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. 34
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 29
UNITED CASH MANAGEMENT, INC.
- --------------------------------------------------------------------------------
(Exact Name as Specified in Charter)
6300 Lamar Avenue, Shawnee Mission, Kansas 66202-4200
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(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (913) 236-2000
Kristen A. Richards, P. O. Box 29217, Shawnee Mission, Kansas 66201-9217
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective
_____ immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
__X__ 60 days after filing pursuant to paragraph (a)(i)
_____ on (date) pursuant to paragraph (a)(i)
_____ 75 days after filing pursuant to paragraph (a)(ii)
_____ on (date) pursuant to paragraph (a)(ii) of Rule 485
_____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
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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, 1999 will be filed on or about September 28, 1999.
<PAGE>
The Securities and Exchange Commission has not approved or disapproved the
Fund's securities, or determined whether this Prospectus is accurate or
adequate. It is a criminal offense to state otherwise.
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.
Prospectus
September 1, 1999
<PAGE>
Table of Contents
An Overview of the Fund........................................................3
Performance....................................................................
FEES AND Expenses..............................................................4
the Investment Principles of the Fund..........................................7
Investment Goal, Principal Strategies and Other Investments.................7
Risk Considerations of Principal Strategies and Other Investments............
Year 2000 Issue..............................................................
Your Account...................................................................9
Choosing a Share Class......................................................
Ways to Set Up Your Account................................................13
Buying Shares..............................................................19
Minimum Investments........................................................16
Adding to Your Account.....................................................16
Selling Shares.............................................................17
Telephone Transactions.....................................................26
Shareholder Services.......................................................27
Personal Service........................................................27
Reports.................................................................27
Exchanges...............................................................27
Automatic Transactions..................................................27
Distributions and Taxes....................................................28
Distributions...........................................................28
Taxes...................................................................29
the Management of the Fund....................................................31
Portfolio Management.......................................................32
Management Fee.............................................................33
FINANCIAL HIGHLIGHTS..........................................................
2
<PAGE>
An Overview of the Fund
Goal
United Cash Management, Inc. (the "Fund") seeks maximum current income
consistent with stability of principal.
Principal Strategies
The Fund seeks to achieve its goal by investing in U.S. dollar-denominated,
high-quality money market obligations and instruments.
Principal Risks of Investing in the Fund
Because the Fund owns different types of money market obligations and
instruments, a variety of factors can affect its investment performance, such
as:
o an increase in interest rates, which can cause the value of the Fund's
holdings to decline;
o the credit quality and other conditions of the issuers whose securities the
Fund holds;
o adverse bond market conditions, sometimes in response to general economic
or industry news, that may cause the prices of the Fund's holdings to fall
as part of a broad market decline; and
o WRIMCO's skill in evaluating and managing the interest rate and credit
risks of the Fund.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
Who May Want to Invest
The Fund is designed for investors who are risk-averse and seek to preserve
principal while earning current income and saving for short-term needs. You
should consider whether the Fund fits your particular investment objectives.
3
<PAGE>
Performance
The chart and table below provide some indication of the risks of investing in
the Fund by showing changes in the Fund's performance from year to year and by
showing the Fund's average annual returns for the periods shown.
o The chart presents the total annual returns for Class A and shows how
performance has varied from year to year over the past ten years.
o The table shows Class A and Waddell & Reed Money Market B average annual
returns.
o Both the chart and the table assume reinvestment of dividends and
distributions. As with all mutual funds, the Fund's past performance does
not necessarily indicate how it will perform in the future.
Note that the performance information in the chart and table is based on
calendar-year periods, while the information shown in the Financial Highlights
section of this Prospectus and in the Fund's shareholder reports is based on the
Fund's fiscal year.
Chart of Year-by-Year Returns
as of December 31 each year (%)
1989 8.76%
1990 7.77%
1991 5.65%
1992 3.16%
1993 2.38%
1994 3.47%
1995 5.30%
1996 4.74%
1997 4.91%
1998 4.97%
In the period shown in the chart, the highest quarterly return was 2.29%
(the second quarter of 1989) and the lowest quarterly return was 0.54% (the
first quarter of 1994). The Class A return for the quarter ended June 30,
1999 was ___%.
Average Annual Total Returns
as of December 31, 1998 (%)
1 Year 5 Years 10 Years Life of Class*
-----------------------------------------------
Class A Shares of the Fund 4.97% 4.78% 5.09%
Waddell & Reed Money Market
B Shares of the Fund 4.11% 4.06%
*Since September 5, 1995, for Waddell & Reed Money Market B shares, formerly
called Class B.
4
<PAGE>
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<CAPTION>
Shareholder Fees Class A Class B Class C Waddell & Reed Waddell & Reed
Money Market B Money Market C
(fees paid directly from Shares Shares Shares Shares Shares
your investment) ------ ------ ------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) None None None None None
Maximum Deferred Sales
Charge (Load)(1) None 5% 1% 3% 1%
(as a percentage of
amount invested)
Annual Fund Operating Expenses(2)
(expenses that are deducted
from Fund assets)
Management Fees 0.% 0.% 0.% % %
Distribution and
Service (12b-1) Fees(3) 0.% 1.00% 1.00% 1.00% 1.00%
Other Expenses 0.% 0.% 0.% % %
Total Annual Fund
Operating Expenses 0.% 0.% 0.% % %
</TABLE>
Example: This example is intended to help you compare the cost of investing in
the shares of the Fund with the cost of investing in other mutual funds. The
example assumes that (a) you invest $10,000 in the particular class for each
time period specified, (b) your investment has a 5% return each year, and (c)
the expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions, your costs would be:
<TABLE>
<CAPTION>
If shares are redeemed
at end of period: 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
Class A shares $ $ $ $
Class B shares $ $ N/A N/A
Class C shares $ $ N/A N/A
Waddell & Reed Money
Market B shares $ $ $ $
Waddell & Reed Money
Market C shares $ $ N/A N/A
</TABLE>
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(1) The contingent deferred sales charge which is imposed on redemption
proceeds of Class B shares declines from 5% of the amount invested to 0%
after 7 years. For Waddell & Reed Money Market B shares, the CDSC declines
from 3% of the amount invested to 0% after 3 years. For Class C shares and
Waddell & Reed Money Market C shares, a 1% CDSC applies to the proceeds of
redemption of these shares held for less than 12 months.
(2) Management Fees and Total Annual Fund Operating Expenses have been restated
to reflect the change in management fees effective June 30, 1999;
otherwise, expense ratios are based on the management fees and other
Fund-level expenses of the Fund for the fiscal year ended June 30, 1999,
and for Class B, Class C and Waddell & Reed Money Market C, the expenses
attributable to each class that are anticipated for the current year.
Actual expenses may be greater or less than those shown.
(3) It is possible that long-term Class B, Class C, Waddell & Reed Money Market
B and Waddell & Reed Money Market C shareholders of the Fund may bear 12b-1
distribution fees that are more than the maximum asset-based sales charge
permitted under the rules of the National Association of Securities
Dealers, Inc.
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
If shares are not redeemed
at end of period: 1 year 3 years 5 years 10 years
Class A shares $ $ $ $
Class B shares $ $ N/A N/A
Class C shares $ $ N/A N/A
Waddell & Reed Money
Market B shares $ $ $ $
Waddell & Reed Money
Market C shares $ $ N/A N/A
</TABLE>
6
<PAGE>
The Investment Principles of the Fund
Investment Goal, Principal Strategies and Other Investments
The goal of the Fund is maximum current income consistent with stability of
principal. The Fund seeks to achieve its goal by investing in a diversified
portfolio of high-quality money market instruments in accordance with the
requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended
(the "1940 Act"). There is no guarantee that the Fund will achieve its goal.
The Fund invests only in the following U.S. dollar-denominated money market
obligations and instruments:
o U.S. government obligations (including obligations of U.S. government
agencies and instrumentalities);
o bank obligations and instruments secured by bank obligations, such as
letters of credit;
o commercial paper;
o corporate debt obligations, including variable amount master demand notes;
o Canadian government obligations; and
o 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 only invests in bank obligations if they are obligations of a bank
subject to regulation by the U.S. Government (including branches of these banks)
or obligations of a foreign bank having total assets of at least $500 million,
and instruments secured by any such obligation. The Fund only invests in
securities with a remaining maturity of not more than 397 calendar days.
WRIMCO may look at a number of factors in selecting securities for the Fund's
portfolio. These include:
o the maturity of the security;
o the relative value of the security; and
o the creditworthiness of the particular issuer or guarantor of the security.
In determining whether to sell a security, WRIMCO will use the same analysis
that it uses in buying securities to determine if the security no longer offers
adequate return or does not comply with Rule 2a-7. As well, WRIMCO may determine
more attractive investment opportunities exist.
You will find more information in the Statement of Additional Information
("SAI") about the Fund's valuation.
7
<PAGE>
Risk Considerations of Principal Strategies and Other Investments
Risks exist in any investment. The Fund is subject to market risk, financial
risk and, in some cases, prepayment risk.
o Market risk is the possibility of a change in the price of the security
because of market factors including changes in interest rates. Bonds with
longer maturities are more interest-rate sensitive. For example, if
interest rates increase, the value of a bond with a longer maturity is more
likely to decrease.
o Financial risk is based on the financial situation of the issuer of the
security. The financial risk of the Fund depends on the credit quality of
the underlying securities in which it invests.
o Prepayment risk is the possibility that, during periods of falling interest
rates, a debt security with a high stated interest rate will be prepaid
before its expected maturity date.
Because the Fund owns different types of investments, its performance will be
affected by a variety of factors. In general, the value of the Fund's
investments and the income it may generate will vary from day to day, generally
due to changes in market conditions, interest rates and other company and
economic news. Performance will also depend on WRIMCO's skill in selecting
investments.
Year 2000 Issue
Like other mutual funds, financial and business organizations and individuals
around the world, the Fund could be adversely affected if the computer systems
used by WRIMCO and the Fund's other service providers do not properly process
and calculate date-related information and data from and after January 1, 2000.
WRIMCO is taking steps that it believes are reasonably designed to address year
2000 computer-related problems with respect to the computer systems that it uses
and to obtain assurances that comparable steps are being taken by the Fund's
other, major service providers. Although there can be no assurances, WRIMCO
believes these steps will be sufficient to avoid any adverse impact on the Fund.
Similarly, the companies and other issuers in which the Fund invests could be
adversely affected by year 2000 computer-related problems, and there can be no
assurance that the steps taken, if any, by these issuers will be sufficient to
avoid any adverse impact on the Fund.
8
<PAGE>
Your Account
Choosing a Share Class
This Prospectus offers five classes of shares for the Fund: Class A, Class B,
Class C and Waddell & Reed Money Market B & Waddell & Reed Money Market C. Each
class has its own sales charge, if any, and expense structure. The decision as
to which class of shares is best suited to your needs depends on a number of
factors that you should discuss with your financial advisor. Some factors to
consider are how much you plan to invest and how long you plan to hold your
investment. For example, if you are investing a substantial amount and plan to
hold your shares for a long time, Class A shares may be the most appropriate for
you. If you are investing a lesser amount, you may want to consider Class B
shares (if investing for at least seven years) or Class C shares (if investing
for less than seven years). Since your objectives may change over time, you may
want to consider another class when you buy additional Fund shares. All of your
future investments in the Fund will be made in the class you select when you
open your account, unless you inform the Fund otherwise, in writing, when you
make the future investment.
General comparison of classes of shares
<TABLE>
<CAPTION>
Class A Class B Class C Waddell & Reed Waddell & Reed
- ------- ------- ------- Money Market B Money Market C
-------------- --------------
<S> <C> <C> <C> <C>
o No initial sales charge o No initial sales o No initial sales charge o No initial sales o No initial sales
charge charge charge
o No deferred sales charge o Deferred sales charge o A 1% deferred sales o Deferred sales charge o A 1% deferred sales
on shares you sell charge on shares you on shares you sell charge on shares
within six years sell within one year within three years you sell within one
year
o No distribution and o Distribution and o Distribution and o Distribution and o Distribution and
service (12b-1) fees service (12b-1) service (12b-1) fees service (12b-1) service (12b-1)
fees of 1.00% of 1.00% fees of 1.00% fees of 1.00%
o Converts to Class A o Does not convert to o Does not convert, so o Does not convert, so
shares in eighth Class A shares, so annual expenses do annual expenses do
year, thus reducing annual expenses do not decrease not decrease
future annual not decrease
expenses
o An investment of o An investment of o An investment of
$300,000 or more $2,000,000 or more $2,000,000 or more
may be placed in will be placed in will be placed in
Class A shares due Class A shares due Class A shares due
to a reduced sales to no sales charge to no sales charge
charge and lower and lower annual and lower annual
annual expenses. expenses. expenses.
</TABLE>
9
<PAGE>
The Fund has adopted a Distribution and Service Plan ("Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940 for each of its Class B, Class C,
Waddell & Reed Money Market B and Waddell & Reed Money Market C shares. Under
each Plan, the Fund may pay Waddell & Reed, Inc., on an annual basis, a service
fee of up to 0.25% of the average daily net assets of the affected class to
compensate Waddell & Reed, Inc. for providing services to shareholders of that
class and/or maintaining shareholders accounts for that class and a distribution
fee of up to 0.75% of the average daily net assets of the class to compensate
Waddell & Reed, Inc. for distributing shares of that class. Because a class's
fees are paid out of the assets of that class on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges.
Class A shares are sold without a sales charge.
Class B shares are not subject to a sales charge when you buy them. However, you
may pay a contingent deferred sales charge ("CDSC") if you sell your Class B
shares within six years of their purchase, based on the table below. Class B
shares pay an annual 12b-1 service fee of up to 0.25% of average net assets and
distribution fee of up to 0.75% of average net assets. If you hold your Class B
shares for seven years, in the eighth year they will automatically convert to
Class A shares of the Fund, which have lower ongoing expenses.
The Fund will redeem your Class B shares at their NAV next calculated after
receipt of a written request for redemption in good order, subject to the CDSC
discussed below.
Deferred
Date of Sales
Redemption Charge
- ---------- ------
within 1st calendar year 5%
2nd full calendar year 4%
3rd full calendar year 3%
4th full calendar year 3%
5th full calendar year 2%
6th full calendar year 1%
after 6th full calendar year 0%
Waddell & Reed Money Market B shares (prior to September 1, 1999, these were
designated Class B shares)
10
<PAGE>
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%
Contingent Deferred Sales Charge. A CDSC may be assessed against your redemption
amount and paid to Waddell & Reed, Inc. (the "Distributor"), as further
described below. The purpose of the CDSC is to compensate the Distributor for
the costs incurred by it in connection with the sale of the Fund's shares of
that class. The CDSC will not be imposed on shares of that class representing
payment of dividends or distributions or on amounts which represent an increase
in the value of a shareholder's account resulting from capital appreciation
above the amount paid for shares of that class purchased during the CDSC period.
The CDSC will be applied to the total amount invested during a calendar year to
acquire Class B shares or Waddell & Reed Money Market B shares, or the value of
the Class B shares or Waddell & Reed Money Market B shares redeemed, whichever
is less. All Class B or Waddell & Reed Money Market B shares investments made
during a calendar year are deemed a single investment in the applicable class
during that calendar year for purposes of calculating the CDSC.
To keep your CDSC as low as possible, each time you place a request to redeem
Class B or Waddell & Reed Money Market B shares the Fund first redeems any
shares in your account that are not subject to a CDSC. If there are not enough
of these to meet your request, the Fund will next redeem your shares of the
particular class in the order they were purchased.
Unless instructed otherwise, the Fund, when requested to redeem a specific
dollar amount, will redeem additional shares of the particular class equal in
value to the CDSC. For example, should you request a $1,000 redemption and the
applicable CDSC is $27, the Fund will redeem shares having an aggregate NAV of
$1,027, absent different instructions.
11
<PAGE>
The CDSC will not apply in the following circumstances:
o redemptions of Class B shares or Waddell & Reed Money Market B 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.
o redemptions of Class B shares or Waddell & Reed Money Market B shares made
to satisfy required minimum distributions after age 70 1/2 from a qualified
retirement plan, a required minimum distribution from an individual
retirement account, Keogh plan or custodial account under section 403(b)(7)
of the Internal Revenue Code of 1986, as amended ("Code"), 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.
o redemptions of Class B or Waddell & Reed Money Market B 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.
o redemptions of Class B or Waddell & Reed Money Market B shares made
pursuant to a shareholder's participation in any systematic withdrawal plan
adopted for the Fund. (The Plan and this exclusion from the CDSC do not
apply to a one-time withdrawal.)
o redemptions of Class B or Waddell & Reed Money Market B shares the proceeds
of which are reinvested in Class B shares or Waddell & Reed Money Market B
of the Fund within thirty days after such redemption.
o the exercise of certain exchange privileges.
o on redemptions effected pursuant to the Fund's right to liquidate a
shareholder's Class B shares or Waddell & Reed Money Market B shares if the
aggregate NAV of those shares is less than $250.
o 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 Class B shares or Waddell & Reed Money Market
B 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
12
<PAGE>
shareholder's shares, which requires certain notices.
Class C and Waddell & Reed Money Market C shares are not subject to a sales
charge when you buy them, but if you sell your Class C or Waddell & Reed Money
Market C shares within 12 months of buying them, you will pay a 1% CDSC. These
shares pay an annual 12b-1 service fee of up to 0.25% of average net assets and
distribution fee of up to 0.75% of average net assets. Over time, these fees
will increase the cost of your investment and may cost you more than if you had
bought Class A shares. These shares do not convert to any other class.
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 (other
than Roth IRAs and Education IRAs) may be tax-deductible.
o Individual Retirement Accounts (IRAs) allow an individual under 70 1/2,
with earned income, to invest up to $2,000 per tax year. The maximum annual
contribution 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.
o Rollover IRAs retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
o Roth IRAs allow certain individuals to make non-deductible contributions up
to $2,000 per year. Withdrawals of earnings may be tax-free is the account
is at least five years old and certain other requirements are met.
13
<PAGE>
o Education IRAs are established for the benefit of a minor, with
non-deductible contributions, and permit tax-free withdrawals to pay the
higher education expenses of the beneficiary.
o 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 Plan, but with fewer
administrative requirements.
o 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.
o 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.
o 403(b) Custodial Accounts are available to employees of public school
systems or certain types of charitable organizations.
o 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.
o 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 free of Federal
transfer tax consequences. 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
financial advisor for the form.
- --------------------------------------------------------------------------------
14
<PAGE>
Buying Shares
You may buy Class A, Class B, Class C and Waddell & Reed Money Market B and
Waddell & Reed Money Market C shares of the Fund through Waddell & Reed, Inc.
and its financial advisors or through registered broker-dealers. Broker-dealers
may charge a fee for this service. To open your account you must complete and
sign an application. Your Waddell & Reed financial advisor can help you with any
questions you might have.
To purchase Class A shares by wire, you must first obtain an account number by
calling 1-800-366-5465, 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, 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 purchase 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 price to buy a share of the Fund, called the offering price, is calculated
every business day.
The offering price of a share (price to buy one share of a particular class) is
the net asset value ("NAV") per share of that class.
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:
o Orders are accepted only at the home office of Waddell & Reed, Inc.
o All of your purchases must be made in U.S. dollars.
15
<PAGE>
o 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.
o 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.
o The Fund does not issue certificates representing Class B, Class C, Waddell
& Reed Money Market B, or Waddell & Reed Money Market C 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
For Class A:
To Open an Account $1,000
For Class B, Class C, Waddell & Reed Money Market B and Waddell & Reed Money
Market C:
To Open an Account $100
For certain exchanges
into Class A accounts $100
For certain retirement accounts and accounts opened with Automatic Investment
Service $50
For certain retirement accounts and accounts opened through payroll deductions
for or by employees of WRIMCO, Waddell & Reed, Inc. and their affiliates $25
To Add to an Account $100
For Automatic Investment Service $25
Adding to Your Account
Subject to the minimums described under "Minimum Investments," you can make
additional investments of any amount at any time.
16
<PAGE>
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. ("Bank"), ABA Number 101000695, United K.C., for United Cash Management,
Inc., FBO Customer Name and Account Number.
To add to your 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 the class of shares that you wish to
purchase to:
Waddell & Reed, Inc.
P.O. Box 29217
Shawnee Mission, Kansas
66201-9217
Selling Shares
You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares.
The redemption price (price to sell one share of a particular class) is the NAV
of that class, subject to any applicable CDSC.
To sell shares by written request: Complete an Account Service Request form,
available from your Waddell & Reed financial advisor, or write a letter of
instruction with:
o the name on the account registration;
o the Fund's name;
o the Fund account number;
o the dollar amount or number, and the class, of shares to be redeemed; and o
any other applicable requirements listed in the table below.
Deliver the form or your letter to your Waddell & Reed financial advisor, 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 the Bank. You may make these checks payable to the order of
any payee in any amount of $250 or more.
17
<PAGE>
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, subject to any applicable
CDSC. Note the following:
o If more than one person owns the shares, each owner must sign the written
request.
o If you hold a certificate, it must be properly endorsed and sent to the
Fund.
o 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 that the check has cleared and been honored. If you do not,
payment of the redemption proceeds on these shares will be delayed until
the earlier of 10 days or the date the Fund can verify that your purchase
check has cleared and been honored.
o 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.
o Payment is normally made in cash, although under extraordinary conditions
redemptions may be made in portfolio securities.
o 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.
o There is no additional charge for maintaining the check writing privilege
or for processing checks.
o 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.
o 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 may require a signature guarantee in certain situations such as:
o a redemption request made by a corporation, partnership or fiduciary;
o a redemption request made by someone other than the owner of record; or
o the check is made payable to someone other than the owner of record.
18
<PAGE>
This requirement is intended to protect you and Waddell & Reed from fraud. You
can obtain a signature guarantee from most banks and securities dealers, but not
from a notary public.
The deferred sales charge will not apply to the proceeds of Class B, Class C,
Waddell & Reed Money Market B, or Waddell & Reed Money Market C shares which are
redeemed and then reinvested in the particular class within thirty days after
such redemption. You may do this only once as to these shares of the Fund.
19
<PAGE>
Special Requirements for Selling Shares
Account Type Special Requirements
------------ --------------------
Individual or Joint Tenant The written 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 Organization At least one
person authorized by corporate
resolution to act on the account
must sign the written
instructions.
Conservator, Guardian The written instructions must be
or Other Fiduciary signed by the person properly
authorized by court order to act
in the particular fiduciary
capacity.
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
20
<PAGE>
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 financial advisor 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 answer your questions or update your account records. At almost any time of
the day or night, you may access TeleWaddell from a touch-tone phone to:
o obtain information about your accounts;
o obtain price information about other funds in the United Group; or
o request duplicate statements and reorder checks.
Reports
Statements and reports sent to you include the following:
o confirmation statements (after every purchase, other than those purchases
made through Automatic Investment Service, and after every exchange,
transfer or redemption)
o year-to-date statements (quarterly)
o annual and semiannual reports to shareholders (every six months)
To reduce expenses, only one copy of the most recent 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
21
<PAGE>
above for Customer Service if you need copies of annual or semiannual reports or
account information.
Exchanges
You may sell your Class A, B or C shares and buy shares of the same class of
other funds in the United Group, and may also sell your Waddell & Reed Money
Market B or C shares and buy shares of the corresponding class of Waddell & Reed
Funds, Inc., without payment of additional sales charge or a CDSC when you
exchange the shares. For Class B, Class C, Waddell & Reed Money Market B and
Waddell & Reed Money Market C shares, the time period for the CDSC will continue
to run. As well, exchanging Class Y shareholders of another fund in the United
Group may buy Class A shares of the Fund.
You may exchange only into funds that are legally permitted 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 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 financial advisor for more
information.
Regular Investment Plans
Automatic Investment Service
To move money from your bank account to an existing Fund account
Minimum Frequency
$25 Monthly
Funds Plus Service
To move money from the Fund to other funds in the United Group whether in the
same or a different account of the same class
Minimum Frequency
$100 Monthly
22
<PAGE>
Distributions and Taxes
Distributions
The Fund distributes substantially all of its net investment income and net
capital gains to shareholders each year. Usually, dividends are declared daily
and the Fund distributes net investment income monthly on the 27th day of the
month or on the last business day prior to the 27th if the 27th falls on a
weekend or holiday. Dividends declared for a particular day are paid to
shareholders of record on the prior business day. However, dividends declared
for Saturday and Sunday are paid to shareholders of record on the preceding
Thursday. Dividends for each class 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 of that class. 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 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 completely redeemed, any declared but unpaid dividends on those
shares will be paid 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 dividends, capital gains and other distributions
with respect to a class will be automatically paid in additional shares of
the same class of the Fund. If you do not indicate a choice on your
application, you will be assigned this option.
2. Income-Earned Option. Your capital gains and other distributions with
respect to a class will be automatically paid in shares of the same class,
but you will be sent a check for each dividend distribution. However, if
the dividend distribution is less than ten dollars, the distribution will
be automatically paid in additional shares of the same class of the Fund.
3. Cash Option. You will be sent a check for your dividends, capital gains and
other distributions if the total distribution is equal to or greater than
ten dollars. If the distribution is less than ten dollars, it will be
automatically paid in additional shares of the same class of the Fund.
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.
23
<PAGE>
Taxes
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, if any, 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. For Federal income tax
purposes, your long-term capital gains (if you are a noncorporate shareholder of
the Fund) may be taxable at different rates depending on how long the Fund held
the assets generating the gains, but generally are taxed at a maximum rate of
20%.
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 must 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 shareholders subject to backup withholding.
State and local income taxes. The portion of the dividends paid by the Fund
attributable to 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 sale 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; you will find
more information in the SAI. There may be other Federal, state or local tax
considerations applicable to a particular investor. You are urged to consult
your own tax adviser.
24
<PAGE>
The Management of the Fund
Portfolio Management
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. WRIMCO and its predecessors have served as investment
manager to each of the registered investment companies in the United Group of
Mutual Funds, Waddell & Reed Funds, Inc. and Target/United Funds, Inc. since the
inception of the company. WRIMCO is located at 6300 Lamar Avenue, P.O. Box
29217, Shawnee Mission, Kansas 66201-9217.
Mira Stevovich is primarily responsible for the management of the portfolio of
the Fund. Ms. Stevovich has held her Fund responsibilities since May 1998. She
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. Ms. Stevovich has served as the
Assistant Portfolio Manager for investment companies managed by WRIMCO and its
predecessors since January 1989 and has been an employee of such since March
1987.
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.
Management Fee
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 in the SAI.
The management fee is payable by the Fund at the annual rate of 0.40% of net
assets.
Prior to June 30, 1999, the management fee of the Fund was a group fee
determined on the basis of the combined net asset values of all the funds in the
United Group and then allocated pro rata to the Fund based on its relative net
assets at the annual rates shown in the following table:
25
<PAGE>
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%
Management fees for the fiscal year ended June 30, 1999 were ___% of the Fund's
average net assets.
26
<PAGE>
Financial Highlights
The following information is to help you understand the financial performance of
the Fund's Class A* and Waddell & Reed Money Market B (formerly, Class B) shares
for the fiscal periods shown. Certain information reflects financial results for
a single Fund share. "Total return" shows how much your investment would have
increased (or decreased) during each period, assuming reinvestment of all
dividends and distributions. This information has been audited by Deloitte &
Touche LLP, whose independent auditors' report, along with the Fund's financial
statements for the fiscal year ended June 30, 1999, are included in the SAI,
which is available upon request.
For a Class A share outstanding throughout each period:*
FOR THE FISCAL YEAR ENDED JUNE 30,
--------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Per-share Data
Net asset value,
beginning of
period ...... $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
Net investment
income .......... 0.0484 0.0472 0.0487 0.0465
Less dividends
declared......... (0.0484) (0.0472) (0.0487) (0.0465)
------- ------ ------ ------ ------
Net asset value,
end of period ... $1.00 $1.00 $1.00 $1.00
======= ====== ====== ====== ======
Ratios/Supplemental Data
Total return ......... 4.93% 4.80% 5.01% 4.74%
Net assets, end of
period (000
omitted) ........ $532,840 $514,272 $402,009 $368,800
Ratio of expenses
to average net
assets .......... 0.89% 0.87% 0.91% 0.97%
Ratio of net investment
income to average net
assets .......... 4.84% 4.70% 4.89% 4.68%
*On September 5, 1995, Fund shares outstanding were designated Class A shares.
27
<PAGE>
For a Waddell & Reed Money Market B share outstanding throughout each period:*
<TABLE>
<CAPTION>
For the
For the fiscal year period
ended June 30, from 9/5/95**
----------------------- through
1999 1998 1997 6/30/96
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Per-share Data
Net asset value,
beginning of
period ..................... $1.00 $1.00 $1.00
----------- ----------- ----------- -----------
Net investment
income ..................... 0.0403 0.0407 0.0312
Less dividends
declared ................... (0.0403) (0.0407) (0.0312)
----------- ----------- ----------- -----------
Net asset value,
end of period .............. $1.00 $1.00 $1.00
=========== =========== =========== ===========
Ratios/Supplemental Data
Total return .................. 4.10% 4.13% 3.15%
Net assets, end of
period (000
omitted) ................... $3,614 $3,521 $630
Ratio of expenses to
average net
assets ..................... 1.71% 1.48% 1.88%***
Ratio of net
investment income
to average net
assets ..................... 4.03% 4.14% 3.76%***
</TABLE>
* As of September 1, 1999 Class B's name was changed to Waddell & Reed Money
Market B.
** Commencement of operations.
*** Annualized.
28
<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 Auditors 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
29
<PAGE>
United Cash Management, Inc.
PROSPECTUS
September 1, 1999
You can get more information about the Fund in--
o its Statement of Additional Information (SAI) dated September 1, 1999,
which contains detailed information about the Fund, particularly its
investment policies and practices. You may not be aware of important
information about the Fund unless you read both the Prospectus and the SAI.
The current SAI is on file with the Securities and Exchange Commission
(SEC) and it is incorporated into this Prospectus by reference (that is,
the SAI is legally part of the Prospectus).
o its Annual and Semiannual Reports to Shareholders, which detail the Fund's
actual investments and include financial statements as of the close of the
particular annual or semiannual period. The annual report also contains a
discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the year covered by
the report.
To request a copy of the current SAI or copies of the Fund's most recent Annual
and Semiannual reports, without charge, or for other inquiries, contact the Fund
or Waddell & Reed, Inc. at the address and telephone number below. Copies of the
SAI, Annual and/or Semiannual reports may also be requested at
[email protected].
Information about the Fund (including its current SAI and most recent Annual and
Semiannual Reports) is available from the SEC's web site at http://www.sec.gov
and from the SEC's Public Reference Room in Washington, D.C. You can find out
about the operation of the Public Reference Room and applicable copying charges
by calling 1-800-SEC-0330.
The Fund's SEC file number is: 811-2922.
WADDELL & REED, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
913-236-2000
800-366-5465
NUP2010(9-99)
30
<PAGE>
UNITED CASH MANAGEMENT, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
(913) 236-2000
September 1, 1999
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 1, 1999, 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............................................
Investment Strategies, Policies and Practices......................
Investment Management and Other Services...........................
Purchase, Redemption and Pricing of Shares.........................
Directors and Officers.............................................
Payments to Shareholders...........................................
Taxes .............................................................
Portfolio Transactions and Brokerage...............................
Other Information..................................................
Appendix A.........................................................
Financial Statements ..............................................
<PAGE>
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 company organized as a Maryland
corporation on February 13, 1979.
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
2
<PAGE>
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 Waddell & Reed Money Market B
shares (formerly known as Class B) as calculated above for the seven days ended
June 30, 1999, the date of the most recent balance sheet included in the
Prospectus, was ___% and ___%, respectively, and the effective yield calculated
for the same period was ___% and ___%, 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.
No performance information is provided for Class B, Class C or Waddell &
Reed Money Market C since they had not commenced operations as of June 30, 1999.
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. In connection with a ranking, the Fund may
provide additional information, such as the particular category to which it
related, 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 sales
material is historical in nature and is not intended to represent or guarantee
future results. The value of Fund shares when redeemed may be more or less than
their original cost.
INVESTMENT STRATEGIES, POLICIES AND PRACTICES
This SAI supplements the information contained in the
3
<PAGE>
Prospectus and contains more detailed information about the investment
strategies and policies the Fund's investment manager, Waddell & Reed Investment
Management Company ("WRIMCO"), may employ and the types of instruments in which
the Fund may invest, 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, or use them to the full extent permitted by the Fund's investment
policies and restrictions. WRIMCO buys an instrument or uses a technique only if
it believes that doing so will help the Fund achieve its goal. See "Investment
Restrictions and Limitations" for a listing of the fundamental and
non-fundamental (e.g., operating) investment restrictions and policies of the
Fund.
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 ("U.S. Government
securities") are high quality debt instruments issued or guaranteed as to
principal or interest by the U.S. Treasury or an agency or instrumentality of
the U.S. Government. These securities include Treasury Bills (which mature
within one year of the date they are issued), Treasury Notes (which have
maturities of one to ten years) and Treasury Bonds (which generally have
maturities of more than ten years). All such Treasury securities are backed by
the full faith and credit of the United States.
U.S. Government agencies and instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal
<PAGE>
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 WRIMCO is satisfied that the credit risk involved is minimal.
(2) Bank Obligations and Instruments Secured Thereby: Subject to the
limitations described above, time deposits, certificates of deposit, bankers'
acceptances and other bank obligations if they are obligations of a bank subject
to regulation by the U.S. Government (including obligations issued by foreign
branches of these banks) or obligations issued by a foreign bank having total
assets equal to at least U.S. $500,000,000, and instruments secured by any such
obligation; in this SAI, a "bank" includes commercial banks and savings and loan
associations. Time deposits are monies kept on deposit with U.S. banks or other
U.S. financial institutions for a stated period of time at a fixed rate of
interest. At present, bank time deposits are not considered by the Board of
Directors or WRIMCO to be readily marketable. There may be penalties for the
early withdrawal of such time deposits, in which case, the yield of these
investments will be reduced.
(3) Commercial Paper Obligations Including Variable Amount Master Demand
Notes: Commercial paper rated A-1 or A-2 by Standard & Poor's, 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, of comparable quality and 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.
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(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 and Asset-Backed Securities
Mortgage-Backed Securities. Mortgage-backed securities represent direct or
indirect participations in, or are secured by and payable from, mortgage loans
secured by real property and include single- and multi-class pass-through
securities and collateralized mortgage obligations. Multi-class pass-through
securities and collateralized mortgage obligations are collectively referred to
in this SAI as "CMOs." 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 the
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.
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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 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.
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
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<PAGE>
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.
For example, interest-only ("IO") classes are entitled to receive all or a
portion of the interest, but none (or only a nominal amount) of the principal
payments, from the underlying mortgage assets. If the mortgage assets underlying
an IO experience greater than anticipated principal prepayments, then the total
amount of interest allocable to the IO class, and therefore the yield to
investors, generally will be reduced. In some instances, an investor in an IO
may fail to recoup all of the investor's initial investment, even if the
security is government guaranteed or considered to be of the highest quality.
Conversely, principal-only ("PO") classes are entitled to receive all or a
portion of the principal payments, but none of the interest, from the underlying
mortgage assets. PO classes are purchased at substantial discounts from par, and
the yield to investors will be reduced if principal payments are slower than
expected. IOs, POs and other CMOs involve special risks, and evaluating them
requires special knowledge.
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
8
<PAGE>
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
9
<PAGE>
average life of the pool. Changes in the rate or "speed" of these payments can
cause the value of the mortgage backed securities to fluctuate rapidly. 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.
The market for privately issued mortgage-backed and asset-backed securities
is smaller and less liquid than the market for U.S. Government mortgage-backed
securities. CMO classes may be specifically structured in a manner that provides
any of a wide variety of investment characteristics, such as yield, effective
maturity and interest rate sensitivity. As market conditions change, however,
and especially during periods of rapid or unanticipated changes in market
interest rates, the attractiveness of some CMO classes and the ability of the
structure to provide the anticipated investment characteristics may be reduced.
These changes can result in volatility in the market value and in some instances
reduced liquidity, of the CMO class.
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. In either case
payment and delivery for the securities take place at a future date. 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. When purchasing securities on a when issued or delayed-delivery basis,
the Fund assumes the rights and risks of ownership, including the risk of price
and yield fluctuations. 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. When the Fund sells a security on a delayed-delivery basis, the
10
<PAGE>
Fund does not participate in further gains or losses with respect to the
security. 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. If the other party to a delayed-delivery transaction fails to deliver or
pay for the securities, the Fund could miss a favorable price or yield
opportunity, or could suffer a loss.
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
Securities loans may be made on a short-term or long-term basis for the
purpose of increasing the Fund's income. If the Fund lends securities, 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 lent the securities.
The Fund also receives additional compensation. The Fund makes loans of its
securities only to parties deemed by WRIMCO to be creditworthy.
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 lent
on each day the loan is outstanding. If the market value of the lent 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 lent. 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.
11
<PAGE>
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
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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
Restricted securities are securities that are subject to legal or
contractual restrictions on resale. However, restricted securities generally can
be resold in privately negotiated transactions, pursuant to an exemption from
registration under the Securities Act of 1933, as amended ("1933 Act"), or in a
registered public offering.
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 1933 Act. 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.
Where registration of a security 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. Certain
restricted securities, e.g., Section 4(2) paper, may be determined to be liquid
in accordance with guidelines adopted by the Board of Directors. 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
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<PAGE>
unavailable, they will be valued at fair value as determined in good faith by
the Board of Directors.
Illiquid Investments
Illiquid investments are investments that cannot be sold or otherwise
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. 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, illiquid investments do not include any obligations payable at
principal amount plus accrued interest on demand or within seven days after
demand.
If through a change in values, net assets, or other circumstances, the Fund
were in a position where more than 10% of its net assets were invested in
illiquid securities, it would seek to take appropriate steps to protect
liquidity.
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 financial indicators such
as other securities, securities indices or interest rates, 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 performance of indexed securities depends to a great extent on the
performance of the security or other instrument to which they are indexed and
may also be influenced by interest rate changes in the United States and abroad.
At the same time, indexed securities are subject to the credit risks associated
with the issuer of the security and their values may decline substantially if
the issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying investments. 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.
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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,
obligations of foreign branches of domestic banks, and other obligations
guaranteed by a bank in whose obligations the Fund may invest. 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 and Limitations
Certain of the Fund's investment restrictions and other limitations are
described in this SAI. The following are the Fund's fundamental investment
limitations set forth in their entirety, which, like the Fund's goal and the
types of money market securities in which the Fund may invest, cannot be changed
without shareholder approval. For this purpose, shareholder approval means the
approval, at a meeting of Fund shareholders, by the lesser of (1) the holders of
67% or more of the Fund's shares represented at the meeting, if more than 50% of
the Fund's outstanding shares are present in person or by proxy or (2) more than
50% of the Fund's outstanding shares. 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;
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(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;
(iv) 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, except that U.S. Government obligations and bank obligations
and instruments are not included in this limit;
(v) 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; it can
also lend its portfolio securities to the extent allowed, and in
accordance with the requirements, under the 1940 Act or, except as
provided above, enter into repurchase agreements (see "Repurchase
Agreements" above);
(vi) Invest for the purpose of exercising control or management of other
companies;
(vii) Participate on a joint, or a joint and several, basis in any trading
account in any securities;
(viii) Sell securities short or buy securities on margin; also, the Fund
may not engage in arbitrage transactions;
(ix) Engage in the underwriting of securities;
(x) Borrow to increase income, except 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; or
(xi) Issue senior securities.
The following investment restrictions are not fundamental and may be
changed by the Board of Directors without shareholder approval:
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(i) The Fund may not purchase the securities of any one issuer (other than
U.S. Government securities) if, as a result of such purchase, more
than 5% of its total assets would be invested in the securities of any
one issuer, as determined in accordance with Rule 2a-7. The Fund may
not invest more than 5% of its total assets in securities rated in the
second highest rating category by the requisite rating organization(s)
or comparable unrated securities, with investments in such securities
of any one issuer (except U.S. Government securities) limited to the
greater of 1% of the Fund's assets or $1,000,000, as determined in
accordance with Rule 2a-7.
(ii) 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.
(iii) The Fund does not intend to invest more than 25% of its total assets
in a combination of foreign bank obligations.
(iv) The Fund may not purchase a security if, as a result, more than 10% of
its net assets would consist of illiquid investments.
(v) The Fund does not intend to invest more than 50% of its total assets
in Section 4(2) paper determined to be liquid in accordance with
guidelines adopted by the Board of Directors.
(vi) The Fund does not currently intend to invest in 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 instrumentalities, or to CMOs, other mortgage-related
securities, asset-backed securities, indexed securities or
over-the-counter derivative instruments.
(vii) The Fund will not invest in any security whose interest rate or
principal amount to be repaid, or timing of repayments, 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
currency other than U.S. dollars.
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An investment policy or limitation that states a maximum percentage of the
Fund's assets that may be so invested or prescribes quality standards is
typically applied immediately after, and based on, the Fund's acquisition of an
asset. Accordingly, a subsequent change in the asset's value, net assets, or
other circumstances will not be considered when determining whether the
investment complies with the Fund's investment policies and limitations.
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.
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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.
Waddell & Reed Financial, Inc.
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 Waddell & Reed Financial, Inc., a publicly held company. The
address of these companies is 6300 Lamar Avenue, P.O. Box 29217, Shawnee
Mission, Kansas 66201-9217. 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 company's inception date, whichever was later, and to Target/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
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Group of Mutual Funds and Waddell & Reed Funds, Inc. and acts as principal
underwriter and distributor for variable life insurance and variable annuity
policies for which Target/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, 1999, 1998 and 1997 were $______,
$2,047,383 and $1,910,434, 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.
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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, 1999, 1998 and
1997 were $______, $62,500 and $60,000, 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.
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.
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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.
These and other expenses of Waddell & Reed, Inc. are not covered by any
sales charge on Class A shares of the Fund. The contingent deferred sales charge
("CDSC"), if any, imposed on Class B shares, Class C shares, Waddell & Reed
Money Market B and Waddell & Reed Money Market C is designed to compensate
Waddell & Reed, Inc. for distribution of these shares. No portion of the sales
charge is reallowed to dealers. On shares of funds in the United Group that are
sold with sales charges, a major portion of the CDSC for these shares is paid to
Waddell & Reed, Inc.'s financial advisors and managers. Waddell & Reed, Inc. may
compensate its financial advisors as to purchases for which there is no sales or
deferred sales charge.
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, Class C, Waddell & Reed
Money Market B and Waddell & Reed Money Market C shares, the Fund pays the
Distributor daily a distribution fee not to exceed, on an annual basis, 0.75% of
the Fund's particular class net assets and a service fee not to exceed, on an
annual basis, 0.25% of the Fund's particular class net assets.
The Distributor offers Class B, Class C, Waddell & Reed Money Market B and
Waddell & Reed Money Market C shares of the Fund 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. Each Plan and the Agreement contemplate that the
Distributor may be compensated for these distribution efforts with respect to
the shares of the affected class through the distribution fee. The sales force
may be paid continuing compensation based on the value of the shares of the
affected class 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 these shareholders
through telephonic means and written communications. For the fiscal year ended
June 30, 1999, the Fund paid (or accrued) $___ and $___ to the Distributor as
distribution fees and service fees, respectively, under the Waddell & Reed Money
Market B Plan (formerly, 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
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sales management in connection with the distribution of Waddell & Reed Money
Market B shares of the Fund. The service fees were paid to compensate the
Distributor for providing personal services to the Fund's Waddell & Reed Money
Market B shareholders and for the maintenance of Waddell & Reed Money Market B
accounts.
The only Directors or interested persons, as defined in the 1940 Act, of
the Fund who have a direct or indirect financial interest in the operation of a
Plan are the officers and Directors who are also officers of either Waddell &
Reed, Inc. or its affiliate(s) or who are shareholders of Waddell & Reed
Financial, Inc., the indirect parent company of Waddell & Reed, Inc. Each Plan
is anticipated to benefit the Fund and its shareholders of the affected class
through Waddell & Reed, Inc.'s activities not only to distribute the shares of
the affected class but also to provide personal services to shareholders of that
class and thereby promote the maintenance of their accounts with the Fund. The
Fund anticipates that shareholders of a particular class may benefit to the
extent that Waddell & Reed's activities are successful in increasing the assets
of the Fund, through increased sales or reduced redemptions, or a combination of
these, and reducing a shareholder's share of Fund and class expenses. Increased
Fund assets may also provide greater resources with which to pursue the goal of
the Fund. Further, continuing sales of shares may also reduce the likelihood
that it will be necessary to liquidate portfolio securities, in amounts or at
times that may be disadvantageous to the Fund, to meet redemption demands. In
addition, the Fund anticipates that the revenues from the Plan will provide
Waddell & Reed, Inc. with greater resources to make the financial commitments
necessary to continue to improve the quality and level of services to the Fund
and the shareholders of the affected class.
The Plans 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 Waddell & Reed Money Market B shares of the Fund at the time.
Among other things, each Plan provides that (i) the Distributor will submit
to the Directors at least quarterly, and the Directors will review, reports
regarding all amounts expended under the Plan and the purposes for which such
expenditures were made, (ii) the Plan will continue in effect only so long as it
is approved at least annually, and any material amendments thereto are approved
by the Directors including the Plan Directors acting in person at a meeting
called for that purpose, (iii) payments by the Fund under the Plan shall not be
materially increased without the affirmative vote of the holders of a majority
of the outstanding shares of the affected class, and (iv) while the Plan
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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, 1999, the Distributor earned
deferred sales charges in the amount of $___ with respect to the Fund's Waddell
& Reed Money Market 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 auditors,
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 CDSC,
if any, to Class B, Class C, Waddell & Reed Money Market B and Waddell & Reed
Money Market C 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
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<PAGE>
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.
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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 and for
Class B, Class C, Waddell & Reed Money Market B and Waddell & Reed Money Market
C shares, initial investments must be at least $100 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."
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
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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.
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, registration, the particular class and stating that
you wish the enclosed check, etc. to be used for the purchase of the stated
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.
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. 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, 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. See "Payments to Shareholders -- General" for information regarding
dividend payment.
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, Class C, Waddell & Reed
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Money Market B or Waddell & Reed Money Market C shares. Shareholdings are
recorded on the Fund's books whether or not a certificate is issued.
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. Class C or Waddell & Reed
Money Market C shares purchased within the past year remain subject to the CDSC;
however, Class B or Waddell & Reed Money Market B shares redeemed under the
Service are not subject to a CDSC. Applicable forms to start the Service are
available through Waddell & Reed, Inc.
If you own Class A, Class B or Class C shares, to qualify for the Service
you must have invested at least $10,000 in shares which you still own of any of
the funds in the United Group; or, you must own Class A, Class B or Class C
shares having a value of at least $10,000. The value for this purpose is the
value at the offering price.
If you own Waddell & Reed Money Market B or Waddell & Reed Money Market C
shares, to qualify for the Service you must have invested at least $10,000 in
Class B or Class C shares which you still own of any of the funds in Waddell &
Reed Funds, Inc.; or, you must own Waddell & Reed Money Market B or Waddell &
Reed Money Market C 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.
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The dividends and distributions on shares of a class 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 and Class C Share Exchanges
You may exchange Class B or Class C shares of the Fund for corresponding
shares of another fund in the United Group without charge.
The redemption of the Fund's Class B or Class C shares as part of an
exchange is not subject to the deferred sales charge.
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For purposes of computing the deferred sales charge, if any, applicable to the
redemption of the shares acquired in the exchange, those acquired shares are
treated as having been purchased when the original redeemed shares were
purchased.
In addition, you may specify a dollar amount of Class B or Class C shares
of the Fund to be exchanged each month into Class B or Class C 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 B or Class C 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.
Waddell & Reed Money Market B and Waddell & Reed Money Market C Share Exchanges
You may exchange Waddell & Reed Money Market B shares for Class B shares of
Waddell & Reed Funds, Inc. without charge. You may also exchange Waddell & Reed
Money Market C shares for Class C shares of Waddell & Reed Funds, Inc. without
charge.
You may also have a specific dollar amount of Class B or Class C shares of
any of the funds of Waddell & Reed Funds, Inc. redeemed and invested in Waddell
& Reed Money Market B or Waddell & Reed Money Market C shares of the Fund. The
Class B or Class C 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 Waddell & Reed Money Market B or Waddell & Reed Money
Market C 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 Waddell & Reed Money Market B and Waddell &
Reed Money Market C 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
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<PAGE>
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 model or 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 a traditional IRA, an
investor can contribute each year up to 100% of his or her earned income, up to
an annual maximum of $2,000 (provided the investor has not reached age 70 1/2).
For a married couple, 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. Generally, 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. However, a married investor who is not an active participant, files
jointly with his or her spouse and whose combined adjusted gross income does not
exceed $150,000 is not affected by the spouse's active participant status.
An investor may also use a traditional 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 a traditional 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.
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<PAGE>
Roth IRAs. Investors whose adjusted gross income (or combined adjusted
gross income, if married) does not exceed certain levels may establish and
contribute up to $2,000 per tax year to a Roth IRA. In addition, for an investor
whose adjusted gross income does not exceed $100,000 (and who is not a married
person filing a separate return), certain distributions from traditional IRAs
may be rolled over to a Roth IRA and any of the investor's traditional IRAs may
be converted into a Roth IRA; these rollover distributions and conversions are,
however, subject to Federal income tax.
Contributions to a Roth IRA are not deductible; however, earnings
accumulate tax-free in the Roth IRA, and withdrawals of earnings are not subject
to Federal income tax if the account has been held for at least five years and
the account holder has reached age 59 1/2 (or certain other conditions apply).
Education IRAs. Although not technically for retirement savings, Education
IRAs provide a vehicle for saving for a child's higher education. An Education
IRA may be established for the benefit of any minor, and any person whose
adjusted gross income does not exceed certain levels may contribute up to $500
to an Education IRA (or to each of multiple Education IRAs), provided that no
more than $500 may be contributed for any year to Education IRAs for the same
beneficiary. Contributions are not deductible and may not be made after the
beneficiary reaches age 18; however, earnings accumulate tax-free, and
withdrawals are not subject to tax if used to pay the qualified higher education
expenses of the beneficiary (or a member of his or her family).
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 its employees' retirement accounts. A
SIMPLE plan can be funded by either an IRA or a 401(k) plan. In general, 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.
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<PAGE>
457 Plans. If an investor is an employee of a state or local government or
of certain types of charitable organizations, he or she may be able to enter
into a deferred compensation arrangement in accordance with Section 457 of the
Code.
TSAs - Custodial Accounts and Title I Plans. If an investor is an employee
of a public school system or of certain types of charitable organizations, he or
she may be able to enter into a deferred compensation arrangement through a
custodian account under Section 403(b) of the Code. Some organizations have
adopted Title I plans, which are funded by employer contributions in addition to
employee deferrals.
401(k) Plans. With a 401(k) plan, employees can make tax-deferred
contributions into a plan to which the employer may also contribute, usually on
a matching basis. An employee may defer each year up to 25% of compensation,
subject to certain annual maximums, which may be increased each year based on
cost-of-living adjustments.
More detailed information about these arrangements and applicable forms are
available from Waddell & Reed, Inc. These plans may involve complex tax
questions as to premature distributions and other matters. Investors should
consult their tax adviser or pension consultant.
Redemptions
The Prospectus gives information as to 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.
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
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<PAGE>
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 majority of the
Directors are not affiliated with Waddell & Reed, Inc.
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. Vogel 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, Target/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.
KEITH A. TUCKER* 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, Chief
Executive Officer, Principal Financial Officer and Director of Waddell & Reed
Financial, Inc.; President, Chairman of the Board of Directors and Chief
Executive Officer of Waddell & Reed Financial Services, Inc.; Chairman of the
Board of Directors of WRIMCO, Waddell & Reed, Inc. and Waddell & Reed Services
Company; formerly, President of each of the funds in the Fund Complex; formerly,
Chairman of the Board of Directors of Waddell & Reed Asset Management Company, a
former affiliate of Waddell & Reed Financial, Inc. Date of birth: February 11,
1945.
JAMES M. CONCANNON
950 Docking Road
Topeka, Kansas 66615
Dean and Professor of Law, Washburn University School of Law; Director,
AmVestors CBO II Inc. Date of birth: October 2, 1947.
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<PAGE>
JOHN A. DILLINGHAM
4040 Northwest Claymont Drive
Kansas City, Missouri 64116
President, JoDill Corp., an agricultural company; President and Director of
Dillingham Enterprises Inc.; formerly, Director and consultant, McDougal
Construction Company; formerly, Instructor at Central Missouri State University;
formerly, Member of the Board of Police Commissioners, Kansas City, Missouri;
formerly, Senior Vice President-Sales and Marketing, Garney Companies, Inc., a
specialty utility contractor. Date of birth: January 9, 1939.
DAVID P. GARDNER
525 Middlefield Road, Suite 200
Menlo Park, California 94025
President of Hewlett Foundation and Chairman of George S. and Delores Dori
Eccles Foundation. Director of First Security Corp., a bank holding company, and
Director of Fluor Corp., a company with interests in coal. Date of birth: March
24, 1933.
LINDA K. GRAVES*
1 South West Cedar Crest Road
Topeka, Kansas 66606
First Lady of Kansas. Partner, Levy and Craig, P.C., a law firm. Date of
birth: July 29, 1953.
JOSEPH HARROZ, JR.
125 South Creekdale Drive
Norman, Oklahoma 73072
General Counsel of the Board of Regents and Adjunct Professor of Law at the
University of Oklahoma College of Law; formerly, Vice President for Executive
Affairs of the University of Oklahoma; formerly, an Attorney with Crowe &
Dunlevy, a law firm. Date of birth: January 17, 1967.
JOHN F. HAYES
20 West 2nd Avenue
P. O. Box 2977
Hutchinson, Kansas 67504-2977
Director of Central Bank and Trust; Director of Central Financial
Corporation; Director of Central Properties, Inc.; Chairman of the Board of
Directors, Gilliland & Hayes, P.A., a law firm; formerly, President, Gilliland &
Hayes, P.A. Date of birth: December 11, 1919.
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<PAGE>
ROBERT L. HECHLER*
President and Principal Financial Officer of the Fund and each of the other
funds in the Fund Complex; Executive Vice President, Chief Operating Officer and
Director of Waddell & Reed Financial, Inc.; Vice President, Chief Operating
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.; President, Director and
Treasurer of Waddell & Reed Services Company; formerly, Vice President of each
of the funds in the Fund Complex; formerly, Director and Treasurer of Waddell &
Reed Asset Management Company, a former affiliate of Waddell & Reed Financial,
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;
President, Chief Investment Officer, Treasurer and Director of Waddell & Reed
Financial, Inc.; 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; formerly, President, Chief Executive Officer, Chief Investment Officer
and Director of Waddell & Reed Asset Management Company, a former affiliate of
Waddell & Reed Financial, Inc. Date of birth: December 8, 1942.
GLENDON E. JOHNSON
13635 Deering Bay Drive
Unit 284
Miami, Florida 33158
Retired; formerly, 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 each
of the funds 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. Date of birth:
April 27, 1928.
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<PAGE>
RONALD C. REIMER
2601 Verona Road
Mission Hills, Kansas 66208
Retired. Co-founder and teacher at Servant Leadership School of Kansas
City; Director of Network Rehabilitation Services; formerly, Employment
Counselor and Director of McCue-Parker Center. Date of birth: August 3, 1934.
FRANK J. ROSS, JR.*
700 West 47th Street
Kansas City, Missouri 64112
Shareholder, Polsinelli, White, Vardeman & Shalton, a law firm. Date of
birth: April 9, 1953.
ELEANOR B. SCHWARTZ
5100 Rockhill Road
Kansas City, Missouri 64113
Professor of Business Administration, University of Missouri-Kansas City;
formerly, 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.
Helge K. Lee
Vice President, Secretary and General Counsel of the Fund and each of the
other funds in the Fund Complex; Secretary and General Counsel of Waddell & Reed
Financial, Inc.; Vice President, Secretary, General Counsel and Director of
Waddell & Reed Financial Services, Inc.; Senior Vice President, Secretary and
General Counsel of WRIMCO and Waddell & Reed, Inc.; Senior Vice President,
Secretary, General Counsel and Director of Waddell & Reed Services Company;
formerly, Executive Vice President, Secretary and Chief Compliance Officer of
LGT Asset Management, Inc. and affiliates; formerly, Senior Vice President,
General Counsel and Secretary of Strong Capital Management, Inc. and affiliates.
Date of birth: March 30, 1946.
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.
John M. Holliday
Vice President of the Fund and other funds in the Fund Complex; Senior Vice
President of WRIMCO; formerly, Senior Vice President of Waddell & Reed Asset
Management Company; formerly, Senior Vice President of Waddell & Reed, Inc. Date
of birth: June 11, 1935.
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Mira Stevovich
Vice President and Assistant Treasurer of the Fund, Vice President of one
other fund in the Fund Complex and Assistant Treasurer of all Funds in the Fund
complex; Vice President of WRIMCO. Date of birth: July 30, 1953.
The address of each person is 6300 Lamar Avenue, P.O. Box 29217, Shawnee
Mission, Kansas 66201-9217 unless a different address is given.
The Directors who may be deemed to be interested persons, as defined in the
1940 Act of the Fund's underwriter, Waddell & Reed, Inc. or WRIMCO 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 70 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.
Henry L. Bellmon, Jay B. Dillingham, Doyle Patterson, Ronald K. Richey and Paul
S. Wise retired as Directors of the Fund and of each of the funds in the Fund
Complex and elected a position as Director Emeritus.
The funds in the United Group, Target/United Funds, Inc. and Waddell & Reed
Funds, Inc. pay to each Director a total of $48,000 per year, plus $2,500 for
each meeting of the Board of Directors attended plus reimbursement of expenses
of attending such meeting 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, Target/United Funds, Inc.
and Waddell & Reed Funds, Inc. based on their relative size.
During the Fund's fiscal year ended June 30, 1999, the Fund's Directors
received the following fees for service as a director:
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<PAGE>
COMPENSATION TABLE
Total
Aggregate Compensation
Compensation From Fund
From and Fund
Director Fund Complex*
- -------- ------------ ------------
Robert L. Hechler $ 0 $ 0
Henry J. Herrmann 0 0
Keith A. Tucker 0 0
James M. Concannon
John A. Dillingham
David P. Gardner
Linda K. Graves
Joseph Harroz, Jr.
John F. Hayes
Glendon E. Johnson
William T. Morgan
Ronald C. Reimer
Frank J. Ross, Jr.
Eleanor B. Schwartz
Frederick Vogel III
* No pension or retirement benefits have been accrued as a part of Fund
expenses.
Mr. Gardner was elected as a Director on August 19, 1998. Messrs. Harroz,
Hechler, Herrmann and Reimer were elected as Directors on November 18, 1998. The
officers are paid by Waddell & Reed, Inc. or its affiliates.
Shareholdings
As of July 31, 1999, all of the Fund's Directors and officers as a group
owned less than 1% of the outstanding shares of the Fund. The following table
sets forth information with respect to the Fund, as of July 31, 1999, regarding
the beneficial ownership of the classes of the Fund's shares.
<TABLE>
<CAPTION>
Name and Address Shares owned
of Record or Beneficially
Beneficial Owner Class or of Record Percent
- ------------------- ----- ------------ -------
<S> <C> <C> <C>
CS First Boston Corp. Class A %
Attn Robert Plaza
5 World Trade Center
7th Floor
New York NY 10048
Don Cartner Trustee Class B
CPSP Westport Research Assoc
FBO Unallocated Assets
Qualified 401(k) Plan
6102 Arlington
Raytown MO 64133
Bruce N. Jackson & Class B
Donna L. Jackson Co-ttees
U/A dated November 15, 1997
P. O. Box 8173
Fresno CA 93747
Fiduciary Trust Co NH Cust Class B
IRA of Robert Ross
FBO Robert Ross Rollover
1 Gold St. Apt 7C
Hartford CT 06103
</TABLE>
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<PAGE>
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.
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
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<PAGE>
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, however, a total dividend and/or
distribution amount less than ten dollars will be automatically paid in shares
of the Fund of the same class as that with respect to which they were paid (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, however, a total dividend amount less than ten dollars will be
automatically paid in shares of the Fund of the same class as that with respect
to which it was paid 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
The Fund has qualified for treatment as a regulated investment company
("RIC") under the Code, so that it is 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) that is distributed to its shareholders. To
continue to qualify as a RIC, the Fund must distribute to its shareholders for
each taxable year at least 90% of the sum of its investment company taxable
income ("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
41
<PAGE>
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) 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
(3) 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.
If the Fund failed to qualify for treatment as a RIC for any taxable year,
(a) it would be taxed as an ordinary corporation on the full amount of its
taxable income for that year (even if it distributed that income to its
shareholders) and (b) the shareholders would treat all distributions out of its
earnings and profits, including distributions of net capital gain (the excess of
net long-term capital gain over net short-term capital loss), as dividends (that
is, ordinary income). In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest, and make substantial
distributions before requalifying for RIC treatment.
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 or WRIMCO may otherwise combine orders for the Fund
with those of other funds in the
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<PAGE>
United Group, Target/United Funds, Inc. and Waddell & Reed Funds, Inc. or other
accounts for which it has investment discretion. 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, except where the combined order is not filled completely. In this case,
WRIMCO will ordinarily allocate the transaction pro rata based on the orders
placed. 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 through combined orders.
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 seek "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 execution and/or research services and other services
including pricing or quotation services directly or through others ("research
and brokerage 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 has
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.
The investment research provided by a particular broker may be useful only
to one or more of the other advisory accounts of WRIMCO 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
43
<PAGE>
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, 1999, the Fund owned Merrill Lynch and Co., Inc. and J. P.
Morgan & Co. Incorporated debt securities in the aggregate amounts of $___ and
$___, respectively. Merrill Lynch & Co., Inc. and J. P. Morgan & Co.
Incorporated are regular brokers 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.
OTHER INFORMATION
The Shares of the Fund
The Fund offers five classes of shares: Class A, Class B, Class C, Waddell
& Reed Money Market B and Waddell & Reed Money Market C. 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 appropriately limited to that
class; Class B, Class C, Waddell & Reed Money Market B and Waddell & Reed Money
Market C shares are subject to a CDSC and to an ongoing distribution and service
fee; Class B shares that have been held by a shareholder for seven years will
convert automatically, in the eighth year, 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 five classes, dividends and liquidation proceeds of Class B, Class
C, Waddell & Reed Money Market B and Waddell & Reed Money Market C 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.
Shares are fully paid and nonassessable when purchased.
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 fundamental investment policy, which require
shareholder approval will be presented to shareholders at a meeting called by
the Board of Directors for such purpose.
44
<PAGE>
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 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
time which 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.
45
<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.
46
<PAGE>
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.
47
<PAGE>
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.
48
<PAGE>
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.
49
<PAGE>
22. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements -- United Cash Management, Inc.
Included in Part B:
-------------------
As of June 30, 1999
Statement of Assets and Liabilities
For the year ended June 30, 1999
Statement of Operations
For each of the two years ended June 30, 1999
Statement of Changes in Net Assets
Schedule I -- Investment Securities as of June 30, 1999
Report of Independent Accountants
<PAGE>
REGISTRATION STATEMENT
PART C
OTHER INFORMATION
23. Exhibits:
(a) Articles of Incorporation, as amended, filed by EDGAR
on October 29, 1998 as EX-99.B1-charter to
Post-Effective Amendment No. 33 to the Registration
Statement on Form N-1A*
Articles Supplementary attached hereto as
EX-99.B(a)cmartsup
(b) Bylaws, filed by EDGAR on October 29, 1996 as Exhibit
EX-99.B2-cmbylaw to Post-Effective Amendment No. 30
to the Registration Statement on Form N-1A*
Amendment to Bylaws attached hereto as
EX-99.B(b)cmbylaw2
(c) Not applicable
(d) Investment Management Agreement, as amended, filed by
EDGAR on July 7, 1995 as Exhibit EX-99.B(5)-cmima to
to Post-Effective Amendment No. 28 to the
Registration Statement on Form N-1A*
Assignment of the Investment Management Agreement,
filed by EDGAR on July 7, 1995 as Exhibit
EX-99.B5-cmassign to Post-Effective Amendment No. 28
to the Registration Statement on Form N-1A*
Fee Schedule (Exhibit A) to the Investment Management
Agreement, as amended, attached hereto as
EX-99.B(d)cmimafee
(e) Underwriting Agreement, filed by EDGAR on July 7,
1995 as Exhibit EX-99.B6-cmua to Post-Effective
Amendment No. 28 to the Registration Statement on
Form N-1A*
(f) Not applicable
(g) Custodian Agreement, as amended, filed by EDGAR on
October 29, 1998 as EX-99.B8-cmca to Post-Effective
Amendment No. 33 to the Registration Statement on
Form N-1A*
(h) Shareholder Servicing Agreement, filed by EDGAR on
October 29, 1998 as Exhibit EX-99.B(9)-cmssa to
Post-Effective Amendment No. 33 to the Registration
Statement on Form N-1A*
Fund Class A Application, as amended, filed by EDGAR
on 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 on July 7, 1995
as Exhibit EX-99.B9-cmappnav to Post-Effective
Amendment No. 28
<PAGE>
to the Registration Statement on Form N-1A*
Accounting Services Agreement, filed by EDGAR on July
7, 1995 as Exhibit EX-99.B9-cmaca to Post-Effective
Amendment No. 28 to the Registration Statement on
Form N-1A*
(i) Opinion and Consent of Counsel attached hereto as
EX-99.B(i)cmlegopn
(j) Consent of Deloitte & Touche LLP, Independent
Accountants, will be attached as EX-99.B(j)-cmconsnt
in the 485(b) filing to be completed on August 27,
1999
(k) Not applicable
(l) Not applicable
(m) Service Plan, filed by EDGAR on July 7, 1995 as
Exhibit EX-99.B15-cmspcb to Post-Effective Amendment
No. 28 to the Registration Statement on Form N-1A*
Distribution and Service Plan for Class C shares
attached hereto as EX-99.B(m)cmdspc
Distribution and Service Plan for United Cash
Management, Inc. for Waddell & Reed Money Market B
shares attached hereto as EX-99.B(m)cmdspmmb
Distribution and Service Plan for United Cash
Management, Inc. for Waddell & Reed Money Market C
shares attached hereto as EX-99.B(m)cmdspmmc
(n) Not applicable
(o) Multiple Class Plan, as amended, attached hereto as
Exhibit EX-99.B(o)cmmcp
24. Persons Controlled by or under common control with Registrant
-------------------------------------------------------------
None
25. Indemnification
---------------
Reference is made to Article SEVENTH paragraph 6(b) through 6(f) of the
Articles of Incorporation, as amended, filed on October 29, 1998 as
EX.99.B1-charter to Post-Effective Amendment No. 33 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.
<PAGE>
26. 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 and to other investment advisory clients.
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. The address of the officers 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.
27. 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
Advantage Plus
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
<PAGE>
any affiliated person of such affiliated person.
28. 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.
29. 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 23.(h) and
23.(m) hereof.
30. Not applicable
--------------
Not applicable
- ---------------------------------
*Incorporated herein by reference
<PAGE>
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.,
TARGET/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, HELGE K. LEE and KRISTEN A. RICHARDS, 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: May 19, 1999 /s/Robert L. Hechler
--------------------------
Robert L. Hechler, President
<TABLE>
<S> <C> <C>
/s/Keith A. Tucker Chairman of the Board May 19, 1999
- ------------------- -------------
Keith A. Tucker
/s/Robert L. Hechler President, Principal May 19, 1999
- -------------------- Financial Officer and -------------
Robert L. Hechler Director
/s/Henry J. Herrmann Vice President and May 19, 1999
- -------------------- Director -------------
Henry J. Herrmann
/s/Theodore W. Howard Vice President, Treasurer May 19, 1999
- -------------------- and Principal Accounting -------------
Theodore W. Howard Officer
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/James M. Concannon Director May 19, 1999
- -------------------- -------------
James M. Concannon
/s/John A. Dillingham Director May 19, 1999
- -------------------- -------------
John A. Dillingham
/s/David P. Gardner Director May 19, 1999
- ------------------- -------------
David P. Gardner
/s/Linda K. Graves Director May 19, 1999
- -------------------- -------------
Linda K. Graves
/s/Joseph Harroz, Jr. Director May 19, 1999
- -------------------- -------------
Joseph Harroz, Jr.
/s/John F. Hayes Director May 19, 1999
- -------------------- -------------
John F. Hayes
/s/Glendon E. Johnson Director May 19, 1999
- -------------------- -------------
Glendon E. Johnson
/s/William T. Morgan Director May 19, 1999
- -------------------- -------------
William T. Morgan
/s/Ronald C. Reimer Director May 19, 1999
- -------------------- -------------
Ronald C. Reimer
/s/Frank J. Ross, Jr. Director May 19, 1999
- -------------------- -------------
Frank J. Ross, Jr.
/s/Eleanor B. Schwartz Director May 19, 1999
- -------------------- -------------
Eleanor B. Schwartz
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/Frederick Vogel III Director May 19, 1999
- -------------------- -------------
Frederick Vogel III
</TABLE>
Attest:
/s/Kristen A. Richards
- --------------------------------
Kristen A. Richards
Assistant Secretary
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and/or the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
rule 485(a) of the Securities Act of 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 2nd day of July, 1999.
UNITED CASH MANAGEMENT, INC.
By /s/ Robert L. Hechler*
-------------------------
Robert L. Hechler, 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.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C> <C>
/s/Keith A. Tucker* Chairman of the Board July 2, 1999
- ---------------------- ----------------
Keith A. Tucker
/s/Robert L. Hechler* President July 2, 1999
- ---------------------- (Principal Financial Officer) ----------------
Robert L. Hechler and Director
/s/Henry J. Herrmann* Vice President and Director July 2, 1999
- ---------------------- ----------------
Henry J. Herrmann
/s/Theodore W. Howard* Vice President, Treasurer July 2, 1999
- ---------------------- and Principal Accounting ----------------
Theodore W. Howard Officer
/s/James M. Concannon* Director July 2, 1999
- ------------------- ----------------
James M. Concannon
/s/John A. Dillingham* Director July 2, 1999
- ------------------- ----------------
John A. Dillingham
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/David P. Gardner* Director July 2, 1999
- ------------------- ----------------
David P. Gardner
/s/Linda K. Graves* Director July 2, 1999
- ------------------- ----------------
Linda Graves
/s/Joseph Harroz, Jr.* Director July 2, 1999
- ------------------- ----------------
Joseph Harroz, Jr.
/s/John F. Hayes* Director July 2, 1999
- ------------------- ----------------
John F. Hayes
/s/Glendon E. Johnson* Director July 2, 1999
- ------------------- ----------------
Glendon E. Johnson
/s/William T. Morgan* Director July 2, 1999
- ------------------- ----------------
William T. Morgan
/s/Ronald C. Reimer* Director July 2, 1999
- ------------------- ----------------
Ronald C. Reimer
/s/Frank J. Ross, Jr.* Director July 2, 1999
- ------------------- ----------------
Frank J. Ross, Jr.
/s/Eleanor B. Schwartz* Director July 2, 1999
- ------------------- ----------------
Eleanor B. Schwartz
/s/Frederick Vogel III* Director July 2, 1999
- ------------------- ----------------
Frederick Vogel III
</TABLE>
*By
Helge K. Lee
Attorney-in-Fact
ATTEST:
Kristen A. Richards
<PAGE>
Assistant Secretary
EX-99.B(a)cmartsup
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
UNITED CASH MANAGEMENT, INC.
United Cash Management, Inc. (the "Corporation"), a Maryland
corporation, having its principal office in Baltimore, Maryland, hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority vested in the Board of Directors of
the Corporation by Article FIFTH of the Articles of Incorporation of the
Corporation, the Board of Directors has heretofore duly designated, in
accordance with Maryland General Corporation Law, the aggregate number of shares
of capital stock which the Corporation is authorized to issue at Five Billion
(5,000,000,000) shares of capital stock, (par value $0.01 per share), amounting
in the aggregate to a par value of Fifty Million Dollars ($50,000,000.00).
SECOND: Pursuant to the authority vested in the Board of Directors of
the Corporation by Article FIFTH of the Articles of Incorporation of the
Corporation, the Board of Directors, in accordance with Maryland General
Corporation Law, now duly designates and classifies the capital stock of the
Corporation among the classes of the Corporation as follows:
<TABLE>
<S> <C>
Class A 2,500,000,000 shares
Waddell & Reed Money Market Class B 1,000,000,000 shares
Class B 500,000,000 shares
Class C 500,000,000 shares
Waddell & Reed Money Market Class C 500,000,000 shares
</TABLE>
The aggregate number of shares of all classes of stock of the Corporation
remains at Five Billion (5,000,000,000) shares of capital stock, the par value
remains $0.01 per share, and the aggregate par value of all authorized stock
remains Fifty Million Dollars ($50,000,000.00).
THIRD: The capital stock of the Corporation is divided into classes and
there are no changes in the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption as shares of capital stock as set forth in the
Corporation's Articles of Incorporation and Articles Supplementary thereto,
except as follows:
(1) The capital stock of Class A shares shall not be subject
to either a front-end or contingent deferred sales charge
or Rule 12b-1 fees;
<PAGE>
(2) The capital stock of the Class B shares shall be subject
to contingent deferred sales charge and a Rule 12b-1 fee,
as determined by the Board of Directors of the Corporation
from time to time, and Class B shares held by a
shareholder for eight years shall convert automatically to
Class A shares of the Corporation;
(3) To the extent not otherwise set forth in the Corporation's
Articles of Incorporation, each Class or Series of the
Corporation shall have such preferences, conversion and
other rights, voting powers, restrictions, limitations as
to dividends, qualifications and terms and conditions of
redemption as shares of capital stock as are determined by
the Corporation's Board of Directors and described in the
Corporation's registration statement under the Securities
Act of 1933 ("1933 Act") or any amendment thereto or any
supplement to a prospectus or statement of additional
information contained therein.
FOURTH: The Corporation is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act of
1940, as amended.
IN WITNESS WHEREOF, the undersigned Vice President of the Corporation
hereby executes these Articles Supplementary on behalf of the Corporation this
30th day of June, 1999.
____________________________
Helge K. Lee, Vice President
Attest: ________________________________
Kristen A. Richards
Assistant Secretary
The undersigned, Vice President of United Cash Management, Inc. who
executed on behalf said Corporation the foregoing Articles Supplementary, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles Supplementary to be the act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
UNITED CASH MANAGEMENT, INC.
By: ______________________________
Helge K. Lee, Vice President
2
EX-99.B(b)cmbylaw
AMENDMENT TO BYLAWS
RESOLVED, That the Bylaws of each of United Funds, Inc., United Asset
Strategy Fund, Inc., United Cash Management, Inc., United Continental Income
Fund, Inc., 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., Target/United Funds, Inc.
and Waddell & Reed Funds, Inc. are amended by substitution of the following for
the initial paragraph of Article I, Section 7, regarding voting and inspectors;
and, with respect to United Asset Strategy Fund, Inc., United Retirement Shares,
Inc. and Waddell & Reed Funds, Inc., for Article II, Section 2, regarding voting
and proxies:
At all meetings of the stockholders, every stockholder of record
entitled to vote thereat shall be entitled to vote either in person or
by proxy, which term shall include proxies provided by such
stockholder, or his duly authorized attorney, through written,
electronic, telephonic, computerized, facsimile, telecommunications,
telex or oral communication or by any other form of communication, each
pursuant to such voting procedures and through such systems as are
authorized by the Board of Directors or one or more executive officers
of the Corporation. No proxy which is dated or, if otherwise provided
as permitted by these Bylaws and applicable Maryland law, provided more
than three months before the meeting at which it is offered shall be
accepted, unless such proxy shall, on its face, name or, if otherwise
provided as permitted by these Bylaws and applicable Maryland law,
provide a longer period for which it is to remain in force.
I certify that I am Assistant Secretary of each of the following
Corporations, and as such officer, have custody of the minute books of the
Corporations, and that the foregoing resolutions are true and correct
resolutions duly passed by the Board of Directors of each of the following
Corporations at a meeting held on February 10, 1999.
United Funds, Inc.
United Asset Strategy Fund, Inc.
United Cash Management, Inc.
United Continental Income Fund, Inc.
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.
Target/United Funds, Inc.
Waddell & Reed Funds, Inc.
________________________________________
Kristen A. Richards, Assistant Secretary
Dated this 10th day of February, 1999.
EX-99.B(d)cmimafee
EXHIBIT A TO INVESTMENT MANAGEMENT AGREEMENT
UNITED CASH MANAGEMENT, INC.
FEE SCHEDULE
A cash fee computed each day on net asset value for the Fund at the annual rate
of 0.40% of net assets.
As Amended and Effective June 30, 1999.
EX-99.B(i)cmlegopn
July 2, 1999
United Cash Management, Inc.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
RE: United Cash Management, Inc.
Post-Effective Amendment No. 34
Dear Sir or Madam:
In connection with the public offering of shares of Capital Stock of United Cash
Management, Inc. (the "Fund"), I have examined such corporate records and
documents and have made such further investigation and examination as I deemed
necessary for the purpose of this opinion.
It is my opinion that the indefinite number of shares of such Capital Stock
covered by the Fund's Registration Statement on Form N-1A, when issued and paid
for in accordance with the terms of the offering, as set forth in the Prospectus
and Statement of Additional Information forming a part of the Registration
Statement, will be, when such Registration shall have become effective, legally
issued, fully paid and non-assessable by the Fund.
I hereby consent to the filing of this opinion as an Exhibit to the said
Registration Statement and to the reference to me in such Statement of
Additional Information.
Yours truly,
Helge K. Lee
General Counsel
HKL/fr
EX-99.B(m)cmdspc
UNITED CASH MANAGEMENT, INC.
DISTRIBUTION AND SERVICE PLAN
FOR CLASS C SHARES
(Adopted on May 19, 1999)
This Plan is adopted by United Cash Management, Inc. (the "Company") pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act") to
provide for payment by the Company of certain expenses in connection with the
distribution of the Company's Class C shares and the service and maintenance of
Class C shareholder accounts. Payments under the Plan are to be made to Waddell
& Reed, Inc. ("W&R") which serves as the principal underwriter for the Company
under the terms of an underwriting agreement pursuant to which it shall offer
and sell the Class C shares of the Company at net asset value.
Distribution Fee
The Company is authorized to pay to W&R an amount not to exceed on an annual
basis .75 of 1% of the average net assets of Class C shares as a "distribution
fee" to finance the distribution of Class C shares payable to W&R daily or at
such other intervals as the board of directors may determine.
Service Fee
The Company is authorized to pay to W&R an amount not to exceed on an annual
basis .25 of 1% of the average net assets of Class C shares as a "service fee"
to finance shareholder servicing by W&R or its affiliated companies to encourage
and foster the maintenance of Class C shareholder accounts. The amounts shall be
payable to W&R daily or at such other intervals as the board of directors may
determine.
NASD Definition
For purposes of this Plan, the distribution fee may be considered as a sales
charge that is deducted from the net assets of Class C shares and does not
include the service fee. The service fee may be considered a payment made by the
Company for personal service and/or maintenance of Class C shareholder accounts,
provided however, that if the National Association of Securities Dealers, Inc.
("NASD") adopts a definition of "service fee" for purposes of Article III,
ss.26(b) of its Rules of Fair Practice that differs from the definition of
"service fee" as used herein, or if the NASD adopts a related definition
intended to define the same concept, the definition of "service fee" as used
herein shall be automatically amended to conform to the NASD definition.
<PAGE>
Quarterly Reports
W&R shall provide to the board of directors of the Company and the board of
directors shall review at least quarterly a written report of the amounts so
expended of the distribution fee and the service fee paid to it under this Plan
with respect to Class C shares and the purposes for which such expenditures were
made.
Approval of Plan
This Plan shall not become effective until it has been approved by a vote of the
board of directors of the Company and by the directors who are not interested
persons of the Company and have no direct or indirect financial interest in the
operation of the Plan or any agreement related to this Plan (other than as
directors or shareholders of the Company) ("independent directors") cast in
person at a meeting called for the purpose of voting on such Plan.
Continuance
This Plan shall continue in effect for a period of one (1) year and thereafter
from year-to-year only so long as such continuance is approved by the directors,
including the independent directors, as specified hereinabove for the adoption
of a Plan by the directors and independent directors.
Termination
This Plan may be terminated at any time by a vote of a majority of the
independent directors or by a vote of the majority of the outstanding Class C
shares of the Company without penalty. On termination, the payment of all
distribution and service fees shall cease, and the Company shall have no
obligation to W&R to reimburse it for any expenditure it has made or may make to
distribute Class C shares or service Class C shareholder accounts.
Amendments
This Plan may not be amended to increase materially the amount to be spent for
distribution or services without shareholder approval of the Class C
shareholders, and all material amendments of this Plan must be approved in the
manner prescribed for the adoption of the Plan by the directors and independent
directors as provided hereinabove. The distribution and service fees may,
however, be reduced by action of the board of directors without shareholder
approval.
Directors
While this Plan is in effect, the selection and nomination of the directors who
are not interested persons of the Company shall be committed to the discretion
of the directors who are not interested persons of the Company.
<PAGE>
Records
Copies of the Plan, agreements and reports made pursuant to this Plan shall be
preserved as provided in Rule 12b-1(f) under the Act.
EX-99.B(m)cmdspmmb
UNITED CASH MANAGEMENT, INC.
DISTRIBUTION AND SERVICE PLAN
FOR CLASS B SHARES
(Adopted on May 19, 1999)
This Plan is adopted by United Cash Management, Inc. (the "Company") pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act") to
provide for payment by the Company of certain expenses in connection with the
distribution of the Company's Class B shares and the service and maintenance of
Class B shareholder accounts. Payments under the Plan are to be made to Waddell
& Reed, Inc. ("W&R") which serves as the principal underwriter for the Company
under the terms of an underwriting agreement pursuant to which it shall offer
and sell the Class B shares of the Company at net asset value.
Distribution Fee
The Company is authorized to pay to W&R an amount not to exceed on an annual
basis .75 of 1% of the average net assets of Class B shares as a "distribution
fee" to finance the distribution of Class B shares payable to W&R daily or at
such other intervals as the board of directors may determine.
Service Fee
The Company is authorized to pay to W&R an amount not to exceed on an annual
basis .25 of 1% of the average net assets of Class B shares as a "service fee"
to finance shareholder servicing by W&R or its affiliated companies to encourage
and foster the maintenance of Class B shareholder accounts. The amounts shall be
payable to W&R daily or at such other intervals as the board of directors may
determine.
NASD Definition
For purposes of this Plan, the distribution fee may be considered as a sales
charge that is deducted from the net assets of Class B shares and does not
include the service fee. The service fee may be considered a payment made by the
Company for personal service and/or maintenance of Class B shareholder accounts,
provided however, that if the National Association of Securities Dealers, Inc.
("NASD") adopts a definition of "service fee" for purposes of Article III,
ss.26(b) of its Rules of Fair Practice that differs from the definition of
"service fee" as used herein, or if the NASD adopts a related definition
intended to define the same concept, the definition of "service fee" as used
herein shall be automatically amended to conform to the NASD definition.
<PAGE>
Quarterly Reports
W&R shall provide to the board of directors of the Company and the board of
directors shall review at least quarterly a written report of the amounts so
expended of the distribution fee and the service fee paid to it under this Plan
with respect to Class B shares and the purposes for which such expenditures were
made.
Approval of Plan
This Plan shall not become effective until it has been approved by a vote of the
board of directors of the Company and by the directors who are not interested
persons of the Company and have no direct or indirect financial interest in the
operation of the Plan or any agreement related to this Plan (other than as
directors or shareholders of the Company) ("independent directors") cast in
person at a meeting called for the purpose of voting on such Plan.
Continuance
This Plan shall continue in effect for a period of one (1) year and thereafter
from year-to-year only so long as such continuance is approved by the directors,
including the independent directors, as specified hereinabove for the adoption
of a Plan by the directors and independent directors.
Termination
This Plan may be terminated at any time by a vote of a majority of the
independent directors or by a vote of the majority of the outstanding Class B
shares of the Company without penalty. On termination, the payment of all
distribution and service fees shall cease, and the Company shall have no
obligation to W&R to reimburse it for any expenditure it has made or may make to
distribute Class B shares or service Class B shareholder accounts.
Amendments
This Plan may not be amended to increase materially the amount to be spent for
distribution or services without shareholder approval of the Class B
shareholders, and all material amendments of this Plan must be approved in the
manner prescribed for the adoption of the Plan by the directors and independent
directors as provided hereinabove. The distribution and service fees may,
however, be reduced by action of the board of directors without shareholder
approval.
Directors
While this Plan is in effect, the selection and nomination of the directors who
are not interested persons of the Company shall be committed to the discretion
of the directors who are not interested persons of the Company.
2
<PAGE>
Records
Copies of the Plan, agreements and reports made pursuant to this Plan shall be
preserved as provided in Rule 12b-1(f) under the Act.
3
Ex-99.(m)cmdspmmc
UNITED CASH MANAGEMENT, INC.
DISTRIBUTION AND SERVICE PLAN
FOR WADDELL & REED MONEY MARKET C SHARES
(Adopted on May 19, 1999)
This Plan is adopted by United Cash Management, Inc. (the "Company") pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "Act") to
provide for payment by the Company of certain expenses in connection with the
distribution of the Company's Waddell & Reed Money Market C shares and the
service and maintenance of Waddell & Reed Money Market C shareholder accounts.
Payments under the Plan are to be made to Waddell & Reed, Inc. ("W&R") which
serves as the principal underwriter for the Company under the terms of an
underwriting agreement pursuant to which it shall offer and sell the Waddell &
Reed Money Market C shares of the Company at net asset value.
Distribution Fee
The Company is authorized to pay to W&R an amount not to exceed on an annual
basis .75 of 1% of the average net assets of Waddell & Reed Money Market C
shares as a "distribution fee" to finance the distribution of Waddell & Reed
Money Market C shares payable to W&R daily or at such other intervals as the
board of directors may determine.
Service Fee
The Company is authorized to pay to W&R an amount not to exceed on an annual
basis .25 of 1% of the average net assets of Waddell & Reed Money Market C
shares as a "service fee" to finance shareholder servicing by W&R or its
affiliated companies to encourage and foster the maintenance of Waddell & Reed
Money Market C shareholder accounts. The amounts shall be payable to W&R daily
or at such other intervals as the board of directors may determine.
NASD Definition
For purposes of this Plan, the distribution fee may be considered as a sales
charge that is deducted from the net assets of Waddell & Reed Money Market C
shares and does not include the service fee. The service fee may be considered a
payment made by the Company for personal service and/or maintenance of Waddell &
Reed Money Market C shareholder accounts, provided however, that if the National
Association of Securities Dealers, Inc. ("NASD") adopts a definition of "service
fee" for purposes of Article III, ss.26(b) of its Rules of Fair Practice that
differs from the definition of "service fee" as used herein, or if the NASD
adopts a related definition intended to define the same concept, the definition
of "service fee" as used herein shall be automatically amended to conform to the
NASD definition.
<PAGE>
Quarterly Reports
W&R shall provide to the board of directors of the Company and the board of
directors shall review at least quarterly a written report of the amounts so
expended of the distribution fee and the service fee paid to it under this Plan
with respect to Waddell & Reed Money Market C shares and the purposes for which
such expenditures were made.
Approval of Plan
This Plan shall not become effective until it has been approved by a vote of the
board of directors of the Company and by the directors who are not interested
persons of the Company and have no direct or indirect financial interest in the
operation of the Plan or any agreement related to this Plan (other than as
directors or shareholders of the Company) ("independent directors") cast in
person at a meeting called for the purpose of voting on such Plan.
Continuance
This Plan shall continue in effect for a period of one (1) year and thereafter
from year-to-year only so long as such continuance is approved by the directors,
including the independent directors, as specified hereinabove for the adoption
of a Plan by the directors and independent directors.
Termination
This Plan may be terminated at any time by a vote of a majority of the
independent directors or by a vote of the majority of the outstanding Waddell &
Reed Money Market C shares of the Company without penalty. On termination, the
payment of all distribution and service fees shall cease, and the Company shall
have no obligation to W&R to reimburse it for any expenditure it has made or may
make to distribute Waddell & Reed Money Market C shares or service Waddell &
Reed Money Market C shareholder accounts.
Amendments
This Plan may not be amended to increase materially the amount to be spent for
distribution or services without shareholder approval of the Waddell & Reed
Money Market C shareholders, and all material amendments of this Plan must be
approved in the manner prescribed for the adoption of the Plan by the directors
and independent directors as provided hereinabove. The distribution and service
fees may, however, be reduced by action of the board of directors without
shareholder approval.
Directors
While this Plan is in effect, the selection and nomination of the directors who
are not interested persons of the Company shall be committed to the discretion
of the directors who are not interested persons of the Company.
2
<PAGE>
Records
Copies of the Plan, agreements and reports made pursuant to this Plan shall be
preserved as provided in Rule 12b-1(f) under the Act.
3
EX-99.B(o)cmmcp
UNITED CASH MANAGEMENT, INC.
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
This Multiple Class Plan ("Plan") pursuant to Rule 18f-3 under the
Investment Company Act of 1940, as amended ("1940 Act"), sets forth the multiple
class structure for United Cash Management, Inc. ("Fund"). This multiple class
structure was approved by the Board of Directors of United Cash Management, Inc.
on February 8, 1995, under an order of exemption issued by the Securities and
Exchange Commission on January 11, 1995. Subsequent to such approval, Rule 18f-3
under the 1940 Act was adopted. It was determined that the Fund operate under
Rule 18f-3, and this Plan was adopted pursuant to Rule 18f-3. This Plan
describes the classes of shares of stock of the Fund -- Class A shares and Class
B shares -- offered to the public on or after September 5, 1995 ("Implementation
Date"), (Class B shares were redesignated as Waddell & Reed Money Market B
shares May 19, 1999); and Class B shares, Class C shares and Waddell & Reed
Money Market C shares -- offered to the public on or after September 1, 1999.
General Description of the Classes:
Class A Shares. Class A shares will be sold to the general public
without a sales charge. Class A shares will not be subject to a 12b-1 fee. All
of the shares of the Fund issued pursuant to a Fund prospectus effective prior
to the Implementation Date and that are outstanding on the Implementation Date
will be designated as Class A shares.
Class B Shares. Class B shares will be sold subject to a contingent
deferred sales charge, which will be imposed on redemption proceeds. The maximum
contingent deferred sales charge will be 5.0% and will decline 1% per year after
the first full calendar year after investment to 0% after seven years. Class B
shares also will be subject to a distribution and/or service fee charged
pursuant to a Service Plan adopted pursuant to Rule 12b-1 under the 1940 Act
("Rule 12b-1") that provides for a maximum fee of 1.00% of the average annual
net assets of the Class B shares of the Fund. Class B shares 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.
Class C Shares. Class C shares will be sold subject to a contingent
deferred sales charge of 1% if the shares are redeemed within twelve months of
purchase. Class C shares will be subject to distribution and service fees
charged pursuant to a Distribution and Service Plan adopted pursuant to Rule
12b-1 that provides for a maximum service fee of 0.25% and a maximum
<PAGE>
distribution fee of 0.75% of the average annual net assets of the Class C shares
of a Fund.
Waddell & Reed Money Market B. Waddell & Reed Money Market B shares
will be sold subject to a contingent deferred sales charge, which will be
imposed on redemption proceeds. The maximum contingent deferred sales charge
will be 3.0% and will decline 1% per year after the first full calendar year
after investment to 0% after four years. Waddell & Reed Money Market B shares
will also be subject to distribution and service fees charged pursuant to a
Distribution and Service Plan adopted pursuant to Rule 12b-1 under the 1940 Act
("Rule 12b-1") that provides for a maximum service fee of 0.25% and a maximum
distribution fee of 0.75% of the average annual net assets of the Waddell & Reed
Money Market B shares of the Fund.
Waddell & Reed Money Market C. Waddell & Reed Money Market C shares
will be sold subject to a contingent deferred sales charge of 1% if the shares
are redeemed within twelve months of purchase. Waddell & Reed Money Market C
shares will be subject to distribution and service fees charged pursuant to a
Distribution and Service Plan adopted pursuant to Rule 12b-1 that provides for a
maximum service fee of 0.25% and a maximum distribution fee of 0.75% of the
average annual net assets of the Waddell & Reed Money Market C shares of the
Fund.
Expense Allocations of Each Class:
In addition to the difference with respect to 12b-1 fees, each shares
of the Fund may also pay a different amount of the following other expenses:
(a) stationery, printing, postage and delivery expenses
related to preparing and distributing materials such as shareholder
reports, prospectuses, and proxy statements to current shareholders of
a specific Class of shares;
(b) Blue Sky registration fees incurred by a specific Class of
shares;
(c) SEC registration fees incurred by a specific Class of
shares;
(d) expenses of administrative personnel and services required
to support the shareholders of a specific Class of shares;
(e) Directors' fees or expenses incurred as a result of issues
relating to a specific Class of shares;
(f) accounting expenses relating solely to a specific Class of
shares;
(g) auditors' fees, litigation expenses, and legal fees and
expenses relating to a specific Class of shares; and
(h) expenses incurred in connection with shareholders meetings
as a result of issues relating to a specific Class of shares.
<PAGE>
The expenses listed above may, but are not required to, be directly
attributed and charged to a particular Class. The shareholder servicing fees and
other expenses listed above that are attributed and charged to a particular
Class are borne on a pro rata basis by the outstanding shares of that Class.
Certain expenses that may be attributable to the Fund, but not a
particular Class, are allocated based on the relative daily net assets of that
Class.
Exchange Privileges:
Class A shares of the Fund may be exchanged for Class A shares of any
other fund in the United Group of Mutual Funds.
Class B shares of the Fund may be exchanged for Class B shares of any
other fund in the United Group of Mutual Funds.
Class C shares of the Fund may be exchanged for Class C shares of any
other fund in the United Group of Mutual Funds.
Waddell & Reed Money Market B shares may be exchanged for Class B
shares of the Waddell & Reed Funds, Inc.
Waddell & Reed Money Market C shares may be exchanged for Class C
shares of the Waddell & Reed Funds, Inc.
These exchange privileges may be modified or terminated by the Fund,
and exchanges may only be made into funds that are legally registered for sale
in the investor's state of residence.
Additional Information:
This Plan is qualified by and subject to the terms of the then current
prospectus for the applicable Class after the Implementation Date; provided,
however, that none of the terms set forth in any such prospectus shall be
inconsistent with the terms of the Classes contained in this Plan. The
prospectus for each Class contains additional information about that Class and
the Fund's multiple class structure.
Adopted July 7, 1995
As amended October 18, 1995
As amended May 19, 1999
