485B POS 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. 36
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
Amendment No. 31
UNITED CASH MANAGEMENT, INC.
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(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)
__X__ on June 30, 2000 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(i)
_____ on (date) pursuant to paragraph (a)(i)
_____ 75 days after filing pursuant to paragraph (a)(ii)
_____ on (date) pursuant to paragraph (a)(ii) of Rule 485
_____ this post-effective amendment designates a new effective date
for a previously filed post-effective amendment
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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 was filed on or about
September 28, 1999.
<PAGE>
PROSPECTUS
JUNE 30, 2000
WADDELL & REED ADVISORS FUNDS
FIXED INCOME &
MONEY MARKET FUNDS
Bond Fund
Government Securities Fund
High Income Fund
High Income Fund II
Municipal Bond Fund
Municipal High Income Fund
Cash Management
THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THE [LOGO]
FUNDS' SECURITIES, OR DETERMINED
WHETHER THIS PROSPECTUS IS ACCURATE OR ADEQUATE. IT IS A CRIMINAL OFFENSE TO
STATE OTHERWISE.
<PAGE>
CONTENTS
3 An Overview of the Funds
3 Bond Fund
9 Government Securities Fund
14 High Income Fund
14 High Income Fund II
24 Municipal Bond Fund
30 Municipal High Income Fund
37 Cash Management
42 The Investment Principles of the Funds
52 Your Account
75 The Management of the Funds
78 Financial Highlights
2
<PAGE>
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AN OVERVIEW OF THE FUND
GOAL
[GRAPHIC]
WADDELL & REED ADVISORS BOND FUND
(FORMERLY UNITED BOND FUND) SEEKS A REASONABLE RETURN WITH EMPHASIS ON
PRESERVATION OF CAPITAL.
PRINCIPAL STRATEGIES
Bond Fund seeks to achieve its goal by investing primarily in domestic debt
securities usually of investment grade (rated BBB and higher by Standard &
Poor's ("S&P") and Baa and higher by Moody's Investors Service, Inc. ("MIS")).
The Fund has no limitations regarding the maturity duration or dollar weighted
average of its holdings. In selecting the debt securities for the Fund's
portfolio, Waddell & Reed Investment Management Company ("WRIMCO"), the Fund's
investment manager, considers yield and relative safety and, in the case of
convertible securities, the possibility of capital growth. The Fund can invest
in securities of companies of any size.
In selecting debt securities for the Fund, WRIMCO may look at many factors.
These include the issuer's past, present and estimated future:
- financial strength;
- cash flow;
- management;
- borrowing requirements; and
- responsiveness to changes in interest rates and business conditions.
As well, WRIMCO considers the maturity of the obligation and the size or nature
of the bond issue.
In general, in determining whether to sell a security, WRIMCO uses the same
type of analysis that it uses in buying securities. For example, WRIMCO may
sell a holding if the issuer's financial strength weakens and/or the yield and
relative safety of the security declines. WRIMCO may also sell a security to
take advantage of more attractive investment opportunities or to raise
cash.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Because Bond Fund owns different types of securities, a variety of factors can
affect its investment performance, such as:
- prepayment of higher-yielding bonds held by the Fund;
- the earnings performance, credit quality and other conditions of the
companies whose securities the Fund holds;
- changes in the maturities of bonds owned by the Fund;
- WRIMCO's skill in evaluating and managing the interest rate and credit
risks of the Fund's portfolio; and
- adverse bond and stock 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.
As with any mutual fund, the value of the Fund's shares will change, and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
WHO MAY WANT TO INVEST
Bond Fund is designed for investors who primarily seek current income while
also seeking to preserve investment principal. You should consider whether the
Fund fits your particular investment objectives.
<PAGE>
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PERFORMANCE
BOND FUND
The bar chart and performance 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 how the Fund's average annual total returns for the
periods shown compare with those of a broad measure of market performance and a
peer group average.
- The bar chart presents the average annual total returns for Class A and
shows how performance has varied from year to year over the past ten
calendar years.
- The bar chart does not reflect any sales charge that you may be required to
pay upon purchase of the Fund's Class A shares. If the sales charge was
included, the returns would be less than those shown.
- The performance table shows average annual total returns for each class and
compares them to the market indicators listed.
- The bar chart and the performance table assume payment of dividends and
other distributions in shares. As with all mutual funds, the Fund's past
performance does not necessarily indicate how it will perform in the
future.
CHART OF YEAR-BY-YEAR RETURNS
AS OF DECEMBER 31, EACH YEAR (%)
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
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4.24% 17.76% 7.84% 13.19% -5.76% 20.50% 3.20% 9.77% 7.27% -1.08%
===============================================================================
IN THE PERIOD SHOWN IN THE CHART, THE HIGHEST QUARTERLY RETURN WAS 7.11% (THE
THIRD QUARTER OF 1991) AND THE LOWEST QUARTERLY RETURN WAS -7.37% (THE FIRST
QUARTER OF 1997). THE CLASS A RETURN FOR THE YEAR THROUGH MARCH 31, 2000 WAS
2.32%.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999 (%) 1 YEAR 5 YEARS 10 YEARS LIFE OF CLASS(1)
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CLASS A SHARES OF BOND FUND -6.77% 6.42% 6.84%
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Salomon Brothers Broad
Investment Grade Index -0.83% 7.74% 7.75%
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Lipper Corporate Debt Funds
A-Rated Universe Average -2.61% 6.90% 7.30%
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CLASS B SHARES OF BOND FUND -4.64%
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Salomon Brothers Broad
Investment Grade Index -0.83% 7.74% 7.75% -0.16%
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Lipper Corporate Debt Funds
A-Rated Universe Average -2.61% 6.90% 7.30% -0.45%
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CLASS C SHARES OF BOND FUND -0.86%
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Salomon Brothers Broad
Investment Grade Index -0.83% 7.74% 7.75% -0.16%
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Lipper Corporate Debt Funds
A-Rated Universe Average -2.61% 6.90% 7.30% -0.45%
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CLASS Y SHARES OF BOND FUND -0.81% 5.93%
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Salomon Brothers Broad
Investment Grade Index -0.83% 7.74% 7.75% 6.04%
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Lipper Corporate Debt Funds
A-Rated Universe Average -2.61% 6.90% 7.30% 5.09%
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THE INDEX SHOWN IS A BROAD-BASED, SECURITIES MARKET INDEX THAT IS UNMANAGED.
THE LIPPER AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH GOALS SIMILAR TO THE
GOAL OF THE FUND.
(1) SINCE SEPTEMBER 9, 1999 FOR CLASS B SHARES, SEPTEMBER 9, 1999 FOR CLASS C
SHARES AND JUNE 19, 1995 FOR CLASS Y SHARES. BECAUSE EACH CLASS COMMENCED
OPERATIONS ON A DATE OTHER THAN AT THE END OF A MONTH, AND PARTIAL MONTH
CALCULATIONS OF THE PERFORMANCE OF THE ABOVE INDEX ARE NOT AVAILABLE, INDEX
PERFORMANCE IS CALCULATED FROM SEPTEMBER 30, 1999, SEPTEMBER 30, 1999, AND
JUNE 30, 1995, RESPECTIVELY.
<PAGE>
FEES AND EXPENSES
BOND FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS Y
YOUR INVESTMENT) SHARES SHARES SHARES SHARES
MAXIMUM SALES CHARGE
(LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE
OF OFFERING PRICE) 5.75% None None None
MAXIMUM DEFERRED
SALES CHARGE (LOAD)(1)
(AS A PERCENTAGE OF LESSER
OF AMOUNT INVESTED OR
REDEMPTION VALUE) None(2) 5% 1% None
==============================================================================
ANNUAL FUND OPERATING EXPENSES(3)
(EXPENSES THAT ARE DEDUCTED CLASS A CLASS B CLASS C CLASS Y
FROM FUND ASSETS) SHARES SHARES SHARES SHARES
MANAGEMENT FEES 0.52% 0.52% 0.52% 0.52%
DISTRIBUTION AND SERVICE
(12b-1) FEES 0.25% 1.00% 1.00% None
OTHER EXPENSES 0.23% 0.39% 0.48% 0.21%
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.00% 1.91% 2.00% 0.73%
==============================================================================
(1) THE CONTINGENT DEFERRED SALES CHARGE (CDSC), WHICH IS IMPOSED ON
THE LESSER OF AMOUNT INVESTED OR REDEMPTION VALUE OF CLASS B SHARES,
DECLINES FROM 5% FOR REDEMPTIONS MADE WITHIN THE FIRST YEAR OF
PURCHASE, TO 4% FOR REDEMPTIONS MADE WITHIN THE SECOND YEAR, TO 3% FOR
REDEMPTIONS MADE WITHIN THE THIRD AND FOURTH YEARS, TO 2% FOR
REDEMPTIONS MADE WITHIN THE FIFTH YEAR, TO 1% FOR REDEMPTIONS MADE
WITHIN THE SIXTH YEAR AND TO 0% FOR REDEMPTIONS MADE AFTER THE SIXTH
YEAR. FOR CLASS C SHARES, A 1% CDSC APPLIES TO THE LESSER OF AMOUNT
INVESTED OR REDEMPTION VALUE OF CLASS C SHARES REDEEMED WITHIN TWELVE
MONTHS AFTER PURCHASE. SOLELY FOR PURPOSES OF DETERMINING THE NUMBER OF
MONTHS OR YEARS FROM THE TIME OF ANY PAYMENT FOR THE PURCHASE OF
SHARES, ALL PAYMENTS DURING A MONTH ARE TOTALED AND DEEMED TO HAVE BEEN
MADE ON THE FIRST DAY OF THE MONTH.
(2) A 1% CDSC MAY BE IMPOSED ON PURCHASES OF $2 MILLION OR MORE OF CLASS
A SHARES THAT ARE REDEEMED WITHIN TWELVE MONTHS OF PURCHASE.
(3) 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 OTHER FUND-LEVEL EXPENSES
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
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EXAMPLE
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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 A, Class B,
Class C or Class Y shares 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:
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IF SHARES ARE REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Class A Shares $671 $875 $1,096 $1,729
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Class B Shares $594 $901 $1,134 $1,998(1)
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Class C Shares $303 $626 $1,076 $2,324
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Class Y Shares $ 75 $233 $ 406 $ 906
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IF SHARES ARE NOT REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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Class A Shares $671 $875 $1,096 $1,729
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Class B Shares $194 $601 $1,034 $1,998(1)
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Class C Shares $203 $626 $1,076 $2,324
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Class Y Shares $ 75 $233 $ 406 $ 906
===============================================================================
(1) REFLECTS ANNUAL OPERATING EXPENSES OF CLASS A AFTER CONVERSION OF CLASS B
SHARES INTO CLASS A SHARES 8 YEARS AFTER THE MONTH IN WHICH THE SHARES WERE
PURCHASED.
<PAGE>
AN OVERVIEW OF THE FUND
WADDELL & REED ADVISORS
GOVERNMENT SECURITIES FUND
(FORMERLY UNITED GOVERNMENT SECURITIES FUND) SEEKS AS HIGH A CURRENT INCOME AS
IS CONSISTENT WITH SAFETY OF PRINCIPAL.
PRINCIPAL STRATEGIES
Government Securities Fund seeks to achieve its goal by investing exclusively
in debt securities issued or guaranteed by the U.S. Government or its agencies
or instrumentalities (U.S. Government securities). The Fund invests in a
diversified portfolio of U.S. Government securities, including treasury issues
and mortgage-backed securities. The Fund has no limitations on the range of
maturities of the debt securities in which it may invest.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Because Government Securities Fund owns different types of fixed-income
instruments, a variety of factors can affect its investment performance, such
as:
- an increase in interest rates, which may cause the value of the Fund's
fixed-income securities, especially bonds with longer maturities, to decline;
- adverse bond and stock 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;
- prepayment of higher-yielding bonds and mortgage-backed securities; and
- WRIMCO's skill in evaluating and selecting securities for the Fund.
As with any mutual fund, the value of the Fund's shares will change and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. As well, not all U.S. Government
securities are backed by the full faith and credit of the United States.
WHO MAY WANT TO INVEST
Government Securities Fund is designed for investors who seek current income
and the relative security of investing in U.S. Government securities. You
should consider whether the Fund fits your particular investment objectives.
<PAGE>
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PERFORMANCE
GOVERNMENT SECURITIES FUND
The bar chart and performance 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 how the Fund's average annual total returns for the
periods shown compare with those of a broad measure of market performance and a
peer group average.
- The bar chart presents the average annual total returns for Class A and
shows how performance has varied from year to year over the past ten
calendar years.
- The bar chart does not reflect any sales charge that you may be required to
pay upon purchase of the Fund's Class A shares. If the sales charge was
included, the returns would be less than those shown.
- The performance table shows average annual total returns for each class and
compares them to the market indicators listed.
- The bar chart and the performance table assume payment of dividends and
other distributions in shares. 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 bar chart and performance 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 (%)
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
-------------------------------------------------------------------------------
7.27% 16.07% 7.54% 9.99% -3.88% 19.30% 1.77% 9.16% 7.49% -0.64%
===============================================================================
IN THE PERIOD SHOWN IN THE CHART, THE HIGHEST QUARTERLY RETURN WAS 6.81% (THE
THIRD QUARTER OF 1991) AND THE LOWEST QUARTERLY RETURN WAS -3.32% (THE FIRST
QUARTER OF 1994). THE CLASS A RETURN FOR THE YEAR THROUGH MARCH 31, 2000 WAS
2.19%.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999 (%) 1 YEAR 5 YEARS 10 YEARS LIFE
OF CLASS(1)
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CLASS A SHARES OF
GOVERNMENT SECURITIES FUND -4.86% 6.27% 6.76%
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Salomon Brothers Treasury/
Government Sponsored/
Mortgage Bond Index -0.59% 7.66% 7.64%
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Lipper General U. S.
Government Funds
Universe Average -3.02% 6.50% 6.63%
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CLASS B SHARES OF
GOVERNMENT SECURITIES FUND - 5.09%
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Salomon Brothers Treasury/
Government Sponsored/
Mortgage Bond Index -0.59% 7.66% 7.64% -0.52%
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Lipper General U. S.
Government Funds
Universe Average -3.02% 6.50% 6.63% -0.82%
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CLASS C SHARES OF
GOVERNMENT SECURITIES FUND -0.87%
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Salomon Brothers Treasury/
Government Sponsored/
Mortgage Bond Index -0.59% 7.66% 7.64% -0.52%
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Lipper General U. S.
Government Funds
Universe Average -3.02% 6.50% 6.63% -0.82%
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CLASS Y SHARES OF
GOVERNMENT SECURITIES FUND -0.28% 5.73%
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Salomon Brothers Treasury/
Government Sponsored/
Mortgage Bond Index -0.59% 7.66% 7.64% 5.96%
-------------------------------------------------------------------------------
Lipper General U. S.
Government Funds
Universe Average -3.02% 6.50% 6.63% 4.69%
===============================================================================
THE INDEX SHOWN IS A BROAD-BASED, SECURITIES MARKET INDEX THAT IS UNMANAGED. THE
LIPPER AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH GOALS SIMILAR TO THE GOAL OF
THE FUND.
(1) SINCE OCTOBER 4, 1999 FOR CLASS B SHARES, OCTOBER 8, 1999 FOR CLASS C
SHARES AND SEPTEMBER 27, 1995 FOR CLASS Y SHARES. BECAUSE EACH CLASS
COMMENCED OPERATIONS ON A DATE OTHER THAN AT THE END OF A MONTH, AND
PARTIAL MONTH CALCULATIONS OF THE PERFORMANCE OF THE INDEX (INCLUDING
INCOME) ARE NOT AVAILABLE, PERFORMANCE OF THE INDEX IS FROM OCTOBER 31,
1999, OCTOBER 31,1999 AND SEPTEMBER 30, 1995, RESPECTIVELY.
<PAGE>
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FEES AND EXPENSES
GOVERNMENT SECURITIES FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS Y
YOUR INVESTMENT) SHARES SHARES SHARES SHARES
------------------------------------------------------------------------------
MAXIMUM SALES CHARGE
(LOAD) IMPOSED ON
PURCHASES (AS A PERCENTAGE
OF OFFERING PRICE) 4.25% None None None
------------------------------------------------------------------------------
MAXIMUM DEFERRED
SALES CHARGE (LOAD)(1)
(AS A PERCENTAGE OF LESSER
OF AMOUNT INVESTED OR
REDEMPTION VALUE) None(2) 5% 1% None
------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(3)
(EXPENSES THAT ARE DEDUCTED CLASS A CLASS B CLASS C CLASS Y
FROM FUND ASSETS) SHARES SHARES SHARES SHARES
------------------------------------------------------------------------------
MANAGEMENT FEES 0.50% 0.50% 0.50% 0.50%
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DISTRIBUTION AND SERVICE
(12b-1) FEES 0.25% 1.00% 1.00% None
------------------------------------------------------------------------------
OTHER EXPENSES 0.40% 0.40% 0.60% 0.30%
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TOTAL ANNUAL FUND
OPERATING EXPENSES 1.15% 1.90% 2.10% 0.80%
===============================================================================
(1) THE CDSC, WHICH IS IMPOSED ON THE LESSER OF AMOUNT INVESTED OR REDEMPTION
VALUE OF CLASS B SHARES, DECLINES FROM 5% FOR REDEMPTIONS MADE WITHIN THE
FIRST YEAR OF PURCHASE, TO 4% FOR REDEMPTIONS MADE WITHIN THE SECOND YEAR,
TO 3% FOR REDEMPTIONS MADE WITHIN THE THIRD AND FOURTH YEARS, TO 2% FOR
REDEMPTIONS MADE WITHIN THE FIFTH YEAR, TO 1% FOR REDEMPTIONS MADE WITHIN
THE SIXTH YEAR AND TO 0% FOR REDEMPTIONS MADE AFTER THE SIXTH YEAR. FOR
CLASS C SHARES, A 1% CDSC APPLIES TO THE LESSER OF AMOUNT INVESTED OR
REDEMPTION VALUE OF CLASS C SHARES REDEEMED WITHIN TWELVE MONTHS AFTER
PURCHASE. SOLELY FOR PURPOSES OF DETERMINING THE NUMBER OF MONTHS OR YEARS
FROM THE TIME OF ANY PAYMENT FOR THE PURCHASE OF SHARES, ALL PAYMENTS
DURING A MONTH ARE TOTALED AND DEEMED TO HAVE BEEN MADE ON THE FIRST DAY
OF THE MONTH.
(2) A 1% CDSC MAY BE IMPOSED ON PURCHASES OF $2 MILLION OR MORE OF CLASS A
SHARES THAT ARE REDEEMED WITHIN TWELVE MONTHS OF PURCHASE.
(3) MANAGEMENT FEES AND TOTAL FUND OPERATING EXPENSES HAVE BEEN RESTATED TO
REFLECT THE CHANGE IN MANAGEMENT FEES EFFECTIVE JUNE 30, 1999; OTHERWISE,
EXPENSE RATIOS ARE BASED ON OTHER FUND-LEVEL EXPENSES OF THE FUND FOR THE
FISCAL YEAR ENDED MARCH 31, 2000. ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
<PAGE>
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 A, Class B,
Class C or Class Y shares 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:
------------------------------------------------------------------------------
IF SHARES ARE REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------- --------------------------------------
Class A Shares $537 $775 $1,031 $1,763
------------------------------------------------------------------------------
Class B Shares $593 $897 $1,126 $2,025(1)
------------------------------------------------------------------------------
Class C Shares $313 $658 $1,129 $2,431
------------------------------------------------------------------------------
Class Y Shares $ 82 $255 $ 444 $ 990
------------------------------------------------------------------------------
IF SHARES ARE NOT REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------
Class A Shares $537 $775 $1,031 $1,763
------------------------------------------------------------------------------
Class B Shares $193 $597 $1,026 $2,025(1)
------------------------------------------------------------------------------
Class C Shares $213 $658 $1,129 $2,431
------------------------------------------------------------------------------
Class Y Shares $ 82 $255 $ 444 $ 990
==============================================================================
(1) REFLECTS ANNUAL OPERATING EXPENSES OF CLASS A AFTER
CONVERSION OF CLASS B SHARES INTO CLASS A SHARES 8 YEARS AFTER THE MONTH
IN WHICH THE SHARES WERE PURCHASED.
<PAGE>
-------------------------------------------------------------------------------
AN OVERVIEW OF THE FUNDS
WADDELL & REED ADVISORS HIGH INCOME FUND
WADDELL & REED ADVISORS HIGH INCOME FUND II
(FORMERLY UNITED HIGH INCOME FUND AND UNITED HIGH INCOME FUND II) SEEK, AS A
PRIMARY GOAL, A HIGH LEVEL OF CURRENT INCOME. AS A SECONDARY GOAL, THE FUNDS
SEEK CAPITAL GROWTH WHEN CONSISTENT WITH THEIR PRIMARY GOAL.
PRINCIPAL STRATEGIES
High Income Fund and High Income Fund II seek to achieve their goals by
investing primarily in a diversified portfolio of high-yield, high-risk,
fixed-income securities the risks of which are, in the judgment of WRIMCO,
consistent with the Funds' goals. The Funds can invest in companies of any
size. The Funds invest primarily in the lower quality bonds, commonly called
junk bonds, that are rated BB and below by S&P or Ba and below by MIS or, if
unrated, deemed by WRIMCO to be of comparable quality. The Funds may invest an
unlimited amount of their respective total assets in junk bonds. As well, the
Funds may invest in bonds of any maturity.
The Funds may each invest up to 20% of their respective total assets in common
stock in order to seek capital growth. The Funds will emphasize a blend of
value and growth in their selection of common stock. Value stocks are those
whose earnings WRIMCO believes are currently selling below their true worth.
Growth stocks are those whose earnings WRIMCO believes are likely to grow
faster than the economy.
WRIMCO may look at a number of factors in selecting securities for the Funds.
These include an issuer's past, current and estimated future:
- financial strength;
- cash flow;
- management;
- borrowing requirements; and
- responsiveness to changes in interest rates and business conditions.
In general, in determining whether to sell a debt security, WRIMCO uses the
same type of analysis that it uses in buying debt securities. For example,
WRIMCO may sell a holding if the issuer's financial strength declines to an
unacceptable level or management of the company weakens. As well, WRIMCO may
choose to sell an equity security if the issuer's growth potential has
diminished. WRIMCO may also sell a security to take advantage of more
attractive investment opportunities or to raise cash.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
Because High Income Fund and High Income Fund II own different types of
securities, a variety of factors can affect their investment performance, such
as:
- the earnings performance, credit quality and other conditions of
the companies whose securities the Funds hold;
- the susceptibility of junk bonds to greater risks of non-payment or default,
price volatility and lack of liquidity compared to higher-rated bonds;
- an increase in interest rates, which may cause the value of a bond held by
either Fund, especially bonds with longer maturities, to decline;
- changes in the maturities of bonds owned by the Funds;
- adverse bond and stock market conditions, sometimes in response to general
economic or industry news, that may cause the prices of the Funds' holdings
to fall as part of a broad market decline; and
- WRIMCO's skill in evaluating and managing the interest rate and credit risks
of the Funds' portfolios.
Market risk for small or medium sized companies may be greater than that for
large companies. For example, smaller companies may have limited financial
resources, limited product lines or inexperienced management.
As with any mutual fund, the value of each Fund's shares will change, and you
could lose money on your investment. An investment in each Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
WHO MAY WANT TO INVEST
High Income Fund and High Income Fund II are designed for investors who
primarily seek a level of current income that is higher than is normally
available with securities in the higher rated categories and, secondarily, seek
capital growth where consistent with the goal of income. The Funds are not
suitable for all investors. You should consider whether either Fund fits your
particular investment objectives.
<PAGE>
-------------------------------------------------------------------------------
PERFORMANCE
HIGH INCOME FUND
The bar chart and performance 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 how the Fund's average annual total returns for the
periods shown compare with those of a broad measure of market performance and a
peer group average.
- The bar chart presents the average annual total returns for Class A and
shows how performance has varied from year to year over the past ten
calendar years.
- The bar chart does not reflect any sales charge that you may be required to
pay upon purchase of the Fund's Class A shares. If the sales charge was
included, the returns would be less than those shown.
- The performance table shows average annual total returns for each class and
compares them to the market indicators listed.
- The bar chart and the performance table assume payment of dividends and
other distributions in shares. 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 bar chart and performance 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 (%)
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
-------------------------------------------------------------------------------
-14.97% 37.45% 16.33% 17.69% -3.66% 17.80% 11.88% 14.32% 3.88% 2.92%
===============================================================================
IN THE PERIOD SHOWN IN THE CHART, THE HIGHEST QUARTERLY RETURN WAS 12.12% (THE
FIRST QUARTER OF 1991) AND THE LOWEST QUARTERLY RETURN WAS -7.59% (THE THIRD
QUARTER OF 1990). THE CLASS A RETURN FOR THE YEAR THROUGH MARCH 31, 2000 WAS
-1.73%.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999 (%) 1 YEAR 5 YEARS 10 YEARS LIFE
OF CLASS(1)
-------------------------------------------------------------------------------
CLASS A SHARES OF
HIGH INCOME FUND -3.00% 8.71% 8.93%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Market Index 1.73% 9.71% 10.94%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Composite Index 1.24% 10.39% 11.35%
-------------------------------------------------------------------------------
Lipper High Current Yield
Funds Universe Average 4.53% 8.84% 10.03%
-------------------------------------------------------------------------------
CLASS B SHARES OF
HIGH INCOME FUND -2.38%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Market Index 1.73% 9.71% 10.94% 2.42%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Composite Index 1.24% 10.39% 11.35% 2.70%
-------------------------------------------------------------------------------
Lipper High Current Yield
Funds Universe Average 4.53% 8.84% 10.03% 2.78%
-------------------------------------------------------------------------------
CLASS C SHARES OF
HIGH INCOME FUND 1.62%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Market Index 1.73% 9.71% 10.94% 2.42%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Composite Index 1.24% 10.39% 11.35% 2.70%
-------------------------------------------------------------------------------
Lipper High Current Yield
Funds Universe Average 4.53% 8.84% 10.03% 2.78%
-------------------------------------------------------------------------------
CLASS Y SHARES OF
HIGH INCOME FUND 3.15% 8.17%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Market Index 1.73% 9.71% 10.94% 7.34%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Composite Index 1.24% 10.39% 11.35% 7.57%
-------------------------------------------------------------------------------
Lipper High Current Yield
Funds Universe Average 4.53% 8.84% 10.03% 7.02%
===============================================================================
THE INDEXES SHOWN ARE BROAD-BASED, SECURITIES MARKET INDEXES THAT ARE UNMANAGED.
THE SALOMON BROTHERS HIGH YIELD MARKET INDEX WILL REPLACE THE SALOMON BROTHERS
HIGH YIELD COMPOSITE INDEX. WRIMCO BELIEVES THAT THE NEW INDEX PROVIDES A MORE
ACCURATE BASIS FOR COMPARING THE FUND'S PERFORMANCE TO THE TYPES OF SECURITIES
IN WHICH THE FUND INVESTS. BOTH INDEXES ARE PRESENTED FOR COMPARISON PURPOSES.
THE LIPPER AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH GOALS SIMILAR TO THE
GOALS OF THE FUND.
(1) SINCE OCTOBER 4, 1999 FOR CLASS B SHARES, OCTOBER 4, 1999 FOR CLASS C
SHARES AND JANUARY 4, 1996 FOR CLASS Y SHARES. BECAUSE EACH CLASS
COMMENCED OPERATIONS ON A DATE OTHER THAN AT THE END OF A MONTH, AND
PARTIAL MONTH CALCULATIONS OF THE PERFORMANCE OF THE INDEXES
(INCLUDING INCOME) ARE NOT AVAILABLE, INDEX PERFORMANCE IS FROM
OCTOBER 31, 1999, OCTOBER 31, 1999AND DECEMBER 31, 1995, RESPECTIVELY.
<PAGE>
-------------------------------------------------------------------------------
FEES AND EXPENSES
HIGH INCOME FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS Y
YOUR INVESTMENT) SHARES SHARES SHARES SHARES
------------------------------------------------------------------------------
MAXIMUM
SALES CHARGE
(LOAD) IMPOSED ON PURCHASES
(AS A PERCENTAGE
OF OFFERING PRICE) 5.75% None None None
------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE
(LOAD)(1) (AS A PERCENTAGE
OF LESSER OF AMOUNT INVESTED
OR REDEMPTION VALUE) None(2) 5% 1% None
==============================================================================
ANNUAL FUND OPERATING EXPENSES(3)
(EXPENSES THAT ARE DEDUCTED CLASS A CLASS B CLASS C CLASS Y
FROM FUND ASSETS) SHARES SHARES SHARES SHARES
------------------------------------------------------------------------------
MANAGEMENT FEES 0.61% 0.61% 0.61% 0.61%
------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE
(12b-1) FEES 0.25% 1.00% 1.00% None
------------------------------------------------------------------------------
OTHER EXPENSES 0.20% 0.38% 0.31% 0.20%
------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.06% 1.99% 1.92% 0.81%
==============================================================================
(1) THE CDSC, WHICH IS IMPOSED ON THE LESSER OF AMOUNT INVESTED OR
REDEMPTION VALUE OF CLASS B SHARES, DECLINES FROM 5% FOR REDEMPTIONS
MADE WITHIN THE FIRST YEAR OF PURCHASE, TO 4% FOR REDEMPTIONS MADE
WITHIN THE SECOND YEAR, TO 3% FOR REDEMPTIONS MADE WITHIN THE THIRD AND
FOURTH YEARS, TO 2% FOR REDEMPTIONS MADE WITHIN THE FIFTH YEAR, TO 1%
FOR REDEMPTIONS MADE WITHIN THE SIXTH YEAR AND TO 0% FOR REDEMPTIONS
MADE AFTER THE SIXTH YEAR. FOR CLASS C SHARES, A 1% CDSC APPLIES TO THE
LESSER OF AMOUNT INVESTED OR REDEMPTION VALUE OF CLASS C SHARES
REDEEMED WITHIN TWELVE MONTHS AFTER PURCHASE. SOLELY FOR PURPOSES OF
DETERMINING THE NUMBER OF MONTHS OR YEARS FROM THE TIME OF ANY PAYMENT
FOR THE PURCHASE OF SHARES, ALL PAYMENTS DURING A MONTH ARE TOTALED AND
DEEMED TO HAVE BEEN MADE ON THE FIRST DAY OF THE MONTH.
(2) A 1% CDSC MAY BE IMPOSED ON PURCHASES OF $2 MILLION OR MORE OF CLASS A
SHARES THAT ARE REDEEMED WITHIN TWELVE MONTHS OF PURCHASE.
(3) MANAGEMENT FEES AND TOTAL FUND OPERATING EXPENSES HAVE BEEN RESTATED TO
REFLECT THE CHANGE IN MANAGEMENT FEES EFFECTIVE JUNE 30, 1999; OTHERWISE,
EXPENSE RATIOS ARE BASED ON OTHER FUND-LEVEL EXPENSES # OF THE FUND FOR
THE FISCAL YEAR ENDED MARCH 31, 2000. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN.
<PAGE>
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 A, Class B,
Class C or Class Y shares 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:
------------------------------------------------------------------------------
IF SHARES ARE REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------
Class A Shares $677 $893 $1,126 $1,795
------------------------------------------------------------------------------
Class B Shares $602 $924 $1,173 $2,074(1)
------------------------------------------------------------------------------
Class C Shares $295 $603 $1,037 $2,243
------------------------------------------------------------------------------
Class Y Shares $ 83 $259 $ 450 $1,002
------------------------------------------------------------------------------
IF SHARES ARE NOT REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------
Class A Shares $677 $893 $1,126 $1,795
------------------------------------------------------------------------------
Class B Shares $202 $624 $1,073 $2,074(1)
------------------------------------------------------------------------------
Class C Shares $195 $603 $1,037 $2,243
------------------------------------------------------------------------------
Class Y Shares $ 83 $259 $ 450 $1,002
==============================================================================
(1) REFLECTS ANNUAL OPERATING EXPENSES OF CLASS A AFTER
CONVERSION OF CLASS B SHARES INTO CLASS A SHARES 8 YEARS AFTER THE
MONTH IN WHICH THE SHARES WERE PURCHASED.
<PAGE>
-------------------------------------------------------------------------------
PERFORMANCE
HIGH INCOME FUND II
The bar chart and performance 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 how the Fund's average annual total returns for the
periods shown compare with those of a broad measure of market performance and a
peer group average.
- The bar chart presents the average annual total returns for Class A and
shows how performance has varied from year to year over the past ten
calendar years.
- The bar chart does not reflect any sales charge that you may be required to
pay upon purchase of the Fund's Class A shares. If the sales charge was
included, the returns would be less than those shown.
- The performance table shows average annual total returns for each class and
compares them to the market indicators listed.
- The bar chart and the performance table assume payment of dividends and
other distributions in shares. 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 bar chart and performance 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 (%)
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
-------------------------------------------------------------------------------
-5.29% 31.31% 15.23% 17.39% -4.07% 16.88% 11.93% 14.97% 2.69% 1.45%
===============================================================================
IN THE PERIOD SHOWN IN THE CHART, THE HIGHEST QUARTERLY RETURN WAS 11.52% (THE
FIRST QUARTER OF 1991) AND THE LOWEST QUARTERLY RETURN WAS -5.76% (THE THIRD
QUARTER OF 1998). THE CLASS A RETURN FOR THE YEAR THROUGH MARCH 31, 2000 WAS
-1.91%.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999 (%) 1 YEAR 5 YEARS 10 YEARS LIFE
OF CLASS(1)
-------------------------------------------------------------------------------
CLASS A SHARES OF
HIGH INCOME FUND II -4.38% 8.11% 9.10%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Market Index 1.73% 9.71% 10.94%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Composite Index 1.24% 10.39% 11.35%
-------------------------------------------------------------------------------
Lipper High Current Yield
Funds Universe Average 4.53% 8.84% 10.03%
-------------------------------------------------------------------------------
CLASS B SHARES OF
HIGH INCOME FUND II -2.55%
-------------------------------------------------------------------------------
Salomon Brothers High
Yield Market Index 1.73% 9.71% 10.94% 2.42%
-------------------------------------------------------------------------------
Salomon Brothers High Yield
Composite Index 1.24% 10.39% 11.35% 2.70%
-------------------------------------------------------------------------------
Lipper High Current Yield
Funds Universe Average 4.53% 8.84% 10.03% 2.78%
-------------------------------------------------------------------------------
CLASS C SHARES OF
HIGH INCOME FUND II 1.45%
-------------------------------------------------------------------------------
Salomon Brothers High Yield
Market Index 1.73% 9.71% 10.94% 2.42%
-------------------------------------------------------------------------------
Salomon Brothers High Yield
Composite Index 1.24% 10.39% 11.35% 2.70%
-------------------------------------------------------------------------------
Lipper High Current Yield Funds
Universe Average 4.53% 8.84% 10.03% 2.78%
-------------------------------------------------------------------------------
CLASS Y SHARES OF
HIGH INCOME FUND II 1.76% 7.36%
-------------------------------------------------------------------------------
Salomon Brothers High Yield
Market Index 1.73% 9.71% 10.94% 7.08%
-------------------------------------------------------------------------------
Salomon Brothers High Yield
Composite Index 1.24% 10.39% 11.35% 7.41%
-------------------------------------------------------------------------------
Lipper High Current Yield Funds
Universe Average 4.53% 8.84% 10.03% 6.48%
===============================================================================
THE INDEXES SHOWN ARE BROAD-BASED, SECURITIES MARKET INDEXES THAT ARE UNMANAGED.
THE LIPPER AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH GOALS SIMILAR TO THE
GOALS OF THE FUND.
(1) SINCE OCTOBER 6, 1999 FOR CLASS B SHARES, OCTOBER 6, 1999 FOR CLASS C
SHARES AND FEBRUARY 27, 1996 FOR CLASS Y SHARES. BECAUSE EACH CLASS
COMMENCED OPERATIONS ON A DATE OTHER THAN AT THE END OF A MONTH, AND
PARTIAL MONTH CALCULATIONS OF THE PERFORMANCE OF THE ABOVE INDEXES
(INCLUDING INCOME) ARE NOT AVAILABLE, INDEX PERFORMANCE IS CALCULATED FROM
OCTOBER 31, 1999, OCTOBER 31, 1999, AND FEBRUARY 29, 1996, RESPECTIVELY.
<PAGE>
-------------------------------------------------------------------------------
FEES AND EXPENSES
HIGH INCOME FUND II
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS Y
YOUR INVESTMENT) SHARES SHARES SHARES SHARES
------------------------------------------------------------------------------
MAXIMUM SALES CHARGE
(LOAD) IMPOSED ON PURCHASES
(AS A PERCENTAGE
OF OFFERING PRICE) 5.75% None None None
------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES CHARGE
(LOAD)(1) (AS A PERCENTAGE
OF LESSER OF AMOUNT INVESTED
OR REDEMPTION VALUE) None(2) 5% 1% None
==============================================================================
ANNUAL FUND OPERATING EXPENSES(3)
(EXPENSES THAT ARE DEDUCTED CLASS A CLASS B CLASS C CLASS Y
FROM FUND ASSETS) SHARES SHARES SHARES SHARES
------------------------------------------------------------------------------
MANAGEMENT FEES 0.63% 0.63% 0.63% 0.63%
------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE
(12b-1) FEES 0.25% 1.00% 1.00% None
------------------------------------------------------------------------------
OTHER EXPENSES 0.25% 0.25% 0.25% 0.21%
------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 1.13% 1.88% 1.88% 0.84%
==============================================================================
(1) THE CDSC, WHICH IS IMPOSED ON THE LESSER OF AMOUNT
INVESTED OR REDEMPTION VALUE OF CLASS B SHARES, DECLINES FROM 5% FOR
REDEMPTIONS MADE WITHIN THE FIRST YEAR OF PURCHASE, TO 4% FOR REDEMPTIONS
MADE WITHIN THE SECOND YEAR, TO 3% FOR REDEMPTIONS MADE WITHIN THE THIRD
AND FOURTH YEARS, TO 2% FOR REDEMPTIONS MADE WITHIN THE FIFTH YEAR, TO 1%
FOR REDEMPTIONS MADE WITHIN THE SIXTH YEAR AND TO 0% FOR REDEMPTIONS MADE
AFTER THE SIXTH YEAR. FOR CLASS C SHARES, A 1% CDSC APPLIES TO THE LESSER
OF AMOUNT INVESTED OR REDEMPTION VALUE OF CLASS C SHARES REDEEMED WITHIN
TWELVE MONTHS AFTER PURCHASE. SOLELY FOR PURPOSES OF DETERMINING THE
NUMBER OF MONTHS OR YEARS FROM THE TIME OF ANY PAYMENT FOR THE PURCHASE
OF SHARES, ALL PAYMENTS DURING A MONTH ARE TOTALED AND DEEMED TO HAVE
BEEN MADE ON THE FIRST DAY OF THE MONTH.
(2) A 1% CDSC MAY BE IMPOSED ON PURCHASES OF $2 MILLION OR MORE OF CLASS A
SHARES THAT ARE REDEEMED WITHIN TWELVE MONTHS OF PURCHASE.
(3) 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 OTHER FUND-LEVEL EXPENSES FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1999, AND FOR CLASS B AND CLASS C, THE EXPENSES
ATTRIBUTABLE TO EACH CLASS THAT ARE ANTICIPATED FOR THE CURRENT YEAR.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
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 A, Class B,
Class C or Class Y shares 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:
------------------------------------------------------------------------------
IF SHARES ARE REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------
Class A Shares $683 $912 $1,159 $1,865
------------------------------------------------------------------------------
Class B Shares $590 $889 $1,114 $1,998(1)
------------------------------------------------------------------------------
Class C Shares $290 $589 $1,014 $2,196
------------------------------------------------------------------------------
Class Y Shares $ 85 $267 $ 463 $1,031
------------------------------------------------------------------------------
IF SHARES ARE NOT REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------
Class A Shares $683 $912 $1,159 $1,865
------------------------------------------------------------------------------
Class B Shares $190 $589 $1,014 $1,998(1)
------------------------------------------------------------------------------
Class C Shares $190 $589 $1,014 $2,196
------------------------------------------------------------------------------
Class Y Shares $ 85 $267 $ 463 $1,031
==============================================================================
(1) REFLECTS ANNUAL OPERATING EXPENSES OF CLASS A AFTER
CONVERSION OF CLASS B SHARES INTO CLASS A SHARES 8 YEARS AFTER THE
MONTH IN WHICH THE SHARES WERE PURCHASED.
<PAGE>
AN OVERVIEW OF THE FUND
[GRAPHIC]
WADDELL & REED ADVISORS
MUNICIPAL BOND FUND
(FORMERLY UNITED MUNICIPAL BOND FUND) SEEKS TO PROVIDE INCOME THAT IS NOT
SUBJECT TO FEDERAL INCOME TAX.
PRINCIPAL STRATEGY
Municipal Bond Fund seeks to achieve its goal by investing primarily in
tax-exempt municipal bonds, mainly of investment grade. The Fund may invest in
bonds of any maturity. "Municipal bonds" mean obligations the interest on which
is not includable in gross income for Federal income tax purposes. However, a
significant portion of the Fund's municipal bond interest may be subject to the
Federal alternative minimum tax ("AMT").
The Fund diversifies its holdings among two main types of municipal bonds:
- general obligation bonds, which are backed by the full faith, credit and
taxing power of the governmental authority, and
- revenue bonds, which are payable only from specific sources, such as the
revenue from a particular facility or a special tax. Revenue bonds include
certain private activity bonds ("PABs") and industrial development bonds
("IDBs"), which finance privately operated facilities.
WRIMCO, the Fund's investment manager, may look at a number of factors in
selecting securities for the Fund's portfolio. These include:
- the security's current coupon;
- the maturity of the security;
- the relative value of the security;
- the creditworthiness of the particular issuer or of the private company
involved; and
- the structure of the security, including whether it has a put or a call
feature.
In general, in determining whether to sell a security, WRIMCO uses the same
type of analysis that is used in buying securities in order to determine
whether the security continues to be a desired investment for the Fund. WRIMCO
may also sell a security to take advantage of more attractive investment
opportunities or to raise cash.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Because Municipal Bond Fund owns different types of securities, a variety of
factors can affect its investment performance, such as:
- an increase in interest rates, which may cause the value of the Fund's
fixed-income securities, especially bonds with longer maturities, to decline;
- prepayment of asset-backed securities or other higher-yielding bonds held by
the Fund ("prepayment risk");
- changes in the maturities of bonds owned by the Fund;
- the credit quality of the issuers whose securities the Fund owns or of the
private companies involved in IDB-financed projects;
- the local economic, political or regulatory environment affecting bonds owned
by the Fund;
- failure of a bond's interest to qualify as tax-exempt;
- legislation affecting the tax status of municipal bond interest;
- adverse bond and stock 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
- WRIMCO's skill in evaluating and managing the interest rate and credit risks
of the Fund's portfolio.
A significant portion of the Fund's municipal bond interest may subject
investors to the AMT; this would have the effect of reducing the Fund's return
to any such investor.
As with any mutual fund, the value of the Fund's shares will change, and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
WHO MAY WANT TO INVEST
Municipal Bond Fund is designed for investors seeking current income that is
primarily free from Federal income tax, through a diversified portfolio. You
should consider whether the Fund fits your particular investment objectives.
<PAGE>
-------------------------------------------------------------------------------
PERFORMANCE
MUNICIPAL BOND FUND
The bar chart and performance 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 how the Fund's average annual total returns for the
periods shown compare with those of a broad measure of market performance and a
peer group average.
- The bar chart presents the average annual total returns for Class A and shows
how performance has varied from year to year over the past ten calendar
years.
- The bar chart does not reflect any sales charge that you may be required to
pay upon purchase of the Fund's Class A shares. If the sales charge was
included, the returns would be less than those shown.
- The performance table shows average annual total returns for each class and
compares them to the market indicators listed.
- The bar chart and the performance table assume payment of dividends and other
distributions in shares. 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 bar chart and performance 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 (%)
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
-------------------------------------------------------------------------------
5.63% 13.15% 9.53% 14.30% -7.14% 20.17% 4.12% 10.23% 5.20% -5.50%
===============================================================================
IN THE PERIOD SHOWN IN THE CHART, THE HIGHEST QUARTERLY RETURN WAS 8.87% (THE
FIRST QUARTER OF 1995) AND THE LOWEST QUARTERLY RETURN WAS -6.48% (THE FIRST
QUARTER OF 1994). THE CLASS A RETURN FOR THE YEAR THROUGH MARCH 31, 2000 WAS
3.19%.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999 (%) 1 YEAR 5 YEARS 10 YEARS LIFE OF CLASS(1)
-------------------------------------------------------------------------------
CLASS A SHARES OF
MUNICIPAL BOND FUND -9.52% 5.60% 6.23%
-------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index -2.07% 6.92% 6.89%
-------------------------------------------------------------------------------
Lipper General Municipal
Debt Funds Universe Average -4.16% 6.06% 6.14%
-------------------------------------------------------------------------------
CLASS B SHARES OF
MUNICIPAL BOND FUND -6.88%
-------------------------------------------------------------------------------
Lehman Brothers
Municipal Bond Index -2.07% 6.92% 6.89% 0.30%
-------------------------------------------------------------------------------
Lipper General Municipal
Debt Funds Universe Average -4.16% 6.06% 6.14% -0.03%
-------------------------------------------------------------------------------
CLASS C SHARES OF
MUNICIPAL BOND FUND -3.05%
-------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index -2.07% 6.92% 6.89% 0.30%
-------------------------------------------------------------------------------
Lipper General Municipal
Debt Funds Universe Average -4.16% 6.06% 6.14% -0.03%
-------------------------------------------------------------------------------
CLASS Y SHARES OF
MUNICIPAL BOND FUND -5.42% -5.41%
-------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index -2.07% 6.92% 6.89% -2.07%
-------------------------------------------------------------------------------
-Lipper General Municipal
Debt Funds Universe Average -4.16% 6.06% 6.14% -4.63%
===============================================================================
THE INDEX SHOWN IS A BROAD-BASED, SECURITIES MARKET INDEX THAT IS UNMANAGED. THE
LIPPER AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH GOALS SIMILAR TO THE GOAL OF
THE FUND.
(1) SINCE OCTOBER 5, 1999 FOR CLASS B SHARES, OCTOBER 7, 1999 FOR CLASS C
SHARES AND DECEMBER 30, 1998 FOR CLASS Y SHARES. BECAUSE EACH CLASS
COMMENCED OPERATIONS ON A DATE OTHER THAN AT THE END OF A MONTH, AND
PARTIAL MONTH CALCULATIONS OF THE PERFORMANCE OF THE ABOVE INDEX (INCLUDING
INCOME) ARE NOT AVAILABLE, INDEX PERFORMANCE IS CALCULATED FROM OCTOBER 31,
1999, OCTOBER 31, 1999 AND DECEMBER 31, 1998, RESPECTIVELY.
<PAGE>
-------------------------------------------------------------------------------
FEES AND EXPENSES
MUNICIPAL BOND FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS Y
YOUR INVESTMENT) SHARES SHARES SHARES SHARES
-------------------------------------------------------------------------------
MAXIMUM SALES CHARGE
(LOAD) IMPOSED ON PURCHASES
(AS A PERCENTAGE
OF OFFERING PRICE) 4.25% None None None
-------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES
CHARGE (LOAD)(1) (AS A
PERCENTAGE OF LESSER OF
AMOUNT INVESTED OR
REDEMPTION VALUE) None(2) 5% 1% None
===============================================================================
ANNUAL FUND OPERATING EXPENSES(3)
(EXPENSES THAT ARE DEDUCTED CLASS A CLASS B CLASS C CLASS Y
FROM FUND ASSETS) SHARES SHARES SHARES SHARES
-------------------------------------------------------------------------------
MANAGEMENT FEES 0.51% 0.51% 0.51% 0.51%
-------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE
(12b-1) FEES 0.23% 1.00% 1.00% None
-------------------------------------------------------------------------------
OTHER EXPENSES 0.11% 0.11% 0.11% 0.24%
-------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 0.85% 1.62% 1.62% 0.75%
===============================================================================
(1) THE CDSC, WHICH IS IMPOSED ON THE LESSER OF AMOUNT INVESTED
OR REDEMPTION VALUE OF CLASS B SHARES, DECLINES FROM 5% FOR REDEMPTIONS
MADE WITHIN THE FIRST YEAR OF PURCHASE, TO 4% FOR REDEMPTIONS MADE WITHIN
THE SECOND YEAR, TO 3% FOR REDEMPTIONS MADE WITHIN THE THIRD AND FOURTH
YEARS, TO 2% FOR REDEMPTIONS MADE WITHIN THE FIFTH YEAR, TO 1% FOR
REDEMPTIONS MADE WITHIN THE SIXTH YEAR AND TO 0% FOR REDEMPTIONS MADE AFTER
THE SIXTH YEAR. FOR CLASS C SHARES, A 1% CDSC APPLIES TO THE LESSER OF
AMOUNT INVESTED OR REDEMPTION VALUE OF CLASS C SHARES REDEEMED WITHIN
TWELVE MONTHS AFTER PURCHASE. SOLELY FOR PURPOSES OF DETERMINING THE NUMBER
OF MONTHS OR YEARS FROM THE TIME OF ANY PAYMENT FOR THE PURCHASE OF SHARES,
ALL PAYMENTS DURING A MONTH ARE TOTALED AND DEEMED TO HAVE BEEN MADE ON THE
FIRST DAY OF THE MONTH.
(2) A 1% CDSC MAY BE IMPOSED ON PURCHASES OF $2 MILLION OR MORE OF CLASS A
SHARES THAT ARE REDEEMED WITHIN TWELVE MONTHS OF PURCHASE.
(3) 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 OTHER FUND-LEVEL EXPENSES FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1999, AND FOR CLASS B AND CLASS C, THE EXPENSES
ATTRIBUTABLE TO EACH CLASS THAT ARE ANTICIPATED FOR THE CURRENT YEAR. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
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 A, Class B,
Class C or Class Y shares 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:
-------------------------------------------------------------------------------
IF SHARES ARE REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class A Shares $508 $685 $876 $1,429
-------------------------------------------------------------------------------
Class B Shares $565 $811 $981 $1,715(1)
-------------------------------------------------------------------------------
Class C Shares $265 $511 $881 $1,922
-------------------------------------------------------------------------------
Class Y Shares $ 77 $240 $417 $ 930
-------------------------------------------------------------------------------
IF SHARES ARE NOT REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class A Shares $508 $685 $876 $1,429
-------------------------------------------------------------------------------
Class B Shares $165 $511 $881 $1,715(1)
-------------------------------------------------------------------------------
Class C Shares $165 $511 $881 $1,922
-------------------------------------------------------------------------------
Class Y Shares $ 77 $240 $417 $ 930
===============================================================================
(1) REFLECTS ANNUAL OPERATING EXPENSES OF CLASS A AFTER
CONVERSION OF CLASS B SHARES INTO CLASS A SHARES 8 YEARS AFTER THE MONTH IN
WHICH THE SHARES WERE PURCHASED.
<PAGE>
-------------------------------------------------------------------------------
AN OVERVIEW OF THE FUND
WADDELL & REED ADVISORS
MUNICIPAL HIGH INCOME FUND
(FORMERLY UNITED MUNICIPAL HIGH INCOME FUND) SEEKS TO PROVIDE A HIGH LEVEL OF
INCOME THAT IS NOT SUBJECT TO FEDERAL INCOME TAX.
PRINCIPAL STRATEGY
Municipal High Income Fund seeks to achieve its goal through a diversified
portfolio consisting mainly of tax-exempt municipal bonds. These bonds are
rated primarily in the lower tier of investment grade (BBB by S&P and Baa by
MIS) or lower, including bonds rated below investment grade, junk bonds (rated
BB and lower by S&P and Ba and lower by MIS), or, if unrated, judged by WRIMCO
to be of similar quality.
"Municipal bonds" mean obligations the interest on which is not includable
in gross income for Federal income tax purposes. The Fund diversifies its
holdings among two main types of municipal bonds:
- general obligation bonds, which are backed by the full faith, credit and
taxing power of the governmental authority, and
- revenue bonds, which are payable only from specific sources, such as the
revenue from a particular facility or a special tax. Revenue bonds, IDBs
and PABs finance privately operated facilities.
WRIMCO may look at a number of factors in selecting securities for the Fund's
portfolio. These include:
- the security's current coupon;
- the maturity of the security;
- the relative value of the security;
- the creditworthiness of the particular issuer or of the private company
involved; and
- the structure of the security, including whether it has a put or a call
feature.
In general, in determining whether to sell a security, WRIMCO uses the same
type of analysis that is used in buying securities in order to determine
whether the security continues to be a desired investment for the Fund. As
well, WRIMCO may sell a security to take advantage of more attractive
investment opportunities or to raise cash.
The Fund may invest significantly in IDBs and PABs in general, revenue bonds
payable from similar projects and municipal bonds of issuers located in the
same geographic area.
The Fund typically invests in municipal bonds with remaining maturities of 10
to 30 years.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Because Municipal High Income Fund owns different types of securities, a
variety of factors can affect its investment performance, such as:
- an increase in interest rates, which may cause the value of the Fund's
fixed-income securities, especially bonds with longer maturities, to
decline;
- the credit quality of the issuers whose securities the Fund owns or of the
private companies involved in IDB or PAB financed projects;
- changes in the maturities of bonds owned by the Fund;
- prepayment of asset-backed securities or other higher-yielding bonds held by
the Fund ("prepayment risk");
- the local economic, political or regulatory environment affecting bonds owned
by the Fund;
- failure of a bond's interest to qualify as tax-exempt;
- legislation affecting the tax status of municipal bond interest;
- adverse bond and stock 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
- WRIMCO's skill in evaluating and managing the interest rate and credit risks
of the Fund's portfolio.
A significant portion of the Fund's municipal bond interest may subject
investors to the AMT; this would have the effect of reducing the Fund's return
to any such investor.
As with any mutual fund, the value of the Fund's shares will change, and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
WHO MAY WANT TO INVEST
Municipal High Income Fund is designed for investors seeking current income
that is primarily free from Federal income tax and that is higher than is
normally available with securities in the higher-rated categories, through a
highly diversified portfolio. The Fund is not suitable for all investors. You
should consider whether the Fund fits your particular investment objectives.
<PAGE>
-------------------------------------------------------------------------------
PERFORMANCE
MUNICIPAL HIGH INCOME FUND
The bar chart and performance 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 how the Fund's average annual total returns for the
periods shown compare with those of a broad measure of market performance and a
peer group average.
- The bar chart presents the average annual total returns for Class A and shows
how performance has varied from year to year over the past ten calendar
years.
- The bar chart does not reflect any sales charge that you may be required to
pay upon purchase of the Fund's Class A shares. If the sales charge was
included, the returns would be less than those shown.
- The performance table shows average annual total returns for each class and
compares them to the market indicators listed.
- The bar chart and the performance table assume payment of dividends and other
distributions in shares. 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 bar chart and performance 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 (%)
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
-------------------------------------------------------------------------------
7.19% 11.67% 10.15% 13.19% -3.12% 16.74% 6.90% 11.77% 6.82% -5.20%
===============================================================================
IN THE PERIOD SHOWN IN THE CHART, THE HIGHEST QUARTERLY RETURN WAS 8.48%
(THE FOURTH QUARTER OF 1998) AND THE LOWEST QUARTERLY RETURN WAS -3.93%
(THE FIRST QUARTER OF 1994). THE CLASS A RETURN FOR THE YEAR THROUGH MARCH
31, 2000 WAS 1.44%.
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999 (%) 1 YEAR 5 YEARS 10 YEARS LIFE OF CLASS(1)
-------------------------------------------------------------------------------
CLASS A SHARES OF
MUNICIPAL HIGH INCOME FUND -9.22% 6.23% 6.96%
-------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index -2.07% 6.92% 6.89%
-------------------------------------------------------------------------------
Lipper High Yield Municipal
Bond Funds Universe Average -4.16% 6.06% 6.14%
-------------------------------------------------------------------------------
CLASS B SHARES OF
MUNICIPAL HIGH INCOME FUND -7.84%
-------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index -2.07% 6.92% 6.89% 0.30%
-------------------------------------------------------------------------------
Lipper High Yield Municipal
Bond Funds Universe Average -4.16% 6.06% 6.14% -0.79%
-------------------------------------------------------------------------------
CLASS C SHARES OF
MUNICIPAL HIGH INCOME FUND -4.06%
-------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index -2.07% 6.92% 6.89% 0.30%
-------------------------------------------------------------------------------
Lipper High Yield Municipal
Bond Funds Universe Average -4.16% 6.06% 6.14% -0.79%
-------------------------------------------------------------------------------
CLASS Y SHARES OF
MUNICIPAL HIGH INCOME FUND -5.00% -4.46%
-------------------------------------------------------------------------------
Lehman Brothers Municipal
Bond Index -2.07% 6.92% 6.89% -2.07%
-------------------------------------------------------------------------------
Lipper High Yield Municipal
Bond Funds Universe Average -4.16% 6.06% 6.14% -4.16%
===============================================================================
THE INDEX SHOWN IS A BROAD-BASED, SECURITIES MARKET INDEX THAT IS UNMANAGED. THE
LIPPER AVERAGE IS A COMPOSITE OF MUTUAL FUNDS WITH GOALS SIMILAR TO THE GOAL OF
THE FUND.
(1) SINCE OCTOBER 5, 1999 FOR CLASS B SHARES, OCTOBER 7, 1999 FOR CLASS C
SHARES AND DECEMBER 30, 1998 FOR CLASS Y SHARES. BECAUSE EACH CLASS
COMMENCED OPERATIONS ON A DATE OTHER THAN AT THE END OF A MONTH, AND
PARTIAL MONTH CALCULATIONS OF THE PERFORMANCE OF THE ABOVE INDEX (INCLUDING
INCOME) ARE NOT AVAILABLE, INDEX PERFORMANCE IS CALCULATED FROM OCTOBER 31,
1999, OCTOBER 31, 1999 AND DECEMBER 31, 1998, RESPECTIVELY.
<PAGE>
-------------------------------------------------------------------------------
FEES AND EXPENSES
MUNICIPAL HIGH INCOME FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM CLASS A CLASS B CLASS C CLASS Y
YOUR INVESTMENT) SHARES SHARES SHARES SHARES
-------------------------------------------------------------------------------
MAXIMUM SALES CHARGE(LOAD)
IMPOSED ON PURCHASES
(AS A PERCENTAGE
OF OFFERING PRICE) 4.25% None None None
-------------------------------------------------------------------------------
MAXIMUM DEFERRED SALES
CHARGE (LOAD)(1) (AS A
PERCENTAGE OF LESSER OF
AMOUNT INVESTED OR
REDEMPTION VALUE) None(2) 5% 1% None
===============================================================================
ANNUAL FUND OPERATING EXPENSES(3)
(EXPENSES THAT ARE DEDUCTED CLASS A CLASS B CLASS C CLASS Y
FROM FUND ASSETS) SHARES SHARES SHARES SHARES
-------------------------------------------------------------------------------
MANAGEMENT FEES 0.52% 0.52% 0.52% 0.52%
-------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE
(12b-1) FEES 0.23% 1.00% 1.00% None
-------------------------------------------------------------------------------
OTHER EXPENSES 0.14% 0.14% 0.14% 0.30%
-------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 0.89% 1.66% 1.66% 0.82%
===============================================================================
(1) THE CDSC, WHICH IS IMPOSED ON THE LESSER OF AMOUNT INVESTED
OR REDEMPTION VALUE OF CLASS B SHARES, DECLINES FROM 5% FOR REDEMPTIONS
MADE WITHIN THE FIRST YEAR OF PURCHASE, TO 4% FOR REDEMPTIONS MADE WITHIN
THE SECOND YEAR, TO 3% FOR REDEMPTIONS MADE WITHIN THE THIRD AND FOURTH
YEARS, TO 2% FOR REDEMPTIONS MADE WITHIN THE FIFTH YEAR, TO 1% FOR
REDEMPTIONS MADE WITHIN THE SIXTH YEAR AND TO 0% FOR REDEMPTIONS MADE AFTER
THE SIXTH YEAR. FOR CLASS C SHARES, A 1% CDSC APPLIES TO THE LESSER OF
AMOUNT INVESTED OR REDEMPTION VALUE OF CLASS C SHARES REDEEMED WITHIN
TWELVE MONTHS AFTER PURCHASE. SOLELY FOR PURPOSES OF DETERMINING THE NUMBER
OF MONTHS OR YEARS FROM THE TIME OF ANY PAYMENT FOR THE PURCHASE OF SHARES,
ALL PAYMENTS DURING A MONTH ARE TOTALED AND DEEMED TO HAVE BEEN MADE ON THE
FIRST DAY OF THE MONTH.
(2) A 1% CDSC MAY BE IMPOSED ON PURCHASES OF $2 MILLION OR MORE OF CLASS A
SHARES THAT ARE REDEEMED WITHIN TWELVE MONTHS OF PURCHASE.
(3) 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 OTHER FUND-LEVEL EXPENSES FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1999, AND FOR CLASS B AND CLASS C, THE EXPENSES
ATTRIBUTABLE TO EACH CLASS THAT ARE ANTICIPATED FOR THE CURRENT YEAR. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
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 A, Class B,
Class C or Class Y shares 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:
-------------------------------------------------------------------------------
IF SHARES ARE REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class A Shares $512 $697 $ 897 $1,474
-------------------------------------------------------------------------------
Class B Shares $569 $823 $1,002 $1,759(1)
-------------------------------------------------------------------------------
Class C Shares $269 $523 $ 902 $1,965
-------------------------------------------------------------------------------
Class Y Shares $ 84 $262 $ 455 $1,014
-------------------------------------------------------------------------------
IF SHARES ARE NOT REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class A Shares $512 $697 $ 897 $1,474
-------------------------------------------------------------------------------
Class B Shares $169 $523 $ 902 $1,759(1)
-------------------------------------------------------------------------------
Class C Shares $169 $523 $ 902 $1,965
-------------------------------------------------------------------------------
Class Y Shares $ 84 $262 $ 455 $1,014
===============================================================================
(1) REFLECTS ANNUAL OPERATING EXPENSES OF CLASS A AFTER
CONVERSION OF CLASS B SHARES INTO CLASS A SHARES 8 YEARS AFTER THE MONTH IN
WHICH THE SHARES WERE PURCHASED.
<PAGE>
-------------------------------------------------------------------------------
AN OVERVIEW OF THE FUND
WADDELL & REED ADVISORS
CASH MANAGEMENT
(FORMERLY UNITED CASH MANAGEMENT) SEEKS MAXIMUM CURRENT INCOME CONSISTENT WITH
STABILITY OF PRINCIPAL.
PRINCIPAL STRATEGIES
Cash Management seeks to achieve its goal by investing in U.S.
dollar-denominated, high-quality money market obligations and instruments. High
quality indicates that the securities will be rated A-1 or A-2 by S&P or
Prime-1 or Prime-2 by MIS, or if unrated, will be of comparable quality as
determined by WRIMCO. The Fund seeks, as well, to maintain a net asset value
("NAV") of $1.00 per share. The Fund maintains a dollar-weighted average
maturity of 90 days or less, and the Fund invests only in securities with a
remaining maturity of not more than 397 calendar days.
PRINCIPAL RISKS OF INVESTING IN THE FUND
Because Cash Management owns different types of money market obligations and
instruments, a variety of factors can affect its investment performance, such
as:
- an increase in interest rates, which can cause the value of the
Fund's holdings, especially securities with longer maturities, to
decline;
- the credit quality and other conditions of the issuers whose securities the
Fund holds;
- 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
- 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
Cash Management 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.
<PAGE>
-------------------------------------------------------------------------------
PERFORMANCE
CASH MANAGEMENT
The bar chart and performance 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 total returns for the periods
shown.
- The bar chart presents the average annual total returns for Class A and shows
how performance has varied from year to year over the past ten calendar
years.
- The performance table shows average annual total returns for each Class.
- The bar chart and the performance table assume payment of dividends and
other distributions in shares. 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 bar chart and performance 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 (%)
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
-------------------------------------------------------------------------------
7.77% 5.65% 3.16% 2.38% 3.47% 5.30% 4.74% 4.91% 4.97% 4.61%
===============================================================================
IN THE PERIOD SHOWN IN THE CHART, THE HIGHEST QUARTERLY
RETURN WAS 1.93% (THE SECOND QUARTER OF 1990) AND THE LOWEST QUARTERLY RETURN
WAS 0.54% (THE FIRST QUARTER OF 1994). AS OF DECEMBER 31, 1999, THE 7-DAY YIELD
WAS EQUAL TO 5.35%. YIELDS ARE COMPILED BY ANNUALIZING THE AVERAGE DAILY
DIVIDEND PER SHARE DURING THE TIME PERIOD FOR WHICH THE YIELD IS PRESENTED.
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1999 (%) 1 YEAR 5 YEARS 10 YEARS LIFE OF CLASS(1)
-------------------------------------------------------------------------------
CLASS A SHARES OF THE FUND 4.61% 4.91% 4.69%
-------------------------------------------------------------------------------
CLASS B SHARES OF THE FUND -3.79%
-------------------------------------------------------------------------------
CLASS C SHARES OF THE FUND 0.20%
===============================================================================
(1) SINCE SEPTEMBER 9, 1999 FOR CLASS B SHARES AND SEPTEMBER 9, 1999 FOR CLASS
C SHARES.
<PAGE>
-------------------------------------------------------------------------------
FEES AND EXPENSES
CASH MANAGEMENT
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
-------------------------------------------------------------------------------
(FEES PAID DIRECTLY FROM CLASS A CLASS B CLASS C
YOUR INVESTMENT) SHARES SHARES SHARES
-------------------------------------------------------------------------------
MAXIMUM SALES CHARGE
(LOAD) IMPOSED ON PURCHASES
(AS A PERCENTAGE
OF OFFERING PRICE) None None None
-------------------------------------------------------------------------------
MAXIMUM DEFERRED
SALES CHARGE (LOAD)(1)
(AS A PERCENTAGE OF LESSER
OF AMOUNT INVESTED OR
REDEMPTION VALUE) None 5% 1%
===============================================================================
ANNUAL FUND OPERATING EXPENSES(2)
-------------------------------------------------------------------------------
(EXPENSES THAT ARE DEDUCTED CLASS A CLASS B CLASS C
FROM FUND ASSETS) SHARES SHARES SHARES
-------------------------------------------------------------------------------
MANAGEMENT FEES 0.40% 0.40% 0.40%
-------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE
(12b-1) FEES None 1.00% 1.00%
-------------------------------------------------------------------------------
OTHER EXPENSES 0.44% 0.44% 0.44%
-------------------------------------------------------------------------------
TOTAL ANNUAL FUND
OPERATING EXPENSES 0.84% 1.84% 1.84%
===============================================================================
(1) THE CDSC, WHICH IS IMPOSED ON THE LESSER OF AMOUNT
INVESTED OR REDEMPTION VALUE OF CLASS B SHARES, DECLINES FROM 5% FOR
REDEMPTIONS MADE WITHIN THE FIRST YEAR OF PURCHASE, TO 4% FOR REDEMPTIONS
MADE WITHIN THE SECOND YEAR, TO 3% FOR REDEMPTIONS MADE WITHIN THE THIRD
AND FOURTH YEARS, TO 2% FOR REDEMPTIONS MADE WITHIN THE FIFTH YEAR, TO 1%
FOR REDEMPTIONS MADE WITHIN THE SIXTH YEAR AND TO 0% FOR REDEMPTIONS MADE
AFTER THE SIXTH YEAR. FOR CLASS C SHARES, A 1% CDSC APPLIES TO THE LESSER
OF AMOUNT INVESTED OR REDEMPTION VALUE OF CLASS C SHARES REDEEMED WITHIN
TWELVE MONTHS AFTER PURCHASE. SOLELY FOR PURPOSES OF DETERMINING THE NUMBER
OF MONTHS OR YEARS FROM THE TIME OF ANY PAYMENT FOR THE PURCHASE OF SHARES,
ALL PAYMENTS DURING A MONTH ARE TOTALED AND DEEMED TO HAVE BEEN MADE ON THE
FIRST DAY OF THE MONTH.
(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 OTHER FUND-LEVEL EXPENSES OF THE FUND FOR THE
FISCAL YEAR ENDED JUNE 30, 1999 AND FOR CLASS B AND CLASS C, THE EXPENSES
ATTRIBUTABLE TO EACH CLASS THAT ARE ANTICIPATED FOR THE CURRENT YEAR. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
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 A, Class B
or Class C shares 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:
-------------------------------------------------------------------------------
IF SHARES ARE REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class A Shares $ 86 $268 $ 466 $1,037
-------------------------------------------------------------------------------
Class B Shares $587 $879 $1,095 $1,894(1)
-------------------------------------------------------------------------------
Class C Shares $287 $579 $ 995 $2,159
-------------------------------------------------------------------------------
IF SHARES ARE NOT REDEEMED
AT END OF PERIOD: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------------
Class A Shares $ 86 $268 $466 $1,037
-------------------------------------------------------------------------------
Class B Shares $187 $579 $995 $1,894(1)
-------------------------------------------------------------------------------
Class C Shares $187 $579 $995 $2,159
===============================================================================
(1) REFLECTS ANNUAL OPERATING EXPENSES OF CLASS A AFTER
CONVERSION OF CLASS B SHARES INTO CLASS A SHARES 8 YEARS AFTER THE MONTH IN
WHICH THE SHARES WERE PURCHASED.
<PAGE>
-------------------------------------------------------------------------------
THE INVESTMENT PRINCIPLES OF THE FUNDS
INVESTMENT GOALS, PRINCIPAL STRATEGIES AND OTHER INVESTMENTS
WADDELL & REED ADVISORS BOND FUND
The goal of the Fund is a reasonable return with emphasis on preservation of
capital. The Fund seeks to achieve this goal by investing primarily in a
diversified portfolio of debt securities of any quality, and to a lesser
extent, in non-investment grade securities, convertible securities and debt
securities with warrants attached. The Fund may use various techniques (e.g.,
investing in put bonds) to manage the duration of its holdings. As a result, as
interest rates rise, the duration, or price sensitivity to rising interest
rates, of the Fund's holdings will typically decline. There is no guarantee
that the Fund will achieve its goal.
The Fund limits its acquisition of securities so that at least 90% of its total
assets will consist of debt securities. These debt securities primarily include
corporate bonds, mostly of investment grade, and securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
The Fund may invest in junk bonds, which are more susceptible to the risk of
non-payment or default, and their prices may be more volatile than higher-rated
bonds.
As well, the Fund may invest in foreign securities, which present additional
risks such as currency fluctuations and political or economic conditions
affecting the foreign country.
When WRIMCO believes that a defensive position is desirable, due to present or
anticipated market or economic conditions, WRIMCO may take a number of actions.
It may sell longer-term bonds and buy shorter-term bonds or money market
instruments with the sales proceeds.
By taking a temporary defensive position, the Fund may not achieve its
investment objective.
<PAGE>
WADDELL & REED ADVISORS GOVERNMENT SECURITIES FUND
The goal of the Fund is high current income consistent with safety of
principal. The Fund seeks to achieve its goal by investing exclusively in a
diversified portfolio of U.S. Government securities. U.S. Government securities
are high-quality instruments issued or guaranteed as to principal or interest
by the U.S. Treasury or by an agency or instrumentality of the U.S. Government.
There is no guarantee that the Fund will achieve its goal.
Not all U.S. Government securities are backed by the full faith and credit of
the United States. Some are backed by the right of the issuer to borrow from
the U.S. Treasury; others are backed by discretionary authority of the U.S.
Government to purchase the agency's obligations, while others are supported
only by the credit of the instrumentality. In the case of securities not backed
by the full faith and credit of the United States, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment. The Fund may invest a significant portion of its assets in
mortgage-backed securities guaranteed by the U.S. Government or one of its
agencies or instrumentalities. The Fund invests in securities of agencies or
instrumentalities only when WRIMCO is satisfied that the credit risk is
acceptable.
Generally, in determining whether to sell a security, WRIMCO uses the same type
of analysis that is used in buying securities of that type. For example, WRIMCO
may sell a security if it believes the security no longer provides significant
income potential or if the safety of the principal is weakened. As well, WRIMCO
may sell a security to take advantage of more attractive investment
opportunities or to raise cash.
When WRIMCO believes that a temporary defensive position is desirable, the Fund
may increase its investments in U.S. Treasury securities and/or increase its
cash position. By taking a temporary defensive position, the Fund may not
achieve its investment objective.
WADDELL & REED ADVISORS HIGH INCOME FUND
WADDELL & REED ADVISORS HIGH INCOME FUND II
The primary goal of the Funds is to earn a high level of current income. As a
secondary goal, the Funds seek capital growth when consistent with the primary
goal. The Funds seek to achieve these goals by investing primarily in a
diversified portfolio of high-yield, high-risk, fixed income securities, the
risks of which are, in the judgment of WRIMCO, consistent with the Funds'
goals. There is no guarantee that the Funds will achieve their goals.
The Funds primarily own debt securities; however, each Fund may also own, to a
lesser degree, preferred stock, common stock and convertible securities. In
general, the high income that the Funds seek is paid by debt securities in the
lower rating categories of the established rating services or unrated
securities that are determined by WRIMCO to be of comparable quality; these are
securities rated BB or lower by S&P, or Ba or lower by MIS. Lower-quality debt
securities, which include junk bonds, are considered to be speculative and
involve greater risk of default or price changes due to changes in the issuer's
creditworthiness. The market prices of these securities may fluctuate more than
higher-quality securities and may decline significantly in periods of general
economic difficulty.
The Funds will each normally invest at least 80% of their respective total
assets to seek a high level of current income. The Funds each limit their
acquisition of common stock so that no more than 20% of each Fund's total
assets will consist of common stock and no more than 10% of each Fund's total
assets will consist of non-dividend-paying common stock.
The Funds may invest an unlimited amount of their assets in foreign securities.
At this time, however, the Funds intend to invest in foreign securities to a
limited extent.
When WRIMCO believes that a full or partial temporary defensive position is
desirable, due to present or anticipated market or economic conditions, WRIMCO
may take any one or more of the following steps with respect to the assets in
each Fund's portfolio:
- shorten the average maturity of the Fund's debt holdings;
- hold cash or cash equivalents (short-term investments, such as commercial
paper and certificates of deposit) in varying amounts designed for
defensive purposes; and/or
- emphasize high-grade debt securities.
By taking a temporary defensive position in any one or more of these manners,
the Funds may not achieve their investment objectives.
WADDELL & REED ADVISORS MUNICIPAL BOND FUND
The goal of the Fund is to provide income that is not subject to Federal income
tax. The Fund seeks to achieve this goal by investing principally in a
diversified portfolio of municipal bonds. There is no guarantee that the Fund
will achieve its goal.
As used in this Prospectus, "municipal bonds" mean obligations the interest on
which is not includable in gross income for Federal income tax purposes. The
Fund and WRIMCO rely on the opinion of bond counsel for the issuer in
determining whether obligations are municipal bonds. The Fund anticipates that
not more than 40% of the dividends it will pay to shareholders will be treated
as a tax preference item for AMT purposes.
Municipal bonds are issued by a wide range of state and local governments,
agencies and authorities for various purposes. The two main types of municipal
bonds are general obligation bonds and revenue bonds. For general obligation
bonds, the issuer has pledged its full faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable only from specific
sources; these may include revenues from a particular facility or class of
facilities or a special tax or other revenue source. IDBs and PABs are revenue
bonds issued by or on behalf of public authorities to obtain funds to finance
privately operated facilities. The Fund may invest more than 25% of its total
assets in IDBs.
Other municipal obligations include lease obligations of municipal authorities
or entities and participations in these obligations.
At least 80% of the Fund's net assets will be invested, during normal market
conditions, in municipal bonds of investment grade.
The Fund may invest up to 10% of its total assets in taxable debt securities
other than municipal bonds. These must be either:
- U.S. Government securities;
- obligations of domestic banks and certain savings and loan associations;
- commercial paper rated at least A by S&P or MIS; and/or
- any of the foregoing obligations subject to repurchase agreements.
Subject to its policies regarding the amount of Fund assets invested in
municipal bonds and taxable debt securities, the Fund may invest in other types
of securities and use certain other instruments in seeking to achieve the
Fund's goal. For example, the Fund may invest, to a lesser extent, in options,
futures contracts, asset-backed securities and other derivative instruments if
it is permitted to invest in the type of asset by which the return on, or value
of, the derivative is measured. Income from taxable obligations, repurchase
agreements and derivative instruments will be subject to Federal income tax. At
this time, the Fund has limited exposure to futures contracts and similar
derivative instruments. The Fund does, and may in the future, hold a significant
portion of its assets in municipal bonds for which the applicable interest rate
formula varies inversely with prevailing interest rates or otherwise may expose
the bond to greater sensitivity to interest rate changes.
When WRIMCO believes that a temporary defensive position is desirable, it may
take certain steps with respect to up to all of the Fund's assets, including any
one or more of the following:
- shorten the average maturity of the Fund's portfolio;
- hold taxable obligations, subject to the limitations stated above;
- emphasize debt securities of a higher quality than those the Fund would
ordinarily hold; or
- hedge exposure to interest rate risk by investing in futures contracts and
options on futures contracts.
By taking a temporary defensive position, the Fund may not achieve its
investment objective.
WADDELL & REED ADVISORS MUNICIPAL HIGH INCOME FUND
The goal of the Fund is to provide a high level of income that is not subject
to Federal income tax. The Fund seeks to achieve this goal by investing in
medium and lower-quality municipal bonds that provide higher yields than bonds
of higher quality. The Fund anticipates that not more than 40% of the dividends
it will pay to shareholders will be treated as a tax preference item for AMT
purposes. There is no guarantee that the Fund will achieve its goal.
Municipal bonds are issued by a wide range of state and local governments,
agencies and authorities for various purposes. The two main types of municipal
bonds are general obligation bonds and revenue bonds. For general obligation
bonds, the issuer has pledged its full faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable only from specific
sources; these may include revenues from a particular facility or class of
facilities or a special tax or other revenue sources. IDBs and PABs are revenue
bonds issued by or on behalf of public authorities to obtain funds to finance
privately operated facilities. Other municipal obligations include lease
obligations of municipal authorities or entities and participations in these
obligations.
Under normal market conditions, the Fund will:
- invest substantially in bonds with remaining maturities of 10 to 30 years;
- invest at least 80% of its total assets in municipal bonds; and
- invest at least 75% of its total assets in medium and lower-quality
municipal bonds, which are bonds rated BBB through D by S&P, or Baa
through C by MIS, or, if unrated, are determined by WRIMCO to be
of comparable quality.
The Fund may invest in higher-quality municipal bonds, and invest less than 75%
of its total assets in medium and lower-quality municipal bonds, at times when
yield spreads are narrow and the higher yields do not justify the increased
risk; and/or when, in the opinion of WRIMCO, there is a lack of medium and
lower-quality securities in which to invest.
The Fund may invest 25% or more of its total assets in IDBs and PABs, in
securities the payment of principal and interest on which is derived from
revenue of similar projects, or in municipal bonds of issuers located in the
same geographic area. The Fund will not, however, have more than 25% of its
total assets in IDBs and PABs issued for any one industry or in any one
state.
During normal market conditions, the Fund may invest up to 20% of its total
assets in a combination of taxable obligations and in options, futures
contracts and other taxable derivative instruments. The taxable obligations
must be either:
- U.S. Government securities;
- obligations of domestic banks and certain savings and loan associations;
- commercial paper rated at least A by S&P or MIS; and/or
- any of the foregoing obligations subject to repurchase agreements.
The Fund may invest in certain derivative instruments if it is permitted to
invest in the type of asset by which the return on, or value of, the derivative
is measured. Income from taxable obligations and certain derivative instruments
will be subject to Federal income tax. At this time, the Fund has limited
exposure to derivative instruments.
At times WRIMCO may believe that a full or partial defensive position is
desirable, temporarily, due to present or anticipated market or economic
conditions that are affecting or could affect the values of municipal bonds.
During such periods, the Fund may invest up to all of its assets in taxable
obligations, which would result in a higher proportion of the Fund's income
(and thus its dividends) being subject to Federal income tax. By taking a
temporary defensive position, the Fund may not achieve its investment
objective.
WADDELL & REED ADVISORS CASH MANAGEMENT
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:
- U.S. government obligations (including obligations of U.S. government
agencies and instrumentalities);
- bank obligations and instruments secured by bank obligations, such as letters
of credit;
- commercial paper;
- corporate debt obligations, including variable amount master demand notes;
- Canadian government obligations; and
- certain other obligations (including municipal obligations) guaranteed
as to principal and interest by a bank in whose obligations the Fund may
invest or a corporation in whose commercial paper the Fund may invest.
The Fund only invests in bank obligations if they are obligations of a bank
subject to regulation by the U.S. Government (including foreign 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.
WRIMCO may look at a number of factors in selecting securities for the Fund's
portfolio. These include:
- the credit quality of the particular issuer or guarantor of the security;
- the maturity of the security; and
- the relative value of the security.
Generally, in determining whether to sell a security, WRIMCO uses 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. WRIMCO may also
sell a security to take advantage of more attractive investment opportunities
or to raise cash.
You will find more information in the Statement of Additional Information
("SAI") about the Fund's valuation procedures.
ALL FUNDS
Each Fund may also invest in and use other types of instruments in seeking to
achieve its goal(s). For example, each Fund is permitted to invest in options,
futures contracts, asset-backed securities and other derivative instruments if
it is permitted to invest in the type of asset by which the return on, or value
of, the derivative is measured.
You will find more information about each Fund's permitted investments and
strategies, as well as the restrictions that apply to them, in its SAI.
RISK CONSIDERATIONS OF PRINCIPAL STRATEGIES AND OTHER INVESTMENTS
Risks exist in any investment. Each Fund is subject to market risk, financial
risk and prepayment risk.
- 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. Because of market risk, the share price of the Fund
(other than Cash Management) will likely change as well.
- Financial risk is based on the financial situation of the issuer of the
security. To the extent a Fund invests in debt securities, the Fund's
financial risk depends on the credit quality of the underlying securities
in which it invests. For an equity investment, a Fund's financial risk may
depend, for example, on the earnings performance of the company issuing the
stock.
- 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.
Certain types of each Fund's authorized investments and strategies, such as
derivative instruments, involve special risks. Lower-quality debt securities
are considered to be speculative and involve greater risk of default or price
changes due to changes in the issuer's creditworthiness. The market prices of
these securities may fluctuate more than higher-quality securities and may
decline significantly in periods of general economic difficulty. Foreign
securities and foreign currencies may involve risks relating to currency
fluctuations, political or economic conditions in the foreign country, and the
potentially less stringent investor protection and disclosure standards of
foreign markets. These factors could make foreign investments, especially those
in developing countries, more volatile.
For IDBs and PABs, their credit quality is generally dependent on the credit
standing of the company involved. To the extent that Municipal Bond Fund or
Municipal High Income Fund invests in municipal bonds the payment of principal
and interest on which is derived from revenue of similar projects, or in
municipal bonds of issuers located in the same geographic area, each Fund may be
more susceptible to the risks associated with economic, political or regulatory
occurrences that might adversely affect particular projects or areas. Currently,
Municipal High Income Fund invests a significant portion of its assets in IDBs
and PABs associated with healthcare-oriented projects. The risks particular to
these types of projects are construction risk and occupancy risk. You will find
more information in the SAI about the types of projects in which each Fund may
invest from time to time and a discussion of the risks associated with such
projects.
Because each Fund owns different types of investments, its performance will be
affected by a variety of factors. The value of a Fund's investments and the
income it generates will vary from day to day, generally reflecting changes in
interest rates, market conditions and other company and economic news.
Performance will also depend on WRIMCO's skill in selecting investments.
<PAGE>
YOUR ACCOUNT
CHOOSING A SHARE CLASS
Each Fund offers four classes of shares: Class A, Class B, Class C and Class Y
(except Cash Management does not offer Class Y). 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. 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. Class B and Class C shares
are not available for investments of $2 million or more. 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).
Class Y shares are designed for institutional investors and others investing
through certain intermediaries, as described below.
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 a
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 a future
investment.
<PAGE>
GENERAL COMPARISON OF CLASS A, CLASS B AND CLASS C SHARES
CLASS A CLASS B CLASS C
-------------------------------------------------------------------------------
-Initial sales charge - No initial sales charge - No initial sales charge
-------------------------------------------------------------------------------
No deferred sales - Deferred sales charge on - A 1% deferred sales
charge(1) shares you sell within six charge on shares you
years after purchase sell within twelve
months after
purchase
-------------------------------------------------------------------------------
Maximum distribution - Maximum distribution and - Maximum distribution
and service (12b-1) service (12b-1) and service (12b-1)
fees of 0.25% fees of 1.00% fees of 1.00%
-------------------------------------------------------------------------------
For an investment of - Converts to Class A shares - Does not convert to
$2 million or more, 8 years after the month in Class A shares, so
only Class A shares which the shares were annual expenses do
are available purchased, thus reducing not decrease
future annual expenses
-------------------------------------------------------------------------------
- For an investment of
$300,000 or more,
your financial advisor
typically will recommend
purchase of Class A shares
due to a reduced sales
charge and lower annual
expenses
===============================================================================
(1)A 1% CDSC MAY APPLY TO PURCHASES OF $2 MILLION OR MORE OF CLASS A SHARES
THAT ARE REDEEMED WITHIN TWELVE MONTHS OF PURCHASE.
<PAGE>
GENERAL COMPARISON OF CLASS A, CLASS B AND CLASS C SHARES
CASH MANAGEMENT
CLASS A CLASS B CLASS C
-------------------------------------------------------------------------------
No initial sales charge No initial sales charge No initial sales charge
-------------------------------------------------------------------------------
Funds Plus Service Funds Plus Service Funds Plus Service
optional required for required for
direct investment direct investment
-------------------------------------------------------------------------------
Deferred sales charge A 1% deferred sales
on shares you sell charge on shares
within six years you sell within
twelve months
-------------------------------------------------------------------------------
No distribution and Maximum distribution Maximum distribution
service (12b-1) fees and service (12b-1) fees and service (12b-1)
of 1.00% fees of 1.00%
-------------------------------------------------------------------------------
For an investment of Converts to Class A shares Does not convert to
$2,000,000 or more 8 years after the month Class A shares, so
only Class A shares in which the shares were annual expenses
are available purchased, thus reducing do not decrease
future annual expenses
===============================================================================
Effective June 30, 2000, Cash Management Waddell & Reed Money Market C shares
are closed to all investments other than re-invested dividends.
EACH FUND HAS ADOPTED A DISTRIBUTION AND SERVICE PLAN ("Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, for each of its
Class A, Class B and Class C shares other than Cash Management Class A. Under
the Class A Plan, each Fund may pay Waddell & Reed, Inc. a fee of up to 0.25%,
on an annual basis, of the average daily net assets of the Class A shares. This
fee is to reimburse Waddell & Reed, Inc. for the amounts it spends for
distributing the Fund's Class A shares, providing service to Class A
shareholders and/or maintaining Class A shareholder accounts. Under the Class B
Plan and the Class C Plan, each 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
class to compensate Waddell & Reed, Inc. for providing service to shareholders
of that class and/or maintaining shareholder 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 ongoing 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 subject to an initial sales charge when you buy them (other
than Cash Management), based on the amount of your investment, according to the
tables below. Class A shares pay an annual 12b-1 fee of up to 0.25% of average
Class A net assets. The ongoing expenses of this class are lower than those for
Class B or Class C shares and higher than those for Class Y shares.
BOND FUND
HIGH INCOME FUND
HIGH INCOME FUND II
SIZE OF PURCHASE
SALES CHARGE REALLOWANCE
AS APPROX. TO DEALERS
SALES CHARGE PERCENT OF AS PERCENT
AS PERCENT OF AMOUNT OF OFFERING
OFFERING PRICE INVESTED PRICE
-------------------------------------------------------------------------------
Under $100,000 5.75% 6.10% 5.00%
-------------------------------------------------------------------------------
$100,000 to less than $200,000 4.75 4.99 4.00
-------------------------------------------------------------------------------
$200,000 to less than $300,000 3.50 3.63 2.80
-------------------------------------------------------------------------------
$300,000 to less than $500,000 2.50 2.56 2.00
-------------------------------------------------------------------------------
$500,000 to less than $1,000,000 1.50 1.52 1.20
-------------------------------------------------------------------------------
$1,000,000 to less than $2,000,000 1.00 1.01 0.75
-------------------------------------------------------------------------------
$2,000,000 and over 0.00(1) 0.00(1) 0.50
===============================================================================
(1) NO SALES CHARGE IS PAYABLE AT THE TIME OF PURCHASE ON INVESTMENTS OF $2
MILLION OR MORE, ALTHOUGH FOR SUCH INVESTMENTS A FUND MAY IMPOSE A CDSC OF
1.00% ON CERTAIN REDEMPTIONS MADE WITHIN TWELVE MONTHS OF THE PURCHASE. THE
CDSC IS ASSESSED ON AN AMOUNT EQUAL TO THE LESSER OF THE THEN CURRENT
MARKET VALUE OR THE COST OF THE SHARES BEING REDEEMED. ACCORDINGLY, NO
SALES CHARGE IS IMPOSED ON INCREASES IN NET ASSET VALUE ABOVE THE INITIAL
PURCHASE PRICE.
<PAGE>
GOVERNMENT SECURITIES FUND
MUNICIPAL BOND FUND
MUNICIPAL HIGH INCOME FUND
SIZE OF PURCHASE
SALES CHARGE REALLOWANCE
AS APPROX. TO DEALERS
SALES CHARGE PERCENT OF AS PERCENT
AS PERCENT OF AMOUNT OF OFFERING
OFFERING PRICE INVESTED PRICE
-------------------------------------------------------------------------------
Under $100,000 4.25% 4.44% 3.60%
-------------------------------------------------------------------------------
$100,000 to less than $300,000 3.25 3.36 2.75
-------------------------------------------------------------------------------
$300,000 to less than $500,000 2.50 2.56 2.00
-------------------------------------------------------------------------------
$500,000 to less than $1,000,000 1.50 1.52 1.20
-------------------------------------------------------------------------------
$1,000,000 to less than $2,000,000 1.00 1.01 0.75
-------------------------------------------------------------------------------
$2,000,000 and over 0.00(1) 0.00(1) 0.50
===============================================================================
(1)NO SALES CHARGE IS PAYABLE AT THE TIME OF PURCHASE ON INVESTMENTS OF $2
MILLION OR MORE, ALTHOUGH FOR SUCH INVESTMENTS THE FUND MAY IMPOSE A CDSC
OF 1.00% ON CERTAIN REDEMPTIONS MADE WITHIN TWELVE MONTHS OF THE PURCHASE.
THE CDSC IS ASSESSED ON AN AMOUNT EQUAL TO THE LESSER OF THE THEN CURRENT
MARKET VALUE OR THE COST OF THE SHARES BEING REDEEMED. ACCORDINGLY, NO
SALES CHARGE IS IMPOSED ON INCREASES IN NET ASSET VALUE ABOVE THE INITIAL
PURCHASE PRICE.
Waddell & Reed, Inc. and its affiliates may pay additional compensation from
its own resources to securities dealers based upon the value of shares of the
Fund owned by the dealer for its own account or for its customers. Waddell &
Reed, Inc. may also provide compensation from its own resources to securities
dealers with respect to the other shares of the Fund purchased by customers of
such dealers without payment of a sales charge.
SALES CHARGE REDUCTIONS AND WAIVERS
LOWER SALES CHARGES ARE AVAILABLE BY:
- Combining additional purchases of Class A shares of any of the funds in
the Waddell & Reed Advisors Funds and/or the W&R Funds except shares of
Waddell & Reed Advisors Cash Management (formerly United Cash Management)
or Class A shares of W&R Funds Money Market Fund unless acquired by
exchange for Class A shares on which a sales charge was paid (or as a
dividend or distribution on such acquired shares), with the net asset value
"NAV") of Class A shares already held ("Rights of Accumulation");
- Grouping all purchases of Class A shares, except shares of Waddell & Reed
Advisors Cash Management or W&R Funds Money Market Fund, made during a
thirteen-month period ("Letter of Intent"); and
- Grouping purchases by certain related persons.
Additional information and applicable forms are available from your
financial advisor.
WAIVERS FOR CERTAIN INVESTORS
CLASS A SHARES MAY BE PURCHASED AT NAV BY:
- The Directors and officers of the Fund or of any affiliated entity of
Waddell & Reed, Inc., employees of Waddell & Reed, Inc., employees of its
affiliates, financial advisors of Waddell & Reed, Inc. and the spouse,
children, parents, children's spouses and spouse's parents of each;
- Certain retirement plans and certain trusts for these persons; and
- Until March 31, 2001, clients of Legend Equities Corporation ("Legend") if
the purchase is made with the proceeds of the redemption of shares of a
mutual fund which is not within the Waddell & Reed Advisors Funds or W&R
Funds and the purchase is made within 60 days of such redemption.
You will find more information in the SAI about sales charge reductions and
waivers.
CONTINGENT DEFERRED SALES CHARGE. A CDSC may be assessed against your
redemption amount of Class B or Class C shares or certain Class A shares 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 Class B or Class C shares or
with Class A investments of $2 million or more at NAV. The CDSC will not be
imposed on shares representing payment of dividends or other 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 the shares
purchased during the CDSC period. For Class B, the date of redemption is
measured in calendar months from the month of purchase. Solely for purposes of
determining the number of months or years from the time of any payment for the
purchase of shares, all payments during a month are totaled and deemed to have
been made on the first day of the month. The CDSC is applied to the lesser of
amount invested or redemption value.
To keep your CDSC as low as possible, each time you place a request to redeem
shares, the Fund assumes that a redemption is made first of shares not subject
to a deferred sales charge (including shares which represent appreciation on
shares held, reinvested dividends and distributions), and then of shares that
represent the lowest sales charge.
Unless instructed otherwise, a Fund, when requested to redeem a specific dollar
amount, will redeem additional shares of the applicable class that are 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.
CLASS B SHARES are not subject to an initial sales charge when you buy them.
However, you may pay a 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 a 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 purchased Class A shares.
Class B shares, and any dividends and distributions paid on such shares,
automatically convert to Class A shares eight years after the end of the month
in which the shares were purchased. Such conversion will be on the basis of the
relative net asset values per share, without the imposition of any sales load,
fee or other charge. The Class A shares 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.
CONTINGENT DEFERRED SALES CHARGE
ON SHARES SOLD WITHIN YEAR AS % OF AMOUNT SUBJECT TO CHARGE
-------------------------------------------------------------------------------
1 5.0%
-------------------------------------------------------------------------------
2 4.0%
-------------------------------------------------------------------------------
3 3.0%
-------------------------------------------------------------------------------
4 3.0%
-------------------------------------------------------------------------------
5 2.0%
-------------------------------------------------------------------------------
6 1.0%
-------------------------------------------------------------------------------
7+ 0.0%
-------------------------------------------------------------------------------
In the table, a "year" is a 12-month period. In applying the
sales charge, all purchases are considered to have been made on the first day
of the month in which the purchase was made.
For example, if a shareholder opens an account on July 14, 2000, then redeems
all Class B shares on July 12, 2001, the shareholder will pay a CDSC of 4%, the
rate applicable to redemptions made within the second year of purchase. All
Class B purchases made prior to July 1, 2000, will be automatically accelerated
to the revised method of calculating the CDSC. Any purchase made in 1999 will be
deemed to have been made on December 1, 1998. Any purchase made from January 1,
2000 to June 30, 2000 will be deemed to have been made on December 1, 1999.
CLASS C SHARES are not subject to an initial sales charge when you buy them,
but if you sell your Class C shares within twelve months after purchase, you
will pay a 1% CDSC. For purposes of the CDSC, purchases of Class C shares
within a month will be considered as being purchased on the first day of the
month. Class C shares pay an annual 12b-1 service fee of up to 0.25% of average
net assets and a 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 purchased Class A shares. Class C shares do not convert to
any other class.
For Class C shares, the CDSC will be applied to the lesser of amount invested
or redemption value of shares that have been held for twelve months or less.
THE CDSC WILL NOT APPLY IN THE FOLLOWING CIRCUMSTANCES:
- redemptions of shares requested within one year of the shareholder's death
or disability, provided the Fund is notified of the death or disability at
the time of the request and furnished proof of such event satisfactory to
the Distributor.
- redemptions of 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"), 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.
- redemptions of shares purchased by current or retired Directors of the Fund,
and Directors of affiliated companies, current or retired officers or
employees of the Fund, WRIMCO, the Distributor or their affiliated
companies, financial advisors of Waddell & Reed, Inc., and by the members
of immediate families of such persons.
- redemptions of shares made pursuant to a shareholder's participation in any
systematic withdrawal service adopted for a Fund. (The service and this
exclusion from the CDSC do not apply to a one-time withdrawal.)
- redemptions the proceeds of which are reinvested within forty-five days in
shares of the same class of the Fund as that redeemed.
- the exercise of certain exchange privileges.
- redemptions effected pursuant to each Fund's right (other than High Income
Fund ) to liquidate a shareholder's shares if the aggregate NAV of those
shares is less than $500, or $250 for Cash Management.
- redemptions effected by another registered investment company by virtue of a
merger or other reorganization with a Fund or by a former shareholder of such
investment company of shares of a Fund acquired pursuant to such
reorganization.
These exceptions may be modified or eliminated by a Fund at any time without
prior notice to shareholders, except with respect to redemptions effected
pursuant to the Fund's right to liquidate a shareholder's shares, which
requires certain notice.
CLASS Y SHARES are not subject to a sales charge or annual 12b-1 fees.
Class Y shares are only available for purchase by:
- participants of employee benefit plans established under section 403(b) or
section 457, or qualified under section 401 of the Code, including 401(k)
plans, when the plan has 100 or more eligible employees and holds the shares
in an omnibus account on the Fund's records;
- banks, trust institutions, investment fund administrators and other third
parties investing for their own accounts or for the accounts of their
customers where such investments for customer accounts are held in an omnibus
account on the Fund's records;
- government entities or authorities and corporations whose investment within
the first twelve months after initial investment is $10 million or more;
and
- certain retirement plans and trusts for employees and financial advisors of
Waddell & Reed, Inc. and its affiliates.
WAYS TO SET UP YOUR ACCOUNT
The different ways to set up (register) your account are listed below.
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 PLANS
TO SHELTER YOUR RETIREMENT SAVINGS FROM INCOME TAXES
Retirement plans allow individuals to shelter investment income and capital
gains from current income taxes. In addition, contributions to these accounts
(other than Roth IRAs and Education IRAs) may be tax-deductible.
- INDIVIDUAL RETIREMENT ACCOUNTS (IRAS) allow a certain individual under age
70 1/2, with earned income, to invest up to $2,000 per tax year. The maximum
for an investor and his or her spouse is $4,000 ($2,000 for each spouse)or,
if less, the couple's combined earned income for the taxable year.
- IRA ROLLOVERS retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
- ROTH IRAs allow certain individuals to make nondeductible contributions up
to $2,000 per 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. Withdrawals of earnings may be
tax free if the account is at least five years old and certain other
requirements are met.
- EDUCATION IRAs are established for the benefit of a minor, with
nondeductible contributions up to $500 per year, and permit tax-free
withdrawals to pay the higher education expenses of the beneficiary.
- SIMPLIFIED EMPLOYEE PENSION PLANS (SEP-IRAs) provide business owners or
those with self-employed income (and their eligible employees) with many of
the same advantages as a Profit Sharing Plan, but with fewer administrative
requirements.
- SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS) can be
established by small employers to contribute to and allow their employees
to contribute a portion of their wages pre-tax to retirement accounts. This
plan-type generally involves fewer administrative requirements than 401(k)
or other qualified plans.
- KEOGH PLANS allow self-employed individuals to make tax-deductible
contributions for themselves of up to 25% of their annual earned income,
with a maximum of $30,000 per year.
- PENSION AND PROFIT-SHARING PLANS, INCLUDING 401(K) PLANS, allow
corporations and nongovernmental tax-exempt organizations of all sizes
and/or their employees to contribute a percentage of the employees' wages or
other amounts on a tax-deferred basis. These accounts need to be established
by the administrator or trustee of the plan.
- 403(b) CUSTODIAL ACCOUNTS are available to employees of public school
systems, churches and certain types of charitable organizations.
- 457 ACCOUNTS allow employees of state and local governments and certain
charitable organizations to contribute a portion of their compensation on a
tax-deferred basis.
GIFTS OR TRANSFERS TO A MINOR
TO INVEST FOR A CHILD'S EDUCATION OR OTHER FUTURE NEEDS
These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child free of Federal
transfer tax consequences. Depending on state laws, you can set up a custodial
account under the Uniform Transfers to Minors Act ("UTMA") or the Uniform Gifts
to Minors Act ("UGMA").
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.
BUYING SHARES
YOU MAY BUY SHARES OF EACH OF THE FUNDS through Waddell & Reed, Inc. and its
financial advisors or through advisors of Legend. To open your account you must
complete and sign an application. Your financial advisor can help you with any
questions you might have.
TO PURCHASE ANY CLASS OF SHARES BY CHECK, make your check payable to Waddell &
Reed, Inc. Mail the check, along with your completed application, to:
Waddell & Reed, Inc.
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
TO PURCHASE CLASS Y SHARES (AND CLASS A SHARES OF CASH MANAGEMENT) BY WIRE, you
must first obtain an account number by calling 800-366-2520, then mail a
completed application to Waddell & Reed, Inc., at the above address, 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, for the account of Waddell & Reed Number 9800007978, Special Account
for Exclusive Benefit of Customers FBO Customer Name and Account Number.
You may also buy Class Y shares of a Fund indirectly through certain
broker-dealers, banks and other third parties, some of which may charge you a
fee. These firms may have additional requirements regarding the purchase of
Class Y shares.
THE PRICE TO BUY A FUND SHARE is its offering price, which is calculated every
business day.
The OFFERING PRICE of a share (the price to buy one share of a particular
class) is the next NAV calculated per share of that class plus, for Class A
shares, the sales charge shown in the tables.
In the calculation of a Fund's NAV:
- The securities in the Fund's portfolio that are listed or traded on an
exchange are valued primarily using market prices.
- Bonds are generally valued according to prices quoted by an independent
pricing service.
- Short-term debt securities are valued at amortized cost, which approximates
market value.
- Other investment assets for which market prices are unavailable are valued
at their fair value by or at the direction of the Board of Directors.
EACH FUND IS OPEN FOR BUSINESS each day the New York Stock Exchange (the
"NYSE") is open. The Funds normally calculate their NAVs as of the close of
business of the NYSE, normally 4 p.m. Eastern time, except that an option or
futures contract held by a Fund may be priced at the close of the regular
session of any other securities exchange on which that instrument is traded.
The Funds may invest in securities listed on foreign exchanges which may trade
on Saturdays or on U.S. national business holidays when the NYSE is closed.
Consequently, the NAV of Fund shares may be significantly affected on days when
a Fund does not price its shares and when you are not able to purchase or
redeem a Fund's shares. Similarly, if an event materially affecting the value
of foreign investments or foreign currency exchange rates occurs prior to the
close of business of the NYSE but after the time their values are otherwise
determined, such investments or exchange rates may be valued at their fair
value as determined in good faith by or under the direction of each Fund's
Board of Directors.
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:
- All of your purchases must be made in U.S. dollars.
- If you buy shares by check, and then sell those shares by any method other
than by exchange to another fund in the Waddell & Reed Advisors Funds
and/or W&R Funds, the payment may be delayed for up to ten days to ensure
that your previous investment has cleared.
- The Funds do not issue certificates representing Class B, Class C or Class Y
shares. Cash Management also does not normally issue certificates
representing Class A shares.
- If you purchase shares of a Fund from certain broker-dealers, banks or other
authorized third parties, the Fund will be deemed to have received your
purchase order when that third party (or its designee) has received your
order. Your order will receive the offering price next calculated after the
order has been received in proper form by the authorized third party (or its
designee). You should consult that firm to determine the time by which it
must receive your order for you to purchase shares of a Fund at that day's
price.
When you sign your account application, you will be asked to certify that your
Social Security or other taxpayer identification number is correct and whether
you are subject to backup withholding for failing to report income to the
Internal Revenue Service.
Waddell & Reed, Inc. reserves the right to reject any purchase orders,
including purchases by exchange, and it and the Funds reserve the right to
discontinue offering Fund shares for purchase.
MINIMUM INVESTMENTS
FOR CLASS A, CLASS B AND CLASS C:
TO OPEN AN ACCOUNT $500 (per Fund)
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For certain exchanges $100 (per Fund)
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For certain retirement accounts and accounts opened
with Automatic Investment Service $50 (per Fund)
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For certain retirement accounts and accounts opened
through payroll deductions for or by employees of
WRIMCO, Waddell & Reed, Inc. and their affiliates $25 (per Fund)
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TO ADD TO AN ACCOUNT Any amount
-------------------------------------------------------------------------------
For certain exchanges $100(per Fund)
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For Automatic Investment Service $25(per Fund)
-------------------------------------------------------------------------------
FOR CLASS Y:
TO OPEN AN ACCOUNT
-------------------------------------------------------------------------------
For a government entity or authority $10
million or for a corporation (within first twelve months)
-------------------------------------------------------------------------------
For other investors Any amount
-------------------------------------------------------------------------------
TO ADD TO AN ACCOUNT Any amount
===============================================================================
ADDING TO YOUR ACCOUNT
Subject to the minimums described under "Minimum Investments," you can make
additional investments of any amount at any time.
TO ADD TO YOUR ACCOUNT, make your check payable to Waddell & Reed, Inc. Mail
the check to Waddell & Reed, Inc., along with:
- the detachable form that accompanies the confirmation of a prior purchase or
your year-to-date statement; or
- a letter stating your account number, the account registration, the Fund and
the class of shares that you wish to purchase.
TO ADD TO YOUR CLASS Y ACCOUNT (OR YOUR CLASS A CASH MANAGEMENT ACCOUNT) BY
WIRE: Instruct your bank to wire the amount you wish to invest, along with the
account number and registration, to UMB Bank, n.a., ABA Number 101000695, for
the account of Waddell & Reed Number 9800007978, Special Account for Exclusive
Benefit of Customers FBO Customer Name and Account Number.
If you purchase shares of the Funds from certain broker-dealers, banks or other
authorized third parties, additional purchases may be made through those firms.
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 of a Fund)
is the NAV per share of that Fund class, subject to any CDSC applicable to
Class A, Class B or Class C shares.
TO SELL SHARES BY WRITTEN REQUEST: Complete an Account Service Request form,
available from your financial advisor, or write a letter of instruction with:
- the name on the account registration;
- the Fund's name;
- the Fund account number;
- the dollar amount or number, and the class, of shares to be redeemed; and
- any other applicable requirements listed in the table below. Deliver the
form or your letter to your financial advisor, or mail it to:
Waddell & Reed Services Company
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
Unless otherwise instructed, Waddell & Reed Services Company will send a check
to the address on the account.
TO SELL CLASS Y SHARES OR CLASS A SHARES OF CASH MANAGEMENT BY TELEPHONE OR
FAX: If you have elected this method in your application or by subsequent
authorization, call 888-WADDELL, or fax your request to 913-236-1599, and give
your instructions to redeem Class Y shares and make payment by wire to your
predesignated bank account or by check to you at the address on the
account.
TO SELL CLASS A SHARES OF CASH MANAGEMENT OR GOVERNMENT SECURITIES BY CHECK: If
you have elected this method in your application or by subsequent
authorization, the Fund will provide you with forms or checks drawn on UMB
Bank, n.a. You may make these checks payable to the order of any payee in any
amount of $250 or more.
WHEN YOU PLACE AN ORDER TO SELL SHARES, your shares will be sold at the next
NAV calculated, subject to any applicable CDSC, after receipt of a written
request for redemption in good order by Waddell & Reed Services Company at the
address listed above. Note the following:
- If more than one person owns the shares, each owner must sign the written
request.
- If you hold a certificate, it must be properly endorsed and sent to the
Fund.
- If you recently purchased the shares by check, the Fund may delay payment of
redemption proceeds. You may arrange for the bank upon which the purchase
check was drawn to provide to the Fund telephone or written assurance 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.
- Redemptions may be suspended or payment dates postponed on days when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted or as permitted by the Securities and Exchange Commission.
- Payment is normally made in cash, although under extraordinary conditions
redemptions may be made in portfolio securities when a Fund's Board of
Directors determines that conditions exist making cash payments undesirable.
A Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of its NAV during any 90-day period for any one shareholder.
- If you purchased shares from certain broker-dealers, banks or other
authorized third parties, you may sell those shares through those firms,
some of which may charge you a fee and may have additional requirements
to sell Fund shares. The Fund will be deemed to have received your order
to sell shares when that firm (or its designee) has received your order.
Your order will receive the NAV of the applicable Class subject to any
applicable CDSC next calculated after the order has been received in proper
form by the authorized firm (or its designee). You should consult that firm
to determine the time by which it must receive your order for you to sell
shares at that day's price.
SPECIAL REQUIREMENTS FOR SELLING SHARES
ACCOUNT TYPE SPECIAL REQUIREMENTS
-------------------------------------------------------------------------------
Individual The written instructions must be
or Joint Tenant signed by all persons required to sign for
transactions, exactly as their names
appear on the account.
-------------------------------------------------------------------------------
Sole The written instructions must be
Proprietorship signed by the individual owner of the business.
-------------------------------------------------------------------------------
UGMA, The custodian must sign the written instructions
UTMA indicating capacity as custodian.
-------------------------------------------------------------------------------
Retirement The written instructions must be signed by a
Account 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 At least one person authorized by
or Organization corporate resolution to act on the account must sign
the written instructions.
-------------------------------------------------------------------------------
Conservator, Guardian or The written instructions must be signed by the
Other Fiduciary person properly authorized by court order to act in
the particular fiduciary capacity.
===============================================================================
A Fund may require a signature guarantee in certain situations such as:
- a redemption request made by a corporation, partnership or fiduciary;
- a redemption request made by someone other than the owner of record; or
- the check is made payable to someone other than the owner of record.
This requirement is 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.
EACH FUND RESERVES THE RIGHT TO REDEEM at NAV all of your Fund shares (other
than High Income Fund) in your account if their aggregate NAV is less than
$500, or $250 for Cash Management. The Fund will give you notice and a 60-day
opportunity to purchase a sufficient number of additional shares to bring the
aggregate NAV of your shares to $500, or $250 for Cash Management. Cash
Management may charge a fee of $1.75 per month on all accounts with a NAV of
less than $250, except for retirement plan accounts.
YOU MAY REINVEST, without charge, all or part of the amount of Class A shares
of a Fund you redeemed by sending to the Fund the amount you want to reinvest.
The reinvested amounts must be received by the Fund within forty-five days
after the date of your redemption. You may do this only once with Class A
shares of a Fund.
The CDSC will not apply to the proceeds of Class A (as applicable), Class B or
Class C shares of a Fund which are redeemed and then reinvested in Class A,
Class B or Class C shares, as applicable, of the Fund within forty-five days
after such redemption. The Distributor will, with your reinvestment, restore an
amount equal to the deferred sales charge attributable to the amount reinvested
by adding the deferred sales charge amount to your reinvestment. For purposes
of determining future deferred sales charges, the reinvestment will be treated
as a new investment. You may do this only once as to Class A shares of a Fund,
once as to Class B shares of a Fund and once as to Class C shares of a Fund.
Payments of principal and interest on loans made pursuant to a 401(a) qualified
plan (if such loans are permitted by the plan) may be reinvested, without
payment of a sales charge, in Class A shares of any Waddell & Reed Advisors Fund
in which the plan may invest.
TELEPHONE TRANSACTIONS
The Funds and their agents will not be liable for following instructions
communicated by telephone that they reasonably believe to be genuine. Each Fund
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If a 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 financial advisor is available to provide personal service.
Additionally, a toll-free call, 800-366-5465, connects you to a Client Services
Representative or our automated customer telephone service. During normal
business hours, our Client 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 your account information from a touch-tone phone, or from our web site,
www.waddell.com, to:
- Obtain information about your accounts;
- Obtain price information about other funds in the Waddell & Reed Advisors
Funds and/or W&R Funds; or
- Request duplicate statements.
REPORTS
Statements and reports sent to you include the following:
- confirmation statements (after every purchase, other than those purchases
made through Automatic Investment Service, and after every exchange,
transfer or redemption)
- year-to-date statements (quarterly)
- annual and semiannual reports to shareholders (every six months) To
reduce expenses, only one copy of the most recent annual and semiannual
reports of the Funds may be mailed to your household, even if you have more
than one account with a Fund. Call the telephone number listed for Client
Services if you need additional copies of annual or semiannual reports or
Account information.
EXCHANGES
You may sell your shares and buy shares of the same Class of another Fund in
the Waddell & Reed Advisors Funds or in W&R Funds without the payment of an
additional sales charge if you buy Class A shares or payment of a CDSC when you
exchange Class B or Class C shares. For Class B and Class C shares or Class A
shares to which the CDSC would otherwise apply, the time period for the
deferred sales charge will continue to run. In addition, exchanging Class Y
shareholders in the Waddell & Reed Advisors Funds may buy Class A shares of
Waddell & Reed Advisors Cash Management.
You may exchange any Class A shares of the Government Securities, Municipal
Bond and Municipal High Income Funds that you have held for at least six months
and any Class A shares of these Funds acquired as payment of a dividend or
distribution for Class A shares of any other fund in the Waddell & Reed
Advisors Funds. You may exchange any Class A shares of the Government
Securities, Municipal Bond and Municipal High Income Funds that you have held
for less than six months only for Class A shares of Government Securities,
Municipal Bond, and Municipal High Income Funds and Cash Management.
You may exchange only into funds that are legally permitted for sale in your
state of residence. Note that exchanges out of a Fund may have tax consequences
for you. Before exchanging into a fund, read its prospectus.
THE FUNDS RESERVE THE RIGHT to terminate or modify these exchange privileges at
any time, upon notice in certain instances.
AUTOMATIC TRANSACTIONS FOR CLASS A, CLASS B AND CLASS C SHAREHOLDERS
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, or
between fund accounts, automatically. While Regular Investment Plans do not
guarantee a profit and will not protect you against loss in a declining market,
they can be an excellent way to invest for retirement, a home, educational
expenses and other long-term financial goals.
Certain restrictions and fees imposed by the plan custodian may also apply for
retirement accounts. Speak with your financial advisor for more information.
REGULAR INVESTMENT PLANS
AUTOMATIC INVESTMENT SERVICE
TO MOVE MONEY FROM YOUR BANK ACCOUNT TO AN EXISTING FUND ACCOUNT
MINIMUM AMOUNT MINIMUM FREQUENCY
$25 (per Fund) Monthly
-------------------------------------------------------------------------------
FUNDS PLUS SERVICE
TO MOVE MONEY FROM WADDELL & REED ADVISORS CASH MANAGEMENT TO A FUND WHETHER IN
THE SAME OR A DIFFERENT ACCOUNT IN THE SAME CLASS
MINIMUM AMOUNT MINIMUM FREQUENCY
$100 (per Fund) Monthly
-------------------------------------------------------------------------------
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
Each Fund distributes substantially all of its net investment income and net
capital gains to its shareholders each year.
Usually, a Fund distributes net investment income at the following times: Bond
Fund, High Income Fund, and Municipal Bond Fund, monthly; Cash Management,
Government Securities Fund, Municipal High Income Fund and High Income Fund II,
daily. 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. Net
capital gains (and any net gains from foreign currency transactions) usually
are distributed in December.
DISTRIBUTION OPTIONS. When you open an account, specify on your application how
you want to receive your distributions. Each Fund offers two 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. 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
five dollars. If the distribution is less than five 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
additional shares.
TAXES
As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account (or you are
not otherwise exempt from income tax), you should be aware of the following tax
implications:
TAXES ON DISTRIBUTIONS. Dividends from a Fund's investment company taxable
income (which includes net short-term gains), if any, generally are taxable to
you as ordinary income whether received in cash or paid in additional Fund
shares. Distributions of a Fund's net capital gains, when designated as such,
are taxable to you as long-term capital gains, whether received in cash or paid
in additional Fund shares and regardless of the length of time you have owned
your shares. For Federal income tax purposes, your long-term capital gains
generally are taxed at a maximum rate of 20%.
Each Fund notifies you after each calendar year-end as to the amounts of
dividends and other distributions paid (or deemed paid) to you for that
year.
A portion of the dividends paid by a Fund, whether received in cash or paid in
additional Fund shares, may be eligible for the dividends received deduction
allowed to corporations. The eligible portion may not exceed the aggregate
dividends received by a Fund from U.S. corporations. However, dividends
received by a corporate shareholder and deducted by it pursuant to the
dividends received deduction are subject indirectly to the Federal alternative
minimum tax.
WITHHOLDING. Each Fund must withhold 31% of all dividends, capital gains and
other 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,
capital gains and other distributions also is required for shareholders subject
to backup withholding.
TAXES ON TRANSACTIONS. Your redemption of Fund shares will result in a taxable
gain or loss to you, depending on whether the redemption proceeds are more or
less than what you paid for the redeemed shares (which normally includes any
sales charge paid). An exchange of Fund shares for shares of any other fund in
the Waddell & Reed Advisors Funds or W&R Funds generally will have similar tax
consequences. However, special rules apply when you dispose of a Fund's Class A
shares through a redemption or exchange within ninety days after your purchase
and then reacquire Class A shares of that Fund or acquire Class A shares of
another fund in the Waddell & Reed Advisors Funds without paying a sales charge
due to the forty-five day reinvestment privilege or exchange privilege. See
"Your Account." In these cases, any gain on the disposition of the original
Fund shares will be increased, or loss decreased, by the amount of the sales
charge you paid when those shares were acquired, and that amount will increase
the adjusted basis of the shares subsequently acquired. In addition, if you
purchase shares of a Fund within thirty days before or after redeeming other
shares of the Fund (regardless of class) at a loss, part or all of that loss
will not be deductible and will increase the basis of the newly purchased
shares.
For Municipal Bond Fund and Municipal High Income Fund, interest on
indebtedness incurred or continued to purchase or carry shares of the Fund
will not be deductible for Federal income tax purposes to the extent the Fund's
distributions consist of exempt-interest dividends. Proposals may be introduced
before Congress for the purpose of restricting or eliminating the Federal
income tax exemption for interest on municipal bonds. If such a proposal were
enacted, the availability of municipal bonds for investment by the Fund and the
value of its portfolio would be affected. In that event, the Fund may decide to
reevaluate its investment goal and policies.
STATE AND LOCAL INCOME TAXES. The portion of the dividends paid by each Fund
attributable to interest earned on U.S. Government securities generally is not
subject to state and local income taxes, although distributions by any 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 Funds in your state
and locality.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting each Fund and its shareholders; you will
find more information in the Fund's 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.
<PAGE>
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THE MANAGEMENT OF THE FUNDS
PORTFOLIO MANAGEMENT
Each Fund is managed by WRIMCO, subject to the authority of each Fund's Board
of Directors. WRIMCO provides investment advice to each of the Funds and
supervises each Fund's investments. WRIMCO and/or its predecessor have served
as investment manager to each of the registered investment companies in the
Waddell & Reed Advisors Funds, W&R Funds and Target/United Funds since the
inception of each company. WRIMCO is located at 6300 Lamar Avenue, P.O. Box
29217, Shawnee Mission, Kansas 66201-9217.
James C. Cusser is primarily responsible for the management of the Bond Fund
and the Government Securities Fund. Mr. Cusser has held his Fund
responsibilities since September 1992 for Bond Fund and since January 1997 for
Government Securities Fund. He is Vice President of WRIMCO, Vice President of
the Funds and Vice President of other investment companies for which WRIMCO
serves as investment manager. Mr. Cusser has served as the portfolio manager
for the Funds and other investment companies managed by WRIMCO and has been an
employee of WRIMCO since August 1992.
Louise D. Rieke is primarily responsible for the management of the High Income
Fund and High Income Fund II. Ms. Rieke has held her Fund responsibilities for
High Income Fund since January 1990, and for High Income Fund II from the
Fund's inception to January 1990 and from May 1992 to the present. She is Vice
President of WRIMCO, Vice President of the Funds and Vice President of other
investment companies for which WRIMCO serves as investment manager. From
November 1985 to March 1998, Ms. Rieke was Vice President of, and a portfolio
manager for, Waddell & Reed Asset Management Company, a former affiliate of
WRIMCO. Ms. Rieke has served as the portfolio manager for investment companies
managed by WRIMCO and its predecessor since July 1986 and has been an employee
of such since May 1971.
Bryan J. Bailey is primarily responsible for the management of the Municipal
Bond Fund. Mr. Bailey has held his Fund responsibilities since June 14, 2000.
He is Vice President of WRIMCO and Vice President of the Fund. Mr. Bailey has
served as the Assistant Portfolio Manager for investment companies managed by
WRIMCO since January 1999 and has been an employee of WRIMCO since July
1993.
Mark Otterstrom is primarily responsible for the management of the Municipal
High Income Fund. Mr. Otterstrom has held his Fund responsibilities since June
14, 2000. He is Vice President of WRIMCO and Vice President of the Fund. Mr.
Otterstrom has served as the Assistant Portfolio Manager for investment
companies managed by WRIMCO and its predecessor since January 1995 and has been
an employee of WRIMCO since May 1987.
Mira Stevovich is primarily responsible for the management of Cash Management.
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
predecessor 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 a Fund's investments.
MANAGEMENT FEE
Like all mutual funds, the Funds pay fees related to their daily operations.
Expenses paid out of each Fund's assets are reflected in its share price or
dividends; they are neither billed directly to shareholders nor deducted from
shareholder accounts.
Each Fund pays a management fee to WRIMCO for providing investment advice and
supervising its investments. Each Fund also pays other expenses, which are
explained in the SAI.
The management fee is payable at the annual rates of
- for Bond Fund, 0.525% of net assets up to $500 million, 0.50% of net
assets over $500 million and up to $1 billion, 0.45% of net assets
over $1 billion and up to $1.5 billion, and 0.40% of net assets over
$1.5 billion. Management fees for the Fund as a percent of the Fund's
net assets for the fiscal year ended December 31, 1999 were 0.47%;
- for Government Securities Fund, 0.50% of net assets up to $500 million,
0.45% of net assets over $500 million and up to $1 billion, 0.40% of net
assets over $1 billion and up to $1.5 billion, and 0.35% of net assets
over $1.5 billion. Management fees for the Fund as a percent of the
Fund's net assets for the fiscal year ended March 31, 2000 were 0.47%;
- for High Income Fund, 0.625% of net assets up to $500 million, 0.60%
of net assets over $500 million and up to $1 billion, 0.55% of net
assets over $1 billion and up to $1.5 billion, and 0.50% of net assets
over $1.5 billion. Management fees for the Fund as a percent of the
Fund's net assets for the fiscal year ended March 31, 2000 were 0.60%;
- for High Income Fund II, 0.625% of net assets up to $500 million, 0.60%
of net assets over $500 million and up to $1 billion, 0.55% of net assets
over $1 billion and up to $1.5 billion, and 0.50% of net assets over $1.5
billion. Management fees for the Fund as a percent of the Fund's net assets
for the fiscal year ended September 30, 1999 were 0.56%;
- for Municipal Bond Fund, 0.525% of net assets up to $500 million, 0.50% of
net assets over $500 million and up to $1 billion, 0.45% of net assets over
$1 billion and up to $1.5 billion, and 0.40% of net assets over $1.5
billion. Management fees for the Fund as a percent of the Fund's net
assets for the fiscal year ended September 30, 1999 were 0.44%;
- for Municipal High Income Fund, 0.525% of net assets up to $500 million,
0.50% of net assets over $500 million and up to $1 billion, 0.45% of net
assets over $1 billion and up to $1.5 billion, and 0.40% of net assets
over $1.5 billion. Management fees for the Fund as a percent of the
Fund's net assets for the fiscal year ended September 30, 1999 were 0.50%;
And
- for Cash Management, at the annual rate of 0.40% of net assets.
WRIMCO has voluntarily agreed to waive its management fee for any day that a
Fund's net assets are less than $25 million, subject to WRIMCO's right to
change or modify this waiver.
<PAGE>
-------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The following information is to help you understand the financial performance
of each Fund's Class A, Class B, Class C and Class Y (other than for Cash
Management) 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.
<PAGE>
-------------------------------------------------------------------------------
BOND FUND
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 December 31, 1999, is included in the Fund's SAI, which is available
upon request.
For a Class A share outstanding throughout each period(1):
FOR THE FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
CLASS A PER-SHARE DATA
Net asset value,
beginning of
period $6.39 $6.32 $6.14 $6.34 $5.62
-------------------------------------------------------------------------------
Income from investment
operations:
Net investment
income 0.35 0.38 0.39 0.39 0.40
Net realized and
unrealized gain
(loss) on
investments (0.42) 0.07 0.19 (0.20) 0.72
-------------------------------------------------------------------------------
Total from
investment
operations (0.07) 0.45 0.58 0.19 1.12
-------------------------------------------------------------------------------
Less distributions from
net investment
income (0.35) (0.38) (0.40) (0.39) (0.40)
-------------------------------------------------------------------------------
Net asset value,
end of period $5.97 $6.39 $6.32 $6.14 $6.34
CLASS A RATIOS/SUPPLEMENTAL DATA
Total return(2) -1.08% 7.27% 9.77% 3.20% 20.50%
Net assets, end of
period (in
millions) $501 $551 $524 $519 $563
Ratio of expenses
to average net assets 0.95% 0.84% 0.77% 0.77% 0.74%
Ratio of net investment
income to average
net assets 5.72% 5.88% 6.34% 6.34% 6.54%
Portfolio
turnover rate 34.12% 33.87% 35.08% 55.74% 66.38%
===============================================================================
(1) ON JUNE 17, 1995, FUND SHARES OUTSTANDING WERE DESIGNATED CLASS A SHARES.
(2) TOTAL RETURN CALCULATED WITHOUT TAKING INTO ACCOUNT THE SALES LOAD
DEDUCTED ON AN INITIAL PURCHASE.
<PAGE>
------------------------------------------------------------------------------
BOND FUND
For a Class B share outstanding throughout the period:
FOR THE
PERIOD FROM
9/9/99(1) TO
12/31/99
CLASS B PER-SHARE DATA
Net asset value, beginning of period $6.05
------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.10
Net realized and unrealized loss on investments (0.08)
------------------------------------------------------------------------------
Total from investment operations 0.02
------------------------------------------------------------------------------
Less distributions from net investment income (0.10)
------------------------------------------------------------------------------
Net asset value, end of period $5.97
CLASS B RATIOS/SUPPLEMENTAL DATA
Total return 0.30%
Net assets, end of period (in millions) $ 2
Ratio of expenses to
average net assets 1.91%(2)
Ratio of net investment
income to average net assets 4.93%(2)
Portfolio turnover rate 34.12%(2)
==============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
------------------------------------------------------------------------------
BOND FUND
For a Class C share outstanding throughout the period:
FOR THE
PERIOD FROM
9/9/99(1) TO
12/31/99
CLASS C PER-SHARE DATA
Net asset value, beginning of period $6.05
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.10
Net realized and unrealized loss on investments (0.09)
-------------------------------------------------------------------------------
Total from investment operations 0.01
-------------------------------------------------------------------------------
Less distributions from net investment income (0.10)
-------------------------------------------------------------------------------
Net asset value, end of period $5.96
CLASS C RATIOS/SUPPLEMENTAL DATA
Total return 0.13%
Net assets, end of period (in thousands) $289
Ratio of expenses to average net assets 1.98%(2)
Ratio of net investment income to average net assets 4.87%(2)
Portfolio turnover rate 34.12%(2)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
------------------------------------------------------------------------------
BOND FUND
For a Class Y share outstanding throughout each period:
FOR THE FISCAL YEAR FOR THE
ENDED DECEMBER 31, PERIOD FROM
------------------------------------------- 6/19/95(1) TO
1999 1998 1997 1996 12/31/95
CLASS Y PER-SHARE DATA
-------------------------------------------------------------------------------
Net asset value,
beginning of period $6.39 $6.32 $6.14 $6.34 $6.11
-------------------------------------------------------------------------------
Income from investment
operations:
Net investment
income 0.40 0.39 0.42 0.40 0.21
Net realized and
unrealized
gain (loss)
on investments (0.45) 0.07 0.17 (0.20) 0.22
-------------------------------------------------------------------------------
Total from investment
operations (0.05) 0.46 0.59 0.20 0.43
-------------------------------------------------------------------------------
Less distributions
from net
investment income (0.37) (0.39) (0.41) (0.40) (0.20)
-------------------------------------------------------------------------------
Net asset value,
end of period $5.97 $6.39 $6.32 $6.14 $6.34
CLASS Y RATIOS/SUPPLEMENTAL DATA
Total return -0.81% 7.54% 9.91% 3.35% 7.20%
Net assets,
end of period
(in millions) $2 $6 $5 $12 $3
Ratio of expenses
to average net
assets 0.69% 0.61% 0.64% 0.62% 0.63%(2)
Ratio of net
investment
income to
average net
assets 6.00% 6.10% 6.48% 6.52% 6.41%(2)
Portfolio
turnover rate 34.12% 33.87% 35.08% 55.74% 66.38%(2)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
-------------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND
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 March 31, 2000, is included in the Fund's SAI, which is available
upon request.
For a Class A share outstanding throughout each period(1):
FOR THE FISCAL YEAR ENDED MARCH 31,
---------------------------------------------------------------------------
2000 1999 1998 1997 1996
CLASS A PER-SHARE DATA
Net asset value,
beginning of
period $5.43 $5.46 $5.19 $5.32 $5.13
-------------------------------------------------------------------------------
Income from
investment
operations:
Net investment
income 0.31 0.32 0.33 0.33 0.34
Net realized
and unrealized
gain (loss)
on investments (0.21) (0.03) 0.27 (0.13) 0.19
-------------------------------------------------------------------------------
Total from investment
operations 0.10 0.29 0.60 0.20 0.53
-------------------------------------------------------------------------------
Less dividends
declared from
net investment
income (0.31) (0.32) (0.33) (0.33) (0.34)
-------------------------------------------------------------------------------
Net asset value
end of period $5.22 $5.43 $5.46 $5.19 $5.32
CLASS A RATIOS/SUPPLEMENTAL DATA
Total return(2) 1.82% 5.44% 11.84% 3.75% 10.48%
Net assets,
end of
period
(in millions) $117 $134 $131 $129 $146
Ratio of
expenses
to average
net assets 1.12% 0.96% 0.89% 0.91% 0.83%
Ratio of net
investment income
to average
net assets 5.77% 5.82% 6.14% 6.17% 6.34%
Portfolio
turnover rate 26.78% 37.06% 35.18% 34.18% 63.05%
===============================================================================
(1) ON JULY 31, 1995, FUND SHARES OUTSTANDING WERE DESIGNATED CLASS A SHARES.
(2) TOTAL RETURN CALCULATED WITHOUT TAKING INTO ACCOUNT THE SALES LOAD DEDUCTED
ON AN INITIAL PURCHASE.
<PAGE>
------------------------------------------------------------------------------
GOVERNMENT SECURITIES FUND
For a Class B share outstanding throughout the period:
FOR THE
PERIOD FROM
10/4/99(1) TO
3/31/00
CLASS B PER-SHARE DATA
Net asset value, beginning of period $5.25
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.13
Net realized and unrealized loss on investments (0.03)
-------------------------------------------------------------------------------
Total from investment operations 0.10
-------------------------------------------------------------------------------
Less dividends declared from net investment income (0.13)
-------------------------------------------------------------------------------
Net asset value, end of period $5.22
CLASS B RATIOS/SUPPLEMENTAL DATA
Total return 1.88%
Net assets, end of period (in thousands) $599
Ratio of expenses to average net assets 1.85%(2)
Ratio of net investment income to average net assets 5.19%(2)
Portfolio turnover rate 26.78%(2)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
GOVERNMENT SECURITIES FUND
For a Class C share outstanding throughout the period:
FOR THE
PERIOD FROM
10/8/99(1) TO
3/31/00
CLASS C PER-SHARE DATA
Net asset value, beginning of period $5.23
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.12
Net realized and unrealized loss on investments (0.01)
-----------------------------------------------------------------------------
Total from investment operations 0.11
-----------------------------------------------------------------------------
Less dividends declared from net investment income (0.12)
-----------------------------------------------------------------------------
Net asset value, end of period $5.22
CLASS C RATIOS/SUPPLEMENTAL DATA
Total return 2.08%
Net assets,
end of period (in thousands) $269
Ratio of expenses to
average net assets 2.07%(2)
Ratio of net investment
income to average net assets 4.98%(2)
Portfolio turnover rate 26.78%(2)
=============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
GOVERNMENT SECURITIES FUND
For a Class Y share outstanding throughout each period:
FOR THE FISCAL YEAR FOR THE
ENDED MARCH 31, PERIOD FROM
------------------------------------------------------------ 9/27/95(1) TO
2000 1999 1998 1997 3/31/96
CLASS Y PER-SHARE DATA
Net asset value
beginning of
period $5.43 $5.46 $5.19 $5.32 $5.33
-------------------------------------------------------------------------------
Income from investment
operations:
Net investment
income 0.33 0.33 0.34 0.34 0.17
Net realized and
unrealized
gain (loss)
on investments (0.21) (0.03) 0.27 (0.13) (0.01)
-------------------------------------------------------------------------------
Total from investment
operations 0.12 0.30 0.61 0.21 0.16
-------------------------------------------------------------------------------
Less dividends declared
from net
investment income (0.33) (0.33) (0.34) (0.34) (0.17)
-------------------------------------------------------------------------------
Net asset value,
end of period $5.22 $5.43 $5.46 $5.19 $5.32
CLASS Y RATIOS/SUPPLEMENTAL DATA
Total return 2.20% 5.71% 12.02% 3.99% 3.04%
Net assets,
end of period
(in millions) $2 $2 $2 $1 $1
Ratio of expenses to
average net assets 0.75% 0.68% 0.66% 0.67% 0.60%(2)
Ratio of net investment
income to average
net assets 6.15% 6.10% 6.37% 6.41% 6.40%(2)
Portfolio turnover
rate 26.78% 37.06% 35.18% 34.18% 63.05%(2)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
-------------------------------------------------------------------------------
HIGH INCOME FUND
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 March 31, 2000, is included in the Fund's SAI, which is available
upon request.
For a Class A share outstanding throughout each period(1):
FOR THE FISCAL YEAR ENDED MARCH 31,
---------------------------------------------------
2000 1999 1998 1997 1996
CLASS A PER-SHARE DATA
Net asset value,
beginning of period $9.39 $10.04 $9.25 $9.09 $8.70
-------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.78 0.81 0.82 0.80 0.79
Net realized and
unrealized gain (loss)
on investments (0.84) (0.66) 0.79 0.16 0.40
-------------------------------------------------------------------------------
Total from investment
operations (0.06) 0.15 1.61 0.96 1.19
-------------------------------------------------------------------------------
Less dividends from net
investment income (0.79) (0.80) (0.82) (0.80) (0.80)
-------------------------------------------------------------------------------
Net asset value,
end of period $8.54 $9.39 $10.04 $9.25 $9.09
CLASS A RATIOS/SUPPLEMENTAL DATA
Total return(2) -0.65% 1.70% 18.03% 10.94% 14.16%
Net assets,
end of
period (in millions) $826 $1,009 $1,102 $983 $972
Ratio of expenses
to average net assets 1.04% 0.94% 0.84% 0.89% 0.85%
Ratio of net investment
income to
average
net assets 8.65% 8.44% 8.38% 8.68% 8.74%
Portfolio turnover rate 41.55% 53.19% 63.40% 53.17% 41.67%
===============================================================================
(1) ON JULY 31, 1995, FUND SHARES OUTSTANDING WERE DESIGNATED CLASS A SHARES.
(2) TOTAL RETURN CALCULATED WITHOUT TAKING INTO ACCOUNT THE SALES LOAD DEDUCTED
ON AN INITIAL PURCHASE.
<PAGE>
HIGH INCOME FUND
For a Class B share outstanding throughout the period:
FOR THE
PERIOD FROM
10/4/99(1) TO
3/31/00
CLASS B PER-SHARE DATA
Net asset value, beginning of period $8.84
----------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.36
Net realized and unrealized loss on investments (0.30)
----------------------------------------------------------------------------
Total from investment operations 0.06
----------------------------------------------------------------------------
Less dividends from net investment income (0.36)
----------------------------------------------------------------------------
Net asset value, end of period $8.54
CLASS B RATIOS/SUPPLEMENTAL DATA
Total return 0.61%
Net assets,
end of period (in millions) $3
Ratio of expenses
to average net assets 1.96%(2)
Ratio of net
investment income to average net assets 7.79%(2)
Portfolio
turnover rate 41.55%(2)
============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
HIGH INCOME FUND
For a Class C share outstanding throughout the period:
FOR THE
PERIOD FROM
10/4/99(1) TO
3/31/00
CLASS C PER-SHARE DATA
Net asset value, beginning of period $8.84
----------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.36
Net realized and unrealized loss on investments (0.30)
----------------------------------------------------------------------------
Total from investment operations 0.06
----------------------------------------------------------------------------
Less dividends from net investment income (0.36)
----------------------------------------------------------------------------
Net asset value, end of period $8.54
CLASS C RATIOS/SUPPLEMENTAL DATA
Total return 0.65%
Net assets,
end of period (in thousands) $404
Ratio of expenses
to average net assets 1.91%(2)
Ratio of net
investment income to average net assets 7.88%(2)
Portfolio
turnover rate 41.55%(2)
============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
HIGH INCOME FUND
For a Class Y share outstanding throughout each period:
FOR THE
FOR THE FISCAL YEAR ENDED MARCH 31, PERIOD FROM
-------------------------------------- 1/4/96(1) TO
2000 1999 1998 1997 3/31/96
CLASS Y PER-SHARE DATA
Net asset value,
beginning of period $9.39 $10.04 $9.25 $9.10 $9.19
-------------------------------------------------------------------------------
Income from
investment operations:
Net investment income 0.81 0.83 0.82 0.81 0.20
Net realized and
unrealized
gain (loss)
on investments (0.84) (0.66) 0.79 0.15 (0.10)
-------------------------------------------------------------------------------
Total from
investment
operations (0.03) 0.17 1.61 0.96 0.10
-------------------------------------------------------------------------------
Less dividends from
net investment income (0.82) (0.82) (0.82) (0.81) (0.19)
-------------------------------------------------------------------------------
Net asset value,
end of period $8.54 $9.39 $10.04 $9.25 $9.10
CLASS Y RATIOS/SUPPLEMENTAL DATA
Total return -0.39% 1.90% 18.13% 11.07% 1.00%
Net
assets, end of
period (in millions) $2 $2 $3 $3 $2
Ratio of expenses to
average net assets 0.79% 0.74% 0.77% 0.77% 0.80%(2)
Ratio of net
investment income to
average net assets 8.91% 8.62% 8.46% 8.78% 8.55%(2)
Portfolio turnover rate 41.55% 53.19% 63.40% 53.17% 41.67%(2)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
-------------------------------------------------------------------------------
HIGH INCOME FUND II
This information has been audited by Deloitte & Touche LLP, whose independent
auditors' reports, along with the Fund's financial statements for the fiscal
year ended September 30, 1999 and the six months ended March 31, 2000, are
included in the Fund's SAI, which is available upon request.
For a Class A share outstanding throughout each period(1):
FOR THE FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
SIX MONTHS ----------------------------------------
ENDED 3/31/00 1999 1998 1997 1996 1995
CLASS A PER-SHARE DATA
Net asset value,
beginning of period $3.88 $4.12 $4.42 $4.14 $4.03 $3.96
-------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.17 0.35 0.37 0.36 0.35 0.35
Net realized and
unrealized gain
(loss)
on investments (0.13) (0.24) (0.30) 0.28 0.11 0.07
-------------------------------------------------------------------------------
Total from investment
operations 0.04 0.11 0.07 0.64 0.46 0.42
-------------------------------------------------------------------------------
Less dividends declared
from net investment
income (0.17) (0.35) (0.37) (0.36) (0.35) (0.35)
-------------------------------------------------------------------------------
Net asset value,
end of
period $3.75 $3.88 $4.12 $4.42 $4.14 $4.03
CLASS A RATIOS/SUPPLEMENTAL DATA
Total return(2) 0.94% 2.66% 1.22% 16.20% 11.90% 11.25%
Net assets, end of
period (in millions) $328 $371 $416 $407 $368 $368
Ratio of expenses
to average net assets 1.17%(3) 1.06% 0.96% 0.93% 0.95% 0.89%
Ratio of net investment
income to average
net assets 8.70%(3) 8.60% 8.26% 8.54% 8.60% 8.93%
Portfolio turnover rate 27.31% 46.17% 58.85% 64.38% 55.64% 26.82%
===============================================================================
(1) ON JANUARY 12, 1996, FUND SHARES OUTSTANDING WERE DESIGNATED CLASS A
SHARES.
(2) TOTAL RETURN CALCULATED WITHOUT TAKING INTO ACCOUNT THE SALES LOAD DEDUCTED
ON AN INITIAL PURCHASE.
(3) ANNUALIZED.
<PAGE>
HIGH INCOME FUND II
For a Class B share outstanding throughout the period:
FOR THE
PERIOD FROM
10/6/99(1) TO
3/31/00
CLASS B PER-SHARE DATA
Net asset value, beginning of period $3.88
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15
Net realized and unrealized loss on investments (0.13)
-------------------------------------------------------------------------------
Total from investment operations 0.02
-------------------------------------------------------------------------------
Less dividends declared from net investment income (0.15)
-------------------------------------------------------------------------------
Net asset value, end of period $3.75
CLASS B RATIOS/SUPPLEMENTAL DATA
Total return 0.31%
Net assets, end of period (in millions) $1
Ratio of expenses to average net assets 2.06%(2)
Ratio of net investment income to average net assets 7.77%(2)
Portfolio turnover rate 27.31%(3)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
(3) FOR THE SIX MONTHS ENDED MARCH 31, 2000.
<PAGE>
HIGH INCOME FUND II
For a Class C share outstanding throughout the period:
FOR THE
PERIOD FROM
10/6/99(1) TO
3/31/00
CLASS C PER-SHARE DATA
Net asset value, beginning of period $3.88
---------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15
Net realized and unrealized loss on investments (0.13)
---------------------------------------------------------------------------
Total from investment operations 0.02
---------------------------------------------------------------------------
Less dividends declared from net investment income (0.15)
---------------------------------------------------------------------------
Net asset value, end of period $3.75
CLASS C RATIOS/SUPPLEMENTAL DATA
Total return 0.28%
Net assets, end of period (in thousands) $195
Ratio of expenses to average net assets 2.11%(2)
Ratio of net investment income to average net assets 7.73%(2)
Portfolio turnover rate 27.31%(3)
============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
(3) FOR THE SIX MONTHS ENDED MARCH 31, 2000.
<PAGE>
-------------------------------------------------------------------------------
HIGH INCOME FUND II
For a Class Y share outstanding throughout each period:
FOR THE FISCAL YEAR FOR THE
FOR THE ENDED SEPTEMBER 30, PERIOD FROM
SIX MONTHS ------------------------- 2/27/96(1) TO
ENDED 3/31/00 1999 1998 1997 9/30/96
CLASS Y PER-SHARE DATA
Net asset value,
beginning of period $3.88 $4.12 $4.42 $4.14 $4.15
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.18 0.36 0.37 0.37 0.21
Net realized and
unrealized gain (loss)
on investments (0.13) (0.24) (0.30) 0.28 (0.01)
-------------------------------------------------------------------------------
Total from investment
operations 0.05 0.12 0.07 0.65 0.20
-------------------------------------------------------------------------------
Less dividends declared
from net investment
income (0.18) (0.36) (0.37) (0.37) (0.21)
-------------------------------------------------------------------------------
Net asset value,
end of period $3.75 $3.88 $4.12 $4.42 $4.14
CLASS Y RATIOS/SUPPLEMENT DATA
Total return 1.10% 2.95% 1.38% 16.38% 5.00%
Net assets, end of
period (in millions) $3 $3 $2 $2 $2
Ratio of expenses to
average net assets 0.84%(2) 0.77% 0.79% 0.77% 0.77%(2)
Ratio of net investment income to
average net assets 8.98%(2) 8.89% 8.43% 8.69% 8.83%(2)
Portfolio turnover rate 27.31% 46.17% 58.85% 64.38% 55.64%(2)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
-------------------------------------------------------------------------------
MUNICIPAL BOND FUND
This information has been audited by Deloitte & Touche LLP, whose independent
auditors' reports, along with the Fund's financial statements for the fiscal
year ended September 30, 1999 and the six months ended March 31, 2000, are
included in the Fund's SAI, which is available upon request.
For a Class A share outstanding throughout each period(1):
FOR THE
SIX MONTHS FOR THE FISCAL YEAR ENDED SEPTEMBER30,
ENDED ---------------------------------------
3/31/00
1999 1998 1997 1996 1995
CLASS A PER-SHARE DATA
Net asset value,
beginning of period $6.90 $7.63 $7.47 $7.32 $7.25 $6.91
-------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.18 0.36 0.37 0.38 0.39 0.39
Net realized and unrealized
gain (loss) on investments (0.13) (0.61) 0.25 0.30 0.12 0.38
-------------------------------------------------------------------------------
Total from investment
operations 0.05 (0.25) 0.62 0.68 0.51 0.77
-------------------------------------------------------------------------------
Less distributions:
From net investment
income (0.18) (0.37) (0.37) (0.37) (0.39) (0.39)
From capital gains (0.03) (0.11) (0.09) (0.16) (0.05) (0.00)
In excess of
capital gains (0.04) (0.00) (0.00) (0.00) (0.00) (0.04)
-------------------------------------------------------------------------------
Total distributions (0.25) (0.48) (0.46) (0.53) (0.44) (0.43)
-------------------------------------------------------------------------------
Net asset value, end of
period $6.70 $6.90 $7.63 $7.47 $7.32 $7.25
CLASS A RATIOS/SUPPLEMENTAL DATA
Total return(2) 0.83% -3.46% 8.67% 9.77% 7.16% 11.51%
Net assets, end of period
(in millions) $774 $874 $997 $994 $997 $975
Ratio of expenses to average
net assets 0.90%(3) 0.79% 0.72% 0.67% 0.68% 0.65%
Ratio of net investment
income to average
net assets 5.30%(3) 4.98% 4.95% 5.14% 5.23% 5.51%
Portfolio turnover
rate 9.41% 30.93% 50.65% 47.24% 74.97% 70.67%
===============================================================================
(1) ON JANUARY 21, 1996, FUND SHARES OUTSTANDING WERE DESIGNATED
CLASS A SHARES.
(2) TOTAL RETURN CALCULATED WITHOUT TAKING INTO ACCOUNT THE SALES LOAD
DEDUCTED ON AN INITIAL PURCHASE.
(3) ANNUALIZED.
<PAGE>
-------------------------------------------------------------------------------
MUNICIPAL BOND FUND
For a Class B share outstanding throughout the period:
FOR THE
PERIOD FROM
10/5/99(1) TO
3/31/00
CLASS B PER-SHARE DATA
Net asset value, beginning of period $6.87
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15
Net realized and unrealized loss on investments (0.10)
-------------------------------------------------------------------------------
Total from investment operations 0.05
-------------------------------------------------------------------------------
Less distributions:
From net investment income (0.15)
From capital gains (0.03)
In excess of capital gains (0.04)
-------------------------------------------------------------------------------
Total distributions (0.22)
-------------------------------------------------------------------------------
Net asset value, end of period $6.70
CLASS B RATIOS/SUPPLEMENTAL DATA
Total return 0.78%
Net assets, end of period (in thousands) $421
Ratio of expenses to average net assets 1.88%(2)
Ratio of net investment income to average net assets 4.34%(2)
Portfolio turnover rate 9.41%(3)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
(3) FOR THE SIX MONTHS ENDED MARCH 31, 2000.
<PAGE>
-------------------------------------------------------------------------------
MUNICIPAL BOND FUND
For a Class C share outstanding throughout the period:
FOR THE
PERIOD FROM
10/7/99(1) TO
3/31/00
CLASS C PER-SHARE DATA
Net asset value, beginning of period $6.87
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15
Net realized and unrealized loss on investments (0.10)
-------------------------------------------------------------------------------
Total from investment operations 0.05
-------------------------------------------------------------------------------
Less distributions:
From net investment income (0.15)
From capital gains (0.03)
In excess of capital gains (0.04)
-------------------------------------------------------------------------------
Total distributions (0.22)
-------------------------------------------------------------------------------
Net asset value, end of period $6.70
CLASS C RATIOS/SUPPLEMENTAL DATA
Total return 0.78%
Net assets, end of period (in thousands) $202
Ratio of expenses to average net assets 1.92%(2)
Ratio of net investment income to average net assets 4.30%(2)
Portfolio turnover rate 9.41%(3)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
(3) FOR THE SIX MONTHS ENDED MARCH 31, 2000.
<PAGE>
-------------------------------------------------------------------------------
MUNICIPAL BOND FUND
For a Class Y Share outstanding throughout each period:
FOR THE FOR THE
SIX MONTHS PERIOD FROM
ENDED 12/30/98(1) TO
3/31/00 9/30/99
CLASS Y PER-SHARE DATA
Net asset value, beginning of period $6.90 $7.41
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.19 0.28
Net realized and unrealized
loss on investments (0.14) (0.51)
-------------------------------------------------------------------------------
Total from investment operations 0.05 (0.23)
-------------------------------------------------------------------------------
Less distributions:
From net investment income (0.18) (0.28)
From capital gains (0.03) (0.00)
In excess of capital gains (0.04) (0.00)
-------------------------------------------------------------------------------
Total distributions (0.25) (0.28)
-------------------------------------------------------------------------------
Net asset value, end of period $6.70 $6.90
CLASS Y RATIOS/SUPPLEMENTAL DATA
Total return 0.84% -3.21%
Net assets, end of period (in thousands) $7,954 $2
Ratio of expenses to average net assets 0.74%(2) 0.67%(2)
Ratio of net investment
income to average net assets 5.47%(2) 5.08%(2)
Portfolio turnover rate 9.41% 30.93%(3)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
(3) FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999.
<PAGE>
-------------------------------------------------------------------------------
MUNICIPAL HIGH INCOME FUND
This information has been audited by Deloitte & Touche LLP, whose independent
auditors' reports, along with the Fund's financial statements for the fiscal
year ended September 30, 1999 and the six months ended March 31, 2000, are
included in the Fund's SAI, which is available upon request.
For a Class A share outstanding throughout each period(1):
FOR THE
SIX MONTHS FOR THE FISCAL YEAR ENDED SEPTEMBER 30,
ENDED ---------------------------------------
3/31/00
1999 1998 1997 1996 1995
CLASS A PER-SHARE DATA
Net asset value,
beginning of period $5.19 $5.69 $5.55 $5.31 $5.27 $5.12
-------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.15 0.31 0.32 0.34 0.34 0.35
Net realized and
Unrealized gain
(loss) on investments (0.25) (0.37) 0.21 0.25 0.04 0.17
-------------------------------------------------------------------------------
Total from investment
operations (0.10) (0.06) 0.53 0.59 0.38 0.52
-------------------------------------------------------------------------------
Less distributions:
Declared from net
investment income (0.15) (0.31) (0.32) (0.34) (0.34) (0.35)
From capital gains (0.00)(2) (0.13) (0.07) (0.01) (0.00) (0.00)
In excess of
capital gains (0.00)(2) (0.00) (0.00) (0.00) (0.00) (0.02)
-------------------------------------------------------------------------------
Total distributions (0.15) (0.44) (0.39) (0.35) (0.34) (0.37)
-------------------------------------------------------------------------------
Net asset value, end of
period $4.94 $5.19 $5.69 $5.55 $5.31 $5.27
CLASS A RATIOS/SUPPLEMENTAL DATA
Total return(3) -1.82% -1.22% 9.88% 11.45% 7.40% 10.63%
Net assets, end of
period (in millions) $437 $510 $522 $474 $400 $383
Ratio of expenses to
average net assets 0.95%(4) 0.87% 0.82% 0.78% 0.81% 0.76%
Ratio of net investment
income to average
net assets 6.03%(4) 5.59% 5.72% 6.19% 6.41% 6.75%
Portfolio turnover rate 10.60% 26.83% 35.16% 19.47% 26.91% 19.07%
===============================================================================
(1) ON JANUARY 30, 1996, FUND SHARES OUTSTANDING WERE DESIGNATED
CLASS A SHARES.
(2) NOT SHOWN DUE TO ROUNDING.
(3) TOTAL RETURN CALCULATED WITHOUT TAKING INTO ACCOUNT THE SALES LOAD
DEDUCTED ON AN INITIAL PURCHASE.
(4) ANNUALIZED.
<PAGE>
-------------------------------------------------------------------------------
MUNICIPAL HIGH INCOME FUND
For a class B share outstanding throughout the period:
FOR THE
PERIOD FROM
10/5/99(1) TO
3/31/00
CLASS B PER-SHARE DATA
Net asset value, beginning of period $5.16
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.12
Net realized and unrealized loss on investments (0.22)
-------------------------------------------------------------------------------
Total from investment operations (0.10)
-------------------------------------------------------------------------------
Less distributions:
Declared from net investment income (0.12)
From capital gains (0.00)(2)
In excess of capital gains (0.00)(2)
-------------------------------------------------------------------------------
Total distributions (0.12)
-------------------------------------------------------------------------------
Net asset value, end of period $4.94
CLASS B RATIOS/SUPPLEMENTAL DATA
Total return -1.88%
Net assets, end of period (in millions) $1
Ratio of expenses to average net assets 1.96%(3)
Ratio of net investment income to average net assets 5.10%(3)
Portfolio turnover rate 10.60%(4)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) NOT SHOWN DUE TO ROUNDING.
(3) ANNUALIZED.
(4) FOR THE SIX MONTHS ENDED MARCH 31, 2000.
<PAGE>
-------------------------------------------------------------------------------
MUNICIPAL HIGH INCOME FUND
For a Class C share outstanding throughout the period:
FOR THE
PERIOD FROM
10/8/99(1) TO
3/31/00
CLASS C PER-SHARE DATA
Net asset value, beginning of period $5.16
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.12
Net realized and unrealized loss on investments (0.22)
-------------------------------------------------------------------------------
Total from investment operations (0.10)
-------------------------------------------------------------------------------
Less distributions:
Declared from net investment income (0.12)
From capital gains (0.00)(2)
In excess of capital gains (0.00)(2)
-------------------------------------------------------------------------------
Total distributions (0.12)
-------------------------------------------------------------------------------
Net asset value, end of period $4.94
CLASS C RATIOS/SUPPLEMENTAL DATA
Total return -1.91%
Net assets, end of period (in thousands) $331
Ratio of expenses to average net assets 1.87%(3)
Ratio of net investment income to average net assets 5.16%(3)
Portfolio turnover rate 10.60%(4)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) NOT SHOWN DUE TO ROUNDING.
(3) ANNUALIZED.
(4) FOR THE SIX MONTHS ENDED MARCH 31, 2000.
<PAGE>
-------------------------------------------------------------------------------
MUNICIPAL HIGH INCOME FUND
For a Class Y share outstanding throughout each period:
FOR THE FOR THE FOR THE
SIX MONTHS PERIOD FROM PERIOD FROM
ENDED 12/30/98(1)TO 7/1/98(1) TO
3/31/00 9/30/99 8/25/98
CLASS Y PER-SHARE DATA
Net asset value,
beginning of period $5.19 $5.65 $5.64
-------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.15 0.24 0.05
Net realized and unrealized
gain(loss) on investments (0.25) (0.33) 0.01
-------------------------------------------------------------------------------
Total from investment operations (0.10) (0.09) 0.06
-------------------------------------------------------------------------------
Less distributions:
Declared from net investment income (0.15) (0.24) (0.05)
From capital gains (0.00)(2) (0.13) (0.00)
In excess of capital gains (0.00)(2) (0.00) (0.00)
-------------------------------------------------------------------------------
Total distributions (0.15) (0.37) (0.05)
-------------------------------------------------------------------------------
Net asset value, end of period $4.94 $5.19 $5.65
CLASS Y RATIOS/SUPPLEMENTAL DATA
Total return -1.60% -1.53% 1.07%
Net assets, end of
period (in thousands) $2 $2 $0
Ratio of expenses to
average net assets 0.94%(3) 0.80%(3) 0.61%(3)
Ratio of net investment income
to average net assets 5.94%(3) 5.68%(3) 5.99%(3)
Portfolio turnover rate 10.60% 26.83%(4) 35.16%(3)
===============================================================================
(1) CLASS Y SHARES COMMENCED OPERATIONS ON JULY 1, 1998 AND CONTINUED
OPERATIONS UNTIL AUGUST 25, 1998 WHEN ALL OUTSTANDING CLASS Y SHARES WERE
REDEEMED AT THE ENDING NET ASSET VALUE SHOWN IN THE TABLE. OPERATIONS
RECOMMENCED ON DECEMBER 30, 1998.
(2) NOT SHOWN DUE TO ROUNDING.
(3) ANNUALIZED.
(4) FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999.
<PAGE>
-------------------------------------------------------------------------------
CASH MANAGEMENT
This information has been audited by Deloitte & Touche LLP, whose independent
auditors' reports, along with the Fund's financial statements for the fiscal
year ended June 30, 1999 and the six months ended December 31, 1999, are
included in the Fund's SAI, which is available upon request.
For a Class A share outstanding throughout each period(1):
FOR THE
SIX MONTHS FOR THE FISCAL YEAR ENDED JUNE 30,
ENDED --------------------------------------
12/31/99 1999 1998 1997 1996 1995
CLASS A PER-SHARE DATA
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------------------
Net investment income 0.0241 0.0455 0.0484 0.0472 0.0487 0.0465
Less dividends declared (0.0241) (0.0455) (0.0484) (0.0472) (0.0487) (0.0465)
-------------------------------------------------------------------------------
Net asset value, end of
period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
CLASS A RATIOS/SUPPLEMENTAL DATA
Total return 2.47% 4.67% 4.93% 4.80% 5.01% 4.74%
Net assets, end of
period (in millions) $800 $667 $533 $514 $402 $369
Ratio of expenses to
average net assets 0.83%(2) 0.83% 0.89% 0.87% 0.91% 0.97%
Ratio of net investment
income to average
net assets 4.72%(2) 4.54% 4.84% 4.70% 4.89% 4.68%
===============================================================================
(1) ON SEPTEMBER 5, 1995, FUND SHARES OUTSTANDING WERE DESIGNATED CLASS A
SHARES.
(2) ANNUALIZED.
<PAGE>
-------------------------------------------------------------------------------
CASH MANAGEMENT
For a Class B share outstanding throughout the period:
FOR THE
PERIOD FROM
9/9/99(1) to
12/31/99
CLASS B PER-SHARE DATA
Net asset value, beginning of period $1.00
-------------------------------------------------------------------------------
Net investment income 0.0120
Less dividends declared (0.0120)
-------------------------------------------------------------------------------
Net asset value, end of period $1.00
CLASS B RATIOS/SUPPLEMENTAL DATA
Total return 1.21%
Net assets, end of period (in millions) $3
Ratio of expenses to average net assets 1.65%(2)
Ratio of net investment income to average net assets 4.25%(2)
===============================================================================
(1)COMMENCEMENT OF OPERATIONS.
(2)ANNUALIZED.
<PAGE>
-------------------------------------------------------------------------------
CASH MANAGEMENT
For a Class C share outstanding throughout the period:
FOR THE
PERIOD FROM
9/9/99(1) to
12/31/99
CLASS C PER-SHARE DATA
Net asset value, beginning of period $1.00
-------------------------------------------------------------------------------
Net investment income 0.0119
Less dividends declared (0.0119)
-------------------------------------------------------------------------------
Net asset value, end of period $1.00
CLASS C RATIOS/SUPPLEMENTAL DATA
Total return 1.20%
Net assets, end of period (in thousands) $160
Ratio of expenses to average net assets 1.81%(2)
Ratio of net investment income to average net assets 4.13%(2)
===============================================================================
(1) COMMENCEMENT OF OPERATIONS.
(2) ANNUALIZED.
<PAGE>
This space is intended for your notes and calculations.
<PAGE>
This space is intended for your notes and calculations.
<PAGE>
This space is intended for your notes and calculations.
<PAGE>
This space is intended for your notes and calculations.
<PAGE>
This space is intended for your notes and calculations.
<PAGE>
===============================================================================
WADDELL & REED ADVISORS FUNDS
CUSTODIAN
UMB Bank, n.a. 928
Grand Boulevard
Kansas City, Missouri 64141
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N. W.
Washington, D. C.
20036
INDEPENDENT AUDITORS
Deloitte & Touche LLP
1010 Grand Boulevard
Kansas City, Missouri
64106-2232
INVESTMENT MANAGER
Waddell & Reed Investment Management Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
888-WADDELL
UNDERWRITER
Waddell & Reed, Inc.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
888-WADDELL
SHAREHOLDER SERVICING AGENT
Waddell & Reed Services Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217 913-236-2000
888-WADDELL
ACCOUNTING SERVICES AGENT
Waddell & Reed Services Company
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
888-WADDELL
<PAGE>
-------------------------------------------------------------------------------
WADDELL & REED ADVISORS FUNDS
You can get more information about each Fund in its --
- STATEMENT OF ADDITIONAL INFORMATION (SAI), which contains detailed
information about the Fund, particularly the 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).
- 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 a Fund's current SAI or copies of its 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 via e-mail
at [email protected].
Information about each Fund (including the current SAI and most recent Annual
and Semiannual Reports) is available from the SEC's web site at
http://www.sec.gov and may also be obtained, after paying a duplicating fee, by
electronic request at [email protected] or 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 202-942-8090.
The Funds' SEC file numbers are as follows:
Waddell & Reed Advisors Funds, Inc. Bond Fund: 811-2552
Waddell & Reed Advisors Cash Management, Inc.: 811-2922
Waddell & Reed Advisors Government Securities Fund, Inc.: 811-3458
Waddell & Reed Advisors High Income Fund, Inc.: 811-2907
Waddell & Reed Advisors High Income Fund II, Inc.: 811-4520
Waddell & Reed Advisors Municipal Bond Fund, Inc.: 811-2657
Waddell & Reed Advisors Municipal High Income Fund, Inc.: 811-4427
[LOGO] WADDELL & REED
FINANCIAL SERVICES-Registered Trademark-
-------------------------
INVESTING. WITH A PLAN-SM-.
Waddell & Reed, Inc.
6300 Lamar Avenue,
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
913-236-2000
888-WADDELL
WADDELL & REED ADVISORS CASH MANAGEMENT, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
913-236-2000
June 30, 2000
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 for the Class A, Class B and Class C shares and the prospectus
for the Waddell & Reed Money Market B shares and the Waddell & Reed Money
Market C shares (each, a "Prospectus") of Waddell & Reed Advisors Cash
Management, Inc. (the "Fund"), formerly, United Cash Management, Inc.,
dated June 30, 2000, which may be obtained from the Fund or its
underwriter, Waddell & Reed, Inc., at the address or telephone number shown
above.
TABLE OF CONTENTS
Performance Information............................. 2
Investment Strategies, Policies and Practices....... 3
Investment Management and Other Services............ 19
Purchase, Redemption and Pricing of Shares.......... 24
Directors and Officers.............................. 34
Payments to Shareholders............................ 40
Taxes .............................................. 41
Portfolio Transactions and Brokerage................ 42
Other Information................................... 44
Appendix A.......................................... 46
Financial Statements ............................... 50
Waddell & Reed Advisors 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 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, Class B shares, Class C
Shares, Waddell & Reed Money Market B Shares (formerly know as Class B) and
Waddell & Reed Money Market C shares as calculated above for the seven days
ended December 31, 1999, the date of the most recent balance sheet included
in the Prospectus, was 5.38%, 4.09%, 4.09%, 4.49% and 4.09%, respectively,
and the effective yield calculated for the same period was 5.53%, 4.17%,
4.17%, 4.59% and 4.17%, 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.
Effective March 24, 2000, Waddell & Reed Money Market B shares were
combined into and redesignated as Waddell & Reed Money Market C shares.
Effective June 30, 2000, Waddell & Reed Money Market C shares are closed to
all investments other than reinvested dividends.
Performance Rankings and Other Information
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.
Performance information for the Fund may be accompanied by information
about market conditions and other factors that affected the Fund's
performance for the period(s) shown.
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 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 total 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 total assets, with investment in such securities of any one
issuer being limited to the greater of 1% of the Fund's total 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 Housing
Administration, Fannie Mae (also known as 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. The Fund intends to
invest in U.S. Government Securities when there is a limited availability
of other obligations and instruments.
(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.
(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.
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 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 guaranteed by the U.S.
Government 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 securities. Among the
major differences are that interest and principal payments are made more
frequently, usually monthly, and that principal may be prepaid at any time
because the underlying mortgage loans or other obligations generally may be
prepaid at any time. Prepayments on a pool of mortgage loans are
influenced by a variety of economic, geographic, social and other factors,
including changes in mortgagors' housing needs, job transfers,
unemployment, mortgagors' net equity in the mortgaged properties and
servicing decisions. Generally, however, prepayments on fixed-rate
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Similar factors apply
to prepayments on asset-backed securities, but the receivables underlying
asset-backed securities generally are of a shorter maturity and thus are
likely to experience substantial prepayments. Such securities, however,
often provide that for a specified time period the issuers will replace
receivables in the pool that are repaid with comparable obligations. If
the issuer is unable to do so, repayment of principal on the asset-backed
securities may commence at an earlier date.
The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to
the annual fees paid to the servicer of the mortgage pool for passing
through monthly payments to certificate holders and to any guarantor, and
due to any yield retained by the issuer. Actual yield to the holder may
vary from the coupon rate, even if adjustable, if the mortgage-backed
securities are purchased or traded in the secondary market at a premium or
discount. In addition, there is normally some delay between the time the
issuer receives mortgage payments from the servicer and the time the issuer
makes the payments on the mortgage-backed securities, and this delay
reduces the effective yield to the holder of such securities.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and
the associated average life assumption. The average life of pass-through
pools varies with the maturities of the underlying mortgage loans. A
pool's term may be shortened by unscheduled or early payments of principal
on the underlying mortgages. Because prepayment rates of individual pools
vary widely, it is not possible to predict accurately the average life of a
particular pool. In the past, a common industry practice has been to
assume that prepayments on pools of fixed rate 30-year mortgages would
result in a 12-year average life for the pool. At present, mortgage pools,
particularly those with loans with other maturities or different
characteristics, are priced on an assumption of average life determined for
each pool. In periods of declining interest rates, the rate of prepayment
tends to increase, thereby shortening the actual average life of a pool of
mortgage-related securities. Conversely, in periods of rising interest
rates, the rate of prepayment tends to decrease, thereby lengthening the
actual average life of the pool. 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 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. Under the
Fund's current securities lending procedures, the Fund may lend securities
only to broker-dealers and financial institutions deemed creditworthy by
WRIMCO.
Any securities loans that the Fund makes must be collateralized in
accordance with applicable regulatory requirements (the "Guidelines"). At
the time of each loan, the Fund must receive collateral equal to no less
than 100% of the market value of the securities loaned. 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.
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.
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.
Some, but not all, of the Fund's rules are necessary to meet
requirements of certain laws relating to securities loans. These rules
will not be changed unless the change is permitted under these
requirements. These requirements do not cover the present rules, which may
be changed without shareholder vote, as to how the Fund may invest cash
collateral.
There may be risks of delay in receiving additional collateral from
the borrower if the market value of the securities loaned 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.
Repurchase Agreements
The Fund may purchase securities subject to repurchase agreements.
The Fund will not enter into a repurchase transaction that will cause more
than 10% of its net assets to be invested in illiquid investments, which
include repurchase agreements not terminable within seven days. See
"Illiquid Investments." 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 will
engage are overnight transactions, and the delivery pursuant to the resale
typically will occur within one to five days of the purchase. The primary
risk is that the Fund may suffer a loss if the seller fails to pay the
agreed-upon amount on the delivery date and that amount is greater than the
resale price of the underlying securities and other collateral held by the
Fund. In the event of bankruptcy or other default by the seller, there may
be possible delays or expenses in liquidating the underlying securities or
other collateral, decline in their value and loss of interest. The return
on such collateral may be more or less than that from the repurchase
agreement. The Fund's repurchase agreements will be structured so as to
fully collateralize the loans. In other words, the value of the underlying
securities, which will be held by the Fund's custodian bank or by a third
party that qualifies as a custodian under Section 17(f) of the 1940 Act, is
and, during the entire term of the agreement, will remain at least equal to
the value of the loan, including the accrued interest earned thereon.
Repurchase agreements are entered into only with those entities approved by
WRIMCO.
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. For example, 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 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.
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;
(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 and enter into repurchase agreements except as
indicated above (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 total 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:
(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 total 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.
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. 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 WRIMCO or an affiliate of WRIMCO 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, which 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 Waddell &
Reed Advisors Funds (formerly, the United Group of Mutual Funds) 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 W&R Funds, Inc. (formerly, Waddell & Reed Funds, Inc.) since
its inception in September 1992. Waddell & Reed, Inc. serves as principal
underwriter for the investment companies in the Waddell & Reed Advisors
Funds and W&R 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, preparation of prospectuses for existing
shareholders, preparation of proxy statements and certain shareholder
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 $2,476,181, $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, with respect to Class A
shares, 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. For Class B, Class C and Waddell
& Reed Money Market C shares, the Fund pays the agent a monthly fee of
$1.75 for each account which was in existence during any portion of the
immediately preceding month. 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; charges of any sub-agent used by Agent in performing
services under the Shareholder Servicing Agreement; and costs of legal and
special services not provided by Waddell & Reed, Inc., WRIMCO, or the
Agent.
Under the Accounting Services Agreement, the Fund pays the Agent a
monthly fee of one-twelfth of the annual fee shown in the following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
Fees paid to the Agent for the fiscal years ended June 30, 1999, 1998
and 1997 were $70,000, $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. 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 or
Waddell & Reed Money Market C shares is designed to compensate Waddell &
Reed, Inc. for distribution of these shares.
As described in the Prospectus, Waddell & Reed, Inc. reallows to
selling broker-dealers a portion of the sales charge paid for purchases of
Class A shares. On shares of funds in the Waddell & Reed Advisors Funds
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 Plans adopted by the Fund with respect to Class B,
Class C and Waddell & Reed Money Market C shares, respectively, the Fund
pays the Distributor daily a distribution fee not to exceed, on an annual
basis, 0.75% of the net assets of the affected class and a service fee not
to exceed, on an annual basis, 0.25% of the net assets of the affected
class.
The Distributor offers Class A, Class B and Class 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) $43,397
and $11,638 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 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 Waddell & Reed Money Market B
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 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 Waddell &
Reed Money Market B shares.
Custodial and Auditing Services
The Fund's Custodian is UMB Bank, n.a., 928 Grand Boulevard, Kansas
City, Missouri. In general, the Custodian is responsible for holding the
Fund's cash and securities. Deloitte & Touche LLP, 1010 Grand Boulevard,
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
("NAV") of the applicable class. The Fund is designed so that the value of
each share of each class of the Fund (the NAV per share) will remain fixed
at $1.00 per share except under extraordinary circumstances, although this
may not always be possible. This NAV 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 and Waddell & Reed Money Market C shares.
The NAV per share is ordinarily computed once each day that the NYSE
is open for trading as of the close of the regular session of the NYSE
(ordinarily, 4:00 p.m. Eastern time). The NYSE annually announces the days
on which it will not be open for trading. The most recent announcement
indicates that it will not be open on the following days: New Years Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. However,
it is possible that the NYSE may close on other days.
The Fund operates under Rule 2a-7 which permits it to value its
portfolio on the basis of amortized cost. The amortized cost method of
valuation is accomplished by valuing a security at its cost and thereafter
assuming a constant amortization rate to maturity of any discount or
premium, and does not reflect the impact of fluctuating interest rates on
the market value of the security. This method does not take into account
unrealized gains or losses.
While the amortized cost method provides some degree of certainty in
valuation, there may be periods during which value, as determined by
amortized cost, is higher or lower than the price the Fund would receive if
it sold the instrument. During periods of declining interest rates, the
daily yield on the Fund's shares may tend to be higher than a like
computation made by a fund with identical investments utilizing a method of
valuation based upon market prices and estimates of market prices for all
of its portfolio instruments and changing its dividends based on these
changing prices. Thus, if the use of amortized cost by the Fund resulted
in a lower aggregate portfolio value on a particular day, a prospective
investor in the Fund's shares would be able to obtain a somewhat higher
yield than would result from investment in such a fund, and existing
investors in the Fund's shares would receive less investment income. The
converse would apply in a period of rising interest rates.
Under Rule 2a-7, the Fund's Board of Directors must establish
procedures designed to stabilize, to the extent reasonably possible, the
Fund's price per share as computed for the purpose of sales and redemptions
at $1.00. Such procedures must include review of the Fund's portfolio
holdings by the Board at such intervals as it may deem appropriate and at
such intervals as are reasonable in light of current market conditions to
determine whether the Fund's NAV 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 NAV per
share based upon available market quotations (see above) and the NAV 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 NAV per share using
available market quotations.
The procedures which the Fund's Board of Directors has adopted include
changes in the dividends payable by the Fund under specified conditions, as
further described under "Taxes" and "Payments to Shareholders." The
purpose of this portion of the procedures is to provide for the automatic
taking of one of the actions which the Board of Directors might take should
it otherwise be required to consider taking appropriate action.
Minimum Initial and Subsequent Investments
For Class A, Class B and Class C shares, initial investments must be
at least $500 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."
Effective March 24, 2000, Waddell & Reed Money Market B shares were
combined into and redesignated as Waddell & Reed Money Market C shares.
Effective June 30, 2000, Waddell & Reed Money Market C shares are closed to
all investments other than reinvested dividends.
How to Open an Account
If you are purchasing Class A shares, you can make an initial
investment of $500 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.; ABA Number
101000695, for the account of Waddell & Reed Number 9800007978, Special
Account for Exclusive Benefit of Customers FBO Customer Name and Account
Number; (c) complete an application form and mail it to Waddell & Reed,
Inc.
3) Through Broker-dealers. You may, if you wish, purchase your
shares through registered broker-dealers, which may charge their customers
a fee for this service. There is no such fee for investments made by mail
or wire, as described above, or for additional investments made by mail or
wire. No such service fee will be charged for shares purchased through
Waddell & Reed, Inc.
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 Waddell & Reed Advisors 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.; ABA Number
101000695, for the account of Waddell & Reed Number 9800007978, Special
Account for Exclusive Benefit of Customers FBO Customer Name and Account
Number.
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 NAV 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.
Class B and Class C shares may be directly purchased by mail only.
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 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 B or
Class C shares redeemed under the Service are not subject to a CDSC.
Applicable forms to start the Service are available through Waddell & Reed
Services Company.
The maximum amount of the withdrawal for monthly, quarterly,
semiannual and annual withdrawals is 2%, 6%, 12% and 24% respectively of
the value of your account at the time the Service is established. The
withdrawal proceeds are not subject to the deferred sales charge, but only
within these percentage limitations. The minimum withdrawal is $50. The
Service, and this exclusion from the deferred sales charge, does not apply
to a one-time withdrawal.
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 Waddell & Reed Advisors Funds; 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.
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 the Service.
If you have a share certificate for the shares you want to make
available for the Service, you must enclose the certificate with the form
initiating the Service.
The dividends and distributions on shares 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,
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 Waddell &
Reed Advisors Funds or the W&R Funds, Inc. (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 Waddell & Reed Advisors Funds or the W&R Funds, Inc., without payment
of any additional sales charge.
In addition, you may specify a dollar amount of Class A shares of the
Fund to be automatically exchanged each month into Class A shares of any
other fund in the Waddell & Reed Advisors Funds, provided you already own
shares of the fund. The shares which you designate for automatic exchange
into any fund must be worth at least $100, which may be allocated among
funds in the Waddell & Reed Advisors Funds, provided each fund receives a
value of at least $25.
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 Waddell & Reed Advisors Funds
and/or W&R Funds, Inc. without charge.
You may specify a dollar amount of Class B or Class C shares of the
Fund to be automatically exchanged each month into Class B or Class C
shares of any other fund in the Waddell & Reed Advisors Funds, provided you
already own Class B or Class C shares, as applicable, of the fund. The
shares which you designate for automatic exchange into any fund must be
worth at least $100, which may be allocated among funds in the Waddell &
Reed Advisors Funds, provided each fund receives a value of at least $25.
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. 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.
Waddell & Reed Money Market C Share Exchanges
You may exchange Waddell & Reed Money Market C shares for Class C
shares of W&R Funds, Inc. without charge.
You may specify a dollar amount of Waddell & Reed Money Market C
shares to be automatically exchanged each month into Class C shares of any
of the funds of W&R Funds, Inc., provided you already own Class C shares of
the fund in W&R Funds, Inc. The Class C shares that you designate for
automatic exchange must be worth at least $100, which may be allocated
among funds in W&R Funds, Inc., 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.
The redemption of 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 shares acquired in the exchange, those acquired shares are
treated as having been purchased when the original redeemed shares were
purchased.
Effective June 30, 2000, exchanges into Waddell & Reed Money Market C
shares are not permitted.
General Exchange Information
When you exchange shares, the total shares you receive will have the
same aggregate NAV 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 Waddell & Reed Advisors Funds and/or W&R Funds, Inc., can in most
instances, be eliminated or modified at any time and any such exchange may
not be accepted.
Retirement Plans
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 Waddell & Reed Advisors Funds or W&R 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.
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 (or, to
any combination of Roth and traditional IRAs). 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 $25,500, 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 plan 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, generally, than 401(k) or other
qualified plans.
Keogh Plans. Keogh plans, which are available to self-employed
individuals, are defined contribution plans that may be either a money
purchase plan or a profit-sharing plan. As a general rule, an investor
under a defined contribution Keogh plan can contribute each year up to 25%
of his or her annual earned income, with an annual maximum of $30,000.
457 Plans. If an investor is an employee of a state or local
government or of certain types of charitable organizations, he or she may
be able to enter into a deferred compensation arrangement in accordance
with Section 457 of the Code.
TSAs - Custodial Accounts and Title I Plans. If an investor is an
employee of a public school system or of certain types of charitable
organizations, he or she may be able to enter into a deferred compensation
arrangement through a custodian account under Section 403(b) of the Code.
Some organizations have adopted Title I plans, which are funded by employer
contributions in addition to employee deferrals.
Pension and Profit-Sharing Plans, including 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. Redemptions of Class A shares by telephone or fax
must be equal to at least $1,000.00. Redemption payments are made within
seven days from receipt of request 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 NAV. 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 NAV 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 NAV of such shares (taken at cost
or value as the Board of Directors may determine) is less than $250. The
Board intends to compel redemptions of accounts, except for retirement plan
accounts, in which the total NAV is less than $250. Shareholders have 60
days from the date on which the NAV falls below $250 to bring the NAV 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 NAV 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 the past five years of each Director
and officer is stated 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 of the Fund but are not Board members. For
purposes of this section, the term "Fund Complex" includes each of the
registered investment companies in the Waddell & Reed Advisors Funds,
Target/United Funds, Inc. and W&R 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 and Director of Waddell & Reed Financial, Inc.;
President, Chairman of the Board of Directors, Director and Chief Executive
Officer of Waddell & Reed Financial Services, Inc.; Chairman of the Board
of Directors and Director 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.
JOHN A. DILLINGHAM
4040 Northwest Claymont Drive
Kansas City, Missouri 64116
President of 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
of Garney Companies, Inc., a specialty utility contractor. Date of birth:
January 9, 1939.
DAVID P. GARDNER
263 West 3rd Avenue
San Mateo, California 94402
Chairman and Chief Executive Officer of George S. and Delores Dor'e
Eccles Foundation; Director of First Security Corp., a bank holding
company, and Director of Fluor Corp., a company with interests in coal;
formerly, President of Hewlett Foundation. Date of birth: March 24, 1933.
LINDA K. GRAVES*
1 South West Cedar Crest Road
Topeka, Kansas 66606
First Lady of Kansas; formerly, 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 at the University of Oklahoma;
Adjunct Professor of Law at the University of Oklahoma College of Law;
Managing Member, Harroz Investments, L.L.C.; formerly, Vice President for
Executive Affairs of the University of Oklahoma; formerly, 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; Chairman of the Board of Directors, Gilliland & Hayes, P.A., a
law firm; formerly, President of Gilliland & Hayes, P.A.; formerly,
Director of Central Properties, Inc. Date of birth: December 11, 1919.
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.; Executive 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.; Director and Treasurer of Waddell & Reed Services
Company; Chairman of the Board of Directors, Chief Executive Officer,
President and Director of Fiduciary Trust Company of New Hampshire, an
affiliate of Waddell & Reed, Inc.; Director of Legend Group Holdings, LLC,
Legend Advisory Corporation, Legend Equities Corporation, Advisory Services
Corporation, The Legend Group, Inc. and LEC Insurance Agency, Inc.;
formerly, Vice President of each of the funds in the Fund Complex;
formerly, Director and Treasurer of Waddell & Reed Asset Management
Company; formerly, President of Waddell & Reed Services Company. 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, and Director of Waddell &
Reed Financial, Inc.; Executive 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; Chairman of the Board of Directors of
Austin, Calvert & Flavin, Inc., an affiliate of WRIMCO; formerly,
President, Chief Executive Officer, Chief Investment Officer and Director
of Waddell & Reed Asset Management Company. 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 its 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.
RONALD C. REIMER
2601 Verona Road
Mission Hills, Kansas 66208
Retired. Co-founder and teacher at Servant Leadership School of
Kansas City; Director and Vice President of Network Rehabilitation
Services; Board Member, Member of Executive Committee and Finance Committee
of Truman Medical Center; 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;
Director of Columbian Bank and Trust. Date of birth: April 9, 1953.
ELEANOR B. SCHWARTZ
1213 West 95th Court, Chartwell 4
Kansas City, Missouri 64114
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.
Daniel C. Schulte
Vice President, Assistant Secretary and General Counsel of the Fund
and each of the other funds in the Fund Complex; Vice President, Secretary
and General Counsel of Waddell & Reed Financial, Inc.; Senior Vice
President, Secretary and General Counsel of Waddell & Reed Financial
Services Company, Waddell & Reed, Inc., WRIMCO and Waddell & Reed Services
Company; Secretary and Director of Fiduciary Trust Company of New
Hampshire, an affiliate of Waddell & Reed, Inc.; formerly, Assistant
Secretary of Waddell & Reed Financial, Inc.; formerly, an attorney with
Klenda, Mitchell, Austerman & Zuercher, L.L.C. Date of birth: December 8,
1965.
Kristen A. Richards
Vice President, Secretary and Associate General Counsel of the Fund
and each of the other funds in the Fund Complex; Vice President and
Associate General Counsel of WRIMCO; formerly, Assistant Secretary of the
Fund and each of the other funds in the Fund Complex; formerly, Compliance
Officer of WRIMCO. Date of birth: December 2, 1967.
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.
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, whereby an incumbent Director who has attained the age of 70 may,
or if elected on or after May 31, 1993 and has attained the age of 75 must,
resign his or her position as Director and, unless he or she elects
otherwise, will serve as Director Emeritus provided the Director has served
as a Director of the Funds for at least five years which need not have been
consecutive. 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 or she 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 each serves as Director Emeritus.
The funds in the Waddell & Reed Advisors Funds, Target/United Funds,
Inc. and W&R Funds, Inc. pay to each Director effective October 1, 1999, an
annual base fee of $50,000, plus $3,000 for each meeting of the Board of
Directors attended and effective January 1, 2000, an annual base fee of
$52,000 plus $3,250 for each meeting of the Board of Directors attended,
plus reimbursement of expenses for 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 &
Red, Inc. (Prior to October 1, 1999, the funds in the Waddell & Reed
Advisors Funds, Target/United Funds, Inc. and W&R Funds, Inc. paid to each
Director and annual base fee of $48,000 plus $2,500 for each meeting of the
Board of Directors attended). The fees to the Directors are divided among
the funds in the Waddell & Reed Advisors Funds, Target/United Funds, Inc.
and W&R Funds, Inc. based on the funds' 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:
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 1,518 58,500
John A. Dillingham 1,518 58,500
David P. Gardner 1,109 41,500
Linda K. Graves 1,518 58,500
Joseph Harroz, Jr. 1,075 41,500
John F. Hayes 1,518 58,500
Glendon E. Johnson 1,531 59,000
William T. Morgan 1,518 58,500
Ronald C. Reimer 1,071 41,500
Frank J. Ross, Jr. 1,518 58,500
Eleanor B. Schwartz 1,531 59,000
Frederick Vogel III 1,531 59,000
*No pension or retirement benefits have been accrued as a part of Fund
expenses.
The officers are paid by Waddell & Reed, Inc. or its affiliates.
Shareholdings
As of May 31, 2000, 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 May
31, 2000, regarding the beneficial ownership of the classes of the Fund's
shares.
Name and Address Shares owned
of Record or Beneficially
Beneficial Owner Class or of Record Percent
------------------- ----- ------------ -------
Kenneburt & Co. Class A 53,449,819 7.23%
P. O. Box 11426
Birmingham Al 35202-1426
Fiduciary Trust Co NH Cust Class B 359,823 11.26%
IRA Rollover
FBO Dennis J Dachille
300 Arrowhead Dr
Elizabeth PA 15037-9641
Fiduciary Tr Co NH Cust Class B 193,464 6.05%
IRA Rollover
FBO Maurice S Whit3e
68 Fairview St
Carlisle PA 17013-3120
Fiduciary Tr co NH Cust Class B 294,381 9.21%
IRA Rollover
FBO Richard V Snyder
3011 Green St
Harrisburg PA 17110-1235
Fiduciary Tr Co NH Cust W&R Money 681,027 6.08%
IRA Rollover Market C
FBO David L Price
6403 Whisper Wood Ln
Harrisburg PA 17112-1880
George Montgomery Class C 47,296 5.82%
11946 Duran Canyon Ct
Houston TX 77067-1048
Franklin J Brenner (TOD) Class C 76,893 9.47%
743 Miramar Dr
Fullerton CA 92831-1928
Fiduciary Tr Co NH Cust Class C 145,120 17.87%
IRA Rollover
FBO Daniel T Glunt
928 Little Bardfield Rd
Webster NY 14580-8932
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 NAV of a share of a class of the Fund computed on the amortized
cost basis and that computed on an available market price basis, the amount
of the deviation will be added to or subtracted from the dividend for that
class for that day if necessary to reduce the per-share value to within .3
of 1% of $1.00.
If on any day there is insufficient net income to absorb any such
reduction, the Fund's Board of Directors would be required under Rule 2a-7
to consider taking other action if the deviation after eliminating the
dividend for that day exceeds one-half of 1%. See "Determination of
Offering Price." One of the actions that the Board of Directors might take
could be the elimination or reduction of dividends for more than one day.
Choices You Have on Your Dividends and Distributions
On your application form, you can give instructions that (i) you want
cash for your dividends and distributions, (ii) you want your dividends and
distributions paid in shares of the Fund of the same class as that with
respect to which they were paid, or (iii) you want cash for your dividends
and want your distributions paid in shares of the Fund of the same class as
that with respect to which they were declared. However, a total dividend
and/or distribution amount less than five dollars will be automatically
paid in shares of the Fund of the same class as that with respect to which
they were paid. You can change your instructions at any time. If you give
no instructions, your dividends and distributions (if any) will be 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 NAV. The NAV 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 youreceive 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 NAV next
calculated 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 since inception 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 it
distributes to its shareholders. To continue to qualify for treatment as a
RIC, the Fund must distribute to its shareholders for each taxable year at
least 90% 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 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
gains 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 Waddell & Reed Advisors Funds, Target/United
Funds, Inc. and W&R Funds, Inc. or other accounts for which it has
investment discretion, including accounts affiliated with WRIMCO. WRIMCO,
at its discretion, may aggregate such orders. Under current written
procedures, 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, for a transaction
not involving an initial public offering (_IPO_), WRIMCO will ordinarily
allocate the transaction pro rata based on the orders placed, subject to
certain variances provided for in the written procedures. For a partially
filled IPO order, subject to certain variances specified in the written
procedures, WRIMCO generally allocates the shares as follows: the IPO
shares are initially allocated pro rata among the included funds and/or
advisory accounts grouped according to investment objective, based on
relative total assets of each group; and the shares are then allocated
within each group pro rata based on relative total assets of the included
funds and/or advisory accounts, except that (a) within a group having a
small cap-related investment objective, shares are allocated on a
rotational basis after taking into account the impact of the anticipated
initial gain on the value of the included fund or advisory account and (b)
within a group having a mid-cap-related investment objective, shares are
allocated based on the portfolio manager's judgment, including but not
limited to such factors as the fund's or advisory account's investments
strategies and policies, cash availability, any minimum investment policy,
liquidity, anticipated term of the investment and current securities
positions.
In all cases, WRIMCO seeks to implement its allocation procedures to
achieve a fair and equitable allocation of securities among its funds and
other advisory accounts. Sharing in large transactions could affect the
price the Fund pays or receives or the amount it buys or sells. As well, a
better negotiated commission may be 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 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 J. P. Morgan & Co. Incorporated
securities in the aggregate amount of $19,997,826. J. P. Morgan & Co.
Incorporated is a regular broker of the Fund.
The Fund, WRIMCO and Waddell & Reed, Inc. have adopted a Code of
Ethics under Rule 17j-1 of the 1940 Act that permits their respective
directors, officers and employees to invest in securities, including
securities that may be purchased or held by the Fund. The Code of Ethics
subjects covered personnel to certain restrictions that include prohibited
activities, pre-clearance requirements and reporting obligations.
OTHER INFORMATION
The Shares of the Fund
The Fund offers three classes of shares: Class A, Class B and Class
C. Waddell & Reed Money Market C shares are closed to all investments
other than re-invested dividends. 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 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 eight years will convert automatically,
8 years after the month in which the shares were purchased, to Class A
shares of the Fund, and such conversion will be made, without charge or
fee, on the basis of the relative NAVs 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 four classes,
dividends and liquidation proceeds of Class B, Class C 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.
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.
APPENDIX A
The following are descriptions of some of the ratings of securities
which the Fund may use. The Fund may also use ratings provided by other
nationally recognized statistical rating organizations in determining the
securities eligible for investment.
DESCRIPTION OF BOND RATINGS
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. A
Standard & Poor's ("S&P") corporate or municipal bond rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment of creditworthiness may take into
consideration obligors such as guarantors, insurers or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
The ratings are based on current information furnished to S&P by the
issuer or obtained by S&P from other sources it considers reliable. S&P
does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or based on other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
1. Likelihood of default -- capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal
in accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors'
rights.
The top three rating categories of S&P are described below:
AAA -- Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA -- Debt rated AA also qualifies as high quality debt. Capacity to
pay interest and repay principal is very strong, and debt rated AA differs
from AAA issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
Plus (+) or Minus (-) -- To provide more detailed indications of
credit quality, the ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major rating
categories.
NR -- Indicates that no public rating has been requested, that there
is insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
Debt Obligations of issuers outside the United States and its
territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the creditworthiness of the obligor but do not
take into account currency exchange and related uncertainties.
Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service, Inc. ("MIS") rating symbols and their meanings
follows:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge". Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to impairment
sometime in the future.
DESCRIPTION OF NOTE RATINGS
Standard and Poor's, a division of The McGraw-Hill Companies, Inc. A
S&P note rating reflects the liquidity factors and market access risks
unique to notes. Notes maturing in 3 years or less will likely receive a
note rating. Notes maturing beyond 3 years will most likely receive a
long-term debt rating. The following criteria will be used in making that
assessment.
--Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue is to be treated as a note).
--Source of Payment (the more the issue depends on the market for its
refinancing, the more likely it is to be treated as a note.)
The note rating symbols and definitions are as follows:
SP-1 Strong capacity to pay principal and interest. Issues determined
to possess very strong characteristics are given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the
term of the notes.
SP-3 Speculative capacity to pay principal and interest.
Moody's Investors Service, Inc. MIS ratings for state and municipal
short-term obligations will be designated Moody's Investment Grade (MIG).
This distinction is in recognition of the differences between short-term
credit risk and long-term risk. Factors affecting the liquidity of the
borrower are uppermost in importance in short-term borrowing, while various
factors of major importance in bond risk are of lesser importance over the
short run. Rating symbols and their meanings follow:
MIG 1 -- This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2 -- This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3 -- This designation denotes favorable quality. All security
elements are accounted for but this is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
MIG 4 -- This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is specific
risk.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Standard & Poor's, a division of The McGraw Hill Companies, Inc.
commercial paper rating is a current assessment of the likelihood of timely
payment of debt considered short-term in the relevant market. Ratings are
graded into several categories, ranging from A-1 for the highest quality
obligations to D for the lowest. Issuers rated A are further referred to
by use of numbers 1, 2 and 3 to indicate the relative degree of safety.
Issues assigned an A rating (the highest rating) are regarded as having the
greatest capacity for timely payment. An A-1 designation indicates that
the degree of safety regarding timely payment is strong. Those issues
determined to possess extremely strong safety characteristics are denoted
with a plus sign (+) designation. An A-2 rating indicates that capacity
for timely payment is satisfactory; however, the relative degree of safety
is not as high as for issues designated A-1.
Moody's Investors Service, Inc. commercial paper ratings are opinions
of the ability of issuers to repay punctually promissory obligations not
having an original maturity in excess of nine months. MIS employs the
designations of Prime 1, Prime 2 and Prime 3, all judged to be investment
grade, to indicate the relative repayment capacity of rated issuers.
Issuers rated Prime 1 have a superior capacity for repayment of short-term
promissory obligations and repayment capacity will normally be evidenced by
(1) lending market positions in well established industries; (2) high rates
of return on Funds employed; (3) conservative capitalization structures
with moderate reliance on debt and ample asset protection; (4) broad
margins in earnings coverage of fixed financial charges and high internal
cash generation; and (5) well established access to a range of financial
markets and assured sources of alternate liquidity. Issuers rated Prime 2
also have a strong capacity for repayment of short-term promissory
obligations as will normally be evidenced by many of the characteristics
described above for Prime 1 issuers, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation;
capitalization characteristics, while still appropriate, may be more
affected by external conditions; and ample alternate liquidity is
maintained.
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1999
Principal
Amount in
Thousands Value
BANK OBLIGATIONS
Certificates of Deposit _ 2.46%
Yankee
Bank Austria - New York,
5.11%, 4-25-00 ........................ $10,000 $ 9,991,304
UBS AG - Stamford, Connecticut,
5.35%, 5-30-00 ........................ 10,000 9,990,801
Total ................................. 19,982,105
Commercial Paper - 6.50%
Abbey National North America:
6.055%, 1-18-00 ....................... 17,500 17,449,962
5.9%, 3-7-00 .......................... 15,000 14,837,750
Dresdner U.S. Finance Inc.,
6.23%, 1-10-00 ........................ 2,000 1,996,885
Toronto-Dominion Holdings USA Inc.,
6.9%, 1-10-00 ......................... 18,500 18,468,088
Total ................................. 52,752,685
Commercial Paper (backed by irrevocable bank
letter of credit) - 1.20%
Banca Serfin S.A. (Barclays Bank PLC),
5.96%, 6-5-00 ......................... 10,000 9,741,733
Notes _ 7.88%
Banc One Corp.,
6.5188%, 1-10-00 ...................... 14,000 14,000,000
First Bank of South Dakota (U.S. Bank
National Association),
6.5325, 1-19-00 ....................... 10,000 10,005,338
Harris Trust and Savings Bank,
5.05%, 2-17-00 ........................ 13,000 12,999,133
J.P. Morgan & Co., Incorporated,
6.4288%, 1-6-00 ....................... 10,000 9,998,953
Wells Fargo & Company,
5.31%, 4-3-00 ......................... 17,000 16,996,816
Total ................................. 64,000,240
TOTAL BANK OBLIGATIONS _ 18.04% $146,476,763
(Cost: $146,476,763)
CORPORATE OBLIGATIONS
Commercial Paper
Communication - 0.61%
U S WEST Communications Inc.,
7.1%, 1-13-00 ......................... 5,000 4,988,167
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1999
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Electric, Gas and Sanitary Services _ 6.76%
Allegheny Energy Inc.,
5.82%, 2-28-00 ........................ $ 5,000 $ 4,953,117
Bay State Gas Co.,
6.75%, 1-28-00 ........................ 17,000 16,913,938
Questar Corp.:
5.82%, 1-14-00 ........................ 6,000 5,987,390
5.85%, 1-14-00 ........................ 5,000 4,989,438
5.9%, 1-19-00 ......................... 8,500 8,474,925
6.05%, 1-21-00 ........................ 4,100 4,086,219
6.0%, 1-27-00 ......................... 9,500 9,458,833
Total ................................. 54,863,860
Food and Kindred Products - 5.26%
General Mills, Inc.,
6.345%, Master Note ................... 32,800 32,800,000
Golden Peanut Co.,
5.93%, 2-29-00 ........................ 10,000 9,902,814
Total ................................. 42,702,814
Nondepository Institutions _ 5.63%
Associates Capital Corp. PLC (Associates
First Capital Corporation),
6.01%, 1-14-00 ........................ 5,000 4,989,149
Associates Financial Services Co. of
Puerto Rico Inc. (Associates Corp. of
North America),
5.97%, 2-18-00 ........................ 10,000 9,920,400
Associates First Capital B.V. (Associates
First Capital Corporation):
5.8%, 1-10-00 ......................... 6,500 6,490,575
6.0%, 1-10-00 ......................... 9,500 9,485,750
General Electric Capital Corporation,
5.93%, 3-7-00 ......................... 15,000 14,836,925
Total ................................. 45,722,799
Oil and Gas Extraction - 3.62%
Arco British Ltd. (Atlantic Richfield Co.):
6.1%, 1-19-00 ......................... 10,000 9,969,500
6.05%, 1-21-00 ........................ 19,500 19,434,458
Total ................................. 29,403,958
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1999
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Personal Services - 3.92%
Block Financial Corp.:
6.15%, 1-12-00 ........................ $10,000 $ 9,981,208
6.2%, 1-28-00 ......................... 10,000 9,953,500
6.15%, 2-29-00 ........................ 12,000 11,879,050
Total ................................. 31,813,758
Total Commercial Paper _ 25.80% 209,495,356
Commercial Paper (backed by irrevocable bank
letter of credit) - 0.61%
Oil and Gas Extraction
Louis Dreyfus Corp. (ABN-AMRO Bank N.V.),
5.96%, 1-31-00 ........................ 5,000 4,975,167
Notes
Amusement and Recreation Services - 1.23%
Walt Disney Company (The),
5.6%, 4-17-00 ......................... 10,000 10,009,754
Communication - 2.46%
AT&T Corp.,
6.1363%, 1-13-00 ...................... 10,000 9,997,880
Tele-Communications, Inc. (AT&T Corp.),
7.375%, 2-15-00 ....................... 10,000 10,012,431
Total ................................. 20,010,311
Electric, Gas and Sanitary Services _ 3.32%
Baltimore Gas and Electric Company,
6.11%, 3-1-00 ......................... 27,000 26,999,724
Food Stores - 1.85%
Albertson's Inc.,
6.4425%, 1-14-00 ...................... 15,000 14,996,803
General Merchandise Stores - 0.62%
Wal-Mart Stores, Inc.,
5.65%, 2-1-00 ......................... 5,000 5,001,751
Industrial Machinery and Equipment - 0.55%
AP Knitting Elements, Inc. (Wachovia Bank, N.A.),
6.49%, 1-5-00 ......................... 4,500 4,500,000
Insurance Carriers - 1.05%
Atlantic American Corporation (Wachovia Bank, N.A.),
6.49%, 1-5-00 ......................... 8,500 8,500,000
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1999
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Notes (Continued)
Miscellaneous Retail - 1.17%
Todd Shopping Center, L.L.C., Taxable
Variable Rate Demand Bonds, Series 1999
(Wachovia Bank, N.A.),
6.49%, 1-5-00 ......................... $ 9,500 $ 9,500,000
Nondepository Institutions - 9.71%
Associates Corp. of North America:
6.4103%, 1-31-00 ...................... 8,500 8,497,490
6.375%, 8-15-00 ....................... 2,250 2,252,899
Caterpillar Financial Services Corp.:
5.93%, 6-1-00 ......................... 16,500 16,510,118
8.875%, 6-1-00 ........................ 3,000 3,043,447
Ford Motor Credit Company:
8.375%, 1-15-00 ....................... 9,000 9,010,266
6.375%, 10-6-00 ....................... 4,000 4,006,193
General Electric Capital Corporation,
6.66%, 5-1-00 ......................... 8,700 8,728,162
General Motors Acceptance Corporation:
7.875%, 3-15-00 ....................... 2,700 2,714,444
6.875%, 6-7-00 ........................ 10,000 10,051,514
Transamerica Finance Corporation,
6.215%, 3-2-00 ........................ 14,000 14,000,000
Total ................................. 78,814,533
Real Estate - 0.15%
Trap Rock Industries, Inc. (First Union National Bank),
6.8%, 1-5-00 .......................... 1,225 1,225,000
Total Notes _ 22.11% 179,557,876
TOTAL CORPORATE OBLIGATIONS _ 48.52% $394,028,399
(Cost: $394,028,399)
MUNICIPAL OBLIGATIONS
California _ 5.17%
City of Anaheim, California, Certificates
of Participation (1993 Arena Financing
Project), Municipal Adjustable Rate
Taxable Securities (Credit Suisse),
6.2%, 1-19-00 ......................... 29,000 29,000,000
Oakland-Alameda County Coliseum Authority, Lease
Revenue Bonds (Oakland Coliseum Arena Project),
1996 Series A-1 Variable Rate Lease Revenue Bonds
(Taxable), (Canadian Imperial Bank of Commerce),
6.3%, 1-18-00 ......................... 13,000 13,000,000
Total ................................. 42,000,000
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1999
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
Colorado _ 0.25%
Kit Carson County, Colorado, Architectural
Development Revenue Bonds (Taxable), (Midwest
Farms, L.L.C. Project), Series 1997 (Norwest
Bank Minnesota, National Association),
6.5%, 1-6-00 .......................... $ 2,000 $ 2,000,000
Indiana _ 1.50%
City of Whiting, Indiana, Industrial Sewage
and Solid Waste Disposal Revenue Bonds, Taxable
Series 1995 (Amoco Oil Company Project),
6.2%, 1-11-00 ......................... 12,200 12,200,000
Kentucky - 1.48%
City of Bardstown, Kentucky, Taxable Variable Rate
Demand Industrial Revenue Bonds:
Series 1994 (R.J. Tower Corporation Project),
(Comerica Bank),
6.55%, 1-6-00 ......................... 8,035 8,035,000
Series 1995 (R.J. Tower Corporation Project),
(Comerica Bank),
6.55%, 1-6-00 ......................... 4,000 4,000,000
Total ................................. 12,035,000
Louisiana _ 10.14%
Industrial Development Board of the Parish
Of Calcasieu, Inc., Environmental Revenue
Bonds (CITGO Petroleum Corporation Project),
Series 1996 (Taxable), (Westdeutsche
Landesbank Girozentrale):
6.0%, 1-14-00 ......................... 20,000 20,000,000
6.0%, 1-20-00 ......................... 13,000 13,000,000
Industrial District No. 3 of the Parish of West
Baton Rouge, State of Louisiana, Variable Rate
Demand Revenue Bonds, Series 1995 (Taxable),
(The Dow Chemical Company Project):
6.25%, 1-26-00 ........................ 21,150 21,150,000
6.07%, 1-21-00 ........................ 10,000 10,000,000
Gulf Coast Industrial Development Authority,
Environmental Facilities Revenue Bonds
(CITGO Petroleum Corporation Project), Taxable
Series 1998 (Royal Bank of Canada),
6.25%, 1-26-00 ........................ 18,200 18,200,000
Total ................................. 82,350,000
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1999
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
Massachusetts - 0.48%
Massachusetts Industrial Finance Agency, Taxable
Revenue Bonds (Southcoast Nursing and
Rehabilitation Center Partnership Issue -
Series 1997), (Fleet National Bank),
6.8%, 1-5-00 .......................... $ 3,900 $ 3,900,000
Mississippi - 0.74%
Mississippi Business Finance Corporation,
Taxable Adjustable Mode, Industrial Development
Revenue Bonds (BenchCraft Project), Series 1999
(Wachovia Bank, N.A.),
6.49%, 1-5-00 ......................... 6,000 6,000,000
New Jersey _ 1.49%
New Jersey Economic Development Authority,
Federally Taxable Variable Rate Demand/
Fixed Rate Revenue Bonds (The Morey
Organization, Inc. Project), Series of 1997
(First Union National Bank),
6.8%, 1-5-00........................... 12,135 12,135,000
New York _ 2.56%
The City of New York, General Obligation Bonds,
Fiscal 1995 Series B, Taxable Adjustable Rate
Bonds (Bayerische Landesbank Girozentrale,
New York Branch),
5.8%, 2-1-00 .......................... 10,000 10,000,000
Dutchess County Industrial Development Agency,
Taxable Variable Rate Demand Civic Facility
Revenue Bonds, Series 1999-C (St. Francis'
Hospital, Poughkeepsie, New York Civic Facility),
(The Bank of New York),
6.5%, 1-6-00 .......................... 4,000 4,000,000
Putnam Hospital Center, Multi-Mode Revenue Bonds,
Series 1999 (The Bank of New York),
6.5%, 1-5-00 .......................... 3,500 3,500,000
Town of Hempstead, Industrial Development Agency,
Variable Rate Demand Taxable Industrial
Development Revenue Bonds, Series 1996
(1500 Hempstead TPK, LLC Facility), (The
Bank of New York),
6.5%, 1-6-00 .......................... 3,260 3,260,000
Total ................................. 20,760,000
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1999
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
North Carolina - 0.22%
Wake Forest University, Taxable Variable Rate
Demand Bonds, Series 1997 (Wachovia Bank, N.A.),
6.49%, 1-5-00 ......................... $ 1,800 $ 1,800,000
Pennsylvania _ 2.80%
Montgomery County Industrial Development
Authority, Federally Taxable Variable
Rate Demand Revenue Bonds (Neose
Technologies, Inc. Project), Series
B of 1997 (First Union National Bank),
6.8%, 1-5-00 .......................... 10,960 10,960,000
Berks County Industrial Development Authority
(Commercial Facilities Project), Series
B of 1995 (First Union National Bank),
6.8%, 1-5-00 .......................... 8,145 8,145,000
Philadelphia Authority for Industrial Development,
Variable/Fixed Rate Federally Taxable
Economic Development Bonds (Mother's Work, Inc.),
Series of 1995 (Fleet Financial Group Inc.),
6.75%, 1-5-00 ......................... 3,635 3,635,000
Total ................................. 22,740,000
Texas _ 1.52%
Metrocrest Hospital Authority, Series 1989A
(The Bank of New York),
5.63%, 3-7-00 ......................... 12,500 12,370,952
Virginia - 0.76%
Virginia Health Services, Inc., Taxable
Variable Rate Demand Bonds, Series 1998
(Wachovia Bank, N.A.),
6.49%, 1-5-00 ......................... 6,200 6,200,000
Washington - 1.79%
Wenatchee Valley Clinic, P.S.,
Floating Rate Taxable Bonds, Series 1998
(U.S. Bank National Association),
6.5%, 1-6-00 .......................... 14,500 14,500,000
TOTAL MUNICIPAL OBLIGATIONS _ 30.90% $250,990,952
(Cost: $250,990,952)
OTHER GOVERNMENT SECURITY - 1.22%
Commercial Paper (backed by irrevocable bank
letter of credit)
Mexico
United Mexican States (Barclays Bank PLC),
6.08%, 2-1-00 ......................... 10,000 $ 9,947,644
(Cost: $9,947,644)
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
DECEMBER 31, 1999
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITY - 1.11%
Federal Home Loan Bank,
6.163%, 1-5-00 ........................ $ 9,000 $ 9,000,000
(Cost: $9,000,000)
TOTAL INVESTMENT SECURITIES _ 99.79% $810,443,758
(Cost: $810,443,758)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.21% 1,677,064
NET ASSETS - 100.00% $812,120,822
Notes to Schedule of Investments
Cost of investments owned is the same as that used for Federal income
tax purposes.
See Note 1 to financial statements for security valuation and other
significant accounting policies concerning investments.
UNITED CASH MANAGEMENT, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities - at value (Note 1) ........ $810,444
Cash ............................................ 867
Receivables:
Fund shares sold ................................ 9,220
Interest ........................................ 6,029
Prepaid insurance premium ........................ 21
--------
Total assets .................................. 826,581
--------
Liabilities
Payable to Fund shareholders ..................... 10,637
Dividends payable ................................ 3,545
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 236
Accrued management fee (Note 2) .................. 8
Accrued accounting services fee (Note 2) ......... 7
Accrued service fee (Note 2) ..................... 2
Other ............................................ 25
--------
Total liabilities ............................. 14,460
--------
Total net assets ............................. $812,121
========
Net Assets
$0.01 par value capital stock, authorized -- 5,000,000;
Class A shares outstanding _ 800,130
Class B shares outstanding _ 2,638
Class C shares outstanding _ 160
Waddell & Reed Money Market Class B shares
outstanding _ 8,641
Waddell & Reed Money Market Class C shares
outstanding _ 552
Capital stock ................................... $ 8,121
Additional paid-in capital ...................... 804,000
--------
Net assets applicable to outstanding
units of capital ............................. $812,121
========
Net asset value, redemption and offering price
per share for all classes ........................ $1.00
=====
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended DECEMBER 31, 1999
(In Thousands)
Investment Income
Interest and amortization (Note 1B) .............. $20,368
-------
Expenses (Note 2):
Investment management fee ....................... 1,468
Transfer agency and dividend disbursing:
Class A ........................................ 1,279
Class B ....................................... 1
Class C ....................................... ---
Waddell & Reed Class B ........................ 8
Waddell & Reed Class C ........................ ---
Custodian fees .................................. 38
Accounting services fee ......................... 36
Distribution fee:
Class B ....................................... 3
Class C ....................................... ---
Waddell & Reed Class B ........................ 23
Waddell & Reed Class C ........................ 1
Service fee:
Class B ....................................... 1
Class C ....................................... ---
Waddell & Reed Class B ........................ 7
Waddell & Reed Class C ........................ ---
Legal fees ...................................... 20
Audit fees ...................................... 7
Other ........................................... 177
-------
Total expenses ................................ 3,069
-------
Net investment income ........................ 17,299
-------
Net increase in net assets resulting
from operations ........................... $17,299
=======
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands)
For the For the
six months fiscal year
ended ended
December 31, June 30,
1999 1999
------------ -----------
Increase in Net Assets
Operations:
Net investment income .............. $ 17,299 $ 28,632
-------- --------
Net increase in net assets
resulting from operations ....... 17,299 28,632
-------- --------
Dividends to shareholders
from net investment income:*
Class A ............................ (17,158) (28,425)
Class B ............................ (17) ---
Class C ............................ (1) ---
Waddell & Reed Class B ............. (119) (207)
Waddell & Reed Class C ............. (4) ---
-------- --------
(17,299) (28,632)
-------- --------
Capital share transactions (Note 3) . 140,353 135,314
-------- --------
Total increase ...................... 140,353 135,314
Net Assets
Beginning of period ................. 671,768 536,454
-------- --------
End of period ....................... $812,121 $671,768
======== ========
Undistributed net investment
income ........................... $--- $---
==== ====
*See "Financial Highlights" on pages - .
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six
months For the fiscal year ended June 30,
ended ----------------------------------
12/31/99 1999 1998 1997 1996 1995
-------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
Net investment
income ........... 0.0241 0.0455 0.0484 0.0472 0.0487 0.0465
Less dividends
declared ......... (0.0241)(0.0455)(0.0484)(0.0472)(0.0487)(0.0465)
------ ------ ------ ------ ------ ------
Net asset value,
end of period .... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= ======= =======
Total return........ 2.47% 4.67% 4.93% 4.80% 5.01% 4.74%
Net assets, end of
period (in
millions) ........ $800 $667 $533 $514 $402 $369
Ratio of expenses to
average net
assets ........... 0.83%* 0.83% 0.89% 0.87% 0.91% 0.97%
Ratio of net
investment income
to average net
assets ........... 4.72%* 4.54% 4.84% 4.70% 4.89% 4.68%
*Annualized.
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from 9/9/99*
through
12/31/99
--------
Net asset value,
beginning of
period ........... $1.00
------
Net investment
income ........... 0.0120
Less dividends
declared ......... (0.0120)
------
Net asset value,
end of period .... $1.00
=======
Total return........ 1.21%
Net assets, end of
period (in
millions) ........ $3
Ratio of expenses to
average net
assets ........... 1.65%**
Ratio of net
investment income
to average net
assets ........... 4.25%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from 9/9/99*
through
12/31/99
--------
Net asset value,
beginning of
period ........... $1.00
------
Net investment
income ........... 0.0119
Less dividends
declared ......... (0.0119)
------
Net asset value,
end of period .... $1.00
=======
Total return........ 1.20%
Net assets, end of
period (in
thousands) ....... $160
Ratio of expenses to
average net
assets ........... 1.81%**
Ratio of net
investment income
to average net
assets ........... 4.13%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
Waddell & Reed Money Market Class B Shares*
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the
six For the fiscal period
months year ended June 30, from 9/5/95*
ended --------------------- through
12/31/99 1999 1998 1997 6/30/96
-------- ------ ------ ------ -------
Net asset value,
beginning of
period ........... $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
Net investment
income ........... 0.0196 0.0371 0.0403 0.0407 0.0312
Less dividends
declared ......... (0.0196)(0.0371)(0.0403)(0.0407) (0.0312)
------ ------ ------ ------ ------
Net asset value,
end of period .... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total return........ 2.00% 3.79% 4.10% 4.13% 3.15%
Net assets, end of
period (in
millions) ........ $9 $5 $4 $4 $1
Ratio of expenses to
average net
assets ........... 1.70%***1.60% 1.71% 1.48% 1.88%**
Ratio of net
investment income
to average net
assets ........... 3.90%***3.77% 4.03% 4.14% 3.76%**
*Formerly known as United Cash Management Class B shares.
**Commencement of operations.
***Annualized.
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
Waddell & Reed Money Market Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from 10/7/99*
through
12/31/99
--------
Net asset value,
beginning of
period ........... $1.00
------
Net investment
income ........... 0.0095
Less dividends
declared ......... (0.0095)
------
Net asset value,
end of period .... $1.00
=======
Total return........ 0.96%
Net assets, end of
period (in
thousands) ....... $500
Ratio of expenses to
average net
assets ........... 1.66%**
Ratio of net
investment income
to average net
assets ........... 4.23%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 -- Significant Accounting Policies
United Cash Management, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. Its investment objective is to seek maximum
current income to the extent consistent with stability of principal by
investing in a portfolio of money market instruments meeting specified
quality standards. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Security valuation -- The Fund invests only in money market
securities with maturities or irrevocable put options within 397
days. The Fund uses the amortized cost method of security
valuation which is accomplished by valuing a security at its cost
and thereafter assuming a constant amortization rate to maturity
of any discount or premium.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Securities gains and losses, if
any, are calculated on the identified cost basis. Interest
income is recorded on the accrual basis.
C. Federal income taxes -- It is the Fund's policy to distribute all
of its taxable income and capital gains to its shareholders and
otherwise qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. Accordingly, no
provision has been made for Federal income taxes.
D. Dividends to shareholders -- All of the Fund's net income is
declared and recorded by the Fund as dividends on each day to
shareholders of record at the time of the previous determination
of net asset value. Dividends are declared from the total of net
investment income, plus or minus realized gains or losses on
portfolio securities. Since the Fund does not expect to realize
any long-term capital gains, it does not expect to pay any
capital gains distributions.
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee
is computed daily based on the net asset value at the close of
business. The fee is payable by the Fund at the annual rate of 0.40%
of net assets. The Fund accrues and pays this fee daily.
Pursuant to assignment of the Investment Management Agreement
between the Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed
Investment Management Company ("WRIMCO"), a wholly owned subsidiary of
W&R, serves as the Fund's investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed
Services Company ("WARSCO"), a wholly owned subsidiary of W&R. Under
the agreement, WARSCO acts as the agent in providing accounting
services and assistance to the Fund and pricing daily the value of
shares of the Fund. For these services, the Fund pays WARSCO a
monthly fee of one-twelfth of the annual fee shown in the following
table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
Under the Shareholder Servicing Agreement, with respect to Class
A, Class B, Class C and Waddell & Reed Money Market B shares, the Fund
pays WARSCO a monthly fee of $1.75 for each shareholder account which
was in existence at any time during the prior month and, for Class A
shares, $.75 for each shareholder check it processes. For Waddell &
Reed Money Market C shares, the Fund pays WARSCO a monthly fee equal
to 1/12th of .15 of 1% of the average daily net assets for the
preceding month. The Fund also reimburses W&R and WARSCO for certain
out-of-pocket costs.
The Fund has adopted 12b-1 plans for Class B, Class C, Waddell &
Reed Money Market B and Waddell & Reed Money Market C shares. Under
the plans, the Fund pays W&R daily a distribution fee not to exceed,
on an annual basis, 0.75% of the net assets of the affected class and
a service fee not to exceed, on an annual basis, 0.25% of the net
assets of the affected class. During the period ended December 31,
1999, W&R paid no sales commissions.
A contingent deferred sales charge (_CDSC_) may be assessed
against a shareholder's redemption amount of Class B, Class C, Waddell
& Reed Money Market B and Waddell & Reed Money Market C shares,
respectively, and paid to W&R. The purpose of the deferred sales
charge is to compensate W&R for the costs incurred by W&R in
connection with the sale of Fund shares.
With respect to Class B shares, the amount of the CDSC will be
the following percent of the total amount invested during a calendar
year to acquire the shares or the value of the shares redeemed,
whichever is less. Redemption at any time during the first calendar
year of investment, 5%; the second calendar year, 4%; the third
calendar year, 3%; the fourth calendar year, 3%; the fifth calendar
year, 2%; the sixth calendar year, 1% and thereafter, 0%.
For Waddell & Reed Money Market Class B shares, the amount of the
deferred sales charge will be the following percent of the total
amount invested during a calendar year to acquire the shares or the
value of the shares redeemed, whichever is less. Redemption at any
time during the calendar year of investment and the next calendar year
after the calendar year of investment, 3%; the third calendar year,
2%; the fourth calendar year, 1%; and thereafter, 0%. All investments
made during a calendar year shall be deemed as a single investment
during the calendar year for purposes of calculating the deferred
sales charge.
If Class C shares or Waddell & Reed Money Market Class C shares
are sold within 12 months of buying these shares, a 1% CDSC will be
imposed. The deferred sales charge will not be imposed on shares
representing payment of dividends or distributions during the deferred
sales charge period. During the period ended December 31, 1999, the
Distributor received $330, $178, $6,419 and $23 in deferred sales
charges from Class B, Class C, Waddell & Reed Money Market B and
Waddell & Reed Money Market C shares, respectively.
The Fund paid Directors' fees of $13,158, which are included in
other expenses.
W&R is a subsidiary of Waddell & Reed Financial, Inc., a holding
company, and a direct subsidiary of Waddell & Reed Financial Services,
Inc., a holding company.
NOTE 3 -- Multiclass Operations
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, at the end of the seventh calendar year
following the first year of purchase, 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. A comprehensive discussion
of the terms under which shares of each class are offered is contained
in the Prospectus and the Statement of Additional Information for the
Fund.
Income, non-class specific expenses, and realized and unrealized
gains and losses are allocated daily to each class of shares based on
the value of their relative net assets as of the beginning of each day
adjusted for the prior day's capital share activity.
Transactions in capital stock are summarized below. Dollar
amounts are in thousands. The number of shares transacted during the
periods corresponds to the dollar amounts included in this table
because shares are recorded at $1.00 per share.
For the For the
six months fiscal year
ended ended
December 31, June 30,
1999 1999
------------ ------------
Value issued from sale
of shares:
Class A ............ $1,708,736 $2,528,520
Class B ............. 3,810 ---
Class C ............. 277 ---
Waddell & Reed Class B 7,888 12,293
Waddell & Reed Class C 740 ---
Value issued from
reinvestment of dividends:
Class A ............ 16,150 27,258
Class B ............. 16 ---
Class C ............. 1 ---
Waddell & Reed Class B 119 195
Waddell & Reed Class C 4 ---
Value redeemed:
Class A ............ (1,591,911) (2,421,463)
Class B ............. (1,188) ---
Class C ............. (118) ---
Waddell & Reed Class B (3,979) (11,489)
Waddell & Reed Class C (192) ---
-------- ----------
Increase in
outstanding capital $140,353 $ 135,314
======== ==========
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Cash Management, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United Cash Management, Inc.
(the "Fund") as of December 31, 1999, and the related statement of
operations for the six-month period then ended, the statements of
changes in net assets for the six-month period then ended and the
fiscal year ended June 30, 1999, and the financial highlights for the
six-month period ended December 31, 1999, and for each of the five
fiscal years in the period ended June 30, 1999. These financial
statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on
these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of December 31, 1999, by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of United Cash Management, Inc. as of December 31,
1999, the results of its operations for the six-month period then
ended, the changes in its net assets for the six-month period then
ended and the fiscal year ended June 30, 1999, and the financial
highlights for the six-month period ended December 31, 1999, and for
each of the five fiscal years in the period ended June 30, 1999, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
February 4, 2000
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
BANK OBLIGATIONS
Certificates of Deposit
Domestic - 0.74%
Morgan Guaranty Trust Company of New York,
5.09%, 9-27-99 ........................ $ 5,000 $ 4,999,534
Yankee _ 2.98%
Bank Austria - New York,
5.11%, 4-25-2000 ...................... 10,000 9,988,780
UBS AG - Stamford, Connecticut,
5.35%, 5-30-2000 ...................... 10,000 9,993,101
Total ................................. 19,981,881
Total Certificates of Deposit - 3.72% 24,981,415
Commercial Paper - 1.64%
Wells Fargo & Company,
4.82%, 7-14-99 ........................ 11,000 10,980,854
Commercial Paper (backed by irrevocable bank
letter of credit) - 2.21%
Banco Serfin S.A. (Barclays Bank PLC),
5.32%, 8-26-99 ........................ 15,000 14,875,867
Notes _ 10.06%
Abbey National Treasury Services PLC,
5.64%, 7-15-99 ........................ 10,000 9,998,551
Harris Trust and Savings Bank,
5.05%, 2-17-2000 ...................... 13,000 12,995,739
J.P. Morgan & Co., Incorporated:
4.8425%, 7-7-99 ....................... 10,000 9,999,903
4.9025%, 7-6-2000 ..................... 10,000 9,997,923
Shawmut National Corporation
(Fleet Financial Group Inc.),
8.625%, 12-15-99 ...................... 7,500 7,617,046
Wells Fargo & Company,
5.31%, 4-3-2000 ....................... 17,000 16,981,731
Total ................................. 67,590,893
TOTAL BANK OBLIGATIONS _ 17.63% $118,429,029
(Cost: $118,429,029)
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS
Commercial Paper
Chemicals and Allied Products - 1.48%
Monsanto Company:
4.86%, 7-20-99 ........................ $ 3,000 $ 2,992,305
4.87%, 8-18-99 ........................ 5,000 4,967,533
4.87%, 8-19-99 ........................ 2,000 1,986,743
Total ................................. 9,946,581
Electric, Gas and Sanitary Services _ 10.29%
Central Illinois Light Co.:
5.07%, 7-21-99 ........................ 2,952 2,943,685
5.07%, 7-26-99 ........................ 1,110 1,106,092
5.07%, 7-30-99 ........................ 2,726 2,714,866
Idaho Power Co.,
5.5%, 7-8-99 .......................... 1,785 1,783,091
OGE Energy Corp.:
5.13%, 7-2-99 ......................... 8,500 8,498,789
5.55%, 7-8-99 ......................... 11,550 11,537,536
Questar Corp.:
4.93%, 7-2-99 ......................... 12,000 11,998,357
5.33%, 7-2-99 ......................... 1,000 999,852
4.95%, 7-9-99 ......................... 10,700 10,688,230
5.05%, 7-16-99 ........................ 4,900 4,889,690
Southern California Edison Co.,
4.86%, 7-19-99 ........................ 12,000 11,970,840
Total ................................. 69,131,028
Engineering and Management Services - 1.54%
Halliburton Co.,
5.01%,7-23-99 ......................... 10,400 10,368,159
Food and Kindred Products - 0.03%
General Mills, Inc.,
5.075%, Master Note ................... 170 170,000
Food Stores - 1.94%
Albertson's Inc.,
4.9%, 7-6-99 .......................... 13,000 12,991,153
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Commercial Paper (Continued)
Industrial Machinery and Equipment - 0.74%
Deere & Company,
4.99%, 7-19-99 ........................ $ 5,000 $ 4,987,525
Insurance Carriers - 0.74%
Transamerica Finance Corp.,
4.84%, 7-20-99 ........................ 5,000 4,987,228
Nondepository Institutions _ 4.89%
Associates Financial Services Co. of
Puerto Rico Inc. (Associates Corp. of North America),
4.87%, 8-17-99 ........................ 22,000 21,860,123
General Electric Capital Corporation,
4.86%, 7-15-99 ........................ 6,000 5,988,660
IBM Credit Corp.,
5.125%, 7-1-99 ........................ 5,000 5,000,000
Total ................................. 32,848,783
Paper and Allied Products - 1.56%
Sonoco Products Co.,
5.8%, 7-1-99........................... 2,500 2,500,000
Westvaco Corp.,
4.85%, 7-8-99 ......................... 8,000 7,992,456
Total ................................. 10,492,456
Total Commercial Paper _ 23.21% 155,922,913
Commercial Paper (backed by irrevocable bank
letter of credit)
Chemicals and Allied Products - 1.35%
Formosa Plastics Corp. U.S.A. (Bank of America NT & SA),
4.81%, 7-23-99 ........................ 9,100 9,073,251
Electric, Gas and Sanitary Services - 0.97%
CommEd Fuel Co. Inc. (First National Bank of Chicago),
5.1%, 7-7-99 .......................... 6,532 6,526,448
Oil and Gas Extraction - 2.23%
Louis Dreyfus Corp. (ABN-AMRO Bank N.V.):
4.92%, 7-6-99 ......................... 5,000 4,996,583
4.93%, 7-7-99 ......................... 10,000 9,991,783
Total ................................. 14,988,366
Total Commercial Paper (backed by irrevocable bank
letter of credit) - 4.55% 30,588,065
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Notes
Chemicals and Allied Products - 0.47%
Air Products and Chemicals, Inc.,
8.22%, 12-7-99 ........................ $ 3,100 $ 3,140,684
Electric, Gas and Sanitary Services _ 4.02%
Baltimore Gas and Electic Company,
4.9713%, 9-1-99 ....................... 27,000 26,999,703
General Merchandise Stores - 0.75%
Wal-Mart Stores, Inc.,
5.65%, 2-1-2000 ....................... 5,000 5,015,145
Insurance Carriers - 1.26%
Atlantic American Corporation (Wachovia Bank, N.A.),
5.22%, 7-7-99 ......................... 8,500 8,500,000
Motion Pictures - 1.49%
Walt Disney Company (The),
5.6%, 4-17-2000 ....................... 10,000 10,027,382
Nondepository Institutions - 11.48%
American General Finance Corporation,
7.2%, 7-15-99 ......................... 1,800 1,801,463
Associates Corp. of North America,
5.0965%, 7-29-99 ...................... 8,500 8,494,925
Caterpillar Financial Services Corp.:
5.93%, 6-1-2000 ....................... 7,500 7,542,398
8.875%, 6-1-2000 ...................... 3,000 3,094,403
Deere (John) Capital Corp.,
6.43%, 8-9-99 ......................... 10,000 10,006,614
Ford Motor Credit Company,
8.375%, 1-15-2000 ..................... 9,000 9,147,964
General Electric Capital Corporation,
6.66%, 5-1-2000 ....................... 8,700 8,772,590
General Motors Acceptance Corporation:
8.4%, 10-15-99 ........................ 10,270 10,358,044
7.875%, 3-15-2000 ..................... 2,700 2,750,233
6.875%, 6-7-2000 ...................... 10,000 10,109,525
Norwest Financial Inc.,
6.2%, 9-15-99 ......................... 5,000 5,010,877
Total ................................. 77,089,036
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
CORPORATE OBLIGATIONS (Continued)
Notes (Continued)
Real Estate - 0.20%
Trap Rock Industries, Inc. (First Union National Bank),
5.3%, 7-7-99 .......................... $ 1,330 $ 1,330,000
Total Notes _ 19.67% 132,101,950
TOTAL CORPORATE OBLIGATIONS _ 47.43% $318,612,928
(Cost: $318,612,928)
MUNICIPAL OBLIGATIONS
California _ 10.42%
California Pollution Control Financing Authority,
Environmental Improvement Revenue Bonds:
Shell Martinez Refining Company Project,
Series 1996 (Taxable) (Shell Oil Company):
4.93%, 7-1-99 ......................... 23,000 23,000,000
4.92%, 7-14-99 ........................ 5,000 5,000,000
Air Products and Chemicals, Inc./ Wilmington
Facility, Taxable Series 1997A (Air Products
and Chemicals, Inc.),
5.0%, 7-7-99 .......................... 13,000 13,000,000
City of Anaheim, California, Certificates
of Participation (1993 Arena Financing
Project), Municipal Adjustable Rate
Taxable Securities (Credit Suisse),
5.075%, 8-11-99 ....................... 21,000 21,000,000
Oakland-Alameda County Coliseum Authority,
Lease Revenue Bonds (Oakland Coliseum Arena
Project), 1996 Series A-1 Variable Rate Lease
Revenue Bonds (Taxable) (Canadian Imperial Bank of
Commerce),
5.0%, 8-3-99 .......................... 8,000 8,000,000
Total ................................. 70,000,000
Colorado _ 0.98%
Panorama Metropolitan District, Arapahoe
County, Colorado (Taxable/Tax Exempt),
Series 1997A (Banque Nationale de Paris,
San Francisco Branch),
5.65%, 12-1-99 ........................ 4,575 4,575,000
Kit Carson County, Colorado, Architectural
Development Revenue Bonds (Taxable), (Midwest
Farms, L.L.C. Project), Series 1997 (Norwest
Bank Minnesota, National Association),
5.35%, 7-1-99 ......................... 2,000 2,000,000
Total ................................. 6,575,000
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
Indiana _ 3.77%
City of Whiting, Indiana, Industrial Sewage
and Solid Waste Disposal Revenue Bonds, Taxable
Series 1995 (Amoco Oil Company Project):
4.93%, 7-1-99 ......................... $16,000 $ 16,000,000
4.9%, 7-14-99 ......................... 9,300 9,300,000
Total ................................. 25,300,000
Kentucky - 1.79%
City of Bardstown, Kentucky, Taxable Variable Rate
Demand Industrial Revenue Bonds:
Series 1994 (R.J. Tower Corporation Project),
(Comerica Bank),
5.15%, 7-1-99 ......................... 8,035 8,035,000
Series 1995 (R.J. Tower Corporation Project),
(Comerica Bank),
5.15%, 7-1-99 ......................... 4,000 4,000,000
Total ................................. 12,035,000
Louisiana _ 10.64%
Industrial Development Board of the Parish
Of Calcasieu, Inc., Environmental Revenue
Bonds (CITGO Petroleum Corporation Project),
Series 1996 (Taxable) (West Deutsche Bank),
5.25%, 7-29-99 ........................ 31,800 31,800,000
Industrial District No. 3 of the Parish of West
Baton Rouge, State of Louisiana, Variable Rate
Demand Revenue Bonds Series 1995 (Taxable),
(The Dow Chemical Company Project),
5.1%, 8-5-99 .......................... 23,200 23,200,000
Gulf Coast Industrial Development Authority,
Environmental Facilities Revenue Bonds
(CITGO Petroleum Corporation Project), Taxable
Series 1998 (Royal Bank of Canada),
4.92%, 7-7-99 ......................... 16,500 16,500,000
Total ................................. 71,500,000
New Jersey _ 1.90%
New Jersey Economic Development Authority,
Federally Taxable Variable Rate Demand/
Fixed Rate Revenue Bonds (The Morey
Organization, Inc. Project), Series of 1997
(First Union National Bank),
5.3%, 7-7-99........................... 12,775 12,775,000
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
New York _ 1.99%
The City of New York, General Obligation Bonds,
Fiscal 1995 Series B, Taxable Adjustable Rate
Bonds (Bayerische Landesbank Girozentrale,
New York Branch),
5.145%, 8-5-99 ........................ $10,000 $ 10,000,000
Town of Hempstead, Industrial Development Agency,
Variable Rate Demand Taxable Industrial
Development Revenue Bonds, Series 1996
(1500 Hempstead TPK, LLC Facility), (The
Bank of New York),
5.19%, 7-1-99 ......................... 3,370 3,370,000
Total ................................. 13,370,000
North Carolina - 0.27%
Wake Forest University, Taxable Variable Rate
Demand Bonds, Series 1997 (Wachovia Bank, N.A.),
5.22%, 7-7-99 ......................... 1,800 1,800,000
Pennsylvania _ 3.41%
Montgomery County Industrial Development
Authority, Federally Taxable Variable
Rate Demand Revenue Bonds (Neose
Technologies, Inc. Project), Series
B of 1997 (First Union National Bank),
5.3%, 7-7-99 .......................... 11,035 11,035,000
Berks County Industrial Development Authority
(Commercial Facilities Project), Series
B of 1995 (First Union National Bank),
5.2%, 7-7-99 .......................... 8,160 8,160,000
Philadelphia Authority for Industrial Development,
Variable/Fixed Rate Federally Taxable
Economic Development Bonds (Mother's Work, Inc.),
Series of 1995 (Fleet Financial Group Inc.),
5.2%, 7-7-99 .......................... 3,730 3,730,000
Total ................................. 22,925,000
Texas _ 2.37%
Metrocrest Hospital Authority, Series 1989A
(The Bank of New York),
4.993%, 8-2-99 ........................ 16,000 15,928,988
See Notes to Schedule of Investments on page .
THE INVESTMENTS OF
UNITED CASH MANAGEMENT, INC.
JUNE 30, 1999
Principal
Amount in
Thousands Value
MUNICIPAL OBLIGATIONS (Continued)
Washington - 2.19%
Wenatchee Valley Clinic, P.S.,
Floating Rate Taxable Bonds, Series 1998
(U.S. Bank National Association),
5.2%, 7-1-99 .......................... 14,700 14,700,000
TOTAL MUNICIPAL OBLIGATIONS _ 39.73% $266,908,988
(Cost: $266,908,988)
UNITED STATES GOVERNMENT SECURITY - 0.30%
Federal Farm Credit Bank,
5.24%, 9-29-99 ........................ 2,000 $ 2,000,000
(Cost: $2,000,000)
TOTAL INVESTMENT SECURITIES _ 105.09% $705,950,945
(Cost: $705,950,945)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (5.09%) (34,182,639)
NET ASSETS - 100.00% $671,768,306
Notes to Schedule of Investments
Cost of investments owned is the same as that used for Federal income
tax purposes.
See Note 1 to financial statements for security valuation and other
significant accounting policies concerning investments.
UNITED CASH MANAGEMENT, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities - at value (Note 1) ........ $705,951
Receivables:
Fund shares sold ................................ 6,193
Interest ........................................ 4,273
Prepaid insurance premium ........................ 18
--------
Total assets .................................. 716,435
--------
Liabilities
Payable to Fund shareholders ..................... 42,033
Due to custodian ................................. 2,044
Dividends payable ................................ 273
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 202
Accrued management fee (Note 2) .................. 8
Accrued accounting services fee (Note 2) ......... 6
Accrued service fee (Note 2) ..................... 1
Other ............................................ 100
--------
Total liabilities ............................. 44,667
--------
Total net assets ............................. $671,768
========
Net Assets
$0.01 par value capital stock, authorized -- 5,000,000;
Class A shares outstanding _ 667,155
Class B shares outstanding _ 4,613
Capital stock ................................... $ 6,718
Additional paid-in capital ...................... 665,050
--------
Net assets applicable to outstanding
units of capital ............................. $671,768
========
Net asset value, redemption and offering price
per share for Class A and Class B ................ $1.00
=====
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended JUNE 30, 1999
(In Thousands)
Investment Income
Interest and amortization (Note 1B) .............. $33,893
-------
Expenses (Note 2):
Investment management fee ....................... 2,476
Transfer agency and dividend disbursing -
Class A ........................................ 2,242
Class B ....................................... 7
Custodian fees .................................. 106
Accounting services fee ......................... 70
Distribution fee - Class B ...................... 43
Service fee - Class B ........................... 12
Audit fees ...................................... 11
Legal fees ...................................... 8
Other ........................................... 286
-------
Total expenses ................................ 5,261
-------
Net investment income ........................ 28,632
-------
Net increase in net assets resulting
from operations ........................... $28,632
=======
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands)
For the fiscal year ended
June 30,
-------------------------
1999 1998
------------- ------------
Increase in Net Assets
Operations:
Net investment income .............. $ 28,632 $ 25,050
---------- ----------
Net increase in net assets
resulting from operations ....... 28,632 25,050
---------- ----------
Dividends to shareholders
from net investment income:*
Class A ............................ (28,425) (24,935)
Class B ............................ (207) (115)
---------- ----------
(28,632) (25,050)
---------- ----------
Capital share transactions:**
Proceeds from sale of shares:
Class A .......................... 2,528,520 3,626,568
Class B .......................... 12,293 7,455
Proceeds from reinvestment
of dividends:
Class A .......................... 27,258 23,831
Class B .......................... 195 109
Payments for shares redeemed:
Class A .......................... (2,421,463) (3,631,832)
Class B .......................... (11,489) (7,470)
---------- ----------
Net increase in net assets
resulting from capital
share transactions .............. 135,314 18,661
---------- ----------
Total increase .................. 135,314 18,661
Net Assets
Beginning of period ................. 536,454 517,793
---------- ----------
End of period ....................... $ 671,768 $ 536,454
========== ==========
Undistributed net investment
income ........................... $--- $---
==== ====
*See "Financial Highlights" on pages - .
**The number of shares transacted during the periods corresponds to
the amounts included in this statement because shares are recorded
at $1.00 per share.
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the fiscal year ended June 30,
------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------
Net investment
income ........... 0.0455 0.0484 0.0472 0.0487 0.0465
Less dividends
declared ......... (0.0455)(0.0484)(0.0472)(0.0487)(0.0465)
------ ------ ------ ------ ------
Net asset value,
end of period .... $1.00 $1.00 $1.00 $1.00 $1.00
======= ======= ======= ======= =======
Total return........ 4.67% 4.93% 4.80% 5.01% 4.74%
Net assets, end of
period (in
millions) ........ $667 $533 $514 $402 $369
Ratio of expenses to
average net
assets ........... 0.83% 0.89% 0.87% 0.91% 0.97%
Ratio of net
investment income
to average net
assets ........... 4.54% 4.84% 4.70% 4.89% 4.68%
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
For the fiscal period
year ended June 30, from 9/5/95*
--------------------- through
1999 1998 1997 6/30/96
------ ------ ------ -------
Net asset value,
beginning of
period ........... $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------
Net investment
income ........... 0.0371 0.0403 0.0407 0.0312
Less dividends
declared ......... (0.0371)(0.0403)(0.0407) (0.0312)
------ ------ ------ ------
Net asset value,
end of period .... $1.00 $1.00 $1.00 $1.00
======= ======= ======= =======
Total return........ 3.79% 4.10% 4.13% 3.15%
Net assets, end of
period (in
millions) ........ $5 $4 $4 $1
Ratio of expenses to
average net
assets ........... 1.60% 1.71% 1.48% 1.88%**
Ratio of net
investment income
to average net
assets ........... 3.77% 4.03% 4.14% 3.76%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
UNITED CASH MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1 -- Significant Accounting Policies
United Cash Management, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. Its investment objective is to seek maximum
current income to the extent consistent with stability of principal by
investing in a portfolio of money market instruments meeting specified
quality standards. The following is a summary of significant
accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Security valuation -- The Fund invests only in money market
securities with maturities or irrevocable put options within 397
days. The Fund uses the amortized cost method of security
valuation which is accomplished by valuing a security at its cost
and thereafter assuming a constant amortization rate to maturity
of any discount or premium.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order
to buy or sell is executed). Securities gains and losses, if
any, are calculated on the identified cost basis. Interest
income is recorded on the accrual basis.
C. Federal income taxes -- It is the Fund's policy to distribute all
of its taxable income and capital gains to its shareholders and
otherwise qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. Accordingly, no
provision has been made for Federal income taxes.
D. Dividends to shareholders -- All of the Fund's net income is
declared and recorded by the Fund as dividends on each day to
shareholders of record at the time of the previous determination
of net asset value. Dividends are declared from the total of net
investment income, plus or minus realized gains or losses on
portfolio securities. Since the Fund does not expect to realize
any long-term capital gains, it does not expect to pay any
capital gains distributions.
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ
from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee
is computed daily based on the net asset value at the close of
business. Until June 30, 1999, the fee consisted of a "Group" fee
computed each day on the combined net asset values of all of the funds
in the United Group of mutual funds at annual rates of .51% of the
first $750 million of combined net assets, .49% on that amount between
$750 million and $1.5 billion, .47% between $1.5 billion and $2.25
billion, .45% between $2.25 billion and $3 billion, .43% between $3
billion and $3.75 billion, .40% between $3.75 billion and $7.5
billion, .38% between $7.5 billion and $12 billion, and .36% of that
amount over $12 billion. Beginning June 30, 1999, the fee is payable
by the Fund at the annual rate of 0.40% of net assets. The Fund
accrues and pays this fee daily.
Pursuant to assignment of the Investment Management Agreement
between the Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed
Investment Management Company ("WRIMCO"), a wholly owned subsidiary of
W&R, serves as the Fund's investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed
Services Company ("WARSCO"), a wholly owned subsidiary of W&R. Under
the agreement, WARSCO acts as the agent in providing accounting
services and assistance to the Fund and pricing daily the value of
shares of the Fund. For these services, the Fund pays WARSCO a
monthly fee of one-twelfth of the annual fee shown in the following
table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
The Fund also pays WARSCO a monthly per account charge of $1.75
for each shareholder account which was in existence at any time during
the prior month and $0.75 for each shareholder check it processed.
The Fund also reimburses W&R and WARSCO for certain out-of-pocket
costs.
The Fund has adopted a 12b-1 plan for Class B shares under which
W&R, principal underwriter and sole distributor of the Fund's shares,
is compensated in an amount calculated and payable daily up to 1%
annually of the Fund's average daily net assets for Class B shares.
This fee consists of two elements: (i) up to 0.75% may be paid to the
Distributor (W&R) for distribution services and distribution expenses
including commissions paid by the Distributor to its sales
representatives and managers and (ii) up to 0.25% may be paid to
reimburse the Distributor for continuing payments made to the
Distributor's representatives and managers, its administrative costs
in overseeing these payments, and the expenses of WARSCO in providing
certain personal services to shareholders. During the period ended
June 30, 1999, W&R paid no sales commissions.
A contingent deferred sales charge may be assessed against a
shareholder's redemption amount of Class B shares and paid to the
Distributor, W&R. The purpose of the deferred sales charge is to
compensate the Distributor for the costs incurred by the Distributor
in connection with the sale of Fund shares. The amount of the
deferred sales charge will be the following percent of the total
amount invested during a calendar year to acquire the shares or the
value of the shares redeemed, whichever is less. Redemption at any
time during the calendar year of investment and the first full
calendar year after the calendar year of investment, 3%; the second
full calendar year, 2%; the third full calendar year, 1%; and
thereafter, 0%. All investments made during a calendar year shall be
deemed as a single investment during the calendar year for purposes of
calculating the deferred sales charge. The deferred sales charge will
not be imposed on shares representing payment of dividends or
distributions or on amounts which represent an increase in the value
of the shareholder's account resulting from capital appreciation above
the amount paid for shares purchased during the deferred sales charge
period. During the period ended June 30, 1999, the Distributor
received $21,305 in deferred sales charges.
The Fund paid Directors' fees of $22,765, which are included in
other expenses.
W&R is a subsidiary of Waddell & Reed Financial, Inc., a holding
company, and a direct subsidiary of Waddell & Reed Financial Services,
Inc., a holding company.
NOTE 3 -- Multiclass Operations
On September 5, 1995, the Fund was authorized to offer investors
two classes of shares, Class A and Class B, each of which has equal
rights as to assets and voting privileges. Class A shares are not
subject to a sales charge on purchases or a contingent deferred sales
charge on redemption; they are not subject to a Rule 12b-1 Service
Plan. A comprehensive discussion of the terms under which shares of
either class are offered is contained in the Prospectus and the
Statement of Additional Information for the Fund.
Income and non-class specific expenses are allocated daily to
each class of shares based on the value of relative net assets as of
the beginning of each day adjusted for the prior day's capital share
activity.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Cash Management, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United Cash Management, Inc.
(the "Fund") as of June 30, 1999, and the related statement of
operations for the fiscal year then ended, the statements of changes
in net assets for each of the two fiscal years in the period then
ended, and the financial highlights for each of the five fiscal years
in the period then ended. These financial statements and the
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned as of June 30, 1999, by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of United Cash Management, Inc. as of June 30,
1999, the results of its operations for the fiscal year then ended,
the changes in its net assets for each of the two fiscal years in the
period then ended, and the financial highlights for each of the five
fiscal years in the period then ended in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP
Kansas City, Missouri
August 6, 1999
REGISTRATION STATEMENT
PART C
OTHER INFORMATION
23. Exhibits: United Cash Management, Inc.
(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 filed by EDGAR on July 2, 1999 as EX-
99.B(a)cmartsup to Post-Effective Amendment No. 34 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 filed by EDGAR on July 2, 1999 as EX-
99.B(b)cmbylaw2 to Post-Effective Amendment No. 34 to the
Registration Statement on Form N-1A*
(c) Not applicable
(d) Investment Management Agreement, as amended, filed by EDGAR
on July 7, 1995 as Exhibit EX-99.B(5)-cmima 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, filed by EDGAR on July 2, 1999 as EX-
99.B(d)cmimafee to Post-Effective Amendment No. 34 to the
Registration Statement on Form N-1A*
(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*
Custodian Agreement, as amended, attached hereto as EX-
99.B(g)cmca
(h) 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*
<PAGE>
Fund NAV Application, filed by EDGAR on July 7, 1995 as
Exhibit EX-99.B9-cmappnav to Post-Effective Amendment No. 28
to the Registration Statement on Form N-1A*
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*
Compensation Table (Exhibit B) to Shareholder Servicing
Agreement filed by EDGAR on August 30, 1999 as EX-
99.B(h)cmssacom to Post-Effective Amendment No. 60 to the
Registration Statement on Form N-1A*
Fidelity Bond Coverage (Exhibit C), as amended, to the
Shareholder Servicing Agreement filed by EDGAR on August 30,
1999 as EX-99.B(h)cmssafid to Post-Effective Amendment No.
60 to the Registration Statement on Form N-1A*
Fund Application, (Non-Retirement Plan), as amended,
attached hereto as Exhibit EX-99.B(h)cmappnon
Fund Application (Retirement Plan) attached hereto as EX-
99.B(h)cmappabc
Fund Application (Institutional) attached hereto as EX-
99.B(h)asappnav
Fund Application (Legend Non-Retirement) attached hereto as
EX-99.B(h)cmapplegnon
Fund Application (Legend Retirement) attached hereto as EX-
99.B(h)cmapplegabc
(i) Opinion and Consent of Counsel attached hereto as EX-
99.B(i)cmlegopn
(j) Consent of Deloitte & Touche LLP, Independent Accountants,
attached hereto as EX-99.B(j)cmconsnt
(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 B shares filed by
EDGAR on August 30, 199 as EX-99.B(m)cmdspb to Post-
Effective Amendment No. 60 to the Registration Statement on
Form N-1A*
Distribution and Service Plan for Class C shares filed by
EDGAR on August 30, 1999 as EX-99.B(m)cmdspc to Post-
Effective Amendment No. 60 to the Registration Statement on
Form N-1A*
Distribution and Service Plan for United Cash Management,
Inc. for Waddell & Reed Money Market B shares filed by EDGAR
on August 30, 1999 as EX-99.B(m)cmdspmmb to Post-Effective
<PAGE>
Amendment No. 60 to the Registration Statement on Form N-1A*
Distribution and Service Plan for United Cash Management,
Inc. for Waddell & Reed Money Market C shares filed by EDGAR
on August 30, 1999 as EX-99.B(m)cmdspmmc to Post-Effective
Amendment No. 60 to the Registration Statement on Form N-1A*
(n) Not applicable
(o) Multiple Class Plan, as amended, attached hereto as Exhibit
EX-99.B(o)cmmcp
(p) Code of Ethics attached hereto as EX-99.B(p)cmcode
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.
Registrant undertakes to carry out all indemnification provisions of
its Articles of Incorporation, Bylaws, and the above-described
contracts in accordance with the Investment Company Act Release No.
11330 (September 4, 1980) and successor releases.
Insofar as indemnification for liability arising under the 1933 Act,
as amended, may be provided to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment of the Registrant of expenses incurred or paid
by a director, officer of controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
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 &
<PAGE>
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 Municipal High Income Fund, Inc.
United High Income Fund II, Inc.
United Asset Strategy Fund, Inc.
United Small Cap Fund, Inc.
United Tax-Managed Equity Fund, Inc.
Waddell & Reed Funds, Inc.
Advantage I
Advantage II
Advantage Plus
Advantage Gold
(b) The information contained in the underwriter's application on
Form BD as filed on June 16, 2000 SEC No. 8-27030, under the
Securities Exchange Act of 1934, is herein incorporated by
reference.
(c) No compensation was paid by the Registrant to any principal
underwriter who is not an affiliated person of the Registrant or
any affiliated person of such affiliated person.
28. Location of Accounts and Records
--------------------------------
<PAGE>
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. Kristen A. Richards, 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
ASSET STRATEGY FUND, INC., UNITED CASH MANAGEMENT, INC., UNITED CONTINENTAL
INCOME FUND, INC., UNITED FUNDS, 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 SMALL CAP FUND, INC., UNITED TAX-
MANAGED EQUITY FUND, INC., UNITED VANGUARD 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, DANIEL C.
SCHULTE 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: February 9, 2000 /s/Robert L. Hechler
--------------------------
Robert L. Hechler, President
/s/Keith A. Tucker Chairman of the Board February 9, 2000
------------------- -----------------
Keith A. Tucker
/s/Robert L. Hechler President, Principal February 9, 2000
-------------------- Financial Officer and -----------------
Robert L. Hechler Director
/s/Henry J. Herrmann Vice President and February 9, 2000
-------------------- Director -----------------
Henry J. Herrmann
/s/Theodore W. Howard Vice President, Treasurer February 9, 2000
-------------------- and Principal Accounting -----------------
Theodore W. Howard Officer
<PAGE>
/s/James M. Concannon Director February 9, 2000
-------------------- -----------------
James M. Concannon
/s/John A. Dillingham Director February 9, 2000
-------------------- -----------------
John A. Dillingham
/s/David P. Gardner Director February 9, 2000
------------------- -----------------
David P. Gardner
/s/Linda K. Graves Director February 9, 2000
-------------------- -----------------
Linda K. Graves
/s/Joseph Harroz, Jr. Director February 9, 2000
-------------------- -----------------
Joseph Harroz, Jr.
/s/John F. Hayes Director February 9, 2000
-------------------- -----------------
John F. Hayes
/s/Glendon E. Johnson Director February 9, 2000
-------------------- -----------------
Glendon E. Johnson
/s/William T. Morgan Director February 9, 2000
-------------------- -----------------
William T. Morgan
/s/Ronald C. Reimer Director February 9, 2000
-------------------- -----------------
Ronald C. Reimer
/s/Frank J. Ross, Jr. Director February 9, 2000
-------------------- -----------------
Frank J. Ross, Jr.
/s/Eleanor B. Schwartz Director February 9, 2000
-------------------- -----------------
Eleanor B. Schwartz
/s/Frederick Vogel III Director February 9, 2000
-------------------- -----------------
Frederick Vogel III
Attest:
/s/Kristen A. Richards
--------------------------------
Kristen A. Richards
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(b) of the Securities Act of 1933, and the Registrant
has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Overland Park,
and State of Kansas, on the 30th day of June, 2000.
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.
Signatures Title
---------- -----
/s/Keith A. Tucker* Chairman of the Board June 30, 2000
---------------------- ----------------
Keith A. Tucker
/s/Robert L. Hechler* President June 30, 2000
---------------------- Principal Financial Officer ----------------
Robert L. Hechler and Director
/s/Henry J. Herrmann* Vice President and Director June 30, 2000
---------------------- ----------------
Henry J. Herrmann
/s/Theodore W. Howard* Vice President, Treasurer June 30, 2000
---------------------- and Principal Accounting ----------------
Theodore W. Howard Officer
/s/James M. Concannon* Director June 30, 2000
------------------- ----------------
James M. Concannon
/s/John A. Dillingham* Director June 30, 2000
------------------- ----------------
John A. Dillingham
/s/David P. Gardner* Director June 30, 2000
------------------- ----------------
David P. Gardner
/s/Linda K. Graves* Director June 30, 2000
------------------- ----------------
<PAGE>
Linda Graves
/s/Joseph Harroz, Jr.* Director June 30, 2000
------------------- ----------------
Joseph Harroz, Jr.
/s/John F. Hayes* Director June 30, 2000
------------------- ----------------
John F. Hayes
/s/Glendon E. Johnson* Director June 30, 2000
------------------- ----------------
Glendon E. Johnson
/s/William T. Morgan* Director June 30, 2000
------------------- ----------------
William T. Morgan
/s/Ronald C. Reimer* Director June 30, 2000
------------------- ----------------
Ronald C. Reimer
/s/Frank J. Ross, Jr.* Director June 30, 2000
------------------- ----------------
Frank J. Ross, Jr.
/s/Eleanor B. Schwartz* Director June 30, 2000
------------------- ----------------
Eleanor B. Schwartz
/s/Frederick Vogel III* Director June 30, 2000
------------------- ----------------
Frederick Vogel III
*By/s/Kristen A. Richards
--------------------------
Kristen A. Richards
Attorney-in-Fact
ATTEST:/s/Daniel C. Schulte
---------------------------
Daniel C. Schulte
Assistant Secretary
<PAGE>
