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. 32
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 27
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)
__X__ on September 30, 1997 pursuant to paragraph (b)
_____ 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-2(a)(1). Notice for the
Registrant's fiscal year ended June 30, 1997 was filed on or about August 26,
1997.
<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) ..................... *
(c) ..................... Performance
(d) ..................... Performance; About Your Account
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
(c) ..................... An Overview of the Fund; About the Investment
Principles 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) ..................... About the Management and Expenses of the Fund
(d) ..................... About the Management and Expenses of the Fund
(e) ..................... Inside Back Cover; About the Management and
Expenses of the Fund
(f) ..................... Expenses; About the Management and Expenses of
the Fund
(g) ..................... *
5A......................... **
6(a) ..................... About the Management and Expenses of the Fund
(b) ..................... *
(c) ..................... *
(d) ..................... About the Management and Expenses of the Fund
(e) ..................... About Your Account
(f) ..................... About Your Account
(g) ..................... About Your Account
(h) ..................... About the Management and Expenses of the Fund
7(a) ..................... Inside Back Cover; About Your Account; About the
Management and Expenses of the Fund
(b) ..................... About Your Account
(c) ..................... About Your Account
(d) ..................... About Your Account
(e) ..................... *
(f) ..................... About the Management and Expenses of the Fund
8(a) ..................... About Your Account
(b) ..................... *
(c) ..................... About Your Account
(d) ..................... About Your Account
9 ........................ *
Part B of
Form N-1A
Item No. SAI Caption
- --------- -----------
10(a) ..................... Cover Page
(b) ..................... *
11 ........................ Cover Page
12 *
13(a) ..................... Goal and Investment Policies
(b) ..................... Goal and Investment Policies
(c) ..................... Goal and Investment Policies
(d) ..................... Goal and Investment Policies
14(a) ..................... Directors and Officers
(b) ..................... Directors and Officers
(c) ..................... Directors and Officers
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) ..................... Investment Management and Other Services
17(a) ..................... Portfolio Transactions and Brokerage
(b) ..................... *
(c) ..................... Portfolio Transactions and Brokerage
(d) ..................... Portfolio Transactions and Brokerage
(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) ..................... Investment Management and Other Services
(c) ..................... *
22(a) ..................... Performance Information
(b)(i) .................. Performance Information
(b)(ii) ................. Performance Information
(b)(iii) ................ *
(b)(iv) ................. Performance Information
23 ........................ Financial Statements
- ---------------------------------------------------------------------------
*Not Applicable or Negative Answer
**Contained in the Annual Report to Shareholders
<PAGE>
Please read this Prospectus before investing, and keep it on file for future
reference. It sets forth concisely the information about the 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 30, 1997. 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 30, 1997
UNITED CASH MANAGEMENT, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
800-366-5465
<PAGE>
Table of Contents
AN OVERVIEW OF THE FUND.........................................3
EXPENSES........................................................4
FINANCIAL HIGHLIGHTS............................................6
PERFORMANCE.....................................................9
Explanation of Terms ..........................................9
ABOUT WADDELL & REED...........................................10
ABOUT THE INVESTMENT PRINCIPLES OF THE FUND....................11
Investment Goal and Principles ...............................11
Securities and Investment Practices ..........................11
ABOUT YOUR ACCOUNT.............................................17
Ways to Set Up Your Account ..................................17
Buying Shares ................................................18
Minimum Investments ..........................................20
Adding to Your Account .......................................20
Selling Shares ...............................................20
Telephone Transactions .......................................25
Shareholder Services .........................................25
Personal Service ...........................................25
Reports ....................................................26
Exchanges ..................................................26
Automatic Transactions .....................................26
Distributions and Taxes ......................................27
Distributions ..............................................27
Taxes ......................................................28
ABOUT THE MANAGEMENT AND EXPENSES OF THE FUND..................30
WRIMCO and Its Affiliates ....................................31
Breakdown of Expenses ........................................32
Management Fee .............................................32
Other Expenses .............................................33
<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 Class B 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 from 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).
Management
fees 0.40% 0.40%
12b-1 fees None 0.98%2
Other expenses 0.47% 0.21%
Total Fund
operating
expenses 0.87% 1.59%
Example: You would pay the following expenses on
a $1,000 investment, assuming (1) 5% annual
return3 and (2) redemption at the end of each
time period:
Class Class
A B
----- -----
1 year $ 9 $ 46
3 years $ 28 $ 60
5 years $ 48 $ 87
10 years $107 $169
Example: You would pay the following expenses on
a $1,000 investment in the Class B shares of the
Fund, assuming (1) 5% annual return3 and (2) no
redemption at the end of each time period:
Class
B
-----
1 year $ 16
3 years $ 50
5 years $ 87
10 years $1694
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 the contingent deferred sales charge.
2It 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."
3Use of an assumed annual return of 5% is for illustration purposes only and
not a representation of the Fund's future performance, which may be greater or
lesser.
4Assumes the conversion of Class B shares into Class A shares after 8 years
and, therefore, reflects Class A expenses in years nine and ten. See "About
the Management and Expenses of the Fund."
<PAGE>
Financial Highlights
The following information has been audited in conjunction with the audits
of the Financial Statements of the Fund. Financial Statements for the fiscal
year ended June 30, 1997 and the independent auditors' report of Deloitte &
Touche LLP thereon are included in the SAI and should be read in conjunction
with the Financial Highlights.
For a Class A share outstanding throughout each period:*
<TABLE>
For the fiscal year ended June 30,
-----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<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 ......... 0.0472 0.0487 0.0465 0.0252 0.0251 0.0434 0.0665 0.0786 0.0805 0.0626
Less dividends
declared ....... (0.0472) (0.0487) (0.0465) (0.0252) (0.0251) (0.0434) (0.0665) (0.0786) (0.0805) (0.0626)
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
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 ..... 4.80% 5.01% 4.74% 2.55% 2.57% 4.41% 6.89% 8.18% 8.33% 6.46%
Net assets, end of
period (000
omitted) ....... $514,272 $402,009 $368,800 $316,920 $350,624 $448,127 $579,944 $563,893 $445,156 $298,162
Ratio of expenses
to average net
assets ......... 0.87% 0.91% 0.97% 1.04% 1.06% 0.99% 0.95% 0.95% 1.00% 1.07%
Ratio of net investment
income to average net
assets ......... 4.70% 4.89% 4.68% 2.51% 2.56% 4.36% 6.65% 7.86% 8.14% 6.27%
*On September 5, 1995, Fund shares outstanding were designated Class A shares.
</TABLE>
<PAGE>
Financial Highlights
The following information has been audited in conjunction with the audits
of the Financial Statements of the Fund. Financial Statements for the fiscal
year ended June 30, 1997 and the independent auditors' report of Deloitte &
Touche LLP thereon are included in the SAI and should be read in conjunction
with the Financial Highlights.
For a Class B share outstanding throughout each period:
For the
For the period from
fiscal year 9/5/95*
ended through
6/30/97 6/30/96
-------- --------
Net asset value,
beginning of period $1.00 $1.00
------- -------
Net investment
income .......... 0.0407 0.0312
Less dividends ....
declared......... (0.0407) (0.0312)
------- -------
Net asset value,
end of period ..... $1.00 $1.00
======= =======
Total return ....... 4.13% 3.15%
Net assets, end of
period (000
omitted) ......... $3,521 $630
Ratio of expenses
to average net
assets ............ 1.48% 1.88%**
Ratio of net
investment income
to average net
assets ............ 4.14% 3.76%**
*Commencement of operations.
**Annualized.
<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 Composite Stock Price 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 the telephone number listed on the inside
back cover of this Prospectus.
<PAGE>
About the Investment Principles of the Fund
Investment Goal 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 ("Rule 2a-7")
under the Investment Company Act of 1940, as amended (the "1940 Act"), the Fund
may invest only in the following U.S. dollar-denominated money market
obligations and instruments: 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; corporate debt obligations, including variable amount
master demand notes; Canadian Government obligations; and certain other
obligations (including municipal 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, a division of The McGraw-Hill Companies, Inc. ("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.
In accordance with Rule 2a-7, the Fund may invest in securities with a
remaining maturity of not more than 397 calendar days.
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 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.
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 and the type of money market securities in which the Fund may invest
are fundamental policies. 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 ("U.S. Government Securities"). 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
Securities 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 does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or foreign
governments or political subdivisions thereof) if, as a result, more than 5% of
its total assets would be invested in the securities of business enterprises
that, including predecessors, have a record of less than three years of
continuous operation. This restriction does not apply to any obligations
issued or guaranteed by the U.S. government or a state or local government
authority, or their respective agencies or instrumentalities, or to
collateralized mortgage obligations, other mortgage-related securities, asset-
backed securities, indexed securities or over-the-counter derivative financial
instruments.
Municipal Obligations are issued by a wide range of state and local
governments, agencies and authorities for various purposes. The two main kinds
of municipal bonds are "general obligation" bonds and "revenue" bonds. In
"general obligation" bonds, the issuer has pledged its full faith, credit and
taxing power for the payment of principal and interest. "Revenue" bonds are
payable only from specific sources; these may include revenues from a
particular facility or class of facilities or special tax or other revenue
source.
Industrial development bonds are revenue bonds issued by or on behalf of
public authorities to obtain funds to finance privately operated facilities.
Their credit quality is generally dependent on the credit standing of the
company involved.
Policies and Restrictions: Consistent with its fundamental policies, the
Fund may invest in only those municipal obligations that either (i) are
guaranteed as to principal and interest by a bank in whose obligations the Fund
may invest or by a corporation in whose commercial paper the Fund may invest,
or (ii) depend for their repayment solely upon a corporate issuer whose debt
obligations are rated at least A by S&P or MIS.
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 U.S. dollar
denominated.
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.
Mortgage-Backed and Other Asset-Backed Securities are bonds backed by
specific types of assets. Mortgage-backed securities represent direct or
indirect interests in pools of underlying mortgage loans that are secured by
real property. U.S. Government mortgage-backed securities are issued or
guaranteed as to principal and interest (but not as to market value) by the
Government National Mortgage Association, Fannie Mae (formerly the Federal
National Mortgage Association), the Federal Home Loan Mortgage Corporation or
other government-sponsored enterprises. Other mortgage-backed securities are
sponsored or issued by private entities, including investment banking firms and
mortgage originators.
Mortgage-backed securities may be composed of one or more classes and may
be structured either as pass-through securities or collateralized debt
obligations. Multiple-class mortgage-backed securities are referred to in this
Prospectus as "CMOs." Some CMOs are directly supported by other CMOs, which in
turn are supported by mortgage pools. Investors typically receive payments out
of the interest and principal on the underlying mortgages. The portions of
these payments that investors receive, as well as the priority of their rights
to receive payments, are determined by the specific terms of the CMO class.
Other asset-backed securities are similar to mortgage-backed securities,
except that the underlying assets securing the debt are different. These
underlying assets may be nearly any type of financial asset or receivable, such
as motor vehicle installment sales contracts, home equity loans, leases of
various types of real and personal property and receivables from credit cards.
Policies and Restrictions: The Fund may invest in mortgage-backed, asset-
backed and stripped securities as long as WRIMCO determines that it is
consistent with the Fund's goal and investment policies and subject to the
requirements of Rule 2a-7.
Indexed Securities. Subject to the requirements of Rule 2a-7, the Fund
may purchase indexed securities, which are securities the value of which varies
in relation to the value of other securities, securities indices, precious
metals or other commodities, or other financial indicators, as long as the
indexed securities are U.S. dollar denominated. 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 indexed securities in which the Fund may invest include securities
whose prices are indexed to 90-day Treasury Bill rates, the London Inter-Bank
Offering Rate (LIBOR), prime interest rates, Federal composite commercial paper
rates and Federal funds rates. Certain indexed securities that are not traded
on an established market may be deemed illiquid.
Policies and Restrictions: The Fund will not invest in any security whose
interest rate or principal amount to be repaid, or timing of payments, varies
or floats with the value of a foreign currency, the rate of interest payable on
foreign currency borrowings, or with any interest rate or index expressed in a
currency other than U.S. dollars.
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.
Policies and Restrictions: As a fundamental policy, the Fund will not
enter into a repurchase agreement if, as a result, more than 10% of its net
assets would consist of illiquid investments, which include repurchase
agreements not terminable within seven days.
Restricted Securities and Illiquid Investments. Restricted securities are
securities that are subject to legal or contractual restrictions on resale.
Restricted securities may be illiquid due to restrictions on their resale.
Certain 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: The Fund may not purchase a security if, as a
result, more than 10% of its net assets would consist of illiquid investments.
The Fund does not intend to invest more than 50% of its total assets in liquid
Section 4(2) commercial paper.
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,
with respect to 75% of its total assets, purchase securities of any one issuer
(other than cash items and "Government securities" as defined in the 1940 Act),
if immediately after and as a result of such purchase, the value of the
holdings of the Fund in the securities of such issuer exceeds 5% of the value
of the Fund's total assets.
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 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, the Fund will not
lend securities representing more than one-third of its total asset value at
any one time and such loans must be on a collateralized basis in accordance
with applicable regulatory requirements.
<PAGE>
About Your Account
The different ways to set up (register) your account are listed below.
Ways to Set Up Your Account
- -------------------------------------------------
Individual or Joint Tenants
For your general investment needs
Individual accounts are owned by one person. Joint accounts have two or more
owners (tenants).
- -------------------------------------------------
Business or Organization
For investment needs of corporations, associations, partnerships, institutions
or other groups
- -------------------------------------------------
Retirement
To shelter your retirement savings from taxes
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible.
. Individual Retirement Accounts (IRAs) allow anyone of legal age and under 70
1/2 with earned income to invest up to $2,000 per tax year. For 1997, the
maximum for an investor and his or her spouse is $4,000 ($2,000 for each
spouse) or, if less, the couple's combined earned income for the taxable
year.
. Rollover IRAs retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
. Simplified Employee Pension Plans (SEP - IRAs) provide small business owners
or those with self-employed income (and their eligible employees) with many
of the same advantages as a Keogh, but with fewer administrative
requirements.
. Keogh Plans allow self-employed individuals to make tax-deductible
contributions for themselves up to 25% of their annual earned income, with a
maximum of $30,000 per year.
. 401(k) Programs allow employees of corporations and non-governmental tax-
exempt organizations of all sizes to contribute a percentage of their wages
on a tax-deferred basis. These accounts need to be established by the
administrator or trustee of the plan.
. 403(b) Custodial Accounts are available to employees of public school
systems or certain types of charitable organizations.
. 457 Accounts allow employees of state and local governments and certain
charitable organizations to contribute a portion of their compensation on a
tax-deferred basis.
. Savings Incentive Match Plans for Employees (SIMPLE Plans) can be
established by small employers to contribute to their employees' retirement
accounts and involve fewer administrative requirements than 401(k) or other
qualified plans generally.
- -------------------------------------------------
Gifts or Transfers to a Minor
To invest for a child's education or other future needs
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
Federal transfer tax. Depending on state laws, you can set up a custodial
account under the Uniform Gifts to Minors Act ("UGMA") or the Uniform Transfers
to Minors Act ("UTMA").
- -------------------------------------------------
Trust
For money being invested by a trust
The trust must be established before an account can be opened, or you may use a
trust form made available by Waddell & Reed. Contact your Waddell & Reed
account representative for the form.
- -------------------------------------------------
Buying Shares
You may buy 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 Class B 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 1-800-366-2520, then mail a completed application to Waddell
& Reed, Inc., P.O. Box 29217, Shawnee Mission, Kansas 66201-9217, or fax it to
913-236-5044. Instruct your bank to wire the amount you wish to invest to UMB
Bank, n.a., ABA Number 101000695, 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 (the
"NYSE") is open. The Fund normally calculates the NAVs 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.
. Dividends do not accrue 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 other taxpayer identification number is correct and
whether you are subject to backup withholding for failing to report income to
the Internal Revenue Service.
Waddell & Reed, Inc. reserves the right to reject any purchase orders,
including purchases by exchange, and it and the 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 stating
your account number, the account registration and that you wish to purchase
Class A shares of the Fund to:
Waddell & Reed, Inc.
P.O. Box 29217
Shawnee Mission, Kansas
66201-9217
Selling Shares
You can arrange to take money out of your Fund account at any time by
selling (redeeming) some or all of your shares.
The redemption price (price to sell one 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. The year of investment with respect to Class B shares
acquired by exchange of Class B shares of funds in Waddell & Reed Funds, Inc.
is deemed to be the calendar year that such Class B shares were acquired.
To sell shares by telephone or fax: If you have elected this method in
your application or by subsequent authorization, call 1-800-366-2520 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 receipt of a written request for
redemption in good order by Waddell & Reed, Inc. at its home office. Note the
following:
. If more than one person owns the shares, each owner must sign the written
request.
. If you hold a certificate, it must be properly endorsed and sent to the
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.
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 payment of
dividends and distributions and then of 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 $20, the Fund will redeem shares having an
aggregate net asset value of $1,020, 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 the Fund. (The
Plan and this exclusion from the deferred sales charge do not apply to a
one-time withdrawal.)
. 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 the 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 the Fund or by a
former shareholder of such investment company of shares of the 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, one toll-free call, 1-800-366-5465, connects you
to a Customer Service Representative or TeleWaddell, our automated customer
telephone service. During normal business hours, our Customer Services staff
is available to respond to your inquiries, process a transaction or update your
account records. At almost any time of the day or night, you may access
TeleWaddell from a touch-tone phone to:
. Obtain information about your accounts;
. Obtain price information about our funds; or
. Request duplicate statements and reorder checks.
Reports
Statements and reports sent to you include the following:
. confirmation statements (after every purchase, other than those purchases
made through Automatic Investment Service, and after every exchange,
transfer or redemption)
. year-to-date statements (quarterly)
. annual and semiannual reports (every six months)
To reduce expenses, only one copy of most annual and semiannual reports
will be mailed to your household, even if you have more than one account with
the Fund. Call the telephone number listed on the inside back cover of this
Prospectus if you need copies of annual or semiannual reports or historical
account information.
Exchanges
You may sell your Class A shares and buy Class A shares of other funds in
the United Group. You may sell your Class B shares and buy Class B shares of
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 ongoing 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.
Regular Investment Plans
Automatic Investment Service
To move money from your bank account to an existing Class A Fund account
Minimum Frequency
$25 Monthly
Funds Plus Service
To move money from the Fund to other funds in the United Group whether in the
same or a different account
Minimum Frequency
$100 Monthly
Distributions and Taxes
Distributions
The Fund distributes substantially all of its net investment income and
net 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 NAV per share at $1.00. The Fund may make additional
distributions if necessary to avoid Federal income or excise taxes on certain
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 dividend 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 Internal Revenue Code of 1986, as
amended, so that it will be relieved of Federal income tax on that part of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gains and net gains from certain foreign
currency transactions) and net capital gains (the excess of net long-term
capital gains over net short-term capital losses) that are distributed to its
shareholders.
There are certain 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 generally are taxable to you as ordinary income whether received
in cash or paid in additional Fund shares. Distributions of the Fund's net
capital gains, when designated as such, are taxable to you as long-term capital
gains, whether received in cash or paid in additional Fund shares and
regardless of the length of time you have owned your shares. The Fund notifies
you after each calendar year-end as to the amounts of dividends and other
distributions paid (or deemed paid) to you for that year.
Withholding. The Fund is required to withhold 31% of all dividends,
capital gains distributions and redemption proceeds payable to individuals and
certain other noncorporate shareholders who do not furnish the Fund with a
correct taxpayer identification number. Withholding at that rate from
dividends and capital gains distributions also is required for such
shareholders who otherwise are subject to backup withholding.
State income taxes. The portion of the dividends paid by the Fund
attributable to the interest earned on its U.S. Government Securities generally
is not subject to state and local income taxes, although distributions by the
Fund to its shareholders of net realized gains on the disposition of those
securities are fully subject to those taxes. You should consult your tax
adviser to determine the taxability of dividends and other distributions by the
Fund in your state and locality.
The foregoing is only a summary of some of the important Federal tax
considerations generally affecting the Fund and its shareholders; see the SAI
for a more detailed discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You are urged to consult
your own tax adviser.
<PAGE>
About the Management and Expenses of the 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, diversified 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 Class B shares provide
shareholders of each of the funds in Waddell & Reed Funds, Inc. with an
opportunity to acquire shares of a money market fund through exchange of their
Class B shares of funds in Waddell & Reed Funds, Inc. without incurring the
contingent deferred sales charge. Class B shares that have been held by a
shareholder for eight years will convert automatically to Class A shares of the
Fund. This conversion will be made, without charge or fee, on the basis of the
relative net asset values of the two classes.
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 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
have served as investment manager to each of the registered investment
companies in the United Group of Mutual Funds, except United Asset Strategy
Fund, Inc., since 1940 or the inception of the company, whichever was later,
and to TMK/United Funds, Inc. since that fund's inception, until January 8,
1992, when it assigned its duties as investment manager and assigned its
professional staff for investment management services to WRIMCO. WRIMCO has
also served as investment manager for Waddell & Reed Funds, Inc. since its
inception in September 1992 and United Asset Strategy Fund, Inc. since it
commenced operations in March 1995.
Richard K. Poettgen is primarily responsible for the day-to-day management
of the portfolio of the Fund. Mr. Poettgen has held his Fund responsibilities
since January 1989. He is Vice President of WRIMCO, Vice President and
Assistant Treasurer of the Fund, and Vice President and Assistant Treasurer 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 acts as the principal underwriter and distributor of the
variable life insurance and variable annuity policies issued by United
Investors Life Insurance Company for which TMK/United Funds, Inc. is the
underlying investment vehicle.
Waddell & Reed Services Company acts as transfer agent ("Shareholder
Servicing Agent") for the 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 Fund shares as a factor in the selection of brokers to
execute portfolio transactions, subject to best execution. For further
information concerning Fund portfolio transactions, please see "Portfolio
Transactions and Brokerage" in the SAI.
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 $16.9 billion as of June 30, 1997. Management fees for the
fiscal year ended June 30, 1997 were 0.40% of the Fund's average net
assets.
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.
The Fund also pays other expenses, such as fees and expenses of certain
directors, audit and outside legal fees, costs of materials sent to
shareholders, taxes, brokerage commissions, interest, insurance premiums,
custodian fees, fees payable by the Fund under federal or other securities laws
and to the Investment Company Institute, and extraordinary expenses including
litigation and indemnification relative to litigation.
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 and/or the service and maintenance of the Class B shareholder
accounts.
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 Class B 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 the Distributor to finance the provision of certain personal services
by the Distributor and Waddell & Reed Services Company to Class B shareholders
and the provision of services to maintain Class B shareholder accounts (the
"Service Fee").
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.
No payment of the distribution fee will be made, and no deferred sales
charge will be paid, to the Distributor by the Fund with respect to Class B
shares 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 with
respect to such shares 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 with respect to
Class B shares may exceed the amount it receives from the Class B distribution
fees and deferred sales charges. Although such fees and charges are paid to
compensate the Distributor for its promotional activities with respect to Class
B shares, the expenses of such activities 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.
<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 Massachusetts Avenue, N. W. (913) 236-2000
Washington, D. C. 20036 (800) 366-5465
Independent Accountants Shareholder Servicing Agent
Deloitte & Touche LLP Waddell & Reed
1010 Grand Avenue Services Company
Kansas City, Missouri 6300 Lamar Avenue
64106-2232 P. O. Box 29217
Shawnee Mission, Kansas
Investment Manager 66201-9217
Waddell & Reed Investment (913) 236-2000
Management Company (800) 366-5465
6300 Lamar Avenue
P. O. Box 29217 Accounting Services Agent
Shawnee Mission, Kansas Waddell & Reed
66201-9217 Services Company
(913) 236-2000 6300 Lamar Avenue
(800) 366-5465 P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
<PAGE>
United Cash Management, Inc.
PROSPECTUS
September 30, 1997
The United Group of Mutual Funds
United Asset Strategy Fund, Inc.
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Funds, Inc.
United Bond Fund
United Income Fund
United Accumulative Fund
United Science and Technology Fund
United Gold & Government Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Vanguard Fund, Inc.
Waddell & Reed Funds, Inc.
Asset Strategy Fund
Growth Fund
High Income Fund
International Growth Fund
Limited-Term Bond Fund
Municipal Bond Fund
Science and Technology Fund
Total Return Fund
NUP2010(9-97)
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 30, 1997
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 30,
1997, 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
Goal and Investment Policies........................ 3
Investment Management and Other Services............ 17
Purchase, Redemption and Pricing of Shares.......... 22
Directors and Officers.............................. 31
Payments to Shareholders............................ 37
Taxes .............................................. 39
Portfolio Transactions and Brokerage................ 40
Other Information................................... 41
Appendix A.......................................... 43
Financial Statements ............................... 47
<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 and Class B shares as calculated
above for the seven days ended June 30, 1997, the date of the most recent
balance sheet included in the Prospectus, was 4.72% and 4.00% respectively and
the effective yield calculated for the same period was 4.83% and 4.08%
respectively.
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 Composite Stock Price 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.
GOAL AND INVESTMENT POLICIES
The goal and investment 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 ("Rule 2a-7") under the Investment Company Act of
1940, as amended (the "1940 Act"). Under Rule 2a-7, investments are limited to
those that are U.S. dollar denominated 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
Appendix A 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
being limited to the greater of 1% of the Fund's assets or $1,000,000. In
accordance with Rule 2a-7, the Fund may invest in securities with a remaining
maturity of not more than 397 calendar days. 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,
Fannie Mae (formerly, the Federal National Mortgage Association), Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Government National Mortgage Association ("Ginnie Mae"),
General Services Administration, Central Bank for Cooperatives, Federal Home
Loan Banks, Federal Home Loan Mortgage Corporation ("Freddie Mac"), Farm Credit
Banks, Maritime Administration, the Tennessee Valley Authority, the Resolution
Funding Corporation and the Student Loan Marketing Association.
Securities issued or guaranteed by U.S. Government agencies and
instrumentalities are not always supported by the full faith and credit of the
United States. Some, such as securities issued by the Federal Home Loan Banks,
are backed by the right of the agency or instrumentality to borrow from the
Treasury. Others, such as securities issued by Fannie Mae, are supported only
by the credit of the instrumentality and by a pool of mortgage assets. If the
securities are not backed by the full faith and credit of the United States,
the owner of the securities must look principally to the agency issuing the
obligation for repayment and may not be able to assert a claim against the
United States in the event that the agency or instrumentality does not meet its
commitment. The Fund will invest in securities of agencies and
instrumentalities only if Waddell & Reed Investment Management Company
("WRIMCO"), the Fund's investment adviser, 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, a division of
The McGraw-Hill Companies, Inc. ("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 (such as municipal obligations) above only if any 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.
Specific Securities and Investment Practices
Mortgage-Backed Securities
The Fund may invest in mortgage-backed securities as long as WRIMCO
determines that it is consistent with the Fund's goal and investment policies
and subject to the requirements of Rule 2a-7. The Fund may purchase mortgage-
backed securities issued by both government and non-government entities such as
banks, mortgage lenders, or other financial institutions.
Mortgage-backed securities represent direct or indirect participations in,
or are secured by and payable from, mortgage loans secured by real property and
include single- and multi-class pass-through securities and collateralized
mortgage obligations. Multi-class pass-through securities and collateralized
mortgage obligations are collectively referred to in this SAI as "CMOs." The
U.S. Government mortgage-backed securities in which the Fund may invest include
mortgage-backed securities issued or guaranteed as to the payment of principal
and interest (but not as to market value) by Ginnie Mae, Fannie Mae or Freddie
Mac. Other mortgage-backed securities are issued by private issuers, generally
originators of and investors in mortgage loans, including savings associations,
mortgage bankers, commercial banks, investment bankers and special purpose
entities. Payments of principal and interest (but not the market value) of
such private mortgage-backed securities may be supported by pools of mortgage
loans or other mortgage-backed securities that are guaranteed, directly or
indirectly, by the U.S. Government or one of its agencies or instrumentalities,
or they may be issued without any government guarantee of the underlying
mortgage assets but with some form of non-government credit enhancement. These
credit enhancements do not protect investors from changes in market value.
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 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
Ginnie Mae (but not those of Freddie Mac or Fannie Mae) is guaranteed by the
full faith and credit of the United States. This is not a guarantee against
market decline of the value of these securities or shares of the Fund. It is
possible that the availability and marketability (i.e., liquidity) of these
securities could be adversely affected by actions of the U.S. Government to
tighten the availability of its credit.
Stripped Mortgage-Backed Securities
The Fund may invest in stripped securities as long as WRIMCO determines
that it is consistent with the Fund's goal and investment policies and subject
to the requirements of Rule 2a-7. Stripped mortgage-backed securities are
created when a U.S. Government agency or a financial institution separates the
interest and principal components of a mortgage-backed security and sells them
as individual securities. The holder of the "principal-only" security ("PO")
receives the principal payments made by the underlying mortgage-backed
security, while the holder of the "interest-only" security ("IO") receives
interest payments from the same underlying security.
The Fund has not in the past invested and has no present intention to
invest in these types of securities.
Asset-Backed Securities
Asset-backed securities have structural characteristics similar to
mortgage-backed securities, as discussed above. However, the underlying assets
securing the debt are not first lien mortgage loans or interests therein, but
include assets such as motor vehicle installment sales contracts, other
installment sale contracts, home equity loans, leases of various types of real
and personal property and receivables from revolving credit (credit card)
agreements. Such assets are securitized through the use of trusts or special
purpose corporations. Payments or distributions of principal and interest may
be guaranteed up to a certain amount and for a certain time period by a letter
of credit or pool insurance policy issued by a financial institution
unaffiliated with the issuer, or other credit enhancements may be present. The
value of asset-backed securities may also depend on the creditworthiness of the
servicing agent for the loan pool, the originator of the loans or the financial
institution providing the credit enhancement.
Special Characteristics of Mortgage-Backed and Asset-Backed Securities
The yield characteristics of mortgage-backed and asset-backed securities
differ from those of traditional debt securities. Among the major differences
are that interest and principal payments are made more frequently, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other obligations generally may be prepaid at any time.
Prepayments on a pool of mortgage loans are influenced by a variety of
economic, geographic, social and other factors, including changes in
mortgagors' housing needs, job transfers, unemployment, mortgagors' net equity
in the mortgaged properties and servicing decisions. Generally, however,
prepayments on fixed-rate mortgage loans will increase during a period of
falling interest rates and decrease during a period of rising interest rates.
Similar factors apply to prepayments on asset-backed securities, but the
receivables underlying asset-backed securities generally are of a shorter
maturity and thus are likely to experience substantial prepayments. Such
securities, however, often provide that for a specified time period the issuers
will replace receivables in the pool that are repaid with comparable
obligations. If the issuer is unable to do so, repayment of principal on the
asset-backed securities may commence at an earlier date.
The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, and due to any
yield retained by the issuer. Actual yield to the holder may vary from the
coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-backed securities, and this delay reduces the effective yield
to the holder of such securities.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. Because prepayment rates of individual pools vary widely, it is not
possible to predict accurately the average life of a particular pool. In the
past, a common industry practice has been to assume that prepayments on pools
of fixed rate 30-year mortgages would result in a 12-year average life for the
pool. At present, mortgage pools, particularly those with loans with other
maturities or different characteristics, are priced on an assumption of average
life determined for each pool. In periods of declining interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average
life of a pool of mortgage-related securities. Conversely, in periods of
rising interest rates, the rate of prepayment tends to decrease, thereby
lengthening the actual average life of the pool. However, these effects may
not be present, or may differ in degree, if the mortgage loans in the pools
have adjustable interest rates or other special payment terms, such as a
prepayment charge. Actual prepayment experience may cause the yield of
mortgage-backed securities to differ from the assumed average life yield.
Variable or Floating Rate Instruments
Variable or floating rate instruments (including notes purchased directly
from issuers) bear variable or floating interest rates and may carry rights
that permit holders to demand payment of the unpaid principal balance plus
accrued interest from the issuers or certain financial intermediaries on dates
prior to their stated maturities. Floating rate securities have interest rates
that change whenever there is a change in a designated base rate while variable
rate instruments provide for a specified periodic adjustment in the interest
rate. These formulas are designed to result in a market value for the
instrument that approximates its par value.
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. The
securities so purchased or sold by the Fund are subject to market fluctuation;
their value may be less or more when delivered than the purchase price paid or
received. For example, delivery to the Fund and payment by the Fund in the
case of a purchase by it, or delivery by the Fund and payment to it in the case
of a sale by the Fund, may take place a month or more after the date of the
transaction. The purchase or sale price is fixed on the transaction date. The
Fund will enter into when-issued or delayed-delivery transactions in order to
secure what is considered to be an advantageous price and yield at the time of
entering into the transaction. No interest accrues to the Fund until delivery
and payment is completed. When the Fund makes a commitment to purchase
securities on a when-issued or delayed-delivery basis, it will record the
transaction and thereafter reflect the value of the securities in determining
its net asset value per share. The securities so sold by the Fund on a
delayed-delivery basis are also subject to market fluctuation; their value when
the Fund delivers them may be more than the purchase price the Fund receives.
When the Fund makes a commitment to sell securities on a delayed-delivery
basis, it will record the transaction and thereafter value the securities at
the sales price in determining the Fund's net asset value per share.
Ordinarily the Fund purchases securities on a when-issued or delayed-
delivery basis with the intention of actually taking delivery of the
securities. However, before the securities are delivered to the Fund and
before it has paid for them (the "settlement date"), the Fund could sell the
securities if WRIMCO decided it was advisable to do so for investment reasons.
The Fund will hold aside or segregate cash or other securities, other than
those purchased on a when-issued or delayed-delivery basis, at least equal to
the amount it will have to pay on the settlement date; these other securities
may, however, be sold at or before the settlement date to pay the purchase
price of the when-issued or delayed-delivery securities.
Lending Securities
One of the ways in which the Fund may try to realize income is by lending
not more than one-third of its total asset value. This percentage limitation
can only be changed by shareholder vote. 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 that 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, at least equal in value to the market value of the
securities loaned on each day the loan is outstanding. If the market value of
the loaned securities exceeds the value of the collateral, the borrower must
add more collateral so that it at least equals the market value of the
securities loaned. If the market value of the securities decreases, the
borrower is entitled to return of the excess collateral. This policy of 100%
collateralization is a fundamental policy that 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.
Under the Fund's current securities lending procedures, the Fund may lend
securities only to broker-dealers and financial institutions deemed
creditworthy by WRIMCO. The Fund will make loans only under rules of the New
York Stock Exchange (the "NYSE"), which presently require the borrower to give
the securities back to the Fund within five business days after the Fund gives
notice to do so. The Fund may pay reasonable finder's, administrative and
custodian fees in connection with loans of securities.
There may be risks of delay in receiving additional collateral from the
borrower if the market value of the securities loaned increases, risks of delay
in recovering the securities loaned or even loss of rights in the collateral
should the borrower of the securities fail financially.
Some, but not all, of 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.
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 or
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. In other
words, the value of the underlying securities, which will be held by the Fund's
custodian bank or by a third party that qualifies as a custodian under Section
17(f) of the 1940 Act, is and, during the entire term of the agreement, will
remain at least equal to the value of the loan, including the accrued interest
earned thereon. Repurchase agreements are entered into only with those
entities approved by WRIMCO on the basis of criteria established by the Board
of Directors.
Restricted Securities
The Fund may purchase commercial paper that is issued in reliance on the
so-called "private placement" exemption from registration that is afforded by
Section 4(2) ("Section 4(2) paper") of the Securities Act of 1933, as amended
(the "1933 Act"). 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 that the Fund may
own. WRIMCO will determine the liquidity of Section 4(2) paper in accordance
with guidelines established by the Board of Directors.
The Fund may also invest in other securities that are subject to legal or
contractual restrictions on resale because they have not been registered under
the 1933 Act or are otherwise subject to contractual restrictions on resale.
These securities are generally referred to as restricted securities.
Restricted securities generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the 1933 Act, or
in a registered public offering. Where registration is required, the Fund may
be obligated to pay all or part of the registration expense and a considerable
period may elapse between the time it decides to seek registration and the time
the Fund may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, the Fund might obtain a less favorable price than prevailed when it
decided to seek registration of the security.
There are risks associated with investment in restricted securities in
that there can be no assurance of a ready market for resale. Also, the
contractual restrictions on resale might prevent the Fund from reselling the
securities at a time when such sale would be desirable. Restricted securities
in which the Fund seeks to invest need not be listed or admitted to trading on
a foreign or domestic exchange and may be less liquid than listed securities.
See "Illiquid Investments."
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 the Fund may not invest more than 10% of its net
assets in illiquid investments. Investments currently considered to be
illiquid include: (i) repurchase agreements not terminable within seven days;
(ii) fixed time deposits subject to withdrawal penalties other than overnight
deposits; (iii) securities for which market quotations are not readily
available; and (iv) restricted securities 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.
Indexed Securities
Subject to the requirements of Rule 2a-7, the Fund may purchase securities
the values of which varies in relation to the value of other securities,
securities indices, precious metals or other commodities, or other financial
indicators. Indexed securities typically, but not always, are debt securities
or deposits whose value at maturity or coupon rate is determined by reference
to a specific instrument or statistic. Gold-indexed securities, for example,
typically provide for a maturity value that depends on the price of gold,
resulting in a security whose price tends to rise and fall together with gold
prices. Indexed securities may be positively or negatively indexed; that is,
their maturity value may increase when the specified index value increases, or
their maturity value may decline when the index increases. Recent issuers of
indexed securities have included banks, corporations, and certain U.S.
Government agencies.
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 total 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 U.S. dollar denominated. 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. Investments in
obligations of domestic branches of foreign banks will not be considered to be
foreign securities if WRIMCO has determined that the nature and extent of
federal and state regulation and supervision of the branch in question is
substantially equivalent to federal and state chartered or domestic banks doing
business in the same jurisdiction.
Purchasing these securities presents special considerations: reduction of
income by foreign taxes; changes in currency rates and controls (e.g., currency
blockage); 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 that it
may otherwise buy even though the issuer invests in real estate or
interests in real estate;
(iii) With respect to 75% of its total assets, purchase securities of any
one issuer (other than cash items and "Government securities" as
defined in the 1940 Act) if immediately after and as a result of such
purchase, the value of the holdings of the Fund in the securities of
such issuer exceeds 5% of the value of the Fund's total assets; 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 and other obligations
consistent with its goal and its other investment policies and
restrictions that 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) Participate on a joint, or a joint and several, basis in any trading
account in any securities;
(vii) Sell securities short or buy securities on margin; also, the Fund may
not engage in arbitrage transactions;
(viii) Engage in the underwriting of securities; or
(ix) 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.
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." As a general matter, the primary
conditions imposed under Rule 2a-7 relating to the Fund's portfolio investments
are that the Fund must (i) not maintain a dollar-weighted average portfolio
maturity in excess of 90 days, (ii) limit its investments, including repurchase
agreements, to those instruments which are U.S. dollar denominated 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 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) limit its investments in the securities
of any one issuer (except U.S. Government Securities) to no more than 5% of its
assets, (iv) 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) 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) limit its investments to securities with a
remaining maturity of not more than 397 days. 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 and United Asset Strategy Fund, Inc.
since it commenced operations in March 1995. Waddell & Reed, Inc. serves as
principal underwriter for the investment companies in the United Group of
Mutual Funds and Waddell & Reed Funds, Inc. and acts as principal underwriter
and distributor for variable life insurance and variable annuity policies
issued by United Investors Life Insurance Company for which TMK/United Funds,
Inc. is the underlying investment vehicle.
Shareholder Services
Under the Shareholder Servicing Agreement entered into between the 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,
1997, 1996 and 1995 were $1,910,434, $1,686,054 and $1,398,085,
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, 1997, 1996 and
1995 were $60,000, $60,000 and $51,667, respectively.
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 Class A shares of the Fund. The contingent deferred sales
charge, if any, imposed on Class B shares is designed to compensate Waddell &
Reed, Inc. for distribution of Class B shares. On shares of funds in the
United Group that are sold with sales charges, 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; however, the Agreement
recognizes that the Fund may adopt a Distribution and Service Plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan adopted by the Fund
with respect to Class B shares, the Fund pays the Distributor daily a
distribution fee not to exceed, on an annual basis, 0.75% of the Fund's Class B
net assets and a service fee not to exceed, on an annual basis, 0.25% of the
Fund's Class B net assets.
The Distributor offers the Class B shares of the Fund to shareholders of
Class B shares of Waddell & Reed Funds, Inc. through its registered
representatives and sales managers (sales force). In distributing shares
through its sales force, the Distributor may pay commissions and/or 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 Class B 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. For the fiscal year ended
June 30, 1997, the Fund paid (or accrued) $25,796 to the Distributor as
distribution fees and service fees under the Class B Plan. The distribution
fees were paid to compensate the Distributor for its expenses relating to sales
force compensation, providing prospectuses and sales literature to prospective
investors, advertising, sales processing, field office expenses and home office
sales management in connection with the distribution of Class B shares of the
Fund. The service fees were paid to compensate the Distributor for providing
personal services to the Fund's Class B shareholders and for the maintenance of
Class B accounts.
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.
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 Class B shares, 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.
For the Fund's fiscal year ended June 30, 1997, the Distributor earned
deferred sales charges in the amount of $22,497 with respect to the Fund's
Class B shares.
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. Deloitte & Touche 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 prior to the application of the
contingent deferred sales charge, if any, to Class B shares.
The net asset value per share is ordinarily 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, Martin Luther
King, Jr. 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 Class B 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 stating 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 Class B 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. No certificates are issued for Class B 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 through the Flexible Withdrawal
Service (the "Service") regular monthly, quarterly, semiannual or annual
payments by redeeming shares on an ongoing basis. Applicable forms to start
the Service are available through Waddell & Reed, Inc.
If you own Class A shares, to qualify for the Service you must have
invested at least $10,000 in Class A shares which you still own of any of the
funds in the United Group; or, you must own Class A shares having a value of at
least $10,000. The value for this purpose is the value at the offering price.
If you own Class B shares, to qualify for the Service you must have
invested at least $10,000 in Class B shares which you still own of any of the
funds in Waddell & Reed Funds, Inc.; or, you must own Class B shares having a
value of at least $10,000.
You can choose to have your shares redeemed to receive:
1. a monthly, quarterly, semiannual or annual payment of $50 or more;
2. a monthly payment, which will change each month, equal to one-twelfth
of a percentage of the value of the shares in the Account; (you select the
percentage) or
3. a monthly or quarterly payment, which will change each month or
quarter, by redeeming a number of shares fixed by you (at least five shares).
Shares are redeemed on the 20th day of the month in which the payment is
to be made (or on the prior business day if the 20th is not a business day).
Payments are made within five days of the redemption.
Retirement plan accounts may be subject to a fee imposed by the plan
custodian for use of their service.
If you have a share certificate for the shares you want to make available
for the Service, you must enclose the certificate with the form initiating the
Service.
The dividends and distributions on shares you have made available for the
Service are paid in additional shares of the Fund of the same class as that
with respect to which they were paid. All payments under the Service are made
by redeeming shares in your account, 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. You may, at any time, redeem part or all of the shares in
your account; if you redeem all of the shares, the Service is terminated. The
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
You may exchange Class A shares of the Fund which you have acquired by
exchange for Class A shares of one or more other funds in the United Group
(whose shares are sold with a sales charge) and any shares received in payment
of dividends on those Class A shares of the Fund for Class A shares of any of
the other funds in the United Group, without payment of 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 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 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 shares of Waddell & Reed
Funds, Inc. without charge. You may also have a specific dollar amount of
Class B shares of any of the funds of Waddell & Reed Funds, Inc. redeemed and
invested in Class B shares of the Fund. The Class B 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 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. For tax years after 1996, the annual maximum is $4,000
($2,000 for each spouse) or, if less, the couple's combined earned income for
the taxable year even if one spouse had no earned income. The contributions
are deductible unless the investor (or, if married, either spouse) is an active
participant in a qualified retirement plan or if, notwithstanding that the
investor or one or both spouses so participate, their adjusted gross income
does not exceed certain levels.
An investor may also use an IRA to receive a rollover contribution that is
either (a) a direct rollover distribution from an employer's plan or (b) a
rollover of an eligible distribution paid to the investor from an employer's
plan or another IRA. To the extent a rollover contribution is made to an IRA,
the distribution will not be subject to Federal income tax until distributed
from the IRA. A direct rollover generally applies to any distribution from an
employer's plan (including a custodial account under Section 403(b)(7) of the
Code, but not an IRA) other than certain periodic payments, required minimum
distributions and other specified distributions. In a direct rollover, the
eligible rollover distribution is paid directly to the IRA, not to the
investor. If, instead, an investor receives payment of an eligible rollover
distribution, all or a portion of that distribution generally may be rolled
over to an IRA within 60 days after receipt of the distribution. Because
mandatory Federal income tax withholding applies to any eligible rollover
distribution which is not paid in a direct rollover, investors should consult
their tax advisers or pension consultants as to the applicable tax rules. If
you already have an IRA, you may have the assets in that IRA transferred
directly to an IRA offered by Waddell & Reed, Inc.
Simplified Employee Pension (SEP) plans. Employers can make contributions
to SEP-IRAs established for employees. An employer may contribute up to 15% of
compensation or $24,000, whichever is less, per year for each employee.
Savings Incentive Match Plans for Employees (SIMPLE Plans). An employer
with 100 or fewer employees who does not sponsor another active retirement plan
may sponsor a SIMPLE to contribute to their employees' retirement accounts. A
SIMPLE plan can be funded by either an IRA or a 401(k) plan. An employer can
choose to match employee contributions dollar-for-dollar (up to 3% of an
employee's compensation) or may contribute to all eligible employees 2% of
their compensation, whether or not they defer salary to their retirement plans.
SIMPLE plans involve fewer administrative requirements than 401(k) or other
qualified plans generally.
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. Wise 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, TMK/United Funds, Inc. and Waddell & Reed Funds,
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; Chairman of the Board of Directors
of Vesta Insurance Group, Inc.; formerly, Chairman of the Board of Directors of
Waddell & Reed, Inc. Father of Linda Graves, Director of the Fund and each of
the other funds in the Fund Complex. Date of birth: June 16, 1926.
KEITH A. TUCKER*
President of the Fund and each of the other funds in the Fund Complex;
President, Chief Executive Officer and Director of Waddell & Reed Financial
Services, Inc.; Chairman of the Board of Directors of WRIMCO, Waddell & Reed,
Inc., Waddell & Reed Services Company, Waddell & Reed Asset Management Company
and Torchmark Distributors, Inc., an affiliate of Waddell & Reed, Inc.; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; Director of Southwestern Life Corporation; formerly,
partner in Trivest, a private investment concern; formerly, Director of
Atlantis Group, Inc., a diversified company. Date of birth: February 11,
1945.
HENRY L. BELLMON
Route 1
P. O. Box 26
Red Rock, Oklahoma 74651
Rancher; Professor, Oklahoma State University; formerly, Governor of
Oklahoma. Date of birth: September 3, 1921.
DODDS I. BUCHANAN
905 13th Street
Boulder, Colorado 80302
Advisory Director, The Hand Companies, an actuarial consulting company;
President, Buchanan Ranch Corporation; formerly, Professor and Chairman of
Marketing, College of Business, University of Colorado. Date of birth: April
18, 1931.
JAMES M. CONCANNON
950 Docking Road
Topeka, Kansas 66615
Dean and Professor of Law, Washburn University School of Law. Date of
birth: October 2, 1947.
JOHN A. DILLINGHAM
4040 Northwest Claymont Drive
Kansas City, Missouri 64116
Director and consultant, McDougal Construction Company; formerly Senior
Vice President-Sales and Marketing, Garney Companies, Inc., a specialty utility
contractor. Date of birth: January 9, 1939.
LINDA GRAVES*
1 South West Cedar Crest Road
Topeka, Kansas 66606
First Lady of Kansas; formerly, partner, Levy and Craig, P.C., a law firm.
Daughter of Ronald K. Richey, Chairman of the Board of the Fund and each of the
other funds in the Fund Complex. Date of birth: July 29, 1953.
JOHN F. HAYES*
20 West 2nd Avenue
P. O. Box 2977
Hutchinson, Kansas 67504-2977
Director of Central Bank and Trust; Director of Central Kansas Bankshares;
Director of Central Properties, Inc.; Chairman, Gilliland & Hayes, P.A., a law
firm; formerly, President, Gilliland & Hayes, P.A. Date of birth: December
11, 1919.
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. Date of birth: February 19, 1924.
WILLIAM T. MORGAN*
928 Glorietta Blvd.
Coronado, California 92118
Retired; formerly, Chairman of the Board of Directors and President of the
Fund and each fund in the Fund Complex then in existence. (Mr. Morgan retired
as Chairman of the Board of Directors and President of the funds in the Fund
Complex then in existence on April 30, 1993); formerly, President, Director and
Chief Executive Officer of WRIMCO and Waddell & Reed, Inc.; formerly, Chairman
of the Board of Directors of Waddell & Reed Services Company; formerly,
Director of Waddell & Reed Asset Management Company, United Investors
Management Company and United Investors Life Insurance Company, affiliates of
Waddell & Reed, Inc. Date of birth: April 27, 1928.
WILLIAM L. ROGERS
1999 Avenue of the Stars
Los Angeles, California 90067
Principal, Colony Capital, Inc., a real estate related investment company;
formerly, partner in Trivest, a private investment concern. Date of birth:
September 8, 1946.
FRANK J. ROSS, JR.*
700 West 47th Street
Kansas City, Missouri 64112
Partner, Polsinelli, White, Vardeman & Shalton, a law firm. Date of
birth: April 9, 1953.
ELEANOR B. SCHWARTZ
5100 Rockhill Road
Kansas City, Missouri 64113
Chancellor, University of Missouri-Kansas City; formerly, Interim
Chancellor, University of Missouri-Kansas City. Date of birth: January 1,
1937.
FREDERICK VOGEL III
1805 West Bradley Road
Milwaukee, Wisconsin 53217
Retired. Date of birth: August 7, 1935.
PAUL S. WISE
P. O. Box 5248
8648 Silver Saddle Drive
Carefree, Arizona 85377
Director of Potash Corporation of Saskatchewan. Date of birth: July 16,
1920.
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. Date of birth: November 12, 1936.
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. Date of birth:
December 8, 1942.
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. Date of birth: July 18, 1942.
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. Date of birth:
February 9, 1959.
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.
Date of birth: June 11, 1935.
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. Date of
birth: February 4, 1933.
The address of each person is 6300 Lamar Avenue, P.O. Box 29217, Shawnee
Mission, Kansas 66201-9217 unless a different address is given.
As of the date of this SAI, six of the 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 or her past services
whether or not services are rendered in his or her capacity as Director
Emeritus, but he has no authority or responsibility with respect to management
of the Fund. Messrs. Doyle Patterson and Jay B. Dillingham retired as
Directors of the Fund and of each of the funds in the Fund Complex effective
January 1, 1997 and January 14, 1997, respectively, and each has elected a
position as Director Emeritus. During the Fund's fiscal year ended June 30,
1997, Mr. Patterson received total compensation for his service as a Director
of $48,000 from the Fund Complex and the Fund and aggregate compensation from
the Fund of $1,291. During the Fund's fiscal year ended June 30, 1997, Mr.
Dillingham received total compensation for his service as a Director of $48,000
from the Fund Complex and the Fund and aggregate compensation from the Fund of
$1,293.
The funds in the United Group, TMK/United Funds, Inc. and Waddell & Reed
Funds, Inc. pay to each Director a total of $44,000 per year, plus $1,000 for
each meeting of the Board of Directors attended and $500 for each committee
meeting attended which is not in conjunction with a Board of Directors'
meeting, other than Directors who are affiliates of Waddell & Reed, Inc. The
fees to the Directors who receive them are divided among the funds in the
United Group, TMK/United Funds, Inc. and Waddell & Reed Funds, Inc. based on
their relative size.
During the Fund's fiscal year ended June 30, 1997, the Fund's Directors
received the following fees for service as a director:
COMPENSATION TABLE
Total
Aggregate Compensation
Compensation From Fund
From and Fund
Director Fund Complex*
- -------- ------------ ------------
Ronald K. Richey $ 0 $ 0
Keith A Tucker 0 0
Henry L. Bellmon 1,346 50,000
Dodds I. Buchanan 1,346 50,000
Linda Graves 1,346 50,000
John F. Hayes 1,346 50,000
Glendon E. Johnson 1,319 49,000
William T. Morgan 1,346 50,000
William L. Rogers 967 36,000
Frank J. Ross, Jr. 967 36,000
Eleanor B. Schwartz 1,346 50,000
Frederick Vogel III 1,346 50,000
Paul S. Wise 1,346 50,000
*No pension or retirement benefits have been accrued as a part of Fund
expenses.
Messrs. Concannon and Dillingham were elected as Directors on July 24,
1997. The officers are paid by Waddell & Reed, Inc. or its affiliates.
Shareholdings
As of August 31, 1997, 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 net investment income, which is
derived from the interest and earned discount on the securities the Fund holds,
less expenses (which will vary by class) and amortization of any premium. The
second source is net realized capital gains, which are derived from the
proceeds received from the Fund's sale of securities at a price higher than the
Fund's tax basis (usually cost) in such securities, less losses from sales of
securities at a price lower than the Fund's basis therein; these gains are
expected to be short-term capital gains.
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 and
for which federal funds have been received by the Fund. 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 paid 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 paid in shares of the Fund of the same class as that with
respect to which they were declared. You can change your instructions at any
time. If you give no instructions, your dividends and distributions (if any)
will be paid in shares of the Fund of the same class as that with respect to
which they were paid. All payments in shares 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) ("Distribution
Requirement") 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 (other than those on foreign currencies) 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 ("50%
Diversification Requirement"); 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 pay sufficient dividends and
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 sales of
the Fund as a factor in the selection of broker-dealers to execute portfolio
transactions. 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.
As of June 30, 1997, the Fund owned Merrill Lynch and Co., Inc. debt
securities in the aggregate amount of $15,986,360. Merrill Lynch & Co., Inc.
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. and Waddell & Reed Funds, Inc. or accounts over which
Waddell & Reed Asset Management Company exercises investment discretion
frequently buy or sell the same securities at the same time. If this happens,
the amount of each purchase or sale is divided. This is done on the basis of
the amount of securities each fund or account wanted to buy or sell. Sharing
in large transactions could affect the price 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. Each class
represents an interest in the same assets of the Fund and differs 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; Class B shares that have been held by a shareholder for eight years will
convert automatically to Class A shares of the Fund, and such conversion will
be made, without charge or fee, on the basis of the relative net asset values
of the two classes; 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, a division of The McGraw-Hill Companies, Inc. 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, a division of The McGraw-Hill Companies, Inc. 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, a division of The McGraw Hill Companies, Inc.
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.
JUNE 30, 1997
Principal
Amount in
Thousands Value
BANK OBLIGATIONS
Bankers Acceptance _ 2.89%
SunTrust Banks Inc.,
5.5%, 7-7-97 .......................... 15,000 14,986,125
Certificates of Deposit
Domestic _ 2.12%
Bankers Trust New York Corp.,
5.40%, 10-16-97 ....................... $11,000 10,999,042
Yankee _ 8.69%
Banque Nationale de Paris,
5.90%, 3-19-98 ........................ 10,000 10,000,000
Canadian Imperial Bank of Commerce,
5.95%, 6-29-98 ........................ 10,000 9,993,918
Deutsche Bank AG - New York,
5.71%, 11-7-97 ........................ 10,000 10,000,000
Societe Generale - New York,
5.85%, 3-3-98 ......................... 15,000 14,985,102
Total ................................. 44,979,020
Total Certificates of Deposit _ 10.81% 55,978,062
Notes _ 7.33%
Abbey National Treasury Services plc,
5.610%, 2-10-98 ....................... 10,750 10,745,536
Capital One Funding Corporation, Series
1996 A (Bank One, Kentucky, NA),
5.63%, 7-3-97 ......................... 13,197 13,197,000
PNC Bank, N.A.,
5.5975%, 12-11-97 ..................... 14,000 13,995,646
Total ................................. 37,938,182
TOTAL BANK OBLIGATIONS _ 21.03% $108,902,369
(Cost: $108,902,369)
CORPORATE OBLIGATIONS
Commercial Paper
Chemicals and Allied Products _ 4.89%
Abbott Laboratories,
5.7%, 7-9-97 .......................... 2,640 2,636,656
Air Products & Chemicals Inc.:
5.7%, 7-8-97 .......................... 6,255 6,248,067
5.56%, 7-28-97 ........................ 10,500 10,456,215
PPG Industries Inc.,
5.53%, 7-29-97 ........................ 6,000 5,974,193
Total ................................. 25,315,131
Communication - 0.54%
BellSouth Corp.,
6.15%, 7-2-97 ......................... 2,800 2,799,522
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1997
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Depository Institutions _ 4.05%
Creditanstalt-Bankverein,
5.55%, 7-3-97 ......................... $ 6,000 $ 5,998,150
Union Bank of Switzerland,
6.2%, 7-1-97 .......................... 15,000 15,000,000
Total ................................. 20,998,150
Electric, Gas and Sanitary Services _ 8.91%
Duke Energy Corp.,
6.3%, 7-1-97 .......................... $ 5,000 $5,000,000
Georgia Power Co.,
5.55%, 7-25-97 ........................ 7,000 6,974,100
Idaho Power Co.:
5.56%, 7-18-97 ........................ 5,500 5,485,559
5.62%, 7-31-97 ........................ 1,000 995,317
Pacific Gas & Electric Co.:
5.55%, 7-10-97 ........................ 10,000 9,986,125
5.57%, 8-5-97 ......................... 3,800 3,779,422
Pacificorp,
5.55%, 7-8-97 ......................... 7,000 6,991,833
Questar Corp.:
5.6%, 7-3-97 .......................... 5,710 5,708,224
5.57%, 7-15-97 ........................ 1,200 1,197,401
Total ................................. 46,117,981
Food and Kindred Products _ 0.70%
General Mills, Inc.,
5.495%, Master Note ................... 3,628 3,628,000
Metal Mining _ 3.76%
BHP Finance (USA) Inc.:
5.53%, 7-7-97 ......................... 15,000 14,986,175
5.66%, 7-7-97 ......................... 4,500 4,495,755
Total ................................ 19,481,930
Nondepository Institutions _ 3.01%
Avco Financial Services Inc.,
6.3%, 7-1-97 .......................... 3,915 3,915,000
Island Finance Puerto Rico Inc.,
5.55%, 7-28-97 ........................ 11,700 11,651,299
Total ............................... 15,566,299
Personal Services _ 3.86%
Block Financial Corp.:
6.32%, 7-1-97 ......................... 6,500 6,500,000
5.6%, 7-18-97 ......................... 13,500 13,464,300
Total ................................. 19,964,300
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1997
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Security and Commodity Brokers _ 2.12%
Merrill Lynch & Co., Inc.,
5.58%, 7-9-97 ......................... $11,000 $ 10,986,360
Tobacco Products _ 5.20%
B.A.T. Capital Corp.,
5.58%, 7-28-97 ........................ 10,000 9,958,150
Philip Morris Companies Inc.,
5.55%, 7-9-97 ......................... 17,000 16,979,033
Total ................................. 26,937,183
Total Commercial Paper _ 37.04% 191,794,856
Notes
Auto Repair, Services and Parking _ 1.93%
PHH Corporation,
5.677%, 7-24-97 ....................... 10,000 10,000,000
Electric, Gas and Sanitary Services _ 2.36%
PacifiCorp,
8.75%, 2-12-98 ........................ 12,000 12,220,250
Food and Kindred Products _ 1.74%
PepsiCo Inc.,
6.125%, 1-15-98 ....................... 9,000 9,022,564
Insurance Carriers _ 0.97%
Transamerica Finance Corp.,
6.75%, 8-15-97 ........................ 5,000 5,005,263
Nondepository Institutions _ 2.51%
Caterpillar Financial Services Corp.,
5.6447%, 7-28-97 ...................... 13,000 13,000,000
Security and Commodity Brokers _ 0.97%
Merrill Lynch & Co., Inc.,
6.155%, 6-2-98 ........................ 5,000 5,000,000
Total Notes _ 10.48% 54,248,077
TOTAL CORPORATE OBLIGATIONS _ 47.52% $246,042,933
(Cost: $246,042,933)
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS
California _ 3.84%
City of Anaheim, California, Certificates
of Participation (1993 Arena Financing
Project), Municipal Adjustable Rate
Taxable Securities (Credit Suisse),
5.72%, 8-1-97 ......................... 15,000 15,000,000
Community Redevelopment Agency of the City of
Visalia, California, East Visalia Redevelopment
Project, Variable Interest Short Term Adjustable
Securities (National Westminster Bank PLC, San
Francisco Overseas Branch),
5.79%, 7-3-97 ......................... 4,895 4,895,000
Total ................................. 19,895,000
Colorado _ 0.39%
Kit Carson County, Colorado, Architectural
Development Revenue Bonds (Taxable), (Midwest
Farms, L.L.C. Project), Series 1997 (Norwest
Bank Minnesota, National Association),
5.75%, 7-1-97 ......................... 2,000 2,000,000
Indiana _ 2.90%
City of Whiting, Indiana, Industrial Sewage
and Solid Waste Disposal Revenue Bonds, Taxable
Series 1995 (Amoco Oil Company Project),
5.6%, 7-1-97 .......................... 15,000 15,000,000
Kentucky _ 1.45%
City of Bardstown, Kentucky, Taxable Variable
Rate Demand Industrial Revenue Bonds, Series 1994
(R.J. Tower Corporation Project), (Comerica Bank),
5.68%, 7-3-97 ......................... 7,510 7,510,000
Louisiana _ 2.90%
Industrial Development Board of the Parish
Of Calcasieu, Inc., Environmental Revenue
Bonds (CITGO Petroleum Corporation Project),
Series 1996 (Taxable),(ABN AMRO Bank N.V.),
5.62%, 7-1-97 ......................... 15,000 15,000,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
Michigan _ 0.35%
Crystal Enterprises, Inc., Crystal Mountain Resort,
Taxable Variable Rate Demand Notes, Series 1995
(NBD Bank),
5.68%, 7-3-97 ......................... $ 1,825 $1,825,000
New Jersey _ 0.80%
New Jersey Economic Development Authority,
Federally Taxable Variable Rate Demand/
Fixed Rate Revenue Bonds (The Morey
Organization, Inc. Project), Series of 1997
(CoreStates Bank, N.A.),
5.8%, 7-2-97 .......................... 4,150 4,150,000
New York _ 2.67%
The City of New York, General Obligation Bonds,
Fiscal 1995 Series B, Taxable Adjustable Rate
Bonds (Bayerische Landesbank Girozentrale,
New York Branch),
5.88%, 8-19-97 ........................ 10,000 10,000,000
Town of Hempstead, Industrial Development Agency,
Variable Rate Demand Taxable Industrial Development
Revenue Bonds, Series 1996 (1500 Hempstead TPK,
LLC Facility), (The Bank of New York),
5.84%, 7-3-97 ......................... 3,800 3,800,000
Total ................................. 13,800,000
Ohio _ 0.92%
City of Cleveland, Ohio, Subordinated Income Tax,
Variable Rate Refunding Bonds, Series 1994
(Union Bank of Switzerland, New York Branch and
Credit Suisse, New York Branch),
5.76%, 7-3-97 ......................... 4,800 4,800,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
Pennsylvania _ 4.23%
Montgomery County Industrial Development
Authority:
Federally Taxable Variable Rate Demand
Revenue Bonds (Neose Technologies,
Inc. Project), Series B of 1997 (CoreStates
Bank, N.A.),
5.8%, 7-2-97 .......................... $ 8,400 $ 8,400,000
Federally Taxable Variable Rate Demand/
Fixed Rate Revenue Bonds (Collegeville
Inn Project), Series of 1996 (CoreStates Bank,
N.A.),
5.8%, 7-2-97 .......................... 2,500 2,500,000
Taxable Fixed Rate/Variable Rate
Demand Revenue Bonds (410 Horsham
Associates Project), Series of 1995
(Meridian Bank),
5.8%, 7-9-97 .......................... 960 960,000
Berks County Industrial Development Authority
(Commercial Facilities Project), Series
B of 1995 (Meridian Bank),
5.8%, 7-9-97 .......................... 6,130 6,130,000
Philadelphia Authority for Industrial Development,
Variable/Fixed Rate Federally Taxable
Economic Development Bonds (Mothers Work,
Inc.), Series of 1995 (Meridian Bank),
5.8%, 7-9-97 .......................... 3,915 3,915,000
Total ................................. 21,905,000
South Dakota _ 0.48%
Central Plains Clinic Ltd., Floating Rate
Taxable Bonds, Series 1996 (Cooperatieve
Centrale Raiffeisen-Borenleenbank B.A.,
"Rabobank Nederland", New York Branch),
5.62%, 7-21-97 ........................ 2,500 2,500,000
Texas _ 5.28%
Metrocrest Hospital Authority, Series 1989A
(The Bank of New York),
5.6235%, 7-2-97 ....................... 16,000 15,997,501
Lower Neches Valley Authority, Industrial
Development Corporation (Texas), Variable
Rate Sewage Facilities Revenue Bonds,
Series 1995A (Taxable), (Mobil Oil Refining
Corporation Project),
5.67%, 8-19-97 ........................ 6,340 6,340,000
See Notes to Schedule of Investments on page .
<PAGE>
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
Texas (Continued)
Gulf Coast Waste Disposal Authority, Pollution
Control Revenue Bonds (Amoco Oil Company
Project), Taxable Series 1995,
5.65%, 8-19-97 ........................ $ 5,000 $ 5,000,000
Total ................................. 27,337,501
TOTAL MUNICIPAL OBLIGATIONS _ 26.21% $135,722,501
(Cost: $135,722,501)
UNITED STATES GOVERNMENT OBLIGATIONS
Federal Home Loan Banks,
5.82%, 11-6-97 ........................ 4,000 3,996,621
Student Loan Marketing Association,
5.37%, 2-17-98......................... 15,000 15,000,000
TOTAL UNITED STATES GOVERNMENT OBLIGATIONS _ 3.67% $ 18,996,621
(Cost: $18,996,621)
TOTAL INVESTMENT SECURITIES _ 98.43% $509,664,424
(Cost: $509,664,424)
CASH AND OTHER ASSETS, NET OF LIABILITIES _ 1.57% 8,128,110
NET ASSETS - 100.00% $517,792,534
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
JUNE 30, 1997
Assets
Investment securities - at value (Note 1) ........ $509,664,424
Cash ............................................ 1,789,146
Receivables:
Fund shares sold ................................ 23,870,436
Interest ........................................ 2,889,385
Prepaid insurance premium ........................ 17,142
------------
Total assets .................................. 538,230,533
------------
Liabilities
Payable to Fund shareholders ..................... 20,077,826
Dividends payable ................................ 191,024
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 142,869
Accrued management fee (Note 2) .................. 5,562
Accrued accounting services fee (Note 2) ......... 5,000
Accrued service fee (Note 2) ..................... 3,040
Other ............................................ 12,678
------------
Total liabilities ............................. 20,437,999
------------
Total net assets ............................. $517,792,534
============
Net Assets
$0.01 par value capital stock, authorized -- 5,000,000,000;
Class A shares outstanding _ 514,272,235;
Class B shares outstanding _ 3,520,299
Capital stock ................................... $5,177,925
Additional paid-in capital ...................... 512,614,609
------------
Net assets applicable to outstanding
units of capital ............................. $517,792,534
============
Net asset value, redemption and offering price
per share for Class A and Class B ................ $1.00
=====
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended JUNE 30, 1997
Investment Income
Interest and amortization (Note 1B) .............. $26,419,045
-----------
Expenses (Note 2):
Investment management fee ....................... 1,910,434
Transfer agency and dividend disbursing -
Class A ........................................ 1,780,788
Class B ....................................... 3,020
Custodian fees .................................. 79,186
Accounting services fee ......................... 60,000
Legal fees ...................................... 27,261
Distribution fee - Class B ...................... 19,773
Audit fees ...................................... 14,110
Service fee - Class B ........................... 6,023
Other ........................................... 254,472
-----------
Total expenses ................................ 4,155,067
-----------
Net investment income ........................ 22,263,978
-----------
Net increase in net assets resulting
from operations ........................... $22,263,978
===========
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended
June 30,
-------------------------
1997 1996
------------- ------------
Increase in Net Assets
Operations:
Net investment income ............ $22,263,978 $20,127,724
------------ ------------
Net increase in net assets
resulting from operations ..... 22,263,978 20,127,724
------------ ------------
Dividends to shareholders
from net investment income:*
Class A .......................... (22,155,491) (20,115,214)
Class B .......................... (108,487) (12,510)
------------ ------------
(22,263,978) (20,127,724)
------------ ------------
Capital share transactions:**
Proceeds from sale of shares:
Class A ........................3,102,132,565 2,162,044,174
Class B ........................ 14,993,673 1,209,660
Proceeds from reinvestment
of dividends:
Class A ........................ 21,289,916 19,534,491
Class B ........................ 95,253 11,555
Payments for shares redeemed:
Class A ........................(3,011,159,149)(2,148,369,622)
Class B ........................ (12,198,722) (591,120)
------------ ------------
Net increase in net assets
resulting from capital
share transactions ............ 115,153,536 33,839,138
------------ ------------
Total increase ................ 115,153,536 33,839,138
Net Assets
Beginning of period ............... 402,638,998 368,799,860
------------ ------------
End of period ..................... $517,792,534 $402,638,998
============ ============
Undistributed net investment
income ......................... $--- $---
==== ====
*See "Financial Highlights" on pages - .
**The number of shares transacted during the periods corresponds to the amounts
included in this statement because shares are recorded at $1.00 per share.
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the fiscal year ended June 30,
----------------------------------
1997 1996 1995 1994 1993
----- ------ ------ ------ ------
Net asset value,
beginning of
period ........... $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
Net investment
income ........... 0.0472 0.0487 0.0465 0.0252 0.0251
Less dividends
declared ......... (0.0472)(0.0487)(0.0465)(0.0252)(0.0251)
------ ------ ------ ------ ------
Net asset value,
end of period .... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total return........ 4.80% 5.01% 4.74% 2.55% 2.57%
Net assets, end of
period (000
omitted) ......... $514,272$402,009$368,800$316,920$350,624
Ratio of expenses to
average net
assets ........... 0.87% 0.91% 0.97% 1.04% 1.06%
Ratio of net
investment income
to average net
assets ........... 4.70% 4.89% 4.68% 2.51% 2.56%
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the
fiscal period
year from 9/5/95*
ended through
6/30/97 6/30/96
-------- --------
Net asset value,
beginning of
period ........... $1.00 $1.00
------ ------
Net investment
income ........... 0.0407 0.0312
Less dividends
declared ......... (0.0407) (0.0312)
------ ------
Net asset value,
end of period .... $1.00 $1.00
======= =======
Total return........ 4.13% 3.15%
Net assets, end of
period (000
omitted) ......... $3,521 $630
Ratio of expenses to
average net
assets ........... 1.48% 1.88%**
Ratio of net
investment income
to average net
assets ........... 4.14% 3.76%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED CASH MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
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. Its investment objective is to seek maximum current income to the
extent consistent with stability of principal by investing in a portfolio of
money market instruments meeting specified quality standards. 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 397 days. 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 Subchapter M of 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.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The 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 $16.9
billion of combined net assets at June 30, 1997) 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
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 has adopted a 12b-1 plan for Class B shares under which W&R,
principal underwriter and sole distributor of the Fund's shares, is compensated
in an amount calculated and payable daily up to 1% annually of the Fund's
average daily net assets for Class B shares. This fee consists of two
elements: (i) up to 0.75% may be paid to the Distributor (W&R) for distribution
services and distribution expenses including commissions paid by the
Distributor to its sales representatives and managers and (ii) up to 0.25% may
be paid to reimburse the Distributor for continuing payments made to the
Distributor's representatives and managers, its administrative costs in
overseeing these payments, and the expenses of WARSCO in providing certain
personal services to shareholders. During the period ended June 30, 1997, W&R
paid no sales commissions.
A contingent deferred sales charge may be assessed against a shareholder's
redemption amount of Class B shares and paid to the Distributor, W&R. The
purpose of the deferred sales charge is to compensate the Distributor for the
costs incurred by the Distributor in connection with the sale of a Fund's
shares. The amount of the deferred sales charge will be the following percent
of the total amount invested during a calendar year to acquire the shares or
the value of the shares redeemed, whichever is less. Redemption at any time
during the calendar year of investment and the first full calendar year after
the calendar year of investment, 3%; the second full calendar year, 2%; the
third full calendar year, 1%; and thereafter, 0%. All investments made during
a calendar year shall be deemed as a single investment during the calendar year
for purposes of calculating the deferred sales charge. 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 the
shareholder's account resulting from capital appreciation above the amount paid
for shares purchased during the deferred sales charge period. During the
period ended June 30, 1997, the Distributor received $22,497 in deferred sales
charges.
The Fund paid Directors' fees of $17,515, which are included in other
expenses.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Commencement of Multiclass Operations
On September 5, 1995, the Fund was authorized to offer investors a choice
of two classes of shares, Class A and Class B, each of which has equal rights as
to assets and voting privileges. Class A shares are not subject to a sales
charge on purchases or a contingent deferred sales charge on redemption; they
are not subject to a Rule 12b-1 Service Plan. A comprehensive discussion of
the terms under which shares of either class are offered is contained in the
Prospectus and the Statement of Additional Information for the Fund.
Income and non-class specific expenses are allocated daily to each class
of shares based on the value of relative net assets as of the beginning of each
day adjusted for the prior day's capital share activity.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Cash Management, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United Cash Management, Inc.
(the "Fund") as of June 30, 1997, the related statements of operations
and changes in net assets for the year then ended, and the financial
highlights for the year then ended. These financial statements and the
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audit. The
financial statements and the financial highlights of the Fund for each
of the periods in the four-year period ended June 30, 1996 were audited
by other auditors whose report, dated August 5, 1996, expressed an
unqualified opinion on those statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at June 30, 1997 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
United Cash Management, Inc. as of June 30, 1997, the results of its
operations, the changes in its net assets, and the financial highlights
for the year then ended in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Kansas City, Missouri
August 1, 1997
<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, 1997
Statement of Assets and Liabilities
For the year ended June 30, 1997
Statement of Operations
For each of the two years ended June 30, 1997
Statement of Changes in Net Assets
Schedule I -- Investment Securities as of June 30, 1997
Report of Independent Accountants
Included in Part C:
-------------------
Financial Data Schedule
Other schedules prescribed by Regulation S-X are not filed because
the required matter is not present or is insignificant.
(b) Exhibits:
(1) Articles of Incorporation, as amended, filed by EDGAR July 7,
1995 as Exhibit EX-99.B1-charter to Post-Effective Amendment No.
28 to the Registration Statement on Form N-1A*
(2) Bylaws, filed October 29, 1996 as Exhibit EX-99.B2-cmbylaw to
Post-Effective Amendment No. 30 to the Registration Statement on
Form N-1A*
(3) Not applicable
(4) Article FIFTH, Article SEVENTH and Article EIGHTH of the
Articles of Incorporation of the Registrant filed by EDGAR July
7, 1995 as Exhibit EX-99.B1-charter to Post-Effective Amendment
No. 28 to the Registration Statement on Form N-1A*; Article I,
Article IV and Article VIII of the Bylaws of the Registrant,
filed October 29, 1996 as Exhibit EX-99.B2-cmbylaw to Post-
Effective Amendment No. 30 to the Registration Statement on Form
N-1A*
(5) Investment Management Agreement, as amended, filed by EDGAR July
7, 1995 as Exhibit EX-99.B5-cmima to Post-Effective Amendment
No. 28 to the Registration Statement on Form N-1A*
Assignment of the Investment Management Agreement, filed by
EDGAR July 7, 1995 as Exhibit EX-99.B5-cmassign to Post-
Effective Amendment No. 28 to the Registration Statement on Form
N-1A*
(6) Underwriting Agreement, filed by EDGAR July 7, 1995 as Exhibit
EX-99.B6-cmua to Post-Effective Amendment No. 28 to the
Registration Statement on Form N-1A*
(7) Not applicable
(8) Custodian Agreement, as amended, filed May 30, 1997 as EX-99.B8-
cmca to Post-Effective Amendment No. 31 to the Registration
Statement on Form N-1A*
(9) Shareholder Servicing Agreement, attached hereto as Exhibit EX-
99.B9-cmssa
Fund Class A Application, as amended, filed May 30, 1997 as
Exhibit EX-99.B9-cmappca to Post-Effective Amendment No. 31 to
the Registration Statement on Form N-1A*
Fund NAV Application, filed by EDGAR July 7, 1995 as Exhibit EX-
99.B9-cmappnav to Post-Effective Amendment No. 28 to the
Registration Statement on Form N-1A*
Accounting Services Agreement, filed by EDGAR July 7, 1995 as
Exhibit EX-99.B9-cmaca to Post-Effective Amendment No. 28 to the
Registration Statement on Form N-1A*
(10) Not applicable
(11) Consent of Deloitte & Touche LLP, Independent Accountants,
attached hereto as EX-99.B11-cmconsnt
Consent of Price Waterhouse LLP, Independent Accountants,
attached hereto as EX-99.B11-cmpwcon
Opinion of Price Waterhouse LLP, attached hereto as EX-99.B11-
cmpwopin
(12) Not applicable
(13) Not applicable
(14) 1. Qualified Retirement Plan and Trust-Defined Contribution
Basic Plan Document filed December 16, 1994 as EX-99.B14-1-
03bpd to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A of United Asset Strategy Fund, Inc.*
2. Qualified Retirement Plan-Summary Plan Description filed
December 16, 1994 as EX-99.B14-2-03spd to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A
of United Asset Strategy Fund, Inc.*
3. Employer Contribution 403(b)-Adoption Agreement filed
December 16, 1994 as EX-99.B14-3-403baa to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A
of United Asset Strategy Fund, Inc.*
4. IRC Section 457 Deferred Compensation Plan-Adoption
Agreement filed December 16, 1994 as EX-99.B14-4-457aa to
Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A of United Asset Strategy Fund, Inc.*
5. IRC Section 457-Deferred Compensation Specimen Plan
Document filed December 16, 1994 as EX-99.B14-5-457bpd to
Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A of United Asset Strategy Fund, Inc.*
6. National Nonstandardized 401(k)Profit Sharing Plan-Adoption
Agreement filed December 16, 1994 as EX-99.B14-6-ns401aa to
Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A of United Asset Strategy Fund, Inc.*
7. 401(k) Nonstandardized Profit Sharing Plan-Summary Plan
Description filed December 16, 1994 as EX-99.B14-7-ns401gs
to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A of United Asset Strategy Fund, Inc.*
8. National Nonstandardized Money Purchase Pension Plan-
Adoption Agreement filed December 16, 1994 as EX-99.B14-8-
nsmppaa to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of United Asset
Strategy Fund, Inc.*
9. National Nonstandardized Profit Sharing Plan-Adoption
Agreement filed December 16, 1994 as EX-99.B14-9-nspspaa to
Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A of United Asset Strategy Fund, Inc.*
10. Standardized 401(k) Profit sharing Plan-Adoption Agreement
filed December 16, 1994 as EX-99.B14-10-s401aa to Pre-
Effective Amendment No. 1 to the Registration Statement on
Form N-1A of United Asset Strategy Fund, Inc.*
11. 401(k) Standardized Profit Sharing Plan-Summary Plan
Description filed December 16, 1994 as EX-99.B14-11-s401gis
to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A of United Asset Strategy Fund, Inc.*
12. Universal Simplified Employee Pension Plan-Adoption
Agreement filed December 16, 1994 as EX-99.B14-12-sepaa to
Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A of United Asset Strategy Fund, Inc.*
13. Universal Simplified Employee Pension Plan-Basic Plan
Document filed December 16, 1994 as EX-99.B14-13-sepbpd to
Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A of United Asset Strategy Fund, Inc.*
14. National Standardized Money Purchase Pension Plan-Adoption
Agreement filed December 16, 1994 as EX-99.B14-14-smppaa to
Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A of United Asset Strategy Fund, Inc.*
15. Standardized Money Purchase pension Plan-Summary Plan
Description filed December 16, 1994 as EX-99.B14-15-smppgis
to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A of United Asset Strategy Fund, Inc.*
16. Standardized Profit Sharing Plan-Adoption Agreement filed
December 16, 1994 as EX-99.B14-16-spspaa to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A
of United Asset Strategy Fund, Inc.*
17. Standardized Profit Sharing Plan-summary Plan Description
field December 16, 1994 as EX-99.B14-17-spspgis to Pre-
Effective Amendment No. 1 to the Registration Statement on
Form N-1A of United Asset Strategy Fund, Inc.*
18. 403(b)(7) Tax-sheltered Custodial Account Agreement filed
December 16, 1994 as EX-99.B14-18-tsa to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A
of United Asset Strategy Fund, Inc.*
19. Title I 403(b) Plan Document filed December 16, 1994 as EX-
99.B14-19-ttllpbd to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of United Asset
Strategy Fund, Inc.*
20. Simple IRA Plan Document filed March 26, 1997 as EX-99.B14-
20-simple to Post-Effective Amendment No. 119 to the
Registration Statement on Form N-1A of United Funds, Inc.*
21. Individual Retirement Plan filed March 26, 1997 as EX-
99.B14-21-crp00005 to Post-Effective Amendment No. 119 to
the Registration Statement on Form N-1A of United Funds,
Inc.*
22. Retirement Plan Distribution/Withdrawal Document filed May
16, 1997 as EX-99.B14-22-crp1665 to Post-Effective
Amendment No. 8 to the Registration Statement on Form N-1A
of Waddell & Reed Funds, Inc.*
23. Special Tax Notice Regarding Plan Payments filed May 16,
1997 as EX-99.B14-23-crp1666 to Post-Effective Amendment
No. 8 to the Registration Statement on Form N-1A of Waddell
& Reed Funds, Inc.*
24. Waiver of Joint and Survivor Annuity filed May 16, 1997 as
EX-99.B14-24-crp1667 to Post-Effective Amendment No. 8 to
the Registration Statement on Form N-1A of Waddell & Reed
Funds, Inc.*
25. Spousal Consent on Early Distribution filed May 16, 1997 as
EX-99.B14-25-crp1668 to Post-Effective Amendment No. 8 to
the Registration Statement on Form N-1A of Waddell & Reed
Funds, Inc.*
26. Consent to Lump Sum Distribution filed May 16, 1997 as EX-
99.B14-26-crp1669 to Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A of Waddell & Reed
Funds, Inc.*
(15) Service Plan, filed by EDGAR July 7, 1995 as Exhibit EX-99.B15-
cmspcb to Post-Effective Amendment No. 28 to the Registration
Statement on Form N-1A*
(16) Computation of yield performance quotations for Class A shares
filed October 29, 1996 as EX-99.B16-cmayield to Post-Effective
Amendment No. 30 to the Registration Statement on Form N-1A*
Computation of yield performance quotations for Class B shares
filed October 29, 1996 as EX-99.B16-cmbyield to Post-Effective
Amendment No. 30 to the Registration Statement on Form N-1A*
(17) Financial Data Schedule, attached hereto as EX-27.B17-cmfds
(18) Multiple Class Plan, filed October 29, 1996 as Exhibit EX-
99.B18-cmmcp to Post-Effective Amendment No. 30 to the
Registration Statement on Form N-1A*
25. Persons Controlled by or under common control with Registrant
-------------------------------------------------------------
None
26. Number of Holders of Securities
-------------------------------
Number of Record Holders as of
Title of Class June 30, 1997
-------------- ------------------------------
Capital Stock Class A 71,764
Capital Stock Class B 168
27. Indemnification
---------------
Reference is made to Article SEVENTH paragraph 6(b) through 6(f) of the
Articles of Incorporation, as amended, of Registrant, filed July 7, 1995
as EX.99.B1-charter to Post-Effective Amendment No. 28 to the Registration
Statement on Form N-1A*, and to Article IV of the Underwriting Agreement,
filed July 7, 1995 as EX.99.B6-cmua to Post-Effective Amendment No. 28 to
the Registration Statement on Form N-1A*, 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.
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.
Advantage I
Advantage II
Waddell & Reed Funds, Inc.
(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) The Fund agrees to furnish to each person to whom a prospectus is
delivered a copy of the Fund's latest annual report to shareholders
upon request and without charge.
(d) To the extent that Section 16(c) of the Investment Company Act of
1940, as amended, applies to the Fund, the Fund agrees, if requested
in writing by the shareholders of record of not less than 10% of the
Fund's outstanding shares, to call a meeting of the shareholders of
the Fund for the purpose of voting upon the question of removal of
any director and to assist in communications with other shareholders
as required by Section 16(c).
- ---------------------------------
*Incorporated herein by reference
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and/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(b) of the Securities Act of 1933, 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 26th day of September, 1997.
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 September 26, 1997
- ---------------------- ------------------
Ronald K. Richey
/s/Keith A. Tucker* President and Director September 26, 1997
- --------------------- (Principal Executive Officer) ------------------
Keith A. Tucker
/s/Theodore W. Howard* Vice President, Treasurer September 26, 1997
- ---------------------- and Principal Accounting ------------------
Theodore W. Howard Officer
/s/Robert L. Hechler* Vice President and September 26, 1997
- ---------------------- Principal Financial ------------------
Robert L. Hechler Officer
/s/Henry L. Bellmon* Director September 26, 1997
- ---------------------- ------------------
Henry L. Bellmon
/s/Dodds I. Buchanan* Director September 26, 1997
- --------------------- ------------------
Dodds I. Buchanan
/s/James M. Concannon* Director September 26, 1997
- ------------------- ------------------
James M. Concannon
/s/John A. Dillingham* Director September 26, 1997
- ------------------- ------------------
John A. Dillingham
/s/Linda Graves* Director September 26, 1997
- ------------------- ------------------
Linda Graves
/s/John F. Hayes* Director September 26, 1997
- ------------------- ------------------
John F. Hayes
/s/Glendon E. Johnson* Director September 26, 1997
- ------------------- ------------------
Glendon E. Johnson
/s/William T. Morgan* Director September 26, 1997
- ------------------- ------------------
William T. Morgan
/s/William L. Rogers* Director September 26, 1997
- ------------------- ------------------
William L. Rogers
/s/Frank J. Ross, Jr.* Director September 26, 1997
- ------------------- ------------------
Frank J. Ross, Jr.
/s/Eleanor B. Schwartz* Director September 26, 1997
- ------------------- ------------------
Eleanor B. Schwartz
/s/Frederick Vogel III* Director September 26, 1997
- ------------------- ------------------
Frederick Vogel III
/s/Paul S. Wise* Director September 26, 1997
- ------------------- ------------------
Paul S. Wise
*By
Sharon K. Pappas
Attorney-in-Fact
ATTEST:
Sheryl Strauss
Assistant Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, That each of the undersigned, UNITED FUNDS,
INC., UNITED INTERNATIONAL GROWTH FUND, INC., UNITED MUNICIPAL BOND FUND, INC.,
UNITED VANGUARD FUND, INC., UNITED HIGH INCOME FUND, INC., UNITED CASH
MANAGEMENT, INC., UNITED NEW CONCEPTS FUND, INC., UNITED GOVERNMENT SECURITIES
FUND, INC., UNITED MUNICIPAL HIGH INCOME FUND, INC., UNITED GOLD & GOVERNMENT
FUND, INC., UNITED HIGH INCOME FUND II, INC., UNITED CONTINENTAL INCOME FUND,
INC., UNITED RETIREMENT SHARES, INC., UNITED ASSET STRATEGY FUND, INC.,
TMK/UNITED FUNDS, INC. AND WADDELL & REED FUNDS, INC. (each hereinafter called
the "Corporation"), and certain directors and officers for the Corporation, do
hereby constitute and appoint KEITH A. TUCKER, ROBERT L. HECHLER, and SHARON K.
PAPPAS, and each of them individually, their true and lawful attorneys and
agents to take any and all action and execute any and all instruments which said
attorneys and agents may deem necessary or advisable to enable each Corporation
to comply with the Securities Act of 1933 and/or the Investment Company Act of
1940, as amended, and any rules, regulations, orders or other requirements of
the United States Securities and Exchange Commission thereunder, in connection
with the registration under the Securities Act of 1933 and/or the Investment
Company Act of 1940, as amended, including specifically, but without limitation
of the foregoing, power and authority to sign the names of each of such
directors and officers in his/her behalf as such director or officer as
indicated below opposite his/her signature hereto, to any Registration Statement
and to any amendment or supplement to the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or the
Investment Company Act of 1940, as amended, and to any instruments or documents
filed or to be filed as a part of or in connection with such Registration
Statement or amendment or supplement thereto; and each of the undersigned hereby
ratifies and confirms all that said attorneys and agents shall do or cause to be
done by virtue hereof.
Date: August 27, 1997 /s/Keith A. Tucker
--------------------------
Keith A. Tucker, President
/s/Ronald K. Richey Chairman of the Board August 27, 1997
- -------------------- ----------------
Ronald K. Richey
/s/Keith A. Tucker President and Director August 27, 1997
- -------------------- (Principal Executive ----------------
Keith A. Tucker Officer)
/s/Theodore W. Howard Vice President, Treasurer August 27, 1997
- -------------------- and Principal Accounting ----------------
Theodore W. Howard Officer
/s/Robert L. Hechler Vice President and August 27, 1997
- -------------------- Principal Financial ----------------
Robert L. Hechler Officer
/s/Henry L. Bellmon Director August 27, 1997
- -------------------- ----------------
Henry L. Bellmon
/s/Dodds I. Buchanan Director August 27, 1997
- -------------------- ----------------
Dodds I. Buchanan
/s/James M. Concannon Director August 27, 1997
- -------------------- ----------------
James M. Concannon
/s/John A. Dillingham Director August 27, 1997
- -------------------- ----------------
John A. Dillingham
/s/Linda Graves Director August 27, 1997
- -------------------- ----------------
Linda Graves
/s/John F. Hayes Director August 27, 1997
- -------------------- ----------------
John F. Hayes
/s/Glendon E. Johnson Director August 27, 1997
- -------------------- ----------------
Glendon E. Johnson
/s/William T. Morgan Director August 27, 1997
- -------------------- ----------------
William T. Morgan
/s/William L. Rogers Director August 27, 1997
- -------------------- ----------------
William L. Rogers
/s/Frank J. Ross, Jr. Director August 27, 1997
- -------------------- ----------------
Frank J. Ross, Jr.
/s/Eleanor Schwartz Director August 27, 1997
- -------------------- ----------------
Eleanor Schwartz
/s/Frederick Vogel III Director August 27, 1997
- -------------------- ----------------
Frederick Vogel III
/s/Paul S. Wise Director August 27, 1997
- -------------------- ----------------
Paul S. Wise
Attest:
/s/Sharon K. Pappas
- --------------------------------
Sharon K. Pappas, Vice President
and Secretary
EX-99.B9-cmssa
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT, made as of the 1st day of July, 1989, by and between UNITED
CASH MANAGEMENT, INC. (the "Company") and Waddell & Reed Services Company (the
"Agent"), as amended and restated as of April 1, 1996,
W I T N E S S E T H :
WHEREAS, the Company wishes, as applicable, to appoint the Agent or to
continue the appointment of the Agent to be its shareholder servicing agent
upon, and subject to, the terms and provisions of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties agree as follows:
1. Appointment of Agent as Shareholder Servicing Agent for the Company;
Acceptance.
(1) The Company hereby appoints the Agent to act as Shareholder
Servicing Agent for the Company upon, and subject to, the terms and provisions
of this Agreement.
(2) The Agent hereby accepts the appointment as Shareholder Servicing
Agent for the Company and agrees to act as such upon, and subject to, the terms
and provisions of this Agreement.
(3) The Agent may appoint an entity or entities approved by the
Company in writing to perform any portion of Agent's duties hereunder (the
"Subagent").
2. Definitions.
(1) In this Agreement -
(a) The term the "Act" means the Investment Company Act of 1940
as amended from time to time;
(b) The term "account" means the shares of the Company
registered on the books of the Company in the name of a shareholder under a
particular account registration number and includes shares subject to
instructions by the shareholder with respect to periodic redemptions and/or
reinvestment in additional shares of any dividends payable on said shares;
(c) The term "affiliate" of a person shall mean a person
controlling, controlled by, or under common control with that person;
(d) The term "Class" shall mean each separate sub-class of a
class of shares of the Company, as may now or in the future exist;
(e) The term "Fund" shall mean each separate class of shares of
the Company, as may now or in the future exist;
(f) The term "officers' instruction" means an instruction given
on behalf of the Company to the Agent and signed on behalf of the Company by any
one or more persons authorized to do so by the Company's Board of Directors;
(g) The term "prospectus" means the prospectus and Statement of
Additional Information of the applicable Fund or Class from time to time in
effect;
(h) The term "shares" means shares including fractional shares
of capital stock of the Company, whether or not such shares are evidenced by an
outstanding stock certificate issued by the Company;
(i) The term "shareholder" shall mean the owner of record of
shares of the Company;
(j) The term "stock certificate" means a certificate
representing shares in the form then currently in use by the Company.
3. Duties of the Agent.
The Agent shall perform such duties as shall be set forth in this
paragraph 3 and in accordance with the practice stated in Exhibit A of this
Agreement or any amendment thereof, any or all of which duties may be delegated
to or performed by one or more Subagents pursuant to Paragraph (3) above.
(1) Transfers.
Subject to the provisions of this Agreement the Agent hereby
agrees to perform the following functions as transfer agent for the Company:
(a) Recording the ownership, transfer, exchange and cancellation
of ownership of shares of the Company on the books of the Company;
(b) Causing the issuance, transfer, exchange and cancellation of
stock certificates;
(c) Establishing and maintaining records of accounts;
(d) Computing and causing to be prepared and mailed or otherwise
delivered to shareholders payment checks 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 and charges to Agent made by
any Subagent; (iv) costs for special reports or information furnished on request
pursuant to this Agreement and not specifically required by the Agent by
Paragraph 3 of this Agreement; and (v) reasonable costs and expenses incurred by
the Agent in connection with the duties of the Agent described in Paragraph
(3)(1)(i). In addition, the Company agrees to promptly pay over to the Agent
any fees or payment of charges it may receive from a shareholder for services
furnished to the shareholder by the Agent.
Services and operations incident to the sale and distribution of the
Company's shares, including sales communications, confirmations of investments
(not including reinvestment of dividends) and the clearing or collection of
payments will not be for the account or at the expense of the Company under this
Agreement.
5. Right of Company to Inspect Records, etc.
The Company will have the right under this Agreement to perform on
site inspection of records and accounts and to perform audits directly
pertaining to the Company shareholder accounts serviced by the Agent hereunder
at the Agent's of any Subagent's facilities in accordance with reasonable
procedures at the frequency necessary to assure proper administration of the
Agreement. The Agent will cooperate with the Company's auditors or
representatives of appropriate regulatory agencies and furnish all reasonably
requested records and data.
6. Insurance.
The Agent now has the insurance coverage described in Exhibit B,
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:____________________________
Sheryl Strauss, Assistant Secretary
WADDELL & REED SERVICES COMPANY
By:__________________________________
Robert L. Hechler, President
ATTEST:
By:___________________________
Sharon K. Pappas, Secretary
<PAGE>
EXHIBIT A
A. DUTIES IN SHARE TRANSFERS AND REGISTRATION
1. The Agent in carrying out its duties shall follow general commercial
practices and the Rules of the Stock Transfer Association, Inc. except as they
may conflict or be inconsistent with the specific provisions of the Company's
Articles of Incorporation and Bylaws, prospectus, applicable Federal and state
laws and regulations and this Agreement.
2. The Agent shall not require that the signature of the appropriate
person be guaranteed, witnessed or verified in order to effect a redemption,
transfer, exchange or change of address except as may from time to time be
directed by the Company as set forth in an officers' instruction. In the event
a signature guarantee is required by the Company, the Agent shall not inquire as
to the genuineness of the guarantee.
3. The Agent shall not replace a lost, stolen or misplaced stock
certificate without requiring and being furnished with an open penalty surety
bond protecting the Company and the Agent against loss.
B. The practices, procedures and requirements specified in A above may be
modified, altered, varied or supplemented as from time to time may be mutually
agreed upon by the Company and the Agent and evidenced on behalf of the Company
by an officers' instruction. Any such change shall not be deemed to be an
amendment to the Agreement within the meaning of Paragraph 8 of the Agreement.
<PAGE>
EXHIBIT B
Bond or
Name of Bond Policy No. Insurer
Investment Company 87015197B ICI
Blanket Bond Form Mutual
Insurance
Company
Fidelity $18,800,000
Audit Expense 50,000
On Premises 18,800,000
In Transit 18,800,000
Forgery or Alteration 18,800,000
Securities 18,800,000
Counterfeit Currency 18,800,000
Uncollectible Items of
Deposit 25,000
Voice-Initiated Transactions 500,000
Total Limit 18,800,000
Directors and Officers/ 87015197D ICI
Errors and Omissions Liability Mutual
Insurance Form Insurance
Total Limit $ 5,000,000 Company
Blanket Lost Instrument Bond (Mail Loss) 30S100639551 Aetna
Life &
Casualty
Blanket Undertaking Lost Instrument
Waiver of Probate 42SUN339806 Hartford
Casualty
Insurance
EX-99.B11-cmconsnt
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Post-Effective Amendment No. 32 to Registration
Statement No. 2-64526 of our report dated August 1, 1997 appearing in the
Statement of Additional Information, which is a part of such Registration
Statement, and to the reference to us under the caption "Financial Highlights"
appearing in the Prospectus, which also is a part of such Registration
Statement.
Deloitte & Touche LLP
Kansas City, Missouri
September 25, 1997
EX-99.B11-cmpwcon
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 32 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated August
5, 1996, relating to the statement of changes in net assets for the year ended
June 30, 1996 and the financial highlights for each of the nine years in the
period ended June 30, 1996 of United Cash Management, Inc., which appears in
such Statement of Additional Information, and to the incorporation by reference
of our report into the Prospectus which constitutes part of this Registration
Statement.
Price Waterhouse LLP
Kansas City, Missouri
September 25, 1997
EX-99.B11-cmpwopin
Report of Independent Accountants
To the Board of Directors and Shareholders of
United Cash Management, Inc.
In our opinion, the accompanying statement of changes in net assets and the
financial highlights present fairly, in all material respects, the changes in
the net assets and financial highlights of United Cash Management, Inc. (the
"Fund") for the year ended June 30, 1996 and for each of the nine years in the
period ended June 30, 1996, respectively, in conformity with generally accepted
accounting principles. This statement of changes in net assets and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the 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, 1996 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above. We have not audited the financial statements of the United
Cash Management, Inc. for any period subsequent to June 30, 1996.
Price Waterhouse LLP
Kansas City, Missouri
August 5, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE ANNUAL REPORT TO
SHAREHOLDERS DATED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000311405
<NAME> UNITED CASH MANAGEMENT, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 509,664,424
<INVESTMENTS-AT-VALUE> 509,664,424
<RECEIVABLES> 26,759,821
<ASSETS-OTHER> 17,142
<OTHER-ITEMS-ASSETS> 1,789,146
<TOTAL-ASSETS> 538,230,533
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 20,437,999
<TOTAL-LIABILITIES> 20,437,999
<SENIOR-EQUITY> 5,177,925
<PAID-IN-CAPITAL-COMMON> 512,614,609
<SHARES-COMMON-STOCK> 517,792,534
<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> 517,792,534
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 26,419,045
<OTHER-INCOME> 0
<EXPENSES-NET> (4,155,067)
<NET-INVESTMENT-INCOME> 22,263,978
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 22,263,978
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (22,263,978)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,117,126,238
<NUMBER-OF-SHARES-REDEEMED> 3,023,357,871
<SHARES-REINVESTED> 21,385,169
<NET-CHANGE-IN-ASSETS> 115,153,536
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,910,434
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,155,067
<AVERAGE-NET-ASSETS> 474,355,538
<PER-SHARE-NAV-BEGIN> 1
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
September 26, 1997
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N. W.
Judiciary Plaza
Washington, D. C. 20549
RE: United Cash Management, Inc.
Post-Effective Amendment No. 32
Dear Sir or Madam:
In connection with the filing of the above-referenced Post-Effective Amendment,
I hereby represent that the Amendment does not contain disclosures which would
render it ineligible to become effective pursuant to paragraph (b) of Rule 485.
Yours truly,
Sharon K. Pappas
General Counsel
SKP:fr
