(2) At all meetings of stockholders each stockholder of the Corporation
shall be entitled to one vote for each share of stock standing in his name on
the books of the Corporation. Any fractional share, if any such fractional
shares are outstanding, shall carry proportionately all the rights of a whole
share, including the right to vote and the right to receive dividends.
(3) Each holder of the capital stock of the Corporation, upon proper
written request (including signature guarantees, if required by the Board of
Directors) to the Corporation, accompanied, when stock certificates representing
such shares are outstanding, by surrender of the appropriate stock certificate
or certificates in proper form for transfer, or any such other form as the Board
of Directors may provide, shall be entitled to require the Corporation to redeem
all or any part of the capital stock standing in the name of such holder on the
books of the Corporation, at the net asset value of such shares. The method of
computing such net asset value, the time as of which such net asset value shall
be computed and the time within which the Corporation shall make payment
therefore shall be determined as hereinafter provided in Article SEVENTH of
these Articles of Incorporation. Notwithstanding the foregoing, the right of
the holders of the capital stock of the Corporation to require the Corporation
to redeem such capital stock shall be suspended when such suspension is required
under the 1940 Act (which term the "1940 Act" shall for the purposes of these
Articles of Incorporation mean the Investment Company Act of 1940 as from time
to time amended and any rule, regulation or order thereunder) and may be
suspended when such suspension is permitted under the 1940 Act.
(4) All shares of the capital stock of the Corporation now or hereafter
authorized shall be subject to redemption and redeemable, in the sense used in
the Maryland General Corporation Law, at the redemption price for any such
shares, determined in the manner set out in these Articles of Incorporation. In
the absence of any specification as to the purposes for which shares are
redeemed or purchased by it, all shares so redeemed or purchased shall be deemed
to be acquired for retirement in the sense contemplated by the laws of the state
of Maryland and the number of the authorized shares of the stock of any class of
the Corporation shall not be reduced by the number of any shares of such class
redeemed or purchased by it.
(5) Notwithstanding any provision of Maryland law requiring any action to
be taken or authorized by the affirmative vote of the holders of a majority or
other designated proportion of the shares, or to be otherwise taken or
authorized by a vote of the stockholders, such action shall be effective and
valid if taken or authorized by the affirmative vote of the holders of a
majority of the total number of shares outstanding and entitled to vote thereon
pursuant to the provisions of these Articles of Incorporation.
(6) No holder of stock of the Corporation shall, as such holder, have any
right to purchase or subscribe for any shares of the capital stock of the
Corporation which it may issue or sell (whether out of the number of shares
authorized by these Articles of Incorporation, or out of any shares of the stock
of the Corporation acquired by it after the issue thereof, or otherwise) other
than such right, if any, as the Board of Directors, in its discretion, may
determine.
(7) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of these Articles of Incorporation.
SIXTH: The number of Directors of the Corporation shall be eleven and the
names of those who shall act as such until the first annual meeting or until
their successors are duly chosen and qualified are as follows:
Benjamin C. Korschot John A. Kroh
Julius Jensen III Sabino Marinella
Wallace F. Bennett Doyle Patterson
Dodds I. Buchanan Mitchel J. Valicenti
Jay B. Dillingham Frederick Vogel III
Glendon E. Johnson
However, the By-Laws of the Corporation may fix the number of Directors at
a number greater or less than that named in these Articles of Incorporation and
may authorize the Board of Directors, by the vote of a majority of the entire
Board of Directors, to increase or decrease the number of Directors fixed by
these Articles of Incorporation or by the By-Laws within a limit specified in
the By-Laws, provided that in no case shall the number of Directors be less than
three, and to fill the vacancies created by any such increase in the number of
Directors. Unless otherwise provided by the By-Laws of the Corporation, the
Directors of the Corporation need not be stockholders therein.
SEVENTH: The following provisions are hereby adopted for the purpose of
defining and regulating the powers of the Corporation and of the Directors and
stockholders.
(1) The holders of shares of the Corporation shall have only such
rights to inspect the records, documents, accounts and books of the
Corporation as are provided by Maryland law, subject to reasonable
regulations of the Board of Directors, not contrary to Maryland law, as to
whether and to what extent, and at which times and places, and under what
conditions and regulations such rights shall be exercised.
(2) Any Director or any officer elected or appointed by the Board of
Directors or by any committee of said Board or by the stockholders or
otherwise, may be removed at any time with or without cause, in such lawful
manner as may be provided in the By-Laws of the Corporation.
(3) If the By-Laws so provide, the Board of Directors of the
Corporation shall have power to hold their meetings, to have an office or
offices and, subject to the provisions of the laws of Maryland, to keep the
books of the Corporation outside of said State at such places as may from
time to time be designated by them.
(4) In addition to the powers and authority herein by statute
expressly conferred upon them, the Board of Directors may exercise all such
powers and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the express provisions of the laws
of Maryland, of these Articles of Incorporation and of the By-Laws of the
Corporation.
(5) Shares of stock in other corporations shall be voted by the
President or a Vice President, or such officer or officers of the
Corporation or such other person or persons as the Board of Directors shall
designate for the purpose, or by a proxy or proxies thereunto duly
authorized by the Board of Directors, except as otherwise ordered by vote
of the holders of a majority of the shares of the capital stock of the
Corporation outstanding and entitled to vote in respect thereto.
(6) (a) Subject to the provisions of the 1940 Act, any director,
officer or employee individually, or any partnership of which any director,
officer or employee may be a member, or any corporation or association of
which any director, officer or employee may be an officer, director,
trustee, employee or stockholder, may be a party to, or may be pecuniarily
or otherwise interested in, any contract or transaction of the Corporation,
and in the absence of fraud no contract or other transaction shall be
thereby affected or invalidated; provided that in case a director, or a
partnership, corporation or association of which a director is a member,
officer, director, trustee, employee or stockholder is so interested, such
fact shall be disclosed or shall have been known to the Board of Directors,
or a majority thereof; and any director of the Corporation who is so
interested, or who is also a director, officer, trustee, employee or
stockholder of such other corporation or association or a member of such
partnership which is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of the
Corporation which shall authorize any such contract or transaction, and may
vote thereat to authorize any such contract or transaction, with like force
and effect as if he were not such director, officer, trustee, employee or
stockholder of such other corporation or association or not so interested
or a member of a partnership so interested.
(b) Each director and officer (and his heirs, executors and
administrators) shall be indemnified by the Corporation against reasonable
costs and expenses incurred by him in connection with any action, suit or
proceeding to which he is made a party by reason of his being or having
been a director or officer of the Corporation, except in relation to any
action, suit or proceeding in which he has been adjudged liable because of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office. In the absence of an
adjudication which expressly absolves the director or officer of liability
to the Corporation or its stockholders for willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office, or in the event of a settlement, each director and
officer (and his heirs, executors and administrators) shall be indemnified
by the Corporation against payments made, including reasonable costs and
expenses, provided that such indemnity shall be conditioned upon a written
opinion of independent counsel (which may be regular counsel to the
Corporation) that the director or officer has no liability by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office. The indemnity provided
herein shall, in the event of the settlement of any such action, suit or
proceeding, not exceed the costs and expenses (including attorneys' fees)
which would reasonably have been incurred if such action, suit or
proceeding had been litigated to a final conclusion. Such a determination
by independent counsel and the payment of amounts by the Corporation on the
basis thereof shall not prevent a stockholder from challenging such
indemnification by appropriate legal proceeding on the grounds that the
officer or director was liable because of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office. The foregoing rights and indemnifications shall not
be exclusive of any other right to which the officers and directors may be
entitled according to law.
(c) Specifically, but without limitation of the foregoing, the
Corporation may enter into a management or investment advisory contract or
underwriting contract and other contracts with, and may otherwise do
business with any manager or investment adviser for the Corporation and/or
principal underwriter of the Corporation or any subsidiary or affiliate of
any such manager or investment adviser and/or principal underwriter and may
permit any such firm or corporation to enter into any contracts or other
arrangements with any other firm or corporation relating to the Corporation
notwithstanding that the Board of Directors of the Corporation may be
composed in part of partners, directors, officers or employees of any such
firm or corporation, and officers of the Corporation may have been or may
be or become partners, directors, officers or employees of any such firm or
corporation, and it the absence of fraud the Corporation and any such firm
or corporation may deal freely with each other, and no such contract or
transaction between the Corporation and any such firm or corporation shall
be invalidated or in any wise affected thereby, nor shall any director or
officer of the Corporation be liable to the Corporation or to any
stockholder or creditor thereof or to any other persons for any loss
incurred by it or him solely because of the existence of any such contract
or transaction; provided that nothing herein shall protect any director or
officer of the Corporation against any liability to the Corporation or to
its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
(c) As used in this subparagraph (c) of this paragraph (7) of this
Article SEVENTH, the following terms shall have the meanings set forth
below:
(i) the term "indemnitee" shall mean any present or former director,
officer or employee of the Corporation (which term as used in this
paragraph (7) shall include a "Corporation" as defined in Section 2-
418(A)(2) of the Maryland General Corporation Law) and any person who while
a director, officer or employee of the corporation is or was serving at the
request of the Corporation as a director, officer, partner, trustee or
employee or agent of another Corporation, partnership, joint venture,
trust, other enterprise or employee benefit plan, any present or former
investment adviser of the Corporation and the heirs, executors,
administrators and successors of any of the foregoing; however, whenever
conduct by an indemnitee is referred to, the conduct shall be that of the
original indemnitee rather than that of the heir, executor, administrator
or successor;
(ii) the term "covered proceeding" shall mean any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which an indemnitee is or was a party
or is threatened to be made a party by reason of the fact or facts under
which he is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of the office in question and, in the case of a director or
former director of the Corporation, failure to meet the standard of conduct
set forth in Section
2-418(B)(1) of the Maryland General Corporation Law;
(iv) the term "covered expenses" shall mean judgments, penalties,
fines, settlements and reasonable expenses (including attorneys' fees)
actually incurred by an indemnitee in connection with a covered proceeding;
and
(v) the term "adjudication of liability" shall mean, as to any
covered proceeding and as to any indemnitee, an adverse determination as to
the indemnitee whether by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent.
(c) The Corporation shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an adjudication of
liability against such indemnitee expressly based on a finding of disabling
conduct.
(d) Except as set forth in (2) above or except as limited in Section 2-
418(B) or 2-418(C) of the Maryland General Corporation Law, the Corporation
shall indemnify any indemnitee for covered expenses in any covered proceeding,
whether or not there is an adjudication of liability as to such indemnitee if a
determination has been made that indemnification is permissible since the
indemnitee was not liable by reason of disabling conduct by (i) a final decision
on the merits of the court or other body before which the covered proceeding was
brought; or (ii) in the absence of such decision, a reasonable determination,
based on a review of the facts, by either (a) the vote of a majority of a quorum
of directors who are neither "interested persons," as defined in the 1940 Act
nor parties to the covered proceeding or (b) any independent legal counsel in a
written opinion, such legal counsel to be selected in the manner set forth in
Section 2-418(E)(II) of the Maryland General Corporation Law; in voting on such
matter, or in giving such opinion, such directors or counsel may consider that
the dismissal of a covered proceeding against an indemnitee for insufficiency of
evidence of any disabling conduct with which the indemnitee has been charged
would provide reasonable assurance that the indemnitee was not liable by reason
of disabling conduct. In the event such determination is made by legal counsel,
authorization of indemnification and determination as to reasonableness of
expenses shall be made as provided in Section 2-418(E) of the Maryland General
Corporation Law.
(e) Covered expenses incurred by an indemnitee in connection with a
covered proceeding shall be advanced by the Corporation to an indemnitee prior
to the final disposition of a covered proceeding upon the request of the
indemnitee for which such advance, the written affirmation required by Section
2-418(F)(1)(I) of the Maryland General Corporation Law and the written
undertaking by or on behalf of the indemnitee to repay the advance unless it is
ultimately determined that the indemnitee is entitled to indemnification
hereunder, but only if one or more of the following is the case; (i) the
indemnitee shall provide security for such undertaking; (ii) the Corporation
shall be insured against losses arising out of any lawful advances; or (iii)
there shall have been a determination, based on a review of the readily
available facts (as opposed to a full trial-type inquiry) that there is reason
to believe that the indemnitee ultimately will be found entitled to
indemnification and that such facts would not preclude indemnification under
Section 2-418 of the Maryland General Corporation Law by either independent
legal counsel (selected as set forth in (3) above) in a written opinion or by
the vote of a majority of a quorum of directors who are neither interested
persons as defined in the 1940 Act nor parties to the covered proceeding. In
the event such determination is made by legal counsel, authorization of the
advance and determination of reasonableness of expenses shall be made as
provided in Section 2-418(E) of the Maryland General Corporation Law.
(f) Nothing herein shall be deemed to affect the right of the Corporation
and/or any indemnitee to acquire and pay for any insurance covering any or all
indemnitees to the extent permitted by the 1940 Act or to affect any other
indemnification rights to which any indemnitee may be entitled to the extent
permitted by the 1940 Act.
(7) The computation of net asset value of each share of capital stock, as
in these Articles of Incorporation referred to, shall be determined as provided
in the 1940 Act, and, except as so provided shall be computed in accordance with
the following rules:
(a) The net asset value of each share of stock of the Corporation
tendered to the Corporation for redemption shall be determined as of the
close of business on the New York Stock Exchange next succeeding the tender
of such share;
(b) The net asset value of each share of stock of the Corporation for
the purpose of the issue of such share shall be determined as of the close
of business on the New York Stock Exchange next succeeding the receipt of
an order to purchase such share;
(c) The net asset value of each share of stock of the Corporation, as
of the close of business on the New York Stock Exchange on any day, shall
be the quotient obtained by dividing the value, as at such close, of the
net assets of the Corporation (i.e., the value of the assets of the
Corporation less the liabilities of the Corporation exclusive of the par
value of its shares and surplus) by the total number of shares of stock of
the Corporation outstanding at such close. The assets and liabilities of
the Corporation shall be determined in accordance with generally accepted
accounting principles; provided, however, that in determining the
liabilities, there shall be included such reserves for taxes or contingent
liabilities as may be authorized or approved by the Board of Directors, and
provided further that in determining the value of the assets of the
Corporation for the purpose of obtaining the net asset value, each security
listed on the New York Stock Exchange shall be valued on the basis of the
closing sale thereof on the New York Stock Exchange on the business day as
of which such value is being determined; if there be no sale on such day,
then the security shall be valued on the basis of the mean between closing
bid and asked prices on such day; if no bid and asked prices are quoted for
such day, then the security shall be valued by such method as the Board of
Directors shall deem in good faith to reflect its fair market value;
securities not listed on the New York Stock Exchange shall be valued in
like manner on the basis of quotations on any other stock exchange which
the Board of Directors may from time to time approve for that purpose;
readily marketable securities traded in the over-the-counter market shall
be valued at the mean between their bid and asked prices, or, if the Board
of Directors shall so determine, at their bid prices; and all other
securities and other assets of the Corporation and all securities as to
which the Corporation might be considered an "underwriter" (as that term is
used in the Securities Act of 1933), whether or not such securities are
listed or traded in the over-the-counter market, shall be valued by such
method as they shall deem in good faith to reflect their fair market value.
In connection with the accrual of any fee or refund payable to or by an
investment adviser of the Corporation, the amount of which accrual is not
definitely determinable as of any time at which the net asset value of each
share of the capital stock of the Corporation is being determined due to
the contingent nature of such fee or refund, the Board of Directors is
authorized to establish from time to time formulae for such accrual, on the
basis of the contingencies in question to the date of such determination,
or on such other basis as the Board of Directors may establish.
For the purposes hereof:
(A) Shares of stock to be issued shall be deemed to be
outstanding as of the time of the determination of the net asset value
per share applicable to such issuance and the net price thereof shall
be deemed to be an asset of the Corporation.
(B) Shares of stock to be redeemed by the Corporation shall be
deemed to be outstanding until the time of the determination of the
net asset value applicable to such redemption and thereupon and until
paid the redemption price thereof shall be deemed to be a liability of
the Corporation.
(d) The net asset value of each share of capital stock of the
Corporation, as of any time other than the close of business on the New
York Stock Exchange on any day, may be determined by applying to the net
asset value as of the close of business on that Exchange on the preceding
business day, computed as provided in paragraph 7(c) of this Article
SEVENTH, such adjustments as are authorized by or pursuant to the direction
of the Board of Directors and designed reasonably to reflect any material
changes in the market value of securities and other assets of the
Corporation and any other material changes in the assets or liabilities of
the Corporation and in the number of its outstanding shares which shall
have taken place since the close of business on such preceding business
day.
(e) In addition to the foregoing, the Board of Directors is
empowered, in its absolute discretion, to establish other bases or times,
or both, for determining the net asset value of each share of stock of the
Corporation in accordance with the 1940 Act and to authorize the voluntary
purchase by the Corporation, either directly or through an agent, of shares
of capital stock of the Corporation upon such terms and conditions and for
such consideration as the Board of Directors shall deem advisable in
accordance with the 1940 Act. Without limiting the generality of the
foregoing, the Board of Directors may authorize the payment of dividends on
each day, the amounts of which are designed to reflect all income and
expenses and all realized and unrealized capital gains and losses, to the
end that the net asset value per share remains fixed, unless and until the
Board of Directors elects to change such dividend policy.
(f) Payment of the net asset value of shares of capital stock of the
Corporation properly surrendered to it for redemption shall be made by the
Corporation within seven days after tender of such stock to the Corporation
for such purpose plus any period of time during which the right of the
holders of the shares of capital stock of the Corporation to require the
Corporation to redeem such capital stock has been suspended. Any such
payment may be made in portfolio securities of the Corporation and/or in
cash, as the Board of Directors shall deem advisable, and no shareholder
shall have a right, other than as determined by the Board of Directors, to
have his shares redeemed in kind.
(g) The Board of Directors is empowered to cause the redemption of
the shares held in any account if the aggregate net asset value of such
shares (taken at cost or value, as determined by the Board) is less than
$500, or such lesser amount as the Board may fix, upon such notice to the
shareholders in question, with such permission to increase the investment
in question and upon such other terms and conditions as may be fixed by the
Board of Directors in accordance with the 1940 Act.
(h) In the event that any person advances the organizational expenses
of the Corporation, such advances shall become an obligation of the
Corporation subject to such terms and conditions as may be fixed by, and on
a date fixed by, or determined in accordance with criteria fixed by the
Board of Directors, to be amortized over a period or periods to be fixed by
the Board.
(i) Whenever any action is taken under this paragraph (7) of this
Article SEVENTH of these Articles of Incorporation under any authorization
to take action which is permitted by the 1940 Act, such action shall be
deemed to have been properly taken if such action is in accordance with the
construction of the 1940 Act then in effect as expressed in "no action"
letters of the staff of the Securities and Exchange Commission or any
release, rule, regulation or order under the 1940 Act or any decision of a
court of competent jurisdiction notwithstanding that any of the foregoing
shall later be found to be invalid or otherwise reversed or modified by any
of the foregoing.
(j) Any action which may be taken by the Board of Directors of the
Corporation under this paragraph (7) of this Article SEVENTH of these
Articles of Incorporation may be taken by the description thereof in the
then effective prospectus relating to the Corporation's shares under the
Securities Act of 1933 rather than by formal resolution of the Board.
(k) Whenever under this paragraph (7) of this Article SEVENTH of
these Articles of Incorporation, the Board of Directors of the Corporation
is permitted or required to place a value on assets of the Corporation,
such action may be delegated by the Board, and/or determined in accordance
with a formula determined by the Board, to the extent permitted by the 1940
Act.
EIGHTH: From time to time any of the provisions of these Articles of
Incorporation may be amended, altered or repealed upon the vote of the holders
of a majority of the shares of capital stock of the Corporation outstanding and
entitled to vote, and other provisions which might under the statutes of the
State of Maryland at the time in force be lawfully contained in articles of
incorporation, may be added or inserted upon such a vote and all rights at any
time conferred upon the stockholders of the Corporation by these Articles of
Incorporation are granted subject to the provisions of this Article EIGHTH.
The term "these Articles of Incorporation" as used herein and in the By-
Laws of the Corporation shall be deemed to mean these Articles of Incorporation
as from time to time amended and restated.
IN WITNESS WHEREOF, the undersigned incorporator of United Cash Management,
Inc., who executed the foregoing Articles of Incorporation hereby acknowledges
the same to be his act and further acknowledges that, to the best of his
knowledge, information and belief the matters and facts set forth therein are
true in all material respects under the penalties of perjury.
Dated the 5th day of February, 1979.
/s/Rodney O. McWhinney
Rodney O. McWhinney
EX-99.B2-cmbylaw
UNITED CASH MANAGEMENT, 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 in Kansas City, Missouri, 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 15th day of May 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.
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 sixty days and not less than ten days preceding the date of
any meeting of stockholders, and not exceeding sixty 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
shall in no case be less than two Directors. If at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
The act of the majority of the Directors present at any meeting at which there
is a quorum shall be the act of the Directors, except as may be otherwise
specifically provided by statute, by the Articles of Incorporation or by these
By-Laws.
Section 7. Executive Committee. The Board of Directors may, by the
affirmative vote of a majority of the entire Board, elect from the Directors an
Executive Committee to consist of such number of Directors as the Board may from
time to time determine. The Board of Directors by such affirmative vote shall
have power at any time to change the members of such Committee and may fill
vacancies in the Committee by election from the Directors. When the Board of
Directors is not in session, the Executive Committee shall have and may exercise
any or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation (including the power to authorize the
seal of the Corporation to be affixed to all papers which may require it) except
as provided by law and except the power to increase or decrease the size of, or
fill vacancies on the Board. The Executive Committee may fix its own rules of
procedure, and may meet, when and as provided by such rules or by resolution of
the Board of Directors, but in every case the presence of a majority shall be
necessary to constitute a quorum. In the absence of any member of the Executive
Committee the members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
the place of such absent member.
Section 8. Other Committees. The Board of Directors, by the affirmative
vote of a majority of the entire Board; may appoint other committees which shall
in each case consist of such number of members (not less than two) and shall
have and may exercise such powers as the Board may determine in the resolution
appointing them. A majority of all members of any such committee may determine
its action, and fix the time and place of its meetings, unless the Board of
Directors shall otherwise provide. The Board of Directors shall have power at
any time to change the members and powers of any such committee, to fill
vacancies, and to discharge any such committee.
Section 9. Informal Action by Directors and Committees. Any action
required or permitted to be taken at any meeting of the Board of Directors or
any committee thereof may be taken without a meeting, if a written consent to
such action is signed by all members of the Board, or of such committee, as the
case may be.
Section 10. Compensation of Directors. No Director shall receive any
stated salary or fees from the Corporation for his services as such Director if
such Director is, otherwise than by reason of being such Director, affiliated
(as such term is defined in the Investment Company Act of 1940) with the
Corporation or with any investment adviser of the Corporation. Except as
provided in the preceding sentence, Directors shall be entitled to receive such
compensation from the Corporation for their services as may from time to time be
voted by the Board of Directors.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers of the Corporation
shall be chosen by the Board of Directors as soon as may be practicable after
the annual meeting of the stockholders. These may include a Chairman of the
Board of Directors, and shall include a President, one or more Vice Presidents
(the number thereof to be determined by the Board of Directors), a Secretary and
a Treasurer. The Chairman of the Board of Directors, if any, and the President
shall be selected from among the Directors. The Board of Directors may also in
its discretion appoint Assistant Secretaries, Assistant Treasurers, and other
officers, 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.B2-cmbylam
AMENDMENT TO BYLAWS
RESOLVED, That Section 2 of ARTICLE I of the Bylaws of each of the Funds in
the United Group (except United Retirement Shares, Inc.) and TMK/United
Funds, Inc. be amended to read as follows:
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 dated 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 election
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;
and further,
RESOLVED, That Section 5 of ARTICLE I of the Bylaws of each of the Funds in
the United Group (except United Retirement Shares, Inc.) and TMK/United
Funds, Inc. be amended to read as follows:
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.
I certify that I am Secretary of each of the following Corporations, and as
such officer, have custody of the minute books of the Corporations, and that the
foregoing resolutions are true and correct resolutions duly passed by the Board
of Directors of each of the following Corporations at the meeting held on
December 6, 1989.
United Funds, Inc.
United Vanguard Fund, Inc.
United Cash Management, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United New Concepts Fund, Inc.
United Municipal Bond Fund, Inc.
United Gold & Government Fund, Inc.
United Continental Income Fund, Inc.
United International Growth Fund, Inc.
United Municipal High Income Fund, Inc.
United Government Securities Fund, Inc.
TMK/United Funds, Inc.
/s/Rodney O. McWhinney
Rodney O. McWhinney, Secretary
Dated this 6th day of December, 1989.
EX-99.B2-cmbylam2
AMENDMENT TO BYLAWS
RESOLVED, That Section 1 of ARTICLE I of the Bylaws of United High Income Fund,
Inc., United International Growth Fund, Inc., United Continental Income Fund,
Inc., United Cash Management, Inc., United Vanguard Fund, Inc., United Municipal
Bond Fund, Inc. and United Funds, Inc. be amended to read as follows:
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.
I certify that I am Secretary of each of the following Corporations, and as
such officer have custody of the minute books of the Corporations, and that the
foregoing resolution is a true and correct resolution duly passed by the Board
of Directors of each of the following Corporations at the meeting held on
September 12, 1990.
United High Income Fund, Inc.
United International Growth Fund, Inc.
United Continental Income Fund, Inc.
United Cash Management, Inc.
United Vanguard Fund, Inc.
United Municipal Bond Fund, Inc.
United Funds, Inc.
Sharon K. Pappas, Secretary
Dated this 12th day of September, 1990.
EX-99.B5-cmima
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 1st day of August, 1990, by and between UNITED CASH
MANAGEMENT, INC. (hereinafter called "United"), and WADDELL & REED, INC.
WITNESSETH:
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
I. In General
Waddell & Reed, Inc., agrees to act as investment adviser to United with
respect to the investment of its assets and in general to supervise the
investments of United, subject at all times to the direction and control of the
Board of Directors of United, all as more fully set forth herein.
II. Duties of Waddell & Reed, Inc., with respect to investment of assets of
United
A. Waddell & Reed Inc., shall regularly provide investment
advice to United and shall, subject to the succeeding provisions of this
section, continuously supervise the investment and reinvestment of cash,
securities or other property comprising the assets of the investment portfolios
of United; and in furtherance thereof, Waddell & Reed, Inc., shall:
1. obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or one or more of the
portfolios of United, and whether concerning the individual companies whose
securities are included in United's portfolios or the industries in which they
engage, or with respect to securities which Waddell & Reed, Inc., considers
desirable for inclusion in United's portfolios;
2. furnish continuously an investment program for each of the portfolios
of United;
3. determine what securities shall be purchased or sold by United;
4. take, on behalf of United, all actions which appear to Waddell & Reed,
Inc., necessary to carry into effect such investment programs and supervisory
functions as aforesaid, including the placing of purchase and sale orders.
B. Waddell & Reed, Inc., shall make appropriate and regular reports to the
Board of Directors of United on the actions it takes pursuant to Section II.A.
above. Any investment programs furnished by Waddell & Reed, Inc., under this
section, or any supervisory function taken hereunder by Waddell & Reed, Inc.,
shall at all times conform to and be in accordance with any requirements imposed
by:
1. the provisions of the Investment Company Act of 1940 and any rules or
regulations in force thereunder;
2. any other applicable provision of law;
3. the provisions of the Articles of Incorporation of United as amended
from time to time;
4. the provisions of the Bylaws of United as amended from time to time;
5. the terms of the registration statements of United, as amended from
time to time, under the Securities Act of 1933 and the Investment Company Act of
1940.
C. Any investment programs furnished by Waddell & Reed, Inc., under this
section or any supervisory functions taken hereunder by Waddell & Reed, Inc.,
shall at all times be subject to any directions of the Board of Directors of
United, its Executive Committee, or any committee or officer of United acting
pursuant to authority given by the Board of Directors.
III. Allocation of Expenses
The expenses of United and the expenses of Waddell & Reed, Inc., in
performing its functions under this Agreement shall be divided into two classes,
to wit:
(i) those expenses which will be paid in full by Waddell & Reed, Inc., as
set forth in subparagraph "A" hereof, and (ii) those expenses which will be paid
in full by United, as set forth in subparagraph "B" hereof.
A. With respect to the duties of Waddell & Reed, Inc., under Section II
above, it shall pay in full, except as to the brokerage and research services
acquired through the allocation of commissions as provided in Section IV
hereinafter, for (a) the salaries and employment benefits of all employees of
Waddell & Reed, Inc. who are engaged in providing these advisory services; (b)
adequate office space and suitable office equipment for such employees; and (c)
all telephone and communications costs relating to such functions. In addition,
Waddell & Reed, Inc., shall pay the fees and expenses of all directors of United
who are employees of Waddell & Reed, Inc., or an affiliated corporation and the
salaries and employment benefits of all officers of United who are affiliated
persons of Waddell & Reed, Inc.
B. United shall pay in full for all of its expenses which are not listed
above (other than those assumed by Waddell & Reed, Inc., or its affiliates in
its capacity as Accounting Services Agent for United), including (a) the costs
of preparing and printing prospectuses and reports to shareholders of United
including mailing costs; (b) the costs of printing all proxy statements and all
other costs and expenses of meetings of shareholders of United; (c) interest,
taxes, brokerage commission and premiums on fidelity and other insurance; (d)
audit fees and expenses of independent accountants and legal fees and expenses
of attorneys, but not of attorneys who are employees of Waddell & Reed, Inc.;
(e) fees and expenses of its directors; (f) custodian fees and expenses; (g)
fees payable by United under the Securities Act of 1933, the Investment Company
Act of 1940, and the securities or "Blue-Sky" laws of any jurisdiction; (h) fees
and assessments of the Investment Company Institute or any successor
organization; (i) such non recurring or extraordinary expenses as may arise,
including litigation affecting United and any indemnification by United of its
officers, directors, employees and agents with respect thereto; (j) the costs
and expenses provided for in any Shareholder Servicing Agreement or Accounting
Services Agreement, including amendments thereto, contemplated by subsection C
of this section III. In the event that any of the foregoing shall, in the first
instance, be paid by Waddell & Reed, Inc., United shall pay the same to Waddell
& Reed, Inc., on presentation of a statement with respect thereto.
C. Waddell & Reed, Inc., or an affiliate of Waddell & Reed, Inc., may also
act as (i) transfer agent or shareholder servicing agent of United and/or as
(ii) accounting services agent of United if at the time in question there is a
separate agreement, "Shareholder Servicing Agreement" and/or "Accounting
Services Agreement," covering such functions between United and Waddell & Reed,
Inc., or such affiliate. The corporation, whether Waddell & Reed, Inc., or its
affiliate, which is the party to such Agreement with United is referred to as
the "Agent." Each such Agreement shall provide in substance that it shall not
go into effect, or may be amended, or a new agreement covering the same topics
between United and the Agent may be entered into only if the terms of such
Agreement, such amendment or such new agreement have been approved by the Board
of Directors of United, including the vote of a majority of the directors who
are not "interested persons" as defined in the Investment Company Act of 1940,
of either party to the Agreement, such amendment or such new agreement
(considering Waddell & Reed, Inc., to be such a party even if at the time in
question the Agent is an affiliate of Waddell & Reed, Inc.), cast in person at a
meeting called for the purpose of voting on such approval. Such a vote is
referred to as a "disinterested director" vote. Each such Agreement shall also
provide in substance for its continuance, unless terminated, for a specified
period which shall not exceed two years from the date of its execution and from
year to year thereafter only if such continuance is specifically approved at
least annually by a disinterested director vote, and that 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 United 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 United; (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 light of the usual and customary charges made by others
for services of the same nature and quality. Any such Agreement may also
provide in substance that any disinterested director vote may be conditioned on
the favorable vote of the holders of a majority (as defined in or under the
Investment Company Act of 1940) of the outstanding shares of each class of
United. Any such Agreement shall also provide in substance that it may be
terminated by the Agent at any time without penalty upon giving United one
hundred twenty (120) days' written notice (which notice may be waived by United)
and may be terminated by United 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 United shall be directed or approved by the
vote of a majority of the Board of Directors of United in office at the time or
by the vote of the holders of a majority (as defined in or under the Investment
Company Act of 1940) of the outstanding shares of each class of United.
IV. Brokerage
(a) Waddell & Reed, Inc., may select brokers to effect the portfolio
transactions of United on the basis of its estimate of their ability to obtain,
for reasonable and competitive commissions, the best execution of particular and
related portfolio transactions. For this purpose, "best execution" means prompt
and reliable execution at the most favorable price obtainable. Such brokers may
be selected on the basis of all relevant factors including the execution
capabilities required by the transaction or transactions, the importance of
speed, efficiency, or confidentiality, and the willingness of the broker to
provide useful or desirable investment research and/or special execution
services. Waddell & Reed, Inc., shall have no duty to seek advance competitive
commission bids and may select brokers based solely on its current knowledge of
prevailing commission rates.
(b) Subject to the foregoing, Waddell & Reed, Inc., shall have discretion,
in the interest of United, to direct the execution of its portfolio transactions
to brokers who provide brokerage and/or research services (as such services are
defined in Section 28(e) of the Securities Exchange Act of 1934) for United
and/or other accounts for which Waddell & Reed, Inc., and its affiliates
exercise "investment discretion" (as that term is defined in Section 3(a)(35) of
the Securities Act of 1934); and in connection with such transactions, to pay
commission in excess of the amount another adequately qualified broker would
have charged if Waddell & Reed, Inc., determines, in good faith, that such
commission is reasonable in relation to the value of the brokerage and/or
research services provided by such broker, viewed in terms of either that
particular transaction or the overall responsibilities of Waddell & Reed, Inc.,
and its investment advisory affiliates with respect to the accounts for which
they exercise investment discretion. In reaching such determination, Waddell &
Reed, Inc., will not be required to attempt to place a specified dollar amount
on the brokerage and/or research services provided by such broker; provided that
Waddell & Reed, Inc., shall be prepared to demonstrate that such determinations
were made in good faith, and that all commissions paid by United over a
representative period selected by its Board of Directors were reasonable in
relation to the benefits to United.
(c) Subject to the foregoing provisions of this Paragraph "IV," Waddell &
Reed, Inc., may also consider sales of insurance policies funded by United's
shares and sales of shares of investment companies distributed by Waddell &
Reed, Inc., or its affiliates, and portfolio valuation or pricing services as a
factor in the selection of brokers to execute brokerage and principal portfolio
transactions.
V. Compensation of Waddell & Reed, Inc.
As compensation in full for services rendered and for the facilities and
personnel furnished under sections I, II, and IV of this Agreement, United will
pay to Waddell & Reed, Inc., for each day the fees specified in Exhibit A
hereto.
The amounts payable to Waddell & Reed, Inc., shall be determined as of the
close of business each day; shall, except as set forth below, be based upon the
value of net assets computed in accordance with the Articles of Incorporation of
United; and shall be paid in arrears whenever requested by Waddell & Reed, Inc.
Notwithstanding the foregoing, if the laws, regulations or policies of any
state in which shares of United are qualified for sale limit the operation and
management expenses of United, Waddell & Reed, Inc., will refund to United the
amount by which such expenses exceed the lowest of such state limitations.
VI. Undertakings of Waddell & Reed, Inc.; Liabilities
Waddell & Reed, Inc., shall give to United the benefit of its best
judgment, efforts and facilities in rendering advisory services hereunder.
Waddell & Reed, Inc., shall at all times be guided by and be subject to
United's investment policies, the provisions of its Articles of Incorporation
and Bylaws as each shall from time to time be amended, and to the decision and
determination of United's Board of Directors.
This Agreement shall be performed in accordance with the requirements of
the Investment Company Act of 1940, the Investment Advisers Act of 1940, the
Securities Act of 1933, and the Securities Exchange Act of 1934, to the extent
that the subject matter of this Agreement is within the purview of such Acts.
Insofar as applicable to Waddell & Reed, Inc., as an investment adviser and
affiliated person of United, Waddell & Reed, Inc., shall comply with the
provisions of the Investment Company Act of 1940, the Investment Advisers Act of
1940 and the respective rules and regulations of the Securities and Exchange
Commission thereunder.
In the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of obligations or duties hereunder on the part of Waddell &
Reed, Inc., it shall not be subject to liability to United or to any stockholder
of United (direct or beneficial) for any act or omission in the course of or
connected with rendering services thereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
VII. Duration of this Agreement
This Agreement shall become effective at the start of business on the date
hereof and shall continue in effect, unless terminated as hereinafter provided,
for a period of one year and from year-to-year thereafter only if such
continuance is specifically approved at least annually by the Board of
Directors, including the vote of a majority of the directors who are not parties
to this Agreement or "interested persons" (as defined in the Investment Company
Act of 1940) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, or by the vote of the holders of a majority
(as so defined) of the outstanding voting securities of each class of United and
by the vote of a majority of the directors who are not parties to this Agreement
or "interested persons" (as so defined) of any such party, cast in person at a
meeting called for the purpose of voting on such approval.
VIII. Termination
This Agreement may be terminated by Waddell & Reed, Inc., at any time
without penalty upon giving United one hundred twenty (120) days' written notice
(which notice may be waived by United) and may be terminated by United at any
time without penalty upon giving Waddell & Reed, Inc. sixty (60) days' written
notice (which notice may be waived by Waddell & Reed, Inc.), provided that such
termination by United shall be directed or approved by the vote of a majority of
the Board of Directors of United in office at the time or by the vote of a
majority (as defined in the Investment Company Act of 1940) of the outstanding
voting securities of United. This Agreement shall automatically terminate in
the event of its assignment, the term "assignment" for this purpose having the
meaning defined in Section 2(a)(4) of the Investment Company Act of 1940 and the
rules and regulations thereunder.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to
be executed by their duly authorized officers and their corporate seal to be
hereunto affixed, all as of the day and year first above written.
(Seal) UNITED CASH MANAGEMENT, INC.
By:/s/Rodney O. McWhinney
Rodney O. McWhinney
Vice President
ATTEST:
/s/Sharon K. Pappas
Sharon K. Pappas, Secretary
(Seal) WADDELL & REED, INC.
By:/s/Robert L. Hechler
Robert L. Hechler
Executive Vice President
ATTEST:
/s/Rodney O. McWhinney
Rodney O. McWhinney, Secretary
<PAGE>
EXHIBIT A TO INVESTMENT MANAGEMENT AGREEMENT
UNITED CASH MANAGEMENT, INC.
FEE SCHEDULE
A cash fee consisting of a pro rata participation based on the relative net
asset size of United in a "Group" fee computed each day on the combined net
asset values of all the Funds in the United Group listed hereafter at the annual
rates shown in the following table:
Group Fee Rate
Group Net Asset Level Annual Group Fee
(all dollars in millions) Rate For Each Level
------------------------- --------------------
From $ 0 to $ 750 .51 of 1%
From $ 750 to $ 1,500 .49 of 1%
From $ 1,500 to $ 2,250 .47 of 1%
From $ 2,250 to $ 3,000 .45 of 1%
From $ 3,000 to $ 3,750 .43 of 1%
From $ 3,750 to $ 7,500 .40 of 1%
From $ 7,500 to $12,000 .38 of 1%
Over $12,000 .36 of 1%
Determined as of the close of business that day or, if not a business day, as of
the close of business the first business day preceding.
The Funds in the United Group are:
United Funds, Inc.
United Bond Fund
United Income Fund
United Accumulative Fund
United Science & Technology Fund
United Vanguard Fund, Inc.
United Retirement Shares, Inc.
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United Continental Income Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United New Concepts Fund, Inc.,
United Gold & Government Fund, Inc.
United Asset Strategy Fund, Inc.
and such other funds for which Waddell & Reed, Inc., may now or hereafter act as
investment adviser, provided that the parties to this Agreement expressly agree
in writing that such fund shall be included in the present United Group for the
purpose of determining the group fee rate.
EX-99.B5-cmassign
Assignment
Waddell & Reed, Inc. ("W&R") does hereby assign, transfer and convey, and United
Cash Management, Inc. ("Fund") does hereby consent to the assignment, transfer
and conveyance of, effective January 8, 1992, the Investment Management
Agreement between W&R and the Fund, dated August l, 1990, to Waddell & Reed
Investment Management Company ("WRIMCO"), a wholly owned subsidiary of W&R. W&R
has provided certain undertakings, agreements and guarantees in connection with
this assignment as provided in the Guarantee of Performance attached hereto as
Exhibit A.
Executed this 8th day of January, 1992.
Waddell & Reed, Inc.
By: William T. Morgan
William T. Morgan, President
United Cash Management, Inc.
By William T. Morgan
William T. Morgan, President
Accepted:
Waddell & Reed Investment Management Company
By Rodney O. McWhinney
Rodney O. McWhinney, Sr. Vice President
Guarantee of Performance
In consideration of each of the Funds' listed in Exhibit A hereto consent to the
assignment by Waddell & Reed, Inc., of the Investment Management Agreement
between Waddell & Reed, Inc., and the particular Fund to Waddell & Reed
Investment Management Company ("WRIMCO"), a wholly owned subsidiary of Waddell &
Reed, Inc., Waddell & Reed, Inc. hereby undertakes and agrees that at all times
WRIMCO shall be staffed and adequately supported to assure that WRIMCO is fully
capable of carrying out any and all of its obligations, duties and
responsibilities under the Investment Management Agreements assigned to it and
hereby further guarantees that WRIMCO shall perform its obligations, duties and
responsibilities in accordance with the terms of the several Investment
Management Agreements and in accordance with all applicable Federal laws and
regulations.
Dated this 11th day of December, 1991.
Waddell & Reed, Inc.
By: Rodney O. McWhinney
Rodney O. McWhinney
Senior Vice President
EXHIBIT A
United Funds, Inc.
United Bond Fund
United Income Fund
United Accumulative Fund
United Science & Energy Fund
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United Government Securities Fund, Inc.
United Vanguard Fund, Inc.
United High Income Fund, Inc.
United Cash Management, Inc.
United Retirement Shares, Inc.
United High Income Fund II, Inc.
United Government Securities Fund, Inc.
United Gold & Government Fund, Inc.
United Continental Income Fund, Inc.
United International Growth Fund, Inc.
TMK/United Funds, Inc.
Bond Portfolio
Growth Portfolio]
High Income Portfolio
Income Portfolio
Money Market Portfolio
EX-99.B6-cmua
UNDERWRITING AGREEMENT
THIS AGREEMENT, made this 8th day of February, 1995, by and between United
Cash Management, Inc. (hereinafter the "Company"), a Maryland corporation, and
Waddell & Reed, Inc. (hereinafter "W&R"), a Delaware corporation;
I. REPRESENTATIONS
A. The Company represents that
1) it is a registered open-end management investment company
(mutual fund), and
2) the shares of each of its classes of shares ("Fund") and of
each sub-class thereof ("Class"), if any, are, as of the date of the
effectiveness of this Agreement as to each such Fund or Class, registered with
the Securities and Exchange Commission ("SEC") and qualified or otherwise
authorized for sale in all states of the United States as may be agreed upon.
(As to any Fund or Class not registered with the SEC and qualified or otherwise
authorized for sale in all states of the United States as may be agreed upon,
this Agreement shall become effective as to such Fund or Class upon such
registration and qualification or authorization.)
B. W&R represents that
1) it is a broker-dealer registered with the SEC and is duly
qualified to offer shares of the Company in all states in which the shares are
currently qualified or otherwise authorized for offer for sale;
2) it is a member of the National Association of Securities
Dealers, Inc. ("NASD");
3) it maintains a retail securities and insurance sales
organization consisting in part of a number of representatives authorized under
Federal and state securities laws to solicit as representatives of W&R orders
for Company shares and other securities;
4) it maintains and enforces procedures to enable it to
supervise its representatives and associated persons in accordance with
applicable securities laws, rules and regulations including the Rules of the
NASD; and
5) it maintains and enforces procedures to review for compliance
with applicable securities laws, rules and regulations all sales literature and
promotional materials used by it and authorized to be used by its
representatives in solicitation of orders to buy Company shares, and it files,
when applicable, such literature and materials with the NASD.
II. APPOINTMENT OF UNDERWRITER and OBLIGATIONS
The Company hereby, as applicable, appoints W&R or continues the
appointment of W&R, and W&R, as applicable, agrees to act or continues to act,
as the Company's principal underwriter under the terms and provisions of this
Agreement.
A. Company agrees
1) to use its best efforts to register from time to time under
the Securities Act of 1933 (the "Securities Act") adequate amounts of its shares
for sale by W&R to the public and to qualify or to permit W&R to qualify such
shares for offering to the public in such states as may from time to time be
agreed upon;
2) to immediately advise W&R (i) when any post-effective
amendment to its registration statement or any further amendment or supplement
thereto or any further registration statement or amendment or supplement thereto
becomes effective, (ii) of any request by the SEC for amendments to the
registration statement(s) or any then effective prospectus or for additional
information, (iii) of the issuance by the SEC of any stop-order suspending the
effectiveness of the registration statement or the initiation of any proceedings
for that purpose, and (iv) of the happening of any event which makes untrue any
material statement made in the registration statement or any then effective
prospectus or which, in the opinion of counsel for the Company, requires the
making of a change in the registration statement or any then effective
prospectus in order to make the statements therein not misleading; in case of
the happening at any time of any event which materially affects the Company or
its securities and which should be set forth in a supplement to or an amendment
of any then effective prospectus in order to make the statements therein not
misleading, to prepare and furnish to W&R such amendment or amendments to that
prospectus as will correct the prospectus so that as corrected it will not
contain, or such supplement or supplements to that prospectus which when read in
conjunction with that prospectus will make the combined information not contain
any untrue statement of a material fact or any omission to state any material
fact necessary in order to make the statements in that prospectus not
misleading; if any time the SEC shall issue any stop-order suspending the
effectiveness of the registration statement, to make every reasonable effort to
obtain the prompt lifting of such order; and, before filing any amendment to the
registration statement or to any then effective prospectus, to furnish W&R with
a copy of the proposed amendment;
3) to advise W&R of the net asset value of the shares of each of
its Funds and Classes, as applicable, as often as computed and to furnish to W&R
as soon as practical such information as may be reasonably requested by W&R in
order that it may know all of the facts necessary to sell shares of the Company;
4) to make delivery of its shares subject to the provisions of
its Articles of Incorporation and Bylaws to W&R as ordered by W&R as soon as
reasonably possible after receipt of the orders and against payment of the
consideration to be received by the Company therefor from W&R;
5) to pay or cause to be paid all expenses incident to the
issuance, transfer, registration and delivery of its shares, all taxes in
connection therewith, costs and expenses incident to preparing and filing any
registration statements and prospectuses and any amendments or supplements to a
registration statement or a prospectus, statutory fees incidental to the
registration of additional shares with the SEC, statutory fees and expenses
incurred in connection with any Blue Sky law qualifications undertaken by or at
the request of W&R, and the fees and expenses of the Company's counsel,
accountants or any other experts used in connection with the foregoing; and
6) not without the consent of W&R to offer any of its shares for
sale directly or to any persons or corporations other than W&R, except only
a) the reinvestment of dividends and/or distributions or
their declaration in shares of the Company, in optional form or otherwise;
b) the issuance of additional shares to stock splits or
stock dividends;
c) sale of shares to another investment or securities
holding company in the process of purchasing all or a portion of its assets;
d) in connection with an exchange of shares of the Company
for shares in another investment or securities holding company;
e) the sale of shares to registered unit investment trusts;
or
f) in connection with the exchange of one Fund's shares for
shares of another Fund of the Company.
B. W&R agrees
1) to offer Company shares in such states as may be agreed upon
through its retail account representatives and, at its sole discretion, through
broker-dealers which are members of the NASD on such terms as are not
inconsistent with this Agreement;
2) to order shares from the Company only after it has received a
purchase order therefor;
3) to pay to the Company the net asset value of shares sold
within two business days after the day payment is received by W&R at its
principal place of business from the investor or broker-dealer, or pay the
Company at such other time as may be agreed upon hereafter by the Company and
W&R, or as may be prescribed by law or the Rules of the NASD;
4) in offering shares to comply with the provisions of the
Articles of Incorporation and Bylaws of the Company and with the provisions
stated in its applicable then current prospectus(es);
5) timely to inform the Company of any action or proceeding to
terminate, revoke or suspend W&R's registration as a broker-dealer with the SEC,
membership in the NASD, or authority with any state securities commission to
offer Company shares; and
6) to pay the cost of all sales literature, advertising and
other materials which it may at its discretion use in connection with the sale
of Company shares, including the cost of reports to the shareholders of the
Company in excess of the cost of reports to existing shareholders and the cost
of printing the prospectus(es) furnished to it by the Company.
III. TERMS FOR SALE OF SHARES
A. It is mutually agreed that
1) W&R shall act as principal in all matters relating to
promotion and sale of Company shares, including the preparation and use of all
advertising, sales literature and other promotional materials, and shall make
and enter into all other arrangements, agreements and contracts as principal on
its own account and not as agent for the Company. Title to shares issued and
sold by the Company through W&R shall pass directly from the Company to the
dealer or investor, or shall first pass to W&R as it may from time to time be
determined by W&R and the Company; except provided, however, that W&R may, if so
agreed by W&R and the Company, act as agent of the Company without commission on
repurchase of shares of the Company;
2) certificates for shares shall not be created or delivered by
the Company in any case in which the purchase is pursuant to any provisions of
the Company described in its applicable then current prospectus(es) under the
terms of which certificates are not to be issued to the shareholder. Shares
sold by W&R shall be registered in such name or names and amounts as W&R may
request from time to time, and all shares when so paid for and issued shall be
fully paid and non-assessable;
3) the offering price at which shares of the Company may be sold
by W&R shall include such selling commission as may be applicable to that Class
and as may be fixed from time to time by W&R but shall not be in excess of 8.5
percent of the offering price. W&R shall retain any such sales commission and
may re-allow all or any part of the sales commission to its account
representatives and to selected brokers and dealers who sell shares of the
Company; and
4) W&R may designate, reduce or eliminate its selling
commissions in certain sales or exchanges to the extent described in the
applicable then current prospectus(es) of the Company and in accordance with
Section 22(d) of the Investment Company Act of 1940 and any rules, regulations
or orders of the SEC thereunder.
IV. THE PLAN
A. It is mutually acknowledged that the Company has adopted a plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (a
"Plan"), which Plan is applicable to certain shares and that the Company may in
the future adopt Plans applicable to certain Funds and Classes, respectively.
B. With respect to any Fund or Class as to which the Company has
adopted a Plan, pursuant to that Plan, each day the Company shall pay to W&R a
distribution fee and/or a service fee at the maximum rates and under the terms
and conditions set forth in the applicable Plan, as amended from time to time,
or such lesser amount as the Company and W&R may agree.
C. The Company shall, after excluding from the redemption proceeds
that portion represented by the reinvestment of dividends and distributions and
the appreciation of the value of Fund shares being redeemed, promptly pay W&R an
amount, if any, equal to the percent of the amount invested as determined by W&R
and as is then stated in the Company's current prospectus applicable to the
shares redeemed (the "contingent deferred sales charge"). For purposes of
determining the applicable contingent deferred sales charge, if any: the
redemptions shall be deemed in order of investment made when more than one
investment has been made; and when the shares being redeemed were acquired by
exchange of shares of another Fund or Class of the Company, or corresponding
class of another registered investment company for which W&R or its affiliate
serves as principal underwriter, the investment shall be deemed as if it had
been made when the Company's shares were first purchased, and the applicable
contingent deferred sales charges, if any, shall be with respect to the amount
originally invested in Company shares; and provided that any contingent deferred
sales charge shall be determined in accordance with and in the manner set forth
in the applicable then current prospectus and any applicable Order or Rule
issued by the SEC.
D. It is contemplated that W&R may pay commissions to its field sales
force at the time of sale of the Company's shares and may incur other expenses
substantially in advance of receiving the distribution fee, if any, that may be
applicable to the payment of such commissions and expenses. W&R recognizes that
such payments are at its risk and that this Agreement may be terminated or not
continued as hereinafter provided without the payment to it of any further
distribution fees or service fees whatsoever and without the payment of any
penalty. The contingent deferred sales charges, if any, shall, however, be
payable to W&R with respect to all subject sales made prior to the termination
of this Agreement.
E. W&R shall at least quarterly provide to the Company's board of
directors a written report with respect to each Fund or Class, as applicable, of
the amounts of the distribution and/or service fees expended and the purposes
for which these expenditures were made. W&R shall in addition furnish to the
board of directors of the Company such information as may be requested or as may
be necessary to an informed determination by the directors of whether or not the
directors should continue the Company's Plan(s) and continue this Agreement and
to determine whether there is reasonable likelihood that the Plan(s) and this
Agreement will benefit the Company and its shareholders affected by such
Plan(s).
V. INDEMNIFICATION
A. The Company agrees with W&R for the benefit of W&R and each
person, if any, who controls W&R within the meaning of Section 15 of the
Securities Act and each and all and any of them, to indemnify and hold harmless
W&R and any such controlling person from and against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Securities Act, under any other statute, at common law
or otherwise, and to reimburse the underwriter and such controlling persons, if
any, for any legal or other expenses (including the cost of any investigation
and preparation) reasonably incurred by them or any of them in connection with
any litigation whether or not resulting in any liability, insofar as such
losses, claims, damages, liabilities or litigation arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or any prospectus or any amendment
thereof or supplement thereto or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that this indemnity agreement shall not apply to amounts paid in settlement of
any such litigation if such settlement is effected without the consent of the
Company or to any such losses, claims, damages, liabilities or litigation
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any registration statement or prospectus or any
amendment thereof or supplement thereto, or arising out of or based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
statement or omission was made in reliance upon information furnished in writing
to the Company by W&R for inclusion in any registration statement or any
prospectus or any amendment thereof or supplement thereto. W&R and each such
controlling person shall promptly, after the complaint shall have been served
upon W&R or such controlling person in any litigation against W&R or such
controlling person in respect of which indemnity may be sought from the Company
on account of its agreement contained in this paragraph, notify the Company in
writing of the commencement thereof. The omission of W&R or such controlling
person so to notify the Company of any such litigation shall relieve the Company
from any liability which it may have to W&R or such controlling person on
account of the indemnity agreement contained in this paragraph but shall not
relieve the Company from any liability which it may have to W&R or controlling
person otherwise than on account of the indemnity agreement contained in this
paragraph. In case any such litigation shall be brought against W&R or any such
controlling person and the underwriter or such controlling person shall notify
the Company of the commencement thereof, the Company shall be entitled to
participate in (and, to the extent that it shall wish, to direct) the defense
thereof at its own expense but such defense shall be conducted by counsel of
good standing and satisfactory to W&R or such controlling person or persons,
defendant or defendants in the litigation. The indemnity agreement of the
Company contained in this paragraph shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of W&R or any such
controlling person and shall survive any delivery of shares of the Company. The
Company agrees to notify W&R promptly of the commencement of any litigation or
proceeding against it or any of its officers or directors of which it may be
advised in connection with the issue and sale of its shares.
B. Anything herein to the contrary notwithstanding, the agreement in
Section A of this article, insofar as it constitutes a basis for reimbursement
by the Company for liabilities (other than payment by the Company of expenses
incurred or paid in the successful defense of any action, suit or proceeding)
arising under the Securities Act, shall not extend to the extent of any interest
therein of any person who is an underwriter or a partner or controlling person
of an underwriter within the meaning of Section 15 of the Securities Act or who,
at the date of this Agreement, is a director of the Company, except to the
extent that an interest of such character shall have been determined by a court
of appropriate jurisdiction the question of whether or not such interest is
against public policy as expressed in the Securities Act.
C. W&R agrees to indemnify and hold harmless the Company and its
directors and such officers as shall have signed any registration statement from
and against any and all losses, claims, damages or liabilities, joint or
several, to which the Company or such directors or officers may become subject
under the Securities Act, under any other statute, at common law or otherwise,
and will reimburse the Company or such directors or officers for any legal or
other expenses (including the cost of any investigation and preparation)
reasonably incurred by it or them or any of them in connection with any
litigation, whether or not resulting in any liability insofar as such losses,
claims, damages, liabilities or litigation arise out of, or are based upon, any
untrue statement or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
which statement or omission was made in reliance upon information furnished in
writing to the Company by W&R for inclusion in any registration statement or any
prospectus, or any amendment thereof or supplement thereto, or which statement
was made in, or the alleged omission was from, any advertising or sales
literature (including any reports to shareholders used as such) which relate to
the Company.
W&R shall not be liable for amounts paid in settlement of any such
litigation if such settlement was effected without its consent. The Company and
its directors and such officers, defendant or defendants, in any such litigation
shall, promptly after the complaint shall have been served upon the Company or
any such director or officer in any litigation against the Company or any such
director or officer in respect of which indemnity may be sought from W&R on
account of its agreement contained in this paragraph, notify W&R in writing of
the commencement thereof. The omission of the Company or such director or
officer so to notify the underwriter of any such litigation shall relieve W&R
from any liability which it may have to the Company or such director or officer
on account of the indemnity agreement contained in this paragraph, but shall not
relieve W&R from any liability which it may have to the Company or such director
or officer otherwise than on account of the indemnity agreement contained in
this paragraph. In case any such litigation shall be brought against the
Company or any such officer or director and notice of the commencement thereof
shall have been so given to W&R, W&R shall be entitled to participate in (and,
to the extent that it shall wish, to direct) the defense thereof at its own
expense, but such defense shall be conducted by counsel of good standing and
satisfactory to the Company. The indemnity agreement of W&R contained in this
paragraph shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Company and shall survive any delivery
of shares of the Company. W&R agrees to notify the Company promptly of the
commencement of any litigation or proceeding against it or any of its officers
or directors or against any such controlling person of which it may be advised,
in connection with the issue and sale of the Company's shares.
D. Notwithstanding any provision contained in this Agreement, no
party hereto and no person or persons in control of any party hereto shall be
protected against any liability to the Company or its security holders to which
they would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance of their duties or by reason of their
reckless disregard of their obligations and duties under this Agreement.
VI. OTHER TERMS
A. This Agreement shall not be deemed to limit W&R from acting as
underwriter and/or dealer for any other mutual fund, from engaging in any other
aspects of the securities business, whether or not such may be deemed in
competition with the sale of shares of the Company, and to carry on any other
lawful business whatsoever.
B. Except as expressly provided in Article V and hereinabove, the
agreements herein set forth have been made and are made solely for the benefit
of the Company and W&R, and the persons expressly provided for in Article V,
their respective heirs and successors, personal representatives and assigns, and
except as so provided, nothing expressed or mentioned herein is intended or
shall be construed to give any person, firm or corporation other than the
Company, W&R and the persons expressly provided for in Article V any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
representation, warranty or agreement herein contained. Except as so provided,
the term "heirs, successors, personal representatives and assigns" shall not
include any purchaser of shares merely because of such purchase.
C. This Agreement shall continue in effect, unless terminated as
hereinafter provided, for a period of one (1) year and thereafter only if such
continuance is specifically approved at least annually by the Board of
Directors, including the vote of a majority of the directors who are not parties
to the Agreement or "interested persons" (as defined in the Investment Company
Act of 1940) or any such party and who have no direct or indirect financial
interest in the operation of any Plan or any agreement relating to that Plan
(hereafter the "Plan directors"), cast in person at a meeting called for the
purpose of voting on such approval. This Agreement may be terminated by W&R at
any time without penalty upon giving the Company sixty (60) days' written notice
(which notice may be waived by the Company) and may be terminated by the Company
at any time without penalty upon giving W&R sixty (60) days' written notice
(which notice may be waived by W&R), provided that such termination by the
Company shall be directed or approved by the vote of a majority of the Plan
directors, or by the vote of a majority (as defined in the Investment Company
Act of 1940) of the outstanding voting securities of a Fund with respect to that
Fund. This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Investment Company Act of 1940.
D. This Agreement shall be governed and construed in accordance with
the laws of Kansas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective duly authorized officers and their corporate seals to be
affixed as of the day and year first above written.
United Cash Management, Inc.
By: /s/Sharon K. Pappas
Sharon K. Pappas, Vice President
and Secretary
ATTEST:
By: /s/Amy D. Eisenbeis
Amy D. Eisenbeis
Assistant Secretary
WADDELL & REED, INC.
By: /s/Robert L. Hechler
Robert L. Hechler, President
ATTEST:
By: /s/Sharon K. Pappas
Sharon K. Pappas, Secretary
<PAGE>
EX-99.B8-cmca
CUSTODIAN AGREEMENT
Dated as of November 26, 1991
Between
UNITED MISSOURI BANK, n.a.
and
UNITED CASH MANAGEMENT, INC.
<PAGE>
Table of Contents
ARTICLE
I. Appointment of Custodian
II. Powers and Duties of Custodian
2.01 Safekeeping
2.02 Manner of Holding Securities
2.03 Purchase of Assets
2.04 Exchanges of Securities
2.05 Sales of Securities
2.06 Depositary Receipts
2.07 Exercise of Rights, Tender Offers, Etc.
2.08 Stock Dividends, Rights, Etc.
2.09 Options
2.10 Futures Contracts
2.11 Borrowing
2.12 Interest Bearing Deposit
2.13 Foreign Exchange Transactions
2.14 Securities Loan
2.15 Collections
2.16 Dividends, Distributions and Redemptions
2.17 Proceeds from Shares Sold
2.18 Proxies, Notices, Etc.
2.19 Bills and Other Disbursements
2.20 Nondiscretionary Functions
2.21 Bank Accounts
2.22 Deposit of Fund Assets in Securities System
2.23 Other Transfers
2.24 Establishment of Segregated Account
2.25 Custodian's Books and Records
2.26 Opinion of Fund's Independent
Certified Public Accountants
2.27 Reports by Independent Certified Public
Accountants
2.28 Overdraft Facility
III. Proper Instructions, Special Instructions
and Related Matters
3.01 Proper Instruction and Special Instructions
3.02 Authorized Persons
3.03 Persons Having Access to Assets of the Portfolios
3.04 Actions of Custodian Based on Proper
Instructions and Special Instructions
IV. Subcustodians
4.01 Domestic Subcustodians
4.02 Foreign Sub-Subcustodians and
Interim Sub-Subcustodians
4.03 Special Subcustodians
4.04 Termination of a Subcustodian
4.05 Certification Regarding Foreign Sub-Subcustodians
V. Standard of Care, Indemnification
5.01 Standard of Care
5.02 Liability of the Custodian for Actions
of Other Person
5.03 Indemnification by Fund
5.04 Investment Limitations
5.05 Fund's Right to Proceed
5.06 Indemnification by Custodian
5.07 Custodian's Right to Proceed
VI. Compensation
VII. Termination
VIII. Defined Terms
IX. Miscellaneous
9.01 Execution of Documents, Etc.
9.02 Representations and Warranties
9.03 Entire Agreement
9.04 Waivers and Amendments
9.05 Interpretation
9.06 Captions
9.07 Governing Law
9.08 Notices
9.09 Assignment
9.10 Counterparts
9.11 Confidentiality
Appendices
Appendix "A"
Appendix "B"
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of the 26th day of November, 1991 between United Cash
Management, Inc. (the "Fund") and United Missouri Bank, n.a. (the "Custodian").
WITNESSETH
WHEREAS, the Fund desires to appoint the Custodian as custodian on behalf
of the Fund in accordance with the provisions of the Investment Company Act of
1940, as amended (the "1940 Act") and the rules and regulations thereunder,
under the terms and conditions set forth in this Agreement, and the Custodian
has agreed so to act as custodian.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
APPOINTMENT OF CUSTODIAN
Subject to the terms and provisions of this Agreement, the Fund hereby
employs and appoints the Custodian as a custodian of the cash, securities and
other assets owned by the Fund and deposited from time to time with the
Custodian ("Assets"). The Fund shall deliver to the Custodian, or shall cause
to be delivered to the Custodian, Assets during the term of this Agreement. The
Custodian is authorized to act under the terms and conditions of this Agreement
as the Fund's agent and shall be representing the Fund when acting within the
scope of this Agreement. The Custodian hereby accepts such appointment as
custodian and shall perform the duties and responsibilities set forth herein on
the terms and conditions set forth herein.
ARTICLE II
POWERS AND DUTIES OF CUSTODIAN
As custodian, the Custodian shall have and perform the powers and duties
set forth in this Article II. Pursuant to and in accordance with Article IV
hereof, the Custodian may appoint one or more Subcustodians (as hereinafter
defined) to exercise the powers and perform the duties of the Custodian set
forth in this Article II and references to the Custodian in this Article II
shall include any Subcustodian so appointed.
Section 2.01. Safekeeping. The Custodian shall accept delivery of and
keep safely the Assets in accordance with the terms and conditions hereof on
behalf of the Fund.
Section 2.02. Manner of Holding Securities.
(a) The Custodian shall at all times hold securities of the Fund either:
(i) by physical possession of the share certificates or other instruments
representing such securities in registered or bearer form; or (ii) in book-entry
form by a Securities System (as hereinafter defined) in accordance with the
provisions of Section 2.22 below.
(b) The Custodian may at all times hold registered securities of the Fund
in the name of the Fund or the Fund's nominee, or in the nominee name of the
Custodian unless specifically directed by Proper Instructions (as hereinafter
defined) to hold such registered securities in so-called street name; provided
that, in any event, all Assets shall be held in an account of the Custodian
containing only assets of the Fund. Notwithstanding the foregoing, unless it
receives Proper Instructions to the contrary, the Custodian shall register all
securities in the name of the Custodian's nominee as authorized by the Fund.
All securities held directly or indirectly by the Custodian hereunder shall at
all times be identifiable on the records of the Custodian. Except as otherwise
provided herein, the Custodian shall keep the Assets physically segregated from
those of other persons or entities. The Custodian shall execute and deliver all
certificates and documents in connection with registration of securities as may
be required by the applicable provisions of the Internal Revenue Code, the laws
of any State or territory of the United States and the laws of any jurisdiction
in which the securities are held.
Section 2.03. Purchase of Assets.
(a) Security Purchases. Upon receipt of Proper Instructions, the
Custodian shall pay for and receive securities purchased for the account of the
Fund, provided that payment shall be made by Custodian only upon receipt of the
securities: (a) by the Custodian; (b) by a clearing corporation of a national
securities exchange of which the Custodian is a member; or (c) by a Securities
System. Notwithstanding the foregoing, upon receipt of Proper Instructions:
(i) in the case of a repurchase agreement, the Custodian may release funds to a
Securities System prior to the receipt of advice from the Securities System that
the securities underlying such repurchase agreement have been transferred by
book-entry into the Account (as hereinafter defined) maintained with such
Securities System by the Custodian, provided that the Custodian's instructions
to the Securities System require that the Securities System may make payment of
such funds to the other party to the repurchase agreement only upon transfer by
book-entry of the securities underlying the repurchase agreement into the
Account; (ii) in the case of time deposits, call account deposits, currency
deposits and other deposits, foreign exchange transactions, futures contracts or
options, pursuant to Sections 2.09, 2.10, 2.12 and 2.13 hereof, the Custodian
may make payment therefor before receipt of an advice or transaction; and (iii)
in the case of the purchase of securities, the settlement of which occurs
outside of the United States of America, the Custodian may make payment therefor
and receive delivery of such securities in accordance with local custom and
practice generally accepted by Institutional Clients (as hereinafter defined) in
the country in which the settlement occurs, but in all events subject to the
standard of care set forth in Article V hereof. For purposes of this Agreement,
an "Institutional Client" shall mean a major commercial bank, corporation,
insurance company, or substantially similar institution, which, as a substantial
part of its business operations, purchases or sells securities and makes use of
custodial services.
(b) Other Asset Purchases. Upon receipt of Proper Instructions and except
as otherwise provided herein, the Custodian shall pay for and receive other
Assets for the account of the Fund as provided in Proper Instructions.
Section 2.04. Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for the account
of the Fund for other securities in connection with any reorganization,
recapitalization, split-up of shares, change of par value, conversion or other
event relating to the securities or the issuer of such securities, and shall
deposit any such securities in accordance with the terms of any reorganization
or protective plan. The Custodian shall, without receiving Proper Instructions:
surrender securities for transfer into the name of the Fund, the Fund's nominee
or the nominee name of the Custodian as permitted by Section 2.02(b); and
surrender securities for a different number of certificates or instruments
representing the same number of shares or same principal amount of indebtedness,
provided that the securities to be issued will be delivered to the Custodian.
Section 2.05. Sales of Securities. Upon receipt of Proper Instructions,
the Custodian shall make delivery of securities which have been sold for the
account of the Fund, but only against payment therefor in the form of: (a)
cash, certified check, bank cashier's check, bank credit, or bank wire transfer;
(b) credit to the account of the Custodian with a clearing corporation of a
national securities exchange of which the Custodian is a member; or (c) credit
to the Account of the Custodian with a Securities System, in accordance with the
provisions of Section 2.22 hereof. Notwithstanding the foregoing: (i) in the
case of the sale of securities, the settlement of which occurs outside of the
United States of America, such securities shall be delivered and paid for in
accordance with local custom and practice generally accepted by Institutional
Clients in the country in which the settlement occurs, but in all events subject
to the standard of care set forth in Article V hereof; and (ii) in the case of
securities held in physical form, such securities shall be delivered and paid
for in accordance with "street delivery custom" to a broker or its clearing
agent, against delivery to the Custodian of a receipt for such securities,
provided that the Custodian shall have taken reasonable steps to ensure prompt
collection of the payment for, or return of, such securities by the broker or
its clearing agent, and provided further that, subject to the standard of care
set forth in Article V hereof, the Custodian shall not be responsible for the
selection of or the failure or inability to perform of such broker or its
clearing agent.
Section 2.06. Depositary Receipts. Upon receipt of Proper Instructions,
the Custodian shall surrender securities to the depositary used for such
securities by an issuer of American Depositary Receipts or International
Depositary Receipts (hereinafter referred to, collectively , a "ADRs"), against
a written receipt therefor adequately describing such securities and written
evidence satisfactory to the Custodian that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such securities in the
name of the Custodian or a nominee of the Custodian, for delivery to the
Custodian at such place as the Custodian may from time to time designate. Upon
receipt of Proper Instructions, the Custodian shall surrender ADRs to the issuer
thereof, against a written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the Custodian that the issuer
of the ADRs has acknowledged receipt of instructions to cause its depository to
deliver the securities underlying such ADRs to the Custodian.
Section 2.07. Exercise of Rights, Tender Offers, Etc. Upon receipt of
Proper Instructions, the Custodian shall: (a) deliver warrants, puts, calls,
rights or similar securities to the issuer or trustee thereof (or to the agent
of such issuer or trustee) for the purpose of exercise or sale, provided that
the new securities, cash or other Assets, if any, acquired as a result of such
actions are to be delivered to the Custodian; and (b) deposit securities upon
invitations for tenders thereof, provided that the consideration for such
securities is to be paid or delivered to the Custodian, or the tendered
securities are to be returned to the Custodian. Notwithstanding any provision
of this Agreement to the contrary, the Custodian shall promptly notify the Fund
in writing of (i) any default in payment of funds on securities; (ii) any
securities that have matured, been called or redeemed; and (iii) to the extent
the Custodian has notice which is contained in services to which it normally
subscribes for such purposes, or actual knowledge if not contained in such
services, any other default involving securities; and all announcements of
defaults, bankruptcies, reorganizations, mergers, consolidations,
recapitalizations or rights or privileges to subscribe, convert, exchange, put,
redeem or tender securities held subject to this Agreement. The Custodian
shall, following receipt or knowledge, convey such information to the Fund in a
timely manner based upon the circumstances of each particular case. Whenever
any such rights or privileges exist, the Fund will, in a timely manner based
upon the circumstances of each particular case, provide the Custodian with
Proper Instructions. Absent the Custodian's timely receipt of Proper
Instructions, the Custodian shall not be liable for not taking any action or not
exercising such rights prior to their expiration unless such failure is due to
Custodian's failure to give timely notice to the Fund in accordance with this
Section 2.07.
Section 2.08. Stock Dividends, Rights, Etc. The Custodian shall receive
and collect all stock dividends, rights and other items of like nature and, upon
receipt of Proper Instructions, take action with respect to the same as directed
in such Proper Instructions.
Section 2.09. Options. Upon receipt of Proper Instructions and in
accordance with the provisions of any agreement between the Custodian, any
registered broker-dealer and, if necessary, the Fund relating to compliance with
the rules of the Options Clearing Corporation (the "OCC") or of any registered
national securities exchange or similar organization(s), the Custodian shall:
(a) receive and retain confirmations or other documents, if any, evidencing the
purchase or writing of an option by the Fund; (b) deposit and maintain in a
segregated account, securities (either physically or by book-entry in a
Securities System), cash or other Assets; and (c) pay, release and/or transfer
such securities, cash or other Assets in accordance with any such agreement and
with notices or other communications evidencing the expiration, termination or
exercise of such options furnished by the OCC, the securities or options
exchange on which such options are traded or such other organization as may be
responsible for handling such option transactions. The Fund and the broker-
dealer shall be responsible for determining the sufficiency of assets held in
any segregated account established in compliance with applicable margin
maintenance requirements and the performance of other terms of any option
contract; provided, however, that the Custodian shall be liable for performance
of its duties under this Agreement and in accordance with Proper Instructions,
and shall be liable for performance of its duties under any other agreement
between the Custodian, any registered broker-dealer and, if necessary, the Fund.
Notwithstanding anything herein to the contrary, if the Fund issues Proper
Instructions to sell a naked option (including stock index options), then as
part of the transaction, the Custodian, the Fund and the broker-dealer shall
have entered into a tri-party agreement, as described above.
Section 2.10. Futures Contracts. Upon receipt of Proper Instructions,
or pursuant to the provisions of any futures margin procedural agreement among
the Fund, the Custodian and any futures commission merchant (a "Procedural
Agreement"), the Custodian shall: (a) receive and retain confirmations, if any
evidencing the purchase of or sale of a futures contract or an option on a
futures contract by the Fund; (b) deposit and maintain in a segregated account
cash, securities and other Assets designated as initial, maintenance or
variation "margin" deposits intended to secure the Fund's performance of its
obligations under any futures contracts purchased or sold or any options on
futures contracts written by the Fund, in accordance with the provisions of the
Commodity Futures Trading Commission and/or any commodity exchange or contract
market (such as the Chicago Board of Trade), or any similar organization(s),
regarding such margin deposits; and (c) release assets from and/or transfer
assets into such margin accounts only in accordance with any such Procedural
Agreements. The Fund and such futures commission merchant shall be responsible
for determining the sufficiency of assets held in the segregated account in
compliance with applicable margin maintenance requirements and the performance
of any futures contract or option on a futures contract in accordance with its
terms; provided, however, that the Custodian shall be liable for performance of
its duties under this Agreement and in accordance with Proper Instructions, and
shall be liable for performance of its duties under any Procedural Agreement.
Section 2.11. Borrowing. Upon receipt of Proper Instructions, the
Custodian shall deliver securities of the Fund to lenders or their agents, or
otherwise establish a segregated account as agreed to by the Fund and the
Custodian, as collateral for borrowings effected by the Fund, provided that such
borrowed money is payable by the lender (a) to or upon the Custodian's order, as
Custodian for the Fund, and (b) concurrently with delivery of such securities.
Section 2.12. Interest Bearing Deposits. Upon receipt of Proper
Instructions directing the Custodian to purchase interest bearing fixed term and
call deposits (hereinafter referred to collectively, as "Interest Bearing
Deposits") for the account of the Fund, the Custodian shall purchase such
Interest Bearing Deposits in the name of the Fund with such banks or trust
companies (including the Custodian, any Subcustodian or any subsidiary or
affiliate of the Custodian) (hereinafter referred to as "Banking Institutions")
and in such amounts as the Fund may direct pursuant to Proper Instructions.
Such Interest Bearing Deposits may be denominated in U.S. Dollars or other
currencies, as the Fund may determine and direct pursuant to Proper
Instructions. The Custodian shall include in its records with respect to the
Assets of the Fund appropriate notation as to the amount and currency of each
such Interest Bearing Deposit, the accepting Banking Institution and all other
appropriate details, and shall retain such forms of advice or receipt evidencing
such account, if any, as may be forwarded to the Custodian by the Banking
Institution. The responsibilities of the Custodian to the Fund for Interest
Bearing Deposits accepted on the Custodian's books in the United States shall be
that of a U.S. bank for a similar deposit. With respect to Interest Bearing
Deposits other than those accepted on the Custodian's books, (a) the Custodian
shall be responsible for the collection of income as set forth in Section 2.15
and the transmission of cash and instructions to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or, so long as the Custodian acts in accordance with Proper
Instructions and the terms and conditions of this Agreement, for the failure of
such Banking Institution to pay upon demand. Upon receipt of Proper
Instructions, the Custodian shall take such reasonable actions as the Fund deems
necessary or appropriate to cause each such Interest Bearing Deposit account to
be insured to the maximum extent possible by all applicable deposit insurers
including, without limitation, the Federal Deposit Insurance Corporation.
Section 2.13. Foreign Exchange Transactions.
(a) Foreign Exchange Transactions Other than as Principal. Upon receipt
of Proper Instructions, the Custodian shall settle foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of the Fund with such currency brokers or Banking
Institutions as the Fund may determine and direct pursuant to Proper
Instructions. The Fund accepts full responsibility for its use of third party
foreign exchange brokers (any dealer other than the Foreign Subcustodian) (as
hereinafter defined) and for execution of said foreign exchange contracts and
understands that the Fund shall be responsible for any and all costs and
interest charges which may be incurred as a result of the failure or delay of
its third party broker to deliver foreign exchange unless such loss, damage, or
expense is caused by, or results from the negligence, misfeasance or misconduct
of the Custodian. Notwithstanding the foregoing, the Custodian shall be
responsible for the transmission of cash and instructions to and from the
currency broker or Banking Institution with which the contract or option is
made, the safekeeping of all certificates and other documents and agreements
evidencing or relating to such foreign exchange transactions and the maintenance
of proper records as set forth in Section 2.25. The Custodian shall have no
duty with respect to the selection of the currency brokers or Banking
Institutions with which the Fund deals or, so long as the Custodian acts in
accordance with Proper Instructions, for the failure of such brokers or Banking
Institutions to comply with the terms of any contract or option.
(b) Foreign Exchange Contracts as Principal. The Custodian shall not be
obligated to enter into foreign exchange transactions as principal. However, if
the Custodian has made available to the Fund its services as a principal in
foreign exchange transactions, upon receipt of Proper Instructions, the
Custodian shall enter into foreign currencies for spot and future delivery on
behalf of and for the account of the Fund with the Custodian as principal. The
Custodian shall be responsible for the selection of the currency brokers or
Banking Institutions and the failure of such currency brokers or Banking
Institutions to comply with the terms of any contract or option.
(c) Payments. Notwithstanding anything to the contrary contained herein,
upon receipt of Proper Instructions the Custodian may, in connection with a
foreign exchange contract, make free outgoing payments of cash in the form of
U.S. Dollars or foreign currency prior to receipt of confirmation of such
foreign exchange contract or confirmation that the countervalue currency
completing such contract has been delivered or received.
Section 2.14. Securities Loans. Upon receipt of Proper Instructions,
the Custodian shall, in connection with loans of securities by the Fund, deliver
securities of the Fund to the borrower thereof and may, except as otherwise
provided below, deliver such securities prior to receipt of the collateral, if
any, for such borrowing; provided that, in cases of loans of securities secured
by cash collateral, the Custodian's instructions to the Securities System shall
require that the Securities System deliver the securities of the Fund to the
borrower thereof only upon receipt of the collateral for such borrowing. The
Custodian shall retain on the Fund's behalf the right to any dividends, interest
or distribution on such loaned securities and any other rights specified in
Proper Instructions. Upon receipt of Proper Instructions and the loaned
securities, the Custodian will release the collateral to the borrower.
Section 2.15. Collections. The Custodian shall: (a) collect amounts
due and payable to the Fund with respect to portfolio securities and other
Assets; (b) promptly credit to the account of the Fund all income and other
payments relating to portfolio securities and other Assets held by the Custodian
hereunder upon Custodian's receipt of such income or payments or as otherwise
agreed in writing by the Custodian and the Fund; (c) promptly endorse and
deliver any instruments required to effect such collection; and (d) promptly
execute ownership and other certificates and affidavits for all federal, state,
local and foreign tax purposes in connection with receipt of income or other
payments with respect to portfolio securities and other Assets, or in connection
with the transfer of such securities or other Assets; provided, however, that
with respect to portfolio securities registered in so-called street name, or
physical securities with variable interest rates, the Custodian shall use its
best efforts to collect amounts due and payable to the Fund. The Custodian
shall promptly notify the Fund in writing by facsimile transmission or in such
other manner as the Fund and Custodian may agree in writing if any amount
payable with respect to portfolio securities or other Assets is not received by
the Custodian when due. The Custodian shall not be responsible for the
collection of amounts due and payable with respect to portfolio securities or
other Assets that are in default.
Section 2.16. Dividends, Distributions and Redemptions. To enable the
Fund to pay dividends or other distributions to shareholders of the Fund and to
make payment to shareholders who have requested repurchase or redemption of
their shares of the Fund (collectively, the "Shares"), the Custodian shall
promptly release cash or securities (a) in the case of cash, upon receipt of
Proper Instructions, to one or more Distribution Accounts (as hereinafter
defined) designated by the Fund in such Proper Instructions; or (b) in the case
of securities, upon the receipt of Special Instructions (as hereinafter defined)
to such entity or account designated by the Fund in such Special Instructions.
For purposes of this Agreement, a "Distribution Account" shall mean an account
established at a Banking Institution designated by the Fund in Special
Instructions.
Section 2.17. Proceeds from Shares Sold. The Custodian shall receive
funds representing cash payments received for Shares issued or sold from time to
time by the Fund, and shall promptly credit such funds to the account of the
Fund. The Custodian shall promptly notify the Fund of Custodian's receipt of
cash in payment for Shares issued by the Fund by facsimile transmission or in
such other manner as the Fund and Custodian may agree in writing. Upon receipt
of Proper Instructions, the Custodian shall: (a) deliver all federal funds
received by the Custodian in payment for Shares in payment for such investments
as may be set forth in such Proper Instructions and at a time agreed upon
between the Custodian and the Fund; and (b) make federal funds available to the
Fund as of specified times agreed upon from time to time by the Fund and the
Custodian, in the amount of checks received in payment for Shares which are
deposited to the accounts of the Fund.
Section 2.18. Proxies, Notices, Etc. The Custodian shall deliver or
cause to be delivered to the Fund, in the most expeditious manner practicable,
all forms of proxies, all notices of meetings, and any other notices or
announcements affecting or relating to securities owned by the Fund that are
received by the Custodian, any Subcustodian, or any nominee of either of them,
and, upon receipt of Proper Instructions, the Custodian shall execute and
deliver, or cause such Subcustodian or nominee to execute and deliver, such
proxies or other authorizations as may be required. Except as directed pursuant
to Proper Instructions, neither the Custodian nor any Subcustodian or nominee
shall vote upon any such securities, or execute any proxy to vote thereon, or
give any consent or take any other action with respect thereto. The Custodian
will not release the identity of the Fund to an issuer which requests such
information pursuant to the Shareholder Communications Act of 1985, for the
specific purpose of direct communications between such issuer and the Fund
unless the Fund directs the Custodian otherwise in writing.
Section 2.19. Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of the Fund.
Section 2.20. Nondiscretionary Functions. The Custodian shall attend
to all nondiscretionary details not specifically covered by this Agreement in
accordance with industry standards in connection with the sale, exchange,
substitution, purchase, transfer or other dealings with securities or other
Assets held by the Custodian, except as otherwise directed from time to time
pursuant to Proper Instructions.
Section 2.21. Bank Accounts.
(a) Accounts with the Custodian. The Custodian shall open and operate a
bank account or accounts (hereinafter referred to collectively, as "Bank
Accounts") on the books of the Custodian; provided that such Bank Account(s)
shall be in the name of the Custodian or a nominee thereof, for the account of
the Fund, and shall be subject only to draft or order of the Custodian. The
responsibilities of the Custodian to the Fund for deposits accepted on the
Custodian's books shall be that of a U.S. bank for a similar deposit.
(b) Deposit Insurance. Upon receipt of Proper Instructions, the
Custodian shall take such action as the Fund deems necessary or appropriate to
cause each deposit account established by the Custodian pursuant to this Section
2.21 to be insured to the maximum extent possible by all applicable deposit
insurers, including, without limitation, the Federal Deposit Insurance
Corporation.
Section 2.22. Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain domestic securities owned by the Fund in:
(a) The Depository Trust Company; (b) the Participants Trust Company; (c) any
book-entry system as provided in (i) Subpart O of Treasury Circular No. 300, 31
CFR 306.115 (ii) Subpart B of Treasury Circular Public Debt Series No. 27-76, 31
CFR 350.2, or (iii) the book-entry regulations of federal agencies substantially
in the form of 31 CFR 306.115; or (d) any other domestic clearing agency
registered with the Securities and Exchange Commission ("SEC") under Section 17A
of the Securities Exchange Act of 1934 (or as may otherwise be authorized by the
Securities and Exchange Commission to serve in the capacity of depository or
clearing agent for the securities or other assets of investment companies) which
acts as a securities depository; provided, however, that no such deposit or
maintenance of securities may be made except with respect to those agencies and
entities the use of which the Fund has previously approved by Special
Instructions (each of the foregoing being referred to in this Agreement as a
"Securities System"). Use of a Securities System shall be in accordance with
applicable Federal Reserve Board and SEC rules and regulations, if any, and
subject to the following provisions:
(A) The Custodian or any Subcustodian may deposit and/or maintain
securities held hereunder in a Securities System, provided that such securities
are represented in an account ("Account") of the Custodian in the Securities
System which Account shall not contain any assets of the Custodian other than
assets held as fiduciary, custodian or otherwise for customers.
(B) The books and records of the Custodian shall at all times identify
those securities belonging to the Fund which are maintained in a Securities
System.
(C) The Custodian shall pay for securities purchased for the account of the
Fund only upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account of the Custodian, and (ii) the
making of an entry on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund only upon (iii) receipt of advice from the
Securities System that payment for such securities has been transferred to the
Account of the Custodian, and (iv) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System relating to transfers of
securities for the account of the Fund shall identify the Fund, and shall be
maintained for the Fund by the Custodian. The Custodian shall deliver to the
Fund on the next succeeding business day daily transaction reports which shall
include each day's transactions in the Securities System for the account of the
Fund. Such transaction reports shall be delivered to the Fund or any agent
designated by the Fund pursuant to Proper Instructions, by computer or in such
other manner as the Fund and Custodian may agree in writing.
(D) The Custodian shall, if requested by the Fund pursuant to Proper
Instructions, provide the Fund with all reports obtained by the Custodian or any
Subcustodian with respect to a Securities System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Securities System.
(E) Upon receipt of Special Instructions, the Custodian shall terminate the
use of any Securities System (except the federal book-entry system) on behalf of
the Fund as promptly as practicable and shall take all actions reasonably
practicable to safeguard the securities of the Fund maintained with such
Securities System.
Section 2.23. Other Transfers. Upon receipt of Special Instructions,
the Custodian shall make such other dispositions of securities, funds, or other
Assets of the Fund in a manner or for purposes other than as expressly set forth
in this Agreement, provided that the Special Instructions relating to such
disposition shall include a statement of the purposes for which the delivery is
to be made, the amount of funds, Assets and/or securities to be delivered and
the name of the person or persons to whom delivery is to be made, and shall
otherwise comply with the provisions of Sections 3.01 and 3.03 hereof.
Section 2.24. Establishment of Segregated Account. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its books a
segregated account or accounts for and on behalf of the Fund, into which account
or accounts may be transferred cash and/or securities or other Assets of the
Fund, including securities maintained by the Custodian in a Securities System
pursuant to Section 2.22 hereof, said account or accounts to be maintained: (a)
for the purposes set forth in Section 2.09, 2.10 and 2.11 hereof; (b) for the
purposes of compliance by the Fund with the procedures required by Investment
Company Act Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered investment
companies; or (c) for such other purposes as may be set forth, from time to
time, in Special Instructions. The Custodian shall not be responsible for the
determination of the type or amount of Assets to be held in any segregated
account referred to in this Section 2.24.
Section 2.25. Custodian's Books and Records. The Custodian shall
provide any assistance reasonably requested by the Fund in the preparation of
reports to Fund shareholders and others, audits of accounts, and other
ministerial matters of like nature. The Custodian shall maintain complete and
accurate records with respect to securities and other Assets held for the
accounts of the Fund as required by the rules and regulations of the SEC
applicable to investment companies registered under the 1940 Act, including, but
not limited to: (a) journals or other records of original entry containing a
detailed and itemized daily record of all receipts and deliveries of securities
(including certificate and transaction identification numbers, if any), and all
receipts and disbursements of cash; (b) ledgers or other records reflecting (i)
securities in transfer, (ii) securities in physical possession, (iii) securities
borrowed, loaned or collateralizing obligations of the Fund, (iv) monies
borrowed and monies loaned (together with a record of the collateral therefor
and substitutions of such collateral), and (v) dividends and interest received;
and (c) cancelled checks and bank records relating thereto. The Custodian shall
keep such other books and records of the Fund as the Fund shall reasonably
request. All such books and records maintained by the Custodian shall be
maintained in a form acceptable to the Fund and in compliance with the rules and
regulations of the SEC, including, but not limited to, books and records
required to be maintained by Section 31(a) of the 1940 Act and the rules and
regulations from time to time adopted thereunder. All books and records
maintained by the Custodian pursuant to this Agreement shall at all times be the
property of the Fund and shall be available during normal business hours for
inspection and use by the Fund and its agents, including without limitation, its
independent certified public accountants. Notwithstanding the preceding
sentence, the Funds shall not take any actions or cause the Custodian to take
any actions which would knowingly cause, either directly or indirectly, the
Custodian to violate any applicable laws, regulations or orders.
Notwithstanding the provisions of this Section 2.25, in the event the Fund
purchases cash, securities and other Assets requiring the use of a Domestic
Subcustodian or Foreign Sub-Subcustodian, the Custodian shall be entitled to
rely upon and use the books, records and accountings of the Domestic
Subcustodian as its means of accounting to the Fund for all cash, securities and
other Assets deposited with such entities; provided however, that such books,
records and accountings on which the Bank may rely must be maintained in the
United States by such Domestic Subcustodian and, provided further, that any
agreement between the Custodian and such Domestic Subcustodian must state that
the Domestic Subcustodian agrees to make any records available upon request and
preserve, for the periods described in Rule 31a-2 of the 1940 Act, the records
required to be maintained by Rule 31a-1 of the 1940 Act. In no event shall the
Custodian be entitled to rely upon and use books, records and accountings which
are maintained outside of the United States.
Section 2.26. Opinion of Fund's Independent Certified Public
Accountants. The Custodian shall take all reasonable action as the Fund may
request to obtain from year to year favorable opinions from the Fund's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Fund's Form N-1A
and the Fund's Form N-SAR or other periodic reports to the SEC and with respect
to any other requirements of the SEC.
Section 2.27. Reports by Independent Certified Public Accountants. At
the request of the Fund, the Custodian shall deliver to the Fund a written
report prepared by the Custodian's independent certified public accountants with
respect to the services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting system, internal
accounting control and procedures for safeguarding cash, securities and other
assets, including cash, securities and other assets deposited and/or maintained
in a Securities System or with a Subcustodian. Such report shall be of
sufficient scope and in sufficient detail as may reasonably be required by the
Fund and as may reasonably be obtained by the Custodian.
Section 2.28. Overdraft Facility. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds on
behalf of the Fund for which there would be, at the close of business on the
date of such payment or transfer, insufficient funds held by the Custodian on
behalf of the Fund, the Custodian may, in its sole discretion, provide an
overdraft (an "Overdraft") to the Fund in an amount sufficient to allow the
completion of such payment. Any Overdraft provided hereunder: (a) shall be
payable on the next business day, unless otherwise agreed by the Fund and the
Custodian; and (b) shall accrue interest from the date of the Overdraft to the
date of payment in full by the Fund at a rate agreed upon in writing, from time
to time, by the Custodian and the Fund. The purpose of such Overdrafts is to
temporarily finance extraordinary or emergency expenses not reasonably
foreseeable by the Fund. The Custodian shall promptly notify the Fund in
writing ("Overdraft Notice") of any Overdraft by facsimile transmission or in
such other manner as the Fund and the Custodian may agree in writing. The
Custodian shall have a right of set-off against all Assets (except for Assets
held in a segregated margin account or otherwise pledged in connection with
options or futures contracts held for the benefit of the Fund and for Assets
allocated to any other Overdraft or loan made hereunder); provided, however, the
Custodian shall promptly notify the Fund in writing of any intent to exercise a
right of set-off against Assets hereunder and shall not exercise any such right
of set-off against Assets hereunder unless and until the Fund has failed to pay
(within ten (10) days after the Fund's receipt of such notice of intent to
exercise a right of set-off), any Overdraft, together with all accrued interest
thereon. Notwithstanding the provisions of any applicable law, including,
without limitation, the Uniform Commercial Code, the only rights or remedies
which the Custodian is entitled to with respect to Overdrafts is the right set-
off granted herein.
ARTICLE III
PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
AND RELATED MATTERS
Section 3.01. Proper Instructions and Special Instructions.
(a) Proper Instructions. As used herein, the term "Proper Instructions"
shall mean: (i) a tested telex, a written (including, without limitation,
facsimile transmission) request, direction, instruction or certification signed
or initialed by or on behalf of the Fund by two or more Authorized Persons (as
hereinafter defined); (ii) a telephonic or other oral communication by one or
more Authorized Persons; or (iii) a communication effected directly between an
electro-mechanical or electronic device or system (including, without
limitation, computers) by or on behalf of the Fund by one or more Authorized
Persons; provided, however, that communications of the types described in
clauses (ii) and (iii) above purporting to be given by an Authorized Person
shall be considered Proper Instructions only if the Custodian reasonably
believes such communications to have been given by an Authorized Person with
respect to the transaction involved. Proper Instructions in the form of oral
communications shall be confirmed by the Fund by tested telex or in writing in
the manner set forth in clause (i) above, but the lack of such confirmation
shall in no way affect any action taken by the Custodian in reliance upon such
oral instructions prior to the Custodian's receipt of such confirmation. The
Fund and the Custodian are hereby authorized to record any and all telephonic or
other oral instructions communicated to the Custodian. Proper Instructions may
relate to specific transactions or to types or classes of transactions, and may
be in the form of standing instructions.
(b) Special Instructions. As used herein, the term "Special Instructions"
shall mean Proper Instructions countersigned or confirmed in writing by the
Treasurer or any Assistant Treasurer of the Fund or any other person designated
by the Treasurer of the Fund in writing, which countersignature or confirmation
shall be (i) included on the same instrument containing the Proper Instructions
or on a separate instrument relating thereto, and (ii) delivered by hand, by
facsimile transmission or in such other manner as the Fund and the Custodian
agree in writing.
(c) Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian at the
address and/or telephone, telecopy or telex number agreed upon from time to time
by the Custodian and the Fund.
Section 3.02. Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, the Fund shall
deliver to the Custodian, duly certified as appropriate by a Treasurer or
Assistant Treasurer of the Fund, a certificate setting forth: (a) the names,
titles, signatures, and scope of authority of all persons authorized to give
Proper Instructions or any other notice, request, direction, instruction,
certificate or instrument on behalf of the Fund (collectively, the "Authorized
Persons" and individually, an "Authorized Person"); and (b) the names, titles
and signatures of those persons authorized to issue Special Instructions. Such
certificate may be accepted and relied upon by the Custodian as conclusive
evidence of the facts set forth therein and shall be considered to be in full
force and effect until delivery to the Custodian of a similar certificate to the
contrary. Upon delivery of a certificate which deletes or does not include the
name(s) of a person previously authorized to give Proper Instructions or to
issue Special Instructions, such persons shall no longer be considered an
Authorized Person or authorized to issue Special Instructions.
Section 3.03. Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Director, officer, employee or agent of the Fund shall have
physical access to the Assets of the Fund held by the Custodian nor shall the
Custodian deliver any Assets of the Fund to an account of such person; provided,
however, that nothing in this Section 3.03 shall prohibit (a) any Authorized
Person from giving Proper Instructions, or any person authorized to issue
Special Instructions from issuing Special Instructions, so long as such action
does not result in delivery of or access to Assets of the Fund prohibited by
this Section 3.03; or (b) the Fund's independent certified public accountants
from examining or reviewing the Assets of the Fund held by the Custodian. The
Fund will deliver from time to time a written certificate executed by two
Authorized Persons identifying such Authorized Persons, Directors, officers,
employees and agents of the Fund. Notwithstanding the foregoing, to the extent
that the person acting on behalf of the Custodian in making such delivery has
actual knowledge that any person is an Authorized Person, Director, officer,
employee or agent of the Fund, the Custodian will comply with this Section 3.03
as if the name of such Authorized Person, Director, officer, employee or agent
had been contained in a written certificate provided pursuant to this Section
3.03.
Section 3.04. Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian acts in
accordance with (a) Proper Instructions or Special Instructions, as the case may
be, and (b) the terms of this Agreement, the Custodian shall not be responsible
for the title, validity or genuineness of any property, or evidence of title
thereof, received by it or delivered by it pursuant to this Agreement.
ARTICLE IV
SUBCUSTODIANS
From time to time, in accordance with the relevant provisions of this
Agreement, (i) the Custodian may appoint one or more Domestic Subcustodians and
Special Subcustodians (each, as hereinafter defined) to act on behalf of the
Fund; and (ii) any Domestic Subcustodian so appointed may appoint a Foreign Sub-
Subcustodian or Interim Sub-Subcustodian (as each are hereinafter defined) in
accordance with this Article IV. For purposes of this Agreement, all Domestic
Subcustodians, Special Subcustodians, Foreign Sub-Subcustodians and Interim Sub-
Subcustodians shall be referred to collectively as "Subcustodians".
Section 4.01. Domestic Subcustodians. The Custodian may, at any time
and from time to time, appoint any bank as defined in Section 2(a)(5) of the
1940 Act or any trust company or other entity any of which meet requirements of
a custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder, to act as agent for the Custodian on behalf of the Fund as a
subcustodian for purposes of holding cash, securities and other Assets of the
Fund and performing other functions of the Custodian within the United States (a
"Domestic Subcustodian"); provided, that, the Custodian shall notify the Fund in
writing of the identity and qualifications of any proposed Domestic Subcustodian
at least sixty (60) days prior to the desired appointment of such Domestic
Subcustodian, and the Fund will notify the Custodian, in writing signed by two
or more Authorized Persons, of approval or disapproval of the appointment of the
proposed Domestic Subcustodian; and provided, further, that the Custodian may
not appoint any such Domestic Subcustodian without such prior written approval
of the Fund by such Authorized Persons. Each such duly approved Domestic
Subcustodian and the countries where, Foreign Sub-Subcustodians and the
securities depositories and clearing agencies through which they may hold
securities and other Assets of the Fund shall be as agreed upon by the parties
hereto in writing, from time to time, in accordance with the provisions of
Section 9.04 hereof (the "Subcustodian List").
Section 4.02. Foreign Sub-Subcustodians and Interim Sub-Subcustodians.
(a) Foreign Sub-Subcustodians. The Custodian may at any time appoint, or
cause a Domestic Subcustodian to appoint: (i) any bank, trust company or other
entity meeting requirements of an "eligible foreign custodian" under Section
17(f) of the 1940 Act and the rules and regulations thereunder or by order of
the Securities and Exchange Commission exempted therefrom, or (ii) any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of a
custodian under Section 17(f) of the 1940 Act and the rules and regulations
thereunder to act on behalf of the Fund as a sub-subcustodian for purposes of
holding cash, securities and other Assets of the Fund and performing other
functions of the Domestic Subcustodian in countries other than the United States
of America (a "Foreign Sub-Subcustodian"); provided that, prior to the
appointment or approval of any Foreign Sub-Subcustodian the Custodian shall, or
shall cause the Domestic Subcustodian to, notify the Fund, in writing, of the
identity and qualifications of the proposed Foreign Sub-Subcustodian and make a
copy of the proposed sub-subcustodian agreement available to the Fund at least
sixty (60) days prior to the desired appointment; and provided further that the
Custodian shall have obtained written confirmation from two or more Authorized
Persons of the approval of the Board of Directors or other governing body of the
Fund (which approval may be withheld in the sole discretion of such Board of
Directors or other governing body or entity) with respect to (i) the identity
and qualifications of any proposed Foreign Sub-Subcustodian, and (ii) the
country or countries in which, and the securities depositories or clearing
agencies (hereinafter "Securities Depositories and Clearing Agencies"), if any,
through which, any proposed Foreign Sub-Subcustodian is authorized to hold
securities and other Assets of the Fund. Each such duly approved Foreign Sub-
Subcustodian and the countries where and the Securities Depositories and
Clearing Agencies through which they may hold securities and other Assets of the
Fund shall be listed on the Subcustodian List. The Fund shall be responsible
for informing the Custodian sufficiently in advance of a proposed investment
which is to be held in a country in which no Foreign Sub-Subcustodian is
authorized to act, in order that there shall be sufficient time for the
Custodian or any Domestic Subcustodian to effect the appropriate arrangements
with a proposed Foreign Sub-Subcustodian, including obtaining approval as
provided in this Section 4.02(a). In connection with the appointment of any
Foreign Sub-Subcustodian, the Custodian shall, or shall cause the Domestic
Subcustodian to, enter into a sub-subcustodian agreement with the Foreign Sub-
Subcustodian in form and substance approved by the Fund, provided that the
agreement shall, in all events, comply with the provisions of the 1940 Act and
the rules and regulations thereunder, and the terms and provisions of this
Agreement. The Custodian shall not and shall cause any Domestic Subcustodian
not to consent to the amendment of any sub-subcustodian agreement entered into
with a Foreign Sub-Subcustodian, or agree to any changes thereunder, or waive
any rights under such agreement, except upon prior approval pursuant to Special
Instructions.
(b) Interim Sub-Subcustodians. Notwithstanding the foregoing, in the
event that the Fund shall invest in a security or other Asset to be held in a
country in which no Foreign Sub-Subcustodian is authorized to act, the Custodian
shall, or shall cause the Domestic Subcustodian to, promptly notify the Fund in
writing by facsimile transmission or in such other manner as the Fund and
Custodian shall agree in writing of the unavailability of an approved Foreign
Sub-Subcustodian in such country; and upon the receipt of Special Instructions,
the Custodian shall, or shall cause the Domestic Subcustodian to, appoint or
approve any Person (as hereinafter defined) designated by the Fund in such
Special Instructions, to hold such security or other Asset. (Any Person
appointed or approved as a sub-subcustodian pursuant to this Section 4.02(b) is
hereinafter referred to as an "Interim Sub-Subcustodian.")
Section 4.03. Special Subcustodians. Upon receipt of Special
Instructions, the Custodian shall, on behalf of the Fund, appoint one or more
banks, trust companies or other entities designated in such Special Instructions
to act as a subcustodian for the purpose of (i) effecting third-party repurchase
transactions with banks, brokers, dealers or other entities, (ii) providing
depository and clearing agency services with respect to certain variable rate
demand note securities; and (iii) effecting any other transactions designated by
the Fund in Special Instructions. (Each such designated subcustodian is
hereinafter referred to as a "Special Subcustodian.") Each such duly appointed
Special Subcustodian shall be listed on the Subcustodian List. In connection
with the appointment of any Special Subcustodian, the Custodian shall enter into
a subcustodian agreement with the Special Subcustodian in form and substance
approved by the Fund, provided that such agreement shall in all events comply
with the provisions of the 1940 Act and the rules and regulations thereunder and
the terms and provisions of this Agreement. The Custodian shall not amend any
subcustodian agreement entered into with a Special Subcustodian, or agree to
change or permit any changes thereunder, or waive any rights under such
agreement, except upon prior approval pursuant to Special Instructions.
Section 4.04. Termination of a Subcustodian. The Custodian shall (i)
cause each Domestic Subcustodian to, and (ii) use its best efforts to cause each
Interim Sub-Subcustodian and Special Subcustodian to, perform all of its
obligations in accordance with the terms and conditions of the subcustodian
agreement between the Custodian and such Domestic Subcustodian and Special
Subcustodian or between the Domestic Subcustodian and a Foreign Sub-Subcustodian
or Interim Sub-Subcustodian. In the event that the Custodian is unable to cause
such subcustodian or sub-subcustodian to fully perform its obligations
thereunder, the Custodian shall promptly notify the Fund in writing and
forthwith, upon the receipt of Special Instructions, terminate or cause the
termination of such Subcustodian or Sub-Subcustodian with respect to the Fund
and, if necessary or desirable, appoint or cause the appointment of a
replacement Subcustodian or Sub-Subcustodian in accordance with the provisions
of this Article IV. In addition to the foregoing, the Custodian (A) may, at any
time in its discretion, upon written notification to the Fund, terminate any
Domestic Subcustodian, and (B) shall, upon receipt of Special Instructions,
terminate any Special Subcustodian with respect to the Fund, in accordance with
the termination provisions under the applicable subcustodian agreement, and (C)
shall, upon receipt of Special Instructions, cause the Domestic Subcustodian to
terminate any Foreign Sub-Subcustodian or Interim Sub-Subcustodian as to its use
of such entities with respect to the Fund, in accordance with the termination
provisions under the applicable sub-subcustodian agreement.
Section 4.05. Certification Regarding Foreign Sub-Subcustodians. Upon
request of the Fund, the Custodian shall deliver to the Fund a certificate
stating: (i) the identity of each Foreign Sub-Subcustodian then acting on
behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agents through which each such Foreign Sub-
Subcustodian is then holding cash, securities and other Assets of the Fund; and
(iii) such other information as may be requested by the Fund to ensure
compliance with rules and regulations under the 1940 Act.
ARTICLE V
STANDARD OF CARE: INDEMNIFICATION
Section 5.01. Standard of Care.
(a) General Standard of Care. The Custodian shall exercise reasonable
care and diligence in carrying out all of its duties and obligations under this
Agreement, and shall be liable to the Fund for all loss, damage and expense
suffered or incurred by the Fund resulting from the failure of the Custodian to
exercise such reasonable care and diligence.
(b) Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any Subcustodian or
Securities System, or any subcustodian, Securities Depository or Clearing Agency
utilized by any such Subcustodian, or any nominee of the Custodian or any
Subcustodian (individually, a "Person") is prevented, forbidden or delayed from
performing, or omits to perform, any act or thing which this Agreement provides
shall be performed or omitted to be performed, by reason of: (i) any provision
of any present or future law or regulation or order of the United States of
America, or any state thereof, or of any foreign country, or political
subdivision thereof or of any court of competent jurisdiction (and the Custodian
nor any other Person shall not be obligated to take any action contrary
thereto); or (ii) any act of God or war or other similar circumstance beyond the
control of the Custodian unless in each case, such delay or nonperformance is
caused by the negligence, misfeasance or misconduct of the Custodian.
(c) Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to the Fund, (i) the Custodian
shall, (ii) the Custodian shall cause any applicable Domestic Subcustodian or
Foreign Sub-Subcustodian to, and (iii) the Custodian shall use its best efforts
to cause any applicable Interim Sub-Subcustodian or Special Subcustodian to, use
all commercially reasonable efforts and take all reasonable steps under the
circumstances to mitigate the effects of such event and to avoid continuing harm
to the Fund.
(d) Advice of Counsel. The Custodian shall be without liability for any
action reasonably taken or omitted in good faith pursuant to the written advise
of (i) counsel for the Fund, or (ii) at the expense of the Custodian, such other
counsel as the Fund and the Custodian may agree upon in writing; provided,
however, with respect to the performance of any action or omission of any action
upon such advice, the Custodian shall be required to conform to the standard of
care set forth in Section 5.01 (a).
(e) Expenses of the Fund. In addition to the liability of the Custodian
under this Article V, the Custodian shall be liable to the Fund for all
reasonable costs and expenses incurred by the Fund in connection with any claim
by the Fund against the Custodian arising from the obligations of the Custodian
hereunder including, without limitation, all reasonable attorneys' fees and
expenses incurred by the Fund in asserting any such claim, and all expenses
incurred by the Fund in connection with any investigations, lawsuits or
proceedings relating to such claim; provided however, that the Fund has
recovered from the Custodian for such claim.
(f) Liability for Past Records. The Custodian shall have no liability in
respect of any loss, damage or expense suffered by the Fund, insofar as such
loss, damage or expense arises from the performance of the Custodian in reliance
upon records that were maintained for the Fund by entities other than the
Custodian prior to the Custodian's employment hereunder which the Custodian has
no reason to believe are inaccurate or incomplete after reasonable inquiry.
Section 5.02. Liability of the Custodian for Actions of Other Persons.
(a) Domestic Subcustodian and Foreign Sub-Subcustodian. The Custodian
shall be liable for the actions or omissions of any Domestic Subcustodian or
Foreign Sub-Subcustodian (excluding any Securities Depository or Clearing Agency
appointed by them) to the same extent as if such actions or omissions were
performed by the Custodian itself. In the event of any loss, damage or expense
suffered or incurred by the Fund caused by or resulting from the actions or
omissions of any Domestic Subcustodian or Foreign Sub-Subcustodian for which the
Custodian would otherwise be liable, the Custodian shall promptly reimburse the
Fund in the amount of any such loss, damage or expense.
(b) Special Subcustodians, Interim Sub-Subcustodians, Security Systems,
Securities Depositories and Clearing Agencies. The Custodian shall not be
liable to the Fund for any loss, damage or expense suffered or incurred by the
Fund resulting from the actions or omissions of a Special Subcustodian, Interim
Sub-Subcustodian, Securities System, Securities Depository or Clearing Agency
unless such loss, damage or expense is caused by, or results from, the
negligence, misfeasance or misconduct of the Custodian; provided, however, in
the event of any such loss, damage or expense, the Custodian shall take all
reasonable steps to enforce such rights as it may have against such Special
Subcustodian, Interim Sub-Subcustodian, Security System, Securities Depository
or Clearing Agency to protect the interest of the Fund.
(c) Reimbursement of Expenses. The Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by the Custodian in
connection with the fulfillment of its obligations under Section 5.01(c) as it
relates to Interim Sub-Subcustodians and Special Subcustodians and 5.02(b);
provided however, that such reimbursement shall not apply to expenses occasioned
by or resulting from the negligence, misfeasance or misconduct of the Custodian.
Section 5.03. Indemnification by Fund.
(a) Indemnification Obligations of Fund. Subject to the limitations set
forth in this Agreement, the Fund agrees to indemnify and hold harmless the
Custodian and its nominees from all loss, damage and expense (including
reasonable attorneys' fees) suffered or incurred by the Custodian or its nominee
caused by or arising from actions taken by the Custodian, its employees or
agents in the performance of its duties and obligations under this Agreement;
provided, however, that such indemnity shall not apply to loss, damage and
expense occasioned by or resulting from the negligence, misfeasance or
misconduct of the Custodian or its nominee. In addition, the Fund agrees to
indemnify any Person against liability incurred by reason of taxes assessed to
such Person resulting from the fact that securities and other property of the
Fund are registered in the name of such Person in accordance with the provisions
of this Agreement; provided, however, that in no event shall such
indemnification be applicable to income, franchise or similar taxes which may be
imposed or assessed against any Person. It is also understood that the Fund
agrees to indemnify and hold harmless the Custodian and its nominee for any loss
arising from a foreign currency transaction or contract, where the loss results
from a Sovereign Risk (as hereinafter defined) or where any Person maintaining
securities, currencies, deposits or other Assets of the Fund in connection with
any such transactions has exercised reasonable care maintaining such property or
in connection with any such transaction involving such Assets. A "Sovereign
Risk" shall mean nationalization, expropriation, devaluation, revaluation,
confiscation, seizure, cancellation, destruction or similar action by any
governmental authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of currency
restrictions, exchange controls, taxes, levies or other charges affecting the
Fund's property; or acts of war, terrorism, insurrection or revolution.
(b) Notice of Litigation. Right to Prosecute, Etc. The Fund shall not
be liable for indemnification under this Section 5.03 unless a Person shall have
promptly notified the Fund in writing of the commencement of any litigation or
proceeding brought against the Custodian or other Person in respect of which
indemnity may be sought under this Section 5.03. With respect to claims in such
litigation or proceedings for which indemnity by the Fund may be sought and
subject to applicable law and the ruling of any court of competent jurisdiction,
the Fund shall be entitled to participate in any such litigation or proceeding
with counsel of its choice at its own expense in respect of that portion of the
litigation for which the Fund may be subject to an indemnification obligation;
provided, however, a Person shall be entitled to participate in (but not
control) at its own cost and expense, the defense of any such litigation or
proceeding if the Fund has not acknowledged in writing it obligation to
indemnify the Person with respect to such litigation or proceeding. If the Fund
is not permitted to participate or control such litigation or proceeding under
applicable law or by a ruling of a court of competent jurisdiction, or if the
Fund chooses not to so participate, the Custodian or other Person shall not
consent to the entry of any judgment or enter into any settlement in any such
litigation or proceeding without providing the Fund with adequate notice of any
such settlement or judgment, and without the Fund's prior written consent which
consent shall not be unreasonably withheld or delayed. All Persons shall submit
written evidence to the Fund with respect to any cost or expense for which they
are seeking indemnification in such form and detail as the Fund may reasonably
request.
Section 5.04. Investment Limitations. If the Custodian has otherwise
complied with the terms and conditions of this Agreement in performing its duty
generally, and more particularly in connection with the purchase, sale or
exchange of securities made by or for the Fund, the Custodian shall not be
liable to the Fund and the Fund agrees to indemnify the Custodian and its
nominees, for any loss, damage or expense suffered or incurred by the Custodian
and its nominees arising out of any violation of any investment or other
limitation to which the Fund is subject except for violations of which the
Custodian has actual knowledge. For purposes of this Section 5.04 the term
"actual knowledge" shall mean knowledge gained by the Custodian by means other
than from any prospectus published by the Fund or contained in any filing by the
Fund with the SEC.
Section 5.05. Fund's Right to Proceed. Notwithstanding anything to the
contrary contained herein, the Fund shall have, at its election upon reasonable
notice to the Custodian, the right to enforce, to the extent permitted by any
applicable agreement and applicable law, the Custodian's rights against any
Subcustodian, Securities System or other Person for loss, damage or expense
caused the Fund by such Subcustodian, Securities System or other Person, which
the Custodian may have as a consequence of any such loss, damage or expense, if
and to the extent that the Fund has not been made whole for any such loss,
expense or damage. If the Custodian makes the Fund whole for any such loss,
expense or damage, the Custodian shall retain the ability to enforce its rights
directly against such Subcustodian, Securities System or other Person. Upon the
Fund's election to enforce any rights of the Custodian under this Section 5.05,
the Fund shall reasonably prosecute all actions and proceedings directly
relating to the rights of the Custodian in respect of the loss, damage or
expense incurred by the Fund; provided that, so long as the Fund has
acknowledged in writing its obligation to indemnify the Custodian under Section
5.03 hereof with respect to such claim, the Fund shall retain the right to
settle, compromise and/or terminate any action or proceeding in respect of the
loss, damage or expense incurred by the Fund without the Custodian's consent and
provided further, that if the Fund has not made an acknowledgement of its
obligation to indemnify, the Fund shall not settle, compromise or terminate any
such action or proceeding without the written consent of the Custodian, which
consent shall not be unreasonably withheld or delayed. The Custodian agrees to
cooperate with the Fund and take all actions reasonably requested by the Fund in
connection with the Fund's enforcement of any rights of the Custodian. Nothing
contained in this Section 5.05 shall be construed as an obligation of the Fund
to enforce the Custodian's rights. The Fund agrees to reimburse the Custodian
for out-of-pocket expenses incurred by it in connection with the fulfillment of
its obligations under this Section 5.05; provided, however, that such
reimbursement shall not apply to expenses occasioned by or resulting from the
negligence, misfeasance or misconduct of the Custodian.
Section 5.06. Indemnification by Custodian.
(a) Indemnification Obligations of Custodian. Subject to the limitations
set forth in this Agreement and in addition to the reimbursement obligations
provided in Section 5.02(a), the Custodian agrees to indemnify and hold harmless
the Fund and its nominees from all loss, damage and expense (including
reasonable attorneys' fees) suffered or incurred by the Fund or its nominee
caused by or arising from the failure of the Custodian, its nominee, employees
or agents to comply with the terms or conditions of this Agreement or arising
out of the negligence, misfeasance or misconduct of the Custodian or its
nominee.
(b) Notice of Litigation, Right to Prosecute, Etc. The Custodian shall
not be liable for indemnification under this Section 5.06 unless the Fund shall
have promptly notified the Custodian in writing of the commencement of any
litigation or proceeding brought against the Fund in respect of which indemnity
may be sought under this Section 5.06. With respect to claims in such
litigation or proceedings for which indemnity by the Custodian may be sought and
subject to applicable law and the ruling of any court of competent jurisdiction,
the Custodian shall be entitled to participate in any such litigation or
proceeding with counsel of its choice at its own expense in respect of that
portion of the litigation for which the Custodian may be subject to an
indemnification obligation; provided, however, the Fund shall be entitled to
participate in (but not control) at its own cost and expense, the defense of any
such litigation or proceeding if the Custodian has not acknowledged in writing
its obligation to indemnify the Fund with respect to such litigation or
proceeding. If the Custodian is not permitted to participate or control such
litigation or proceeding under applicable law or by a ruling of a court of
competent jurisdiction, or if the Custodian chooses not to so participate, the
Fund shall not consent to the entry of any judgement or enter into any
settlement in any such litigation or proceeding without providing the Custodian
with adequate notice of any such settlement or judgement, and without the
Custodian's prior written consent which consent shall not be unreasonably
withheld or delayed. The Fund shall submit written evidence to the Custodian
with respect to any cost or expense for which it is seeking indemnification in
such form and detail as the Custodian may reasonably request.
Section 5.07. Custodian's Right to Proceed. Notwithstanding anything
to the contrary contained herein, the Custodian shall have, at its election upon
reasonable notice to the Fund, the right to enforce, to the extent permitted by
any applicable agreement and applicable law, the Fund's rights against any
Subcustodian, Securities System or other Person for loss, damage or expense
caused the Custodian by such Subcustodian, Securities System or other Person,
which the Fund may have as a consequence of any such loss, damage or expense, if
and to the extent that the Custodian has not been made whole for any such loss,
expense or damage. If the Fund makes the Custodian whole for any such loss,
expense or damage, the Fund shall retain the ability to enforce its rights
directly against such Subcustodian, Securities System or other Person. Upon the
Custodian's election to enforce any rights of the Fund under this Section 5.07,
the Custodian shall reasonably prosecute all actions and proceedings directly
relating to the rights of the Fund in respect of the loss, damage and expense
incurred by the Custodian; provided that, so long as the Custodian has
acknowledged in writing its obligation to indemnify the Fund under Section 5.06
hereof with respect to such claim, the Custodian shall retain the right to
settle, compromise and/or terminate any action or proceeding in respect of the
loss, damage or expense incurred by the Custodian without the Fund's consent and
provided further, that if the Custodian has not made an acknowledgement of its
obligation to indemnify, the Custodian shall not settle, compromise or terminate
any such action or proceeding without the written consent of the Fund, which
consent shall not be unreasonably withheld or delayed. The Fund agrees to
cooperate with the Custodian and take all actions reasonably requested by the
Custodian in connection with the Custodian's enforcement of any rights of the
Fund. Nothing contained in this Section 5.07 shall be construed as an
obligation of the Custodian to enforce the Fund's rights. The Custodian agrees
to reimburse the Fund for out-of-pocket expenses incurred by it in connection
with the fulfillment of its obligations under this Section 5.07; provided,
however, that such reimbursement shall not apply to expenses occasioned by or
resulting from the negligence, misfeasance or misconduct of the Fund.
ARTICLE VI
COMPENSATION
For the initial three year period beginning on the effective date of this
Agreement, the Fund shall compensate the Custodian in the amount and at the
times specified in Appendix "B" attached hereto. Thereafter, the Fund shall
compensate the Custodian in the amount, and at times, as may be agreed upon in
writing, from time to time, by the Custodian and the Fund.
ARTICLE VII
TERMINATION
This Agreement shall continue in full force and effect until the first to
occur of: (a) termination by the Custodian by an instrument in writing
delivered or mailed (certified mail, return receipt requested) to the Fund, such
termination to take effect not sooner than ninety (90) days after the date of
such delivery or receipt; (b) termination by the Fund by an instrument in
writing delivered or mailed (certified mail, return receipt requested) to the
Custodian, such termination to take effect not sooner than ninety (90) days
after the date of such delivery or receipt; or (c) termination by the Fund by an
instrument in writing delivered to the Custodian, based upon the Fund's
determination that there is reasonable basis to conclude that the Custodian is
insolvent or that the financial condition of the Custodian is deteriorating in
any material respect, in which case termination shall take effect upon the
Custodian's receipt of such notice or at such later time as the Fund shall
designate. In the event of termination pursuant to this Article VII, the Fund
shall make payment of all accrued fees and unreimbursed expenses within a
reasonable time following termination and delivery of a statement to the Fund
setting forth such fees and expenses. The Fund shall identify in any notice of
termination a successor custodian to which the cash, securities and other Assets
of the Fund shall, upon termination of this Agreement, be delivered. In the
event that securities and other Assets remain in the possession of the Custodian
after the date of termination hereof owing to failure of the Fund to appoint a
successor custodian, the Custodian shall be entitled to compensation for its
services in accordance with the fee schedule most recently in effect, for such
period as the Custodian retains possession of such securities and other Assets,
and the provisions of this Agreement relating to the duties and obligations of
the Custodian and the Fund shall remain in full force and effect for such
period. In the event of the appointment of a successor custodian, the cash,
securities and other Assets owned by the Fund and held by the Custodian, any
Subcustodian or nominee shall be delivered, at the terminating party's expense,
to the successor custodian; and the Custodian agrees to cooperate with the Fund
in the execution of documents and performance of other actions necessary or
desirable in order to substitute the successor custodian for the Custodian under
this Agreement.
ARTICLE VIII
DEFINED TERMS
The following terms are defined in the following sections:
Term Section
Account 2.22(A)
ADRs 2.06
Assets Article I
Authorized Person 3.02
Banking Institution 2.12
Bank Accounts 2.21
Clearing Agency 4.02(a)
Distribution Account 2.16
Domestic Subcustodian 4.01
Foreign Sub-Subcustodian 4.02(a)
Institutional Client 2.03
Interest Bearing Deposit 2.12
Interim Sub-Subcustodian 4.02(b)
OCC 2.09
Overdraft 2.28
Overdraft Notice 2.28
Person 5.01(b)
Procedural Agreement 2.10
Proper Instruction 3.01(a)
SEC 2.22
Securities Depositories 4.02(a)
Securities System 2.22
Shares 2.16
Sovereign Risk 5.03(a)
Special Instruction 3.01(b)
Special Subcustodian 4.03
Subcustodian Article IV
1940 Act Preamble
ARTICLE IX
MISCELLANEOUS
Section 9.01. Execution of Documents, Etc.
(a) Actions by the Fund. Upon request, the Fund shall execute and
deliver to the Custodian such proxies, powers of attorney or other instruments
as may be reasonable and necessary or desirable in connection with the
performance by the Custodian or any Subcustodian of their respective obligations
under this Agreement or any applicable subcustodian agreement, provided that the
exercise by the Custodian or any Subcustodian of any such rights shall in all
events be in compliance with the terms of this Agreement.
(b) Actions by Custodian. Upon receipt of Proper Instructions, the
Custodian shall execute and deliver to the Fund or to such other parties as the
Fund may designate in such Proper Instructions, all such documents, instruments
or agreements as may be reasonable and necessary or desirable in order to
effectuate any of the transactions contemplated hereby and designated therein.
Section 9.02. Representations and Warranties.
(a) Representations and Warranties of the Fund. The Fund hereby
represents and warrants that each of the following shall be true, correct and
complete as of the date of execution of this Agreement and, unless notice to the
contrary is provided by the Fund to the Custodian, at all times during the term
of this Agreement: (i) the Fund is duly organized under the laws of its
jurisdiction of organization and is registered as an open-end management
investment company under the 1940 Act or is a series of portfolio of such
entity; and (ii) the execution, delivery and performance by the Fund of this
Agreement are (w) within its power, (x) have been duly authorized by all
necessary action, and (y) will not (A) contribute to or result in a breach of or
default under or conflict with any existing law, order, regulation or ruling of
any governmental or regulatory agency or authority, or (B) violate any provision
of the Fund's corporate charter or other organizational document, or bylaws, or
any amendment thereof or any provision of its most recent Prospectus or
Statement of Additional Information.
(b) Representations and Warranties of the Custodian. The Custodian
hereby represents and warrants that each of the following shall be true, correct
and complete as of the date of execution of this Agreement and, unless notice to
the contrary is provided by the Custodian to the Fund, at all times during the
term of this Agreement: (i) the Custodian is duly organized under the laws of
its jurisdiction of organization and qualifies to serve as a custodian to open-
end management investment companies under the provisions of the 1940 Act; and
(ii) the execution, delivery and performance by the Custodian of this Agreement
are (w) within its power (x) have been duly authorized by all necessary action,
and (y) will not (A) contribute to or result in a breach of or default under or
conflict with any existing law, order, regulation or ruling of any governmental
or regulatory agency or authority, or (B) violate any provision of the
Custodian's corporate charter, or other organizational document, or bylaws, or
any amendment thereof. The Custodian acknowledges receipt of a copy of the
Fund's most recent Prospectus and Statement of Additional Information.
Section 9.03. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and accordingly, supersedes as of the effective date of this
Agreement any custodian agreement heretofore in effect between the Fund and the
Custodian.
Section 9.04. Waivers and Amendments. No provisions of this Agreement
may be waived, amended or deleted except by a statement in writing signed by the
party against which enforcement of such waiver, amendment or deletion is sought;
provided, however, the Subcustodian List may be amended from time to time by the
Fund's execution and delivery to the Custodian of an amended Subcustodian List,
in which case such amendment shall take effect immediately upon execution by the
Custodian.
Section 9.05. Interpretation. In connection with the operation of this
Agreement, the Custodian and the Fund may agree in writing from time to time on
such provisions interpretative of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the general tenor of
this Agreement. No interpretative or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
Section 9.06. Captions. Headings contained in this Agreement, which
are included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the parties
hereto.
Section 9.07. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Missouri, in each case
without giving effect to principles of conflicts of law.
Section 9.08. Notices. Except in the case of Proper Instructions or
Special Instructions, and as otherwise provided in this Agreement, notices and
other writings contemplated by this Agreement shall be delivered by hand or by
facsimile transmission or as otherwise agreed to by the Fund and the Custodian
in writing (provided that in the case of delivery by facsimile transmission,
notice shall also be mailed postage prepaid) to the parties at the following
addresses:
(a) If to the Fund:
United Cash Management, Inc.
6300 Lamar Avenue
Overland Park, Kansas 66202
Attn: Fund Treasurer
Telephone: 913-236-2000
Telefax: 913-236-1595
(b) If to the Custodian:
United Missouri Bank, n.a.
928 Grand Avenue, 10th Floor
Kansas City, Missouri 64106
Attn: Securities Administration
Telephone: 816-860-7764
Telefax: 816-860-4869
or such other address as either party may have designated in writing to the
other party hereto.
Section 9.09. Assignment. This Agreement shall be binding on and shall
inure to the benefit of the Fund and the Custodian and their respective
successors and assigns, provided that, subject to the provisions of Section 7.01
hereof, neither party hereto may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the other party.
Section 9.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original. This
Agreement shall become effective when one or more counterparts have been signed
and delivered by each of the parties.
Section 9.11. Confidentiality; Survival of Obligations. The parties
hereto agree that each shall treat confidentially the terms and conditions of
this Agreement and all information provided by each party to the other regarding
its business and operations. All confidential information provided by a party
hereto shall be used by any other party hereto solely for the purpose of
rendering services pursuant to this Agreement and, except as may be required in
carrying out this Agreement, shall not be disclosed to any third party without
the prior consent of such providing party. The foregoing shall not be
applicable to any information that is publicly available when provided or
thereafter becomes publicly available other than through a breach of this
Agreement, or that is required to be disclosed by any bank examiner of the
Custodian or any Subcustodians, any auditor or examiner of the parties hereto,
by judicial or administrative process or otherwise by applicable law or
regulation. The provisions of this Section 9.11 and Section 9.01, 9.07, Section
2.28, Section 3.04, Section 4.05, Section 7.01, Article V and Article VI hereof
and any other rights or obligations incurred or accrued by any party hereto
prior to termination of this Agreement shall survive any termination of this
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in its name and behalf on the day and year first above written.
UNITED CASH MANAGEMENT, INC. UNITED MISSOURI BANK, n.a.
By: /s/Rodney O. McWhinney By: /s/David F. Larrabee
Name: Rodney O. McWhinney Name: David F. Larrabee
Title: Vice President Title: Vice President
<PAGE>
APPENDIX "A"
TO CUSTODIAN AGREEMENT
BETWEEN
UNITED CASH MANAGEMENT, INC.
AND
UNITED MISSOURI BANK, n.a.
Dated as of February 16, 1995
The following is a list of Domestic Subcustodians, Foreign Sub-Subcustodian
and Special Subcustodians under the Custodian Agreement as amended:
A. Domestic Subcustodians:
Brown Brothers Harriman & Co.
United Missouri Trust Company of New York
B. Foreign Sub-Subcustodians:
Country Sub-Subcustodian Depository
Argentina Citibank, n.a. CDV
Australia National Australia Bank Ltd. AUSTRACLEAR, RITs
Austria Creditanstalt Bankverein KONTROLLBANK (OEKB)
Belgium Banque Bruxelles Lambert CIK, BNB
Brazil First National Bank of BOVESPA, CLC
Boston, Brazil
Canada Canadian Imperial Bank CDS
of Commerce
Chile Citibank, n.a. None
Denmark Den Danske Bank VP
Finland Union Bank of Finland Securities Association
France Banque Indosuez SICOVAM; Banque De France
Germany Berliner Handels Und KASSENVEREIN
Frankfurter Bank
Hong Kong HongKong & Shanghai HongKong Securities Clearing
Banking Corp. Company
Indonesia Citibank, n.a. None
Italy Banca Commerciale Italiana MONTE TITOLI, Banca D'Italia
Japan Mitsui Trust & Banking Co. JASDEC, Bank of Japan
Korea Citibank, n.a. Korean Securities Depository
Corporation (KSD)
Malaysia HongKong & Shanghai Banking MCD; Bank Negara Malaysia
Corp.
Mexico Citibank Mexico, s.a. INDEVAL; Banco De Mexico
Netherlands ABN - Amro Bank NECIGER; De Nederlandsche Bank
Norway Christiana Bank VPS
Peru Citibank, n.a. Caja De Valores (CAVAL)
Philippines Citibank, n.a. None
Singapore HongKong & Shanghai Banking CDP
Corp.
Spain Banco Santander SCLV; Banco De Espana
Sweden Skandinaviska Enskilda Banken VPC
Switzerland Union Bank of Switzerland SEGA
Thailand HongKong & Shanghai Banking Share Depository Center (SDC)
Corp.
Turkey Citibank, n.a. TvS, Central Bank of Turkey
United
Kingdom Midland Securities PLC CMO, CGO
C. Special Subcustodians:
Wilmington Trust Co.
The Bank of New York, n.a.
Euroclear
<PAGE>
APPENDIX "B"
TO
CUSTODIAN AGREEMENT
BETWEEN
UNITED CASH MANAGEMENT, INC.
AND
UNITED MISSOURI BANK, n.a.
Dated as of January 1, 1995
The Fund shall be responsible for providing the Custodian the net asset
levels the Custodian requires to calculate the net asset portion of the
Custodian's fees. Such determinations shall be based upon the average monthly
assets of each Fund and shall specify the level of domestic assets and foreign
assets by country, as appropriate. Domestic assets shall include all assets
held in the United States including but not limited to American Depositary
Receipts. Foreign assets shall include all assets held outside the United
States including but not limited to securities which clear through Euroclear or
CEDEL. The Custodian will provide as soon as practicable after receiving the
information provided by the Fund with respect to the net asset level numbers, a
bill for the Fund, including such reasonable detail in support of each bill as
may be reasonably requested by the Fund. As used in this Appendix "B", "United
Funds" shall mean all funds in the United Group of Funds, TMK/United Funds,
Inc., Waddell & Reed Funds, Inc., Torchmark Insured Tax-Free Fund, Inc. and
Torchmark Government Securities Fund, Inc.
DOMESTIC CUSTODY FEE SCHEDULE
A. Annual Fee (combining all domestic assets):
An annual fee to be computed as of month end and payable each month of the
Fund's fiscal year (after receipt of the bill issued to each Fund based
upon its portion of domestic assets), at the annual rate of:
.00005 for the first $5,000,000,000 of the net assets of all the United
Funds, plus
.00004 for any net assets exceeding $5,000,000,000 of the assets of all the
United Funds.
B. Portfolio Transaction Fees (billed to each Fund):
(a)For each portfolio transaction* processed through a
Depository (DTC, PTC or Fed) $ 7.00
(b) For each portfolio transaction* processed through the
New York office (physical settlement) 20.00
(c)For each futures/options contract written 25.00
(d)For each principal/interest paydown 6.00
(e)For each interfund note transaction 5.00
* A portfolio transaction includes a receive, delivery, maturity, free
security movement and corporate action.
C. Earnings Credits:
Positive earnings credits will be applied on all collected custody and cash
management balances of each Fund at the Custodian to earn the Custodian's
daily repurchase agreement rate less reserve requirements and FDIC
premiums. Negative earnings credits will be charged on all uncollected
custody and cash management balances of each Fund at the Custodian's prime
rate less 150 basis points on each day a negative balance occurs. Positive
and/or negative earnings credits will be monitored daily for each Fund and
the net positive or negative amount for each Fund will be included in the
monthly statements. Excess positive credits for each Fund will be carried
forward indefinitely.
D. Out-of-Pocket Expenses (passed directly from Special Subcustodians):
Includes all charges by any Special Subcustodian to the Custodian as
Custodian for any Assets held at the Special Subcustodian.
GLOBAL CUSTODY FEE SCHEDULE
A. Global Fee Schedule:
Market: Annual Asset Fees Transaction Fees
Argentina .0037 $85
Australia .0009 $85
Austria .0011 $70
Belgium .0011 $60
Brazil .0035 $60
Canada .0008 $35
Chile .0045 $85
Denmark .0011 $60
Finland .0011 $85
France .0011 $85
Germany .0008 $60
Hong Kong .0009 $85
India .0055 $135
Indonesia .0009 $85
Ireland .0011 $60
Italy .0011 $70
Japan .0008 $40
Korea .0035 $60
Malaysia .0009 $85
Mexico .0016 $60
Netherlands .0011 $35
New Zealand .0009 $85
Norway .0011 $85
Peru .0070 $160
Phillippines .0035 $95
Portugal .0035 $145
Singapore .0009 $85
Spain .0009 $85
Sweden .0011 $70
Switzerland .0009 $85
Thailand .0009 $85
Turkey .0045 $110
U.K. .0011 $60
Note: Fee Schedule eliminates sub-custodian asset and transaction-based out-
of-pocket expenses. Other sub-custodian out-of-pocket expenses (i.e. Scrip
fees, stamp duties, certificate fees, etc.)
B. Out-of-Pocket Expenses (passed directly from Brown Brothers Harriman &
Co.):
Includes, but is not limited to telex, legal, telephones, postage, and
direct expenses including but not limited to tax reclaim, customized
systems programming, certificate fees, duties, and registration fees.
C. Short-term Dollar Denominated Global Assets
Eurodollar CDs, Time Deposits
(1) An annual fee to be computed as of month end and payable each month of
the Fund's fiscal year (after receipt of the bill issued to the Fund
based upon its portion of short-term dollar denominated assets), at
the annual rate of:
.0004 on all short-term dollar denominated assets of the United
Funds.
(2) Portfolio Transaction Fees:
First Chicago Clearing Centre-Trades with Members $136.00
First Chicago Clearing Centre-Trades with Non-members 153.00
First Chicago Clearing Centre-Income Collection 64.00
D. Euroclear Eligible Issues:
(1) An annual fee to be computed as of month end and payable each month of
the Fund's fiscal year (after receipt of the bill issued to the Fund
based upon its portion of Euroclear issues), at the annual rate of:
2.5 basis points on all United Funds Euroclear assets held in account
at UMB Bank, n.a.
(2) Portfolio Transaction Fees:
Euroclear $60.00
EX-99.B9-cmssa
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT, made as of the ____ day of ____________, 1995, by and
between UNITED CASH MANAGEMENT, INC. (the "Company) and Waddell & Reed Services
Company (the "Agent"),
W I T N E S S E T H :
WHEREAS, The Company wishes, as applicable, to appoint the Agent or to
continue the appointment of the Agent to be its shareholder servicing agent
upon, and subject to, the terms and provisions of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree as follows:
1. Appointment of Agent as Shareholder Servicing Agent for the Company;
Acceptance.
(1) The Company hereby appoints the Agent to act as Shareholder
Servicing Agent for the Company upon, and subject to, the terms and provisions
of this Agreement.
(2) The Agent hereby accepts the appointment as Shareholder Servicing
Agent for the Company and agrees to act as such upon, and subject to, the terms
and provisions of this Agreement.
2. Definitions.
(1) In this Agreement -
(a) The term the "Act" means the Investment Company Act of 1940
as amended from time to time;
(b) The term "account" means the shares of the Company
registered on the books of the Company in the name of a shareholder and includes
shares subject to instructions by the shareholder with respect to periodic
redemptions and/or reinvestment in additional shares of any dividends payable on
said shares. An account does not include shares held under a plan or program
issued by a unit investment trust for which Waddell & Reed, Inc. was or is the
depositor or sponsor;
(c) The term "affiliate" of a person shall mean a person
controlling, controlled by, or under common control with that person;
(d) The term "Class" shall mean each separate sub-class of a
class of shares of the Company, as may now or in the future exist;
(e) The term "Fund" shall mean each separate class of shares of
the Company, as may now or in the future exist;
(f) The term "officers' instruction" means an instruction given
on behalf of the Company to the Agent and signed on behalf of the Company by any
one or more persons authorized to do so by the Company's Board of Directors;
(g) The term "prospectus" means the prospectus and Statement of
Additional Information of the applicable Fund or Class from time to time in
effect;
(h) The term "shares" means shares including fractional shares
of capital stock of the Company, whether or not such shares are evidenced by an
outstanding stock certificate issued by the Company;
(i) The term "shareholder" shall mean the owner of record of
shares of the Company;
(j) The term "stock certificate" means a certificate
representing shares in the form then currently in use by the Company.
3. Duties of the Agent.
The Agent shall perform such duties as shall be set forth in this
paragraph 3 and in accordance with the practice stated in Exhibit A of this
Agreement or any amendment thereof.
(1) Transfers.
Subject to the provisions of this Agreement the Agent hereby
agrees to perform the following functions as transfer agent for the Company:
(a) Recording the ownership, transfer, exchange and cancellation
of ownership of shares of the Company on the books of the Company;
(b) Causing the issuance, transfer, exchange and cancellation of
stock certificates;
(c) Establishing and maintaining records of accounts;
(d) Computing and causing to be prepared and mailed or otherwise
delivered to shareholders payment checks including bank wire transfers 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) Causing checking accounts to be available and maintained for
shareholders who elect to redeem shares by drawing checks on such accounts,
including accepting or rejecting signatures on all checks drawn on the checking
account and notifying the payor bank to dishonor any check the Agent deems not
to be validly signed;
(f) Furnishing to shareholders such information as may be
reasonably required by the Company, including appropriate income tax
information;
(g) 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;
(h) 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;
(i) 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;
(j) 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 an amount payable on the first day of each month of $1.75 for each
account of the Company which was in existence during any portion of the
immediately preceding month and $.75 for each check drawn on the checking
account of the Company maintained for its shareholders presented to the Agent
for review during the immediately preceding month. 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, and bank charges for wire transfers and maintenance of
shareholder checking accounts pursuant to Section 3(1)(e) herein above; (ii)
long distance telephone costs incurred by the Agent for telephone communications
and microfilm and storage costs for transfer agency records and documents; (iii)
costs of all ancillary and supporting services and related expenses (other than
insurance premiums) reasonably required by and provided to the Agent, other than
by its employees or employees of an affiliate, with respect to functions of the
Company being performed by it in its capacity as Agent hereunder, including
legal advice and representation in litigation to the extent that such payments
are permitted under Paragraph 7 of this Agreement; (iv) costs for special
reports or information furnished on request pursuant to this Agreement and not
specifically required by the Agent by Paragraph 3 of this Agreement; and (v)
reasonable costs and expenses incurred by the Agent in connection with the
duties of the Agent described in Paragraph (3)(1)(i). In addition, the Company
agrees to promptly pay over to the Agent any fees or payment of charges it may
receive from a shareholder for services furnished to the shareholder by the
Agent.
Services and operations incident to the sale and distribution of the
Company's shares, including sales communications, confirmations of investments
(not including reinvestment of dividends) and the clearing or collection of
payments will not be for the account or at the expense of the Company under this
Agreement.
5. Right of Company to Inspect Records, etc.
The Company will have the right under this Agreement to perform on
site inspection of records and accounts and to perform audits directly
pertaining to the Company shareholder accounts serviced by the Agent hereunder
at the Agent's facilities in accordance with reasonable procedures at the
frequency necessary to assure proper administration of the Agreement. The Agent
will cooperate with the Company's auditors or representatives of appropriate
regulatory agencies and furnish all reasonably requested records and data.
6. Insurance.
The Agent now has the insurance coverage described in Exhibit C,
attached hereto, and the Agent will not take any action to eliminate or decrease
such coverage during the term of this Agreement without receiving the approval
of the Fund in advance of any change, except the Agent, after giving reasonable
notice to the Company, may eliminate or decrease any coverage if the premiums
for such coverage are substantially increased.
The Company, at its expense, will include as part of its insurance
coverages maintained pursuant to Section 17(j) of the Investment Company Act of
1940 fidelity insurance with respect to forgery or alteration of checks drawn on
its checking account referred to in Section 3(1)(e) of this Agreement subject to
such deductible for this particular coverage as it may deem appropriate. The
Agent will maintain at is expense such insurance coverages with respect to the
Agent's duties under Section 3(1)(e) for loss caused by errors or omissions as
it deems appropriate. Any loss to the Company by reason of the deductible on
coverages maintained by it hereunder shall be paid by the Agent.
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, Inc. or 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 CASH MANAGEMENT, INC.
By:_________________________________
Sharon K. Pappas, Vice President
ATTEST:
By:____________________________
Amy D. Eisenbeis, Assistant Secretary
WADDELL & REED SERVICES COMPANY
By:__________________________________
Robert L. Hechler, President
ATTEST:
By:___________________________
Sharon K. Pappas, Secretary
<PAGE>
EXHIBIT A
A. DUTIES IN SHARE TRANSFERS AND REGISTRATION
1. The Agent in carrying out its duties shall follow general commercial
practices and the Rules of the Stock Transfer Association, Inc. except as they
may conflict or be inconsistent with the specific provisions of the Company's
Articles of Incorporation and Bylaws, prospectus, applicable Federal and state
laws and regulations and this Agreement.
2. The Agent shall not require that the signature of the appropriate
person be guaranteed, witnessed or verified in order to effect a redemption,
transfer, exchange or change of address except as may from time to time be
directed by the Company as set forth in an officers' instruction. In the event
a signature guarantee is required by the Company, the Agent shall not inquire as
to the genuineness of the guarantee.
3. The Agent shall not replace a lost, stolen or misplaced stock
certificate without requiring and being furnished with an open penalty surety
bond protecting the Company and the Agent against loss.
B. The practices, procedures and requirements specified in A above may be
modified, altered, varied or supplemented as from time to time may be mutually
agreed upon by the Company and the Agent and evidenced on behalf of the Company
by an officers' instruction. Any such change shall not be deemed to be an
amendment to the Agreement within the meaning of Paragraph 8 of the Agreement.
<PAGE>
EXHIBIT B
Bond or
Name of Bond Policy No. Insurer
Investment Company 87015194B ICI Mutual
Blanket Bond Form Insurance
Company
Fidelity $25,000,000
Audit Expense 500,000
On Premises 25,000,000
In Transit 25,000,000
Forgery or Alteration 25,000,000
Securities 25,000,000
Counterfeit Currency 25,000,000
Uncollectible Items of
Deposit 25,000
Voice-Initiated Transactions 25,000,000
Total Limit 25,000,000
Directors and Officers/ 87015194D ICI Mutual
Errors and Omissions Liability Insurance
Insurance Form Company
Total Limit $ 5,000,000
Blanket Lost Instrument Bond (Mail Loss) 30S100639551 Aetna Life
& Casualty
Blanket Undertaking Lost Instrument
Probate Waiver 42SUN339806 Hartford
Casualty
Insurance
EX-99.B9-cmappca
Waddell & Reed, Inc.
P.O. Box 29217 United Group of Funds Division Office Stamp
Shawnee Mission, KS 66201-9217 APPLICATION
I (We make application for an account to be established as follows:
________________________________________________________________________
REGISTRATION TYPE (one only) Trans Code: ________
Date Tramsmitted: _____
________________________________________________________________________
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
Fidciary 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, Employer's Name (Do not Abbreviate)
attach form #CUF1417) _________________________________________________
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 available
680-Retirement Shares 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 & 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 Number 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: $___ 11. Investment Objectives (mark all that
apply):
8. Other Assets (excluding home, furnishings, cars): $___ [] Retirement Savings
9. Net Worth (Assets minus liabilities): $___ [] Children's College []Income
10. Are you associated with an NASD Member? Yes ___ No ___ [] 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)
_______________________________________________________________________________
ACKNOWLEDGEMENT
* 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 penalities 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
[] Parntership Confidential Questionnaire (CRP1186)
[] Statement of Intention (CUF0671)
[] AIS Authorization (CUF0714)
[] Funds Plus (CUF1444)
[] Additional Applications _______________________________________
[] Check enclosed # _________________________________
[] Other: ___________________________________________
CAP0001(11/94)
EX-99.B9-cmappnav
[ Division Office Stamp]
Waddell & Reed, Inc. Mutual Funds
P.O. Box 29217 Net Asset Value (NAV)
Shawnee Mission, Kansas 66201-9217 APPLICATION
I (We) make application for an account to be established as follows:
[] A NAV account to be established.
[] A new Fund to be added to an existing NAV account.
[] An existing non-NAV account to be converted to a NAV account.
Check applicable block:
[] Home Office Personnel
[] Field Personnel
[] 401(k) Plan with 100 or more eligible employees
________________________________________________________________________________
REGISTRATION TYPE (one only) * SEE REVERSE SIDE FOR ELIGIBLE PURCHASERS*
________________________________________________________________________________
NON RETIREMENT PLAN
[] Single Name [] Joint Tenants W/Right of Survivorship [] Declaration of
Trusts Revocable
[] Uniform Gifts (Transfers) To Minors [] Other: ______ (Attach CUF022)
________________________________________________________________________________
RETIREMENT PLAN
[] Individual IRA [] 401(k) Unallocated account
[] Spousal IRA [] 401(k) Participant
[] Rollover (Qual. plan lump sum distr.) [] Keogh Participant* (Profit Sharing
[] Simplified Pension Plan (SEP/SPP)* Plan)
*(If new plan attach Adoption [] Keogh Participant* (Money Purchase
Agreement from MRP1166) Plan
*(If new plan attach Adoption
Agreement from MRP1182)
[] TSA or [] 457 Plan Employer's Name _____________________________________
(Do Not Abbreviate)
(If billing is required, -----------------------------------------------------
attach form #CSF1417) Street City State Zip
[] If Tri-Vest, enter Partnership name _____________________________ amt $______
________________________________________________________________________________
REGISTRATION []NEW ACCOUNT or []NEW FUND FOR EXISTING ACCOUNT: [][][][][][][]-[]
(Must have same ownership) Date of Birth
________________________________________________________________________________
Individual Name (exactly as desired) If spousal IRA, name of working spouse; if
Keogh or 401(k), name of Plan/Trustee/Custodian.
______________________
Month Day Year
________________________________________________________________________________
Joint Name (if any, exactly as desired) If spousal IRA, name of non-working
spouse; if Keogh or 401(k) Participant, enter name.
______________________ ______________
Month Day Year Relationship
________________________________________________________________________________
Mailing Address
_______________ ______________ ____________ _____/__________-________________
City State Zip Telephone
Social Security #:[][][]-[][]-[][][][] or Taxpayer Identification #:
[][]-[][][][][][][]
________________________________________________________________________________
BENEFICIARY: For Retirement Plan Accounts Only. (not for use with 401(k) Plans)
Full Name of Beneficiary Tax Identification Number Relationship Percent
________________________ _________________________ ____________ ______%
________________________________________________________________________________
INVESTMENTS: Make check payable to Waddell & Reed
FUND CODES
101 - W&R Total Return
102 - W&R Growth
103 - W&R Limited-Term Bond
104 - W&R Municipal Bond
(not available for retirement plans)
105 - W&R International Growth
106 - W&R Asset Strategy
621 - Income
622 - Science & Technology
623 - Accumulative
624 - Bond
625 - International Growth
626 - Gold and Government
627 - Continental Income
628 - High Income
629 - Vanguard
630 - New Concepts
634 - High Income II
680 - Retirement Shares
684 - Asset Strategy
750 - Cash Management
753 - Government Securities
760 - Municipal Bond (not available for Retirement Plans)
762 - Municipal High Income (not available for Retirement Plans)
____ - Other
________________________________________________________________________________
OPEN ACCOUNT
-----If Retirement Plan-----
FUND Amount Yr. Deductible or
(enter code) Enclosed of Contr. Non-Deductible
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
[][][] $______________ 19________ __________
Total $______________
Monthly Div./C.G. Distr**
TOP From AIS* (Assumes RR)
Another Carrier (if any) RR CC CR
[] $______________ [] [] []
[] $______________ [] [] []
[] $______________ [] [] []
[] $______________ [] [] []
[] $______________ [] [] []
$______________
Existing Accounts
To Be Converted
To NAV
[][][][][][][][]
[][][][][][][][]
[][][][][][][][]
[][][][][][][][]
[][][][][][][][]
________________________________________________________________________________
*Attach AIS Authorization Form #CUP0714 **Attach Payroll Deduction Authorization
(PFM743) **RR=Reinvest Div/Cap Gain CC=Cash Div/Cap Gain CR=Cash Div/Reinvest
Cap Gain
NAV application must be approved and signed by Division Manager or Regional Vice
President for field personnel and 401(k) plans or Supervisor for Home Office
personnel. Refer to the reverse side for more details.
CHECK SERVICE (Not available for retirement plans)
Send information to establish redemption checking account for: [] United
Government Securities [] United Cash Management
_______________________________________________________________________________
EXPEDITED REDEMPTION: For United Cash Management Only. (Not available for
retirement plans)
Complete items below:
_________________________________________________________
Name and Address of Bank/Broker/Savings & Loan
_________________________________________________________
Street
_________________________________________________________
City State Zip
_________________________________________________________
Account Number
If account is with a Broker or Savings and Loan, provide:
_________________________________________________________
Name of Its Commercial Bank
_________________________________________________________
Street
_________________________________________________________
City State Zip
_________________________________________________________
Its Account # with Its Commercial Bank
One United Cash Management Accounts where expedited redemption is requested,
Waddell & Reed, Inc. is authorized to honor telephonic, telegraphic or written
requests from anyone for redemption of all or any fund shares so long as the
proceeds are transmitted to the identified account.
_______________________________________________________________________________
ELIGIBLE PURCHASERS
A. EMPLOYEE - Any employee (including retired employees) of Waddell & Reed or
its affiliated companies. A retired employee is an individual separated
from service from Waddell & Reed or affiliated companies with a vested
interest in any Employee Benefit Plan sponsored by Waddell & Reed or its
affiliated companies.
B. SALES REPRESENTATIVE - Any sales representative who is licensed to sell the
products and/or services of Waddell & Reed or a retired Sales Representative.
A retired sales representative is defined as any sales representative who was
at the time of separation from service from Waddell & Reed a Senior Account
Representative.
C. QUALIFYING FAMILY MEMBERS - Spouses, children, parents (no age limit) of
employees and their spouses and sales representatives as defined above.
D. RETIREMENT PLANS - Any Retirement Plan sponsored by Waddell & Reed, Inc.
established for the benefit of an employee, sales representative or
qualifying family member, as defined above.
E. TRUSTS - Trusts, under which the grantor and the trustee or a co-trustee are
each an employee, sales representative or qualifying family member.
F. CUSTODIANS - A custodian pursuant to a Uniform Gifts (or Transfers) to Minors
Act purchasing for the child of an employee or sales representative. (The
Custodian need not be an Eligible Purchaser.)
G. 401(k) PLANS - Any Cash or Deferred Arrangement established pursuant to
Internal Revenue Code Section 401(k) which has 100 or more eligible
employees.
TERMS AND CONDITIONS
A. NO TRANSFER OF OWNERSHIP - Shares purchased hereunder at net asset value
shall not be transferable on the books of the Fund to other than an Eligible
Purchaser except upon death of the registered shareholder(s). However,
assignments to lending institutions to secure loans are permitted except
where otherwise prohibited.
B. JOINT TENANCY - All registered shareholders in a joint tenancy account must
be Eligible Purchasers.
C. CHANGES IN REGISTRATION - A change in registration of shares purchases at net
asset value will be permitted provided the new registration maintains owner-
ship by an Eligible Purchaser.
D. ISSUANCE OF SHARE CERTIFICATES - A share certificate will not be issued,
unless required in connection with a loan.
E. REDEMPTION OF SHARES - Shares may be redeemed as provided in the prospectus
of the respective Fund.
F. PURCHASES - A minimum initial purchase of $500 is usually required for all
Funds. The minimum repeat purchase is $25, except for United Cash Manage-
ment which has no minimum.
G. GENERAL -
1. Purchases of Investment Programs are not included in net asset value
purchases.
2. Shares purchases at net asset value will not be added to existing sales
load accounts. New accounts will be established.
3. If shares held in a non-NAV account are converted/transferred into a NAV
account, the same terms and conditions that apply to NAV shares will also
apply to the converted/transferred shares.
________________________________________________________________________________
TERMINATION
A. The right to purchase shares at net asset value may be terminated by Waddell
& Reed, Inc. at anytime without notice.
________________________________________________________________________________
ACKNOWLEDGEMENT
* I (we) have received a copy of the current prospectus(es) of the Funds
selected.
* If purchasing an IRA, I (we) certify that I (we) have read the Retirement Plan
and Custody Agreement and agree to the terms and conditions set forth therein,
and do hereby establish the Individual Retirement Plan.
* In the case of a 401(k) plan, I (we) certify that more than 100 employees are
currently eligible to participate.
* Under penalties of perjury, I certify that the social security number or other
taxpayer identification number shown on reverse side is correct (or I am wait-
ing for a number to be issued to me) and (strike the following if not true)
that I am not subject to backup withholding because (a) I am exempt fro backup
withholding, or (b) I have not been notified by the IRS that I am subject to
backup withholding as a result of a failure to report all interest and
dividends, or (c) the IRS has notified me that I am no longer subject to back-
up withholding.
An approved application must be submitted for each initial purchase, each new
Fund, and each conversion to NAV. Full payment must accompany the application.
No order will be accepted by wire nor by written request except on the approved
application. MAIL THIS APPLICATION FOR ANY INITIAL PURCHASE, NEW FUND, AND
CONVERSION TO NAV TO THE HOME OFFICE CUSTOMER SERVICE DIVISION. REPEAT
PURCHASES IN AN EXISTING FUND ACCOUNT SHOULD BE MAILED TO THE HOME OFFICE
CUSTOMER SERVICE DIVISION ACCOMPANIED BY THE TEAR-OFF PORTION OF A CONFIRMATION.
I am eligible to purchase shares at net asset value. I have read all the terms
and conditions stated above and understand and agree to all of them. I agree to
notify Waddell & Reed if my account(s) become ineligible of NAV status.
___________________________________ _______________________________________
Signature of Applicant Representative Number, if applicable
___________________________________ _______________________________________
Signature of Division Manager/ RVP or Date
Supervisor of Home Office Personnel
___________________________________ _______________________________________
Name of Waddell & Reed Employee or Applicant's Relationship to Employee
Representative, if applicable or Representative
[Home Office Use Only]
Fiduciary Trust Company of New
Hampshire accepts appointment as
Custodian in accordance with the Custody
Agreement:
By: _________________________________________
Fiduciary Trust Company Authorized Signature
[OSJ: ]
CUF0025(11/93)
EX-99.B9-cmasa
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT, made as of the 1st day of October, 1990, by and between
United Cash Management, Inc. (the "Fund"), a Maryland corporation and Waddell &
Reed Services Company ("Agent"), a Missouri corporation,
WITNESSETH:
WHEREAS, the Fund wishes to appoint the Agent to be its Accounting Services
Agent upon and subject to the terms and provisions of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree as follows:
A. Appointment of the Agent as Accounting Services Agent for the Fund;
Acceptance.
(1) The Fund hereby appoints the Agent to act as Accounting Services
Agent for the Fund upon and subject to the terms and provisions of this
Agreement.
(2) Agent hereby accepts the appointment as Accounting Services Agent
for the Fund and agrees to act as such upon and subject to the terms and
provisions of this Agreement.
B. Duties of the Agent.
The Agent shall perform such duties as set forth in this Paragraph B
as agent for and on behalf of the Fund.
(1) Agent shall provide bookkeeping and accounting services and
assistance by providing to the Fund the necessary personnel and facilities to
maintain the Fund's portfolio records and general accounting records, to price
daily the value of shares of the Fund, and with the assistance and advice of the
Fund's attorneys and independent accountants, to prepare or assist the Fund's
attorneys and independent accountants to prepare, as may be applicable, reports
required to be filed by the Fund with regulatory agencies including the
preparation of proxy statements, prospectuses, shareholder reports and other
reports as required by law.
(2) Agent shall maintain and keep current the accounts, books,
records, and other documents relating to the Fund's financial and portfolio
transactions as may be required by rules and regulations of the Securities and
Exchange Commission adopted under Section 31(a) of the Investment Company Act of
1940 as amended (the "Act").
(3) Agent shall cause the subject records of the Fund to be
maintained and preserved pursuant to the requirements under the Act.
(4) In pricing daily the value of shares of the Fund, Agent may make
arrangements to and obtain the value of portfolio securities from pricing
services or quotation services that are compensated by the Fund directly or
indirectly through the placement of portfolio transactions with broker-dealers
who provide such valuation or quotation services to the Agent.
(5) The Agent shall maintain duplicate copies of, or information from
which copies of, the records necessary to the preparation of the Fund's
financial statements and valuations of its assets may be reconstructed. Such
duplicate copies or information shall be maintained at a location other than
where the Agent performs its normal duties hereunder so that in the event the
records established and maintained pursuant to the foregoing provisions of this
Section B are damaged or destroyed, the Agent shall be able to provide the
bookkeeping and accounting services and assistance specified in this Section B.
(6) In the event any of the Agent's facilities or equipment necessary
for the performance of its duties hereunder is damaged, destroyed or rendered
inoperable by reason of fire, vandalism, riot, natural disaster or otherwise,
Agent will use its best efforts to restore all services hereunder to the Fund
and will not seek from the Fund additional compensation to repair or replace
damaged or destroyed facilities or equipment. The Agent shall also make and
maintain arrangements for emergency use of alternative facilities for use in the
event of the aforesaid destruction of or damage to its facilities.
C. Compensation of the Agent.
The Fund agrees to pay to the Agent for its services under this
Agreement, an amount payable on the first day of the month as shown on the
following table pertinent to the average daily net assets of the Fund during the
prior month:
Fund's Average Daily Net Asset for Monthly Fee
the Month
$ 0 - $ 10 million $ 0
$ 10 - $ 25 million $ 833
$ 25 - $ 50 million $ 1,667
$ 50 - $ 100 million $ 2,500
$100 - $ 200 million $ 3,333
$200 - $ 350 million $ 4,167
$350 - $ 550 million $ 5,000
$550 - $ 750 million $ 5,833
$750 - $ 1.0 billion $ 7,083
$1.0 billion and over $ 8,333
D. Right of Fund to Inspect, and Ownership of Records.
The Fund will have the right under this Agreement to perform on-site
inspection of records and accounts, and audits directly pertaining to the Fund's
accounting and portfolio records maintained by the Agent hereunder at the
Agent's facilities. The Agent will cooperate with the Fund's independent
accountants or representatives of appropriate regulatory agencies and furnish
all reasonably requested records and data. Agent acknowledges that these
records are the property of the Fund, and that it will surrender to the Fund all
such records promptly on request.
E. Standard of Care; Indemnification.
The Agent will at all times exercise due diligence and good faith in
performing its duties hereunder. The Agent will make every reasonable effort
and take all reasonably available measures to assure the adequacy of its
personnel, facilities and equipment as well as the accurate performance of all
services to be performed by it hereunder within, at a minimum, the time
requirements of any applicable statutes, rules or regulations and in conformity
with the Fund's Articles of Incorporation, Bylaws and representations made in
the Fund's current registration statement as filed with the Securities and
Exchange Commission.
The Agent shall not be responsible for, and the Fund agrees to
indemnify the Agent for, any losses, damages or expenses (including reasonable
counsel fees and expenses) (i) resulting from any claim, demand, action or suit
not resulting from the Agent's failure to exercise good faith or due diligence
and arising out of or in connection with the Agent's duties on behalf of the
Fund hereunder; (ii) for any delay, error or omission by reason of circumstances
beyond its control, including acts of civil or military authority, national
emergencies, labor difficulties (except with respect to the Agent's employees),
fire, mechanical breakdown beyond its control, flood catastrophe, acts of God,
insurrection, war, riots or failure beyond its control of transportation,
communication or power supply; or (iii) for any action taken or omitted to be
taken by the Agent in good faith in reliance on the accuracy of any information
provided to it by the Fund or its directors or in reliance on any advice of
counsel who may be internally employed counsel or outside counsel for the Fund
or advice of any independent accountant or expert employed by the Fund with
respect to the preparation and filing of any document with a governmental agency
or authority.
In order for the rights to indemnification to apply, it is understood
that if in any case the Fund may be asked to indemnify or hold the Agent
harmless, the Fund shall be advised of all pertinent facts concerning the
situation in question, and it is further understood that the Agent will use
reasonable care to identify and notify the Fund promptly concerning any
situation which presents or appears likely to present a claim for
indemnification against the Fund. The Fund shall have the option to defend the
Agent against any claim which may be the subject of this indemnification and, in
the event that the Fund so elects, it will so notify the Agent, and thereupon
the Fund shall take over complete defense of the claim, and the Agent shall
sustain no further legal or other expenses in such situation for which the Agent
shall seek indemnification under this paragraph. The Agent will in no case
confess any claim or make any compromise in any case in which the Fund will be
asked to indemnify the Agent except with the Fund's prior written consent.
F. Term of the Agreement; Taking Effect; Amendments.
This Agreement shall become effective at the start of business on the
date hereof and shall continue, unless terminated as hereinafter provided, for a
period of one (1) year and from year-to-year thereafter, provided that such
continuance shall be specifically approved as provided below.
This Agreement shall go into effect, or may be continued, or may be
amended, or a new agreement covering the same topics between the Fund and the
Agent may be entered into only if the terms of this Agreement, such continuance,
the terms of such amendment or the terms of such new agreement have been
approved by the Board of Directors of the Fund, including the vote of a majority
of the directors who are not "interested persons," as defined in the Act, of
either party to this Agreement, the agreement to be continued, amendment or new
agreement, cast in person at a meeting called for the purpose of voting on such
approval. Such a vote is hereinafter referred to as a "disinterested director
vote."
Any disinterested director's vote shall, in favor of continuance,
amendment or execution of a new agreement, include a determination that (i) the
Agreement, amendment, new agreement or continuance in question is in the best
interests of the Fund and its shareholders; (ii) the services to be performed
under the Agreement, the Agreement as amended, new agreement or agreement to be
continued, are services required for the operation of the Fund; (iii) the Agent
can provide services, the nature and quality of which are at least equal to
those provided by others offering the same or similar services; and (iv) the
fees for such services are fair and reasonable in the light of the usual and
customary charges made by others for services of the same nature and quality.
Nothing herein contained shall prevent any disinterested director vote
from being conditioned on the favorable vote of the holders of a majority (as
defined in or under the Act) of the outstanding shares of the Fund.
G. Termination.
(1) This Agreement may be terminated by the Agent at any time without
penalty upon giving the Fund at least one hundred twenty (120) days' written
notice (which notice may be waived by the Fund) and may be terminated by the
Fund at any time without penalty upon giving the Agent at least sixty (60) days'
written notice (which notice may be waived by the Agent), provided that such
termination by the Fund shall be directed or approved by the vote of a majority
of the Board of Directors of the Fund in office at the time or by the vote of
the holders of a majority (as defined in or under the Act) of the outstanding
shares of the Fund.
(2) On termination, the Agent will deliver to the Fund or its
designee all files, documents and records of the Fund used, kept or maintained
by the Agent in the performance of its services hereunder, including such of the
Fund's records in machine readable form as may be maintained by the Agent, as
well as such summary and/or control data relating thereto used by or available
to the Agent.
(3) In addition, on such termination or in preparation therefore at
the request of the Fund and at the Fund's expense, the Agent shall provide, to
the extent that its capabilities then permit, such documentation, personnel and
equipment as may be reasonably necessary in order for a new agent or the Fund to
fully assume and commence to perform the agency functions described in this
Agreement with a minimum disruption to the Fund's activities.
(4) This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the Investment Company Act of 1940 and the rules and
regulations thereunder of the Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the date and year first above written.
United Cash Management, Inc.
By:/s/Rodney O. McWhinney
-------------------------
ATTEST:
By:/s/Sharon K. Pappas
- ----------------------
Secretary
WADDELL & REED SERVICES COMPANY
By: /s/Robert L. Hechler
------------------------
ATTEST:
By:/s/Rodney O. McWhinney
- -------------------------
Secretary
EX-99.B11-consent
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 28 to the Registration
Statement on Form N-1A (the "Registration Statement") of our reports dated
January 31, 1995 and July 29, 1994, relating to the financial statements and
financial highlights of United Cash Management, Inc., which appears in such
Statement of Additional Information. We also consent to the reference to us
under the heading "Custodial and Auditing Services" in such Statement of
Additional Information and to the reference to us under the heading
"Financial Highlights" in the Prospectus which constitutes part of this
Registration Statement.
Price Waterhouse LLP
Kansas City, Missouri
July 7, 1995
EX-99.B15-cmspcb
UNITED CASH MANAGEMENT, INC.
DISTRIBUTION AND SERVICE PLAN
FOR CLASS B SHARES
This Plan is adopted by United Cash Management, Inc. (the "Company") pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act") to
provide for payment by the Company of certain expenses in connection with the
distribution of the Company's Class B shares and the service and maintenance of
Class B shareholder accounts. Payments under the Plan are to be made to Waddell
& Reed, Inc. ("W&R") which serves as the principal underwriter for the Company
under the terms of an underwriting agreement pursuant to which it shall offer
and sell the Class B shares of the Company at net asset value.
Distribution Fee
The Company is authorized to pay to W&R an amount not to exceed on an annual
basis .75 of 1% of the average net assets of Class B shares as a "distribution
fee" to finance the distribution of Class B shares payable to W&R daily or at
such other intervals as the board of directors may determine.
Service Fee
The Company is authorized to pay to W&R an amount not to exceed on an annual
basis .25 of 1% of the average net assets of Class B shares as a "service fee"
to finance shareholder servicing by W&R or its affiliated companies to encourage
and foster the maintenance of Class B shareholder accounts. The amounts shall
be payable to W&R daily or at such other intervals as the board of directors may
determine.
NASD Definition
For purposes of this Plan, the distribution fee may be considered as a sales
charge that is deducted from the net assets of Class B shares and does not
include the service fee. The service fee may be considered a payment made by
the Company for personal service and/or maintenance of Class B shareholder
accounts, provided however, that if the National Association of Securities
Dealers, Inc. ("NASD") adopts a definition of "service fee" for purposes of
Article III, S26(b) of its Rules of Fair Practice that differs from the
definition of "service fee" as used herein, or if the NASD adopts a related
definition intended to define the same concept, the definition of "service fee"
as used herein shall be automatically amended to conform to the NASD definition.
Quarterly Reports
W&R shall provide to the board of directors of the Company and the board of
directors shall review at least quarterly a written report of the amounts so
expended of the distribution fee and the service fee paid to it under this Plan
with respect to Class B shares and the purposes for which such expenditures were
made.
Approval of Plan
This Plan shall not become effective until it has been approved by a vote of at
least a majority of the outstanding Class B shares of the Company (as defined in
the Act) and by a vote of the board of directors of the Company and by the
directors who are not interested persons of the Company and have no direct or
indirect financial interest in the operation of the Plan or any agreement
related to this Plan (other than as directors or shareholders of the Company)
("independent directors") cast in person at a meeting called for the purpose of
voting on such Plan.
Continuance
This Plan shall continue in effect for a period of one (1) year and thereafter
from year-to-year only so long as such continuance is approved by the directors,
including the independent directors, as specified hereinabove for the adoption
of a Plan by the directors and independent directors.
Termination
This Plan may be terminated at any time by a vote of a majority of the
independent directors or by a vote of the majority of the outstanding Class B
shares of the Company without penalty. On termination, the payment of all
distribution and service fees shall cease, and the Company shall have no
obligation to W&R to reimburse it for any expenditure it has made or may make to
distribute Class B shares or service Class B shareholder accounts.
Amendments
This Plan may not be amended to increase materially the amount to be spent for
distribution or services without shareholder approval of the Class B
shareholders, and all material amendments of this Plan must be approved in the
manner prescribed for the adoption of the Plan by the directors and independent
directors as provided hereinabove. The distribution and service fees may,
however, be reduced by action of the board of directors without shareholder
approval.
Directors
While this Plan is in effect, the selection and nomination of the directors who
are not interested persons of the Company shall be committed to the discretion
of the directors who are not interested persons of the Company.
Records
Copies of the Plan, agreements and reports made pursuant to this Plan shall be
preserved as provided in Rule 12b-1(f) under the Act.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the annual
report to shareholders dated June 30, 1994 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<INVESTMENTS-AT-COST> 316,180,983
<INVESTMENTS-AT-VALUE> 316,180,983
<RECEIVABLES> 3,320,335
<ASSETS-OTHER> 579,156
<OTHER-ITEMS-ASSETS> 26,567
<TOTAL-ASSETS> 320,107,041
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,187,401
<TOTAL-LIABILITIES> 3,187,401
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 313,750,444
<SHARES-COMMON-STOCK> 316,919,640
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 316,919,640
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,658,916
<OTHER-INCOME> 0
<EXPENSES-NET> 3,405,162
<NET-INVESTMENT-INCOME> 8,253,754
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 8,253,754
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 8,253,754
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 421,971,836
<NUMBER-OF-SHARES-REDEEMED> 463,748,538
<SHARES-REINVESTED> 8,072,255
<NET-CHANGE-IN-ASSETS> (33,704,447)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,372,977
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,405,162
<AVERAGE-NET-ASSETS> 328,520,409
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .03
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE SEMIANNUAL REPORT
TO SHAREHOLDERS DATED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000311405
<NAME> UNITED CASH MANAGEMENT, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 339,918,155
<INVESTMENTS-AT-VALUE> 339,918,155
<RECEIVABLES> 2,962,238
<ASSETS-OTHER> 21,426
<OTHER-ITEMS-ASSETS> 829,456
<TOTAL-ASSETS> 343,731,275
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,115,894
<TOTAL-LIABILITIES> 5,115,894
<SENIOR-EQUITY> 3,386,154
<PAID-IN-CAPITAL-COMMON> 335,229,227
<SHARES-COMMON-STOCK> 338,615,384
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 338,615,381
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,302,803
<OTHER-INCOME> 0
<EXPENSES-NET> 1,611,816
<NET-INVESTMENT-INCOME> 6,690,987
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 6,690,987
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6,690,987
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 328,331,191
<NUMBER-OF-SHARES-REDEEMED> 313,238,751
<SHARES-REINVESTED> 6,603,301
<NET-CHANGE-IN-ASSETS> 21,695,741
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 681,473
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,611,816
<AVERAGE-NET-ASSETS> 323,966,968
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1
<EXPENSE-RATIO> .99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
EX-99.B18-cmmcp
UNITED CASH MANAGEMENT, INC.
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
This Multiple Class Plan ("Plan") pursuant to Rule 18f-3 under the
Investment Company Act of 1940, as amended ("1940 Act"), sets forth the multiple
class structure for United Cash Management, Inc. ("Fund"). This multiple class
structure was approved by the Board of Directors of United Cash Management, Inc.
on February 8, 1995, under an order of exemption issued by the Securities and
Exchange Commission on January 11, 1995. This Plan describes the classes of
shares of stock of the Fund -- Class A shares and Class B shares -- offered to
the public on or after September 5, 1995 ("Implementation Date").
General Description of the Classes:
Class A Shares. Class A shares will be sold to the general public without
a sales charge. Class A shares will not be subject to a 12b-1 fee. All of the
shares of the Fund issued pursuant to a Fund prospectus effective prior to the
Implementation Date and that are outstanding on the Implementation Date will be
designated as Class A shares.
Class B Shares. Class B shares will be sold subject to a contingent
deferred sales charge, which will be imposed on redemption proceeds. The
maximum contingent deferred sales charge will be 3.0% and will decline 1% per
year after the first full calender year after investment to 0% after four years.
Class B shares also will be subject to a distribution and service fee charged
pursuant to a Service Plan adopted pursuant to Rule 12b-1 under the 1940 Act
("Rule 12b-1") that provides for a maximum fee of 1.00% of the average annual
net assets of the Class B shares of the Fund. Class B shares will be available
for purchase only by exchange of shares of Waddell & Reed Funds, Inc.
Expense Allocations of Each Class:
In addition to the difference with respect to 12b-1 fees, Class A shares
and Class B shares of the Fund may also pay a different amount of the following
other expenses:
(a) stationery, printing, postage and delivery expenses related to
preparing and distributing materials such as shareholder reports,
prospectuses, and proxy statements to current shareholders of a specific
Class;
(b) Blue Sky registration fees incurred by a specific Class of
shares;
(c) SEC registration fees incurred by a specific Class of shares;
(d) expenses of administrative personnel and services required to
support the shareholders of a specific Class of shares;
(e) Directors' fees or expenses incurred as a result of issues
relating to a specific Class of shares;
(f) accounting expenses relating solely to a specific Class of
shares;
(g) auditors' fees, litigation expenses, and legal fees and expenses
relating to a specific Class of shares; and
(h) expenses incurred in connection with shareholders meetings as a
result of issues relating to a specific Class of shares.
The expenses listed above which are attributable to a particular Class are
charged directly to the net assets of the particular Class and, thus, are borne
on a pro rata basis by the outstanding shares of that Class.
Certain expenses that may not be attributable to a particular Class are
allocated based on the relative daily net assets of that Class.
Exchange Privileges:
Class A shares of the Fund may be exchanged for corresponding shares of any
other fund in the United Group of Mutual Funds.
Class B shares may be exchanged for corresponding shares of any other fund
in Waddell & Reed Funds, Inc.
These exchange privileges may be modified or terminated by the Fund, and
exchanges may only be made into funds that are legally registered for sale in
the investor's state of residence.
Additional Information:
This Plan is qualified by and subject to the terms of the then current
prospectus for the applicable Class after the Implementation Date; provided,
however, that none of the terms set forth in any such prospectus shall be
inconsistent with the terms of the Classes contained in this Plan. The
prospectus for each Class contains additional information about that Class and
the Fund's multiple class structure.
July 7, 1995
