United Investors Life Insurance Company
2001 Third Avenue South
P. O. Box 10207
Birmingham, Alabama 35202-0207
June 2, 1997
To our Variable Annuity Contractholders and Variable Life Policyowners:
As an owner of a variable annuity contract or a variable life insurance
policy (each of which is referred to here as a "Policy") issued by United
Investors Life Insurance Company ("United Investors"), you have the right to
instruct United Investors how to vote certain shares of the Portfolios of
TMK/United Funds, Inc., ("Portfolios") at the special meeting of shareholders
to be held on July 24, 1997, at 6300 Lamar Avenue, Overland Park, Kansas
("Meeting").
United Investors, as the legal owner of the Portfolios' shares, is
entitled to vote those shares at the Meeting. As an owner of record on April
30, 1997, of a Policy having all or part of its value invested in shares of a
Portfolio, you have the right to instruct us as to how we should vote the
Portfolio's shares attributable to your Policy.
To assist you in giving us your instructions, we have enclosed the
following: (1) a Notice of Special Meeting of Shareholders; (2) a Proxy
Statement to Shareholders; and (3) an Instruction Card. Please read the Notice
of Special Meeting and Proxy Statement carefully before filling out the
Instruction Card with your voting instructions.
If you do not return the enclosed Instruction Card, United Investors will
vote the shares of the Portfolios attributable to your Policy in the same
proportion as the shares for which we have received instructions. If we
receive your executed Instruction Card and no instruction is indicated on it,
we will vote such shares "For" the Proposals.
You are cordially invited to attend the Meeting. You may, at that time,
alter instructions which you have previously given to us.
YOUR INSTRUCTIONS ARE IMPORTANT. You are urged to complete the enclosed
Instruction Card with your voting instructions and return it promptly in the
enclosed postage-paid envelope. (Please note: if you own more than one
variable Policy, you will receive a separate Instruction Card for each Policy.
Please execute and return each Instruction Card you receive.)
Sincerely,
James L. Sedgwick
President
IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD(S)
IN THE ENCLOSED ENVELOPE
TMK/UNITED FUNDS, INC.
6300 Lamar Avenue Overland Park, Kansas 66202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
July 24, 1997
To Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of
TMK/United Funds, Inc. (the "Fund") will be held at 6300 Lamar Avenue, Overland
Park, Kansas, on July 24, 1997, at 11:00 a.m., or at any adjournment thereof
("Meeting"), for the following purposes:
1. To elect the Board of Directors of the Fund;
2. To ratify the selection of Deloitte & Touche LLP as independent
accountants of the Fund for its current fiscal year;
3. To approve or disapprove changes to certain of the Portfolios'
fundamental investment policies and restrictions; and
4. To transact such other business as may properly come before the
Meeting or any adjournment(s) thereof.
The Board of Directors of the Fund has fixed the close of business on
April 30, 1997 as the record date ("Record Date") for the determination of
Shareholders entitled to notice of and to vote at the Meeting. The number of
shares held by you according to the Fund's records on the record date
determines the number of shares you may vote at the Meeting.
If you attend the meeting, you may vote your shares in person. If you do
not expect to attend the meeting, please complete, date, sign and properly
return the enclosed proxy card(s) in the enclosed postage paid envelope. If
you do not sign and return your proxy card(s), the Portfolios may incur the
additional expense of subsequent mailings in order to have a sufficient number
of cards signed and returned.
Retain this Notice and Proxy Statement. This is a joint Notice and Proxy
Statement for each of the Portfolios of the above-named Fund. The shares you
own in a particular Portfolio may only be voted with respect to that Portfolio.
If you own shares in more than one of the Portfolios listed, please vote with
respect to each Portfolio on the instruction card provided with respect to that
Fund. Please sign, date and return any and all instruction cards that are
mailed to you.
May 30, 1997 By Order of the Board of Directors
SHARON K. PAPPAS, Secretary
TMK/UNITED FUNDS, INC.
6300 Lamar Avenue Overland Park, Kansas 66202
PROXY STATEMENT
INTRODUCTION
This document is a joint proxy statement with respect to TMK/United Funds,
Inc. (the "Fund") furnished in connection with the solicitation of proxies by
the Fund's Board of Directors to be used at the Fund's special meeting of
shareholders ("Meeting") or any adjournment(s) thereof. The Meeting will be
held on July 24, 1997, 11:00 a.m. local time, at 6300 Lamar Avenue, Overland
Park, Kansas, for the purposes set forth in the attached Notice of the Meeting.
This Proxy Statement is being first mailed to shareholders on or about May 30,
1997.
The Fund has eleven series of shares outstanding, each of which represents
a separate investment portfolio, as follows: Money Market Portfolio, Bond
Portfolio, High Income Portfolio, Growth Portfolio, Income Portfolio, Limited-
Term Bond Portfolio, Small Cap Portfolio, International Portfolio, Balanced
Portfolio, Asset Strategy Portfolio and Science and Technology Portfolio.
(These Portfolios are referred to in this Proxy Statement collectively as the
"Portfolios" and individually as a "Portfolio.")
One-third of the shares outstanding on the record date, April 30, 1997
("Record Date"), represented in person or by proxy, of the Fund must be present
for the transaction of business at the Fund's Meeting. In the event that a
quorum is not present or if a quorum is present at the Meeting but sufficient
votes to approve any one of the Proposals are not received, the persons named
as proxies (or their substitutes) may propose one or more adjournments of the
Meeting to permit the further solicitation of proxies. Any adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR such Proposal in favor of an
adjournment and will vote those proxies required to be voted AGAINST such
Proposal against such adjournment. A shareholder vote may be taken on one or
more of the Proposals described in this Proxy Statement prior to any such
adjournment if sufficient votes have been received and it is otherwise
appropriate.
The purpose of this Proxy Statement is to give you information on which
you may base your decisions as to the choices, if any, you make on the enclosed
Instruction Card. This Proxy Statement also contains certain information
regarding the Portfolios, the funds in the United Group of Mutual Funds
("United Group"), which consists of fourteen corporations and four series of
one of those corporations, and the funds in Waddell & Reed Funds, Inc., which
consists of six series. The Fund and each of the funds in the United Group and
Waddell & Reed Funds, Inc. are open-end, management investment companies
managed by Waddell & Reed Investment Management Company ("WRIMCO"), as
described below.
The enclosed Instruction Card authorizes the persons named or their
substitutes ("proxy holders") to represent and direct your voting interest.
You may direct the proxy holders to vote your interest in a Portfolio on a
proposal applicable to that Portfolio by checking the appropriate box "For" or
"Against" or you may instruct them not to vote your interest by checking the
"Abstain" box. If you merely sign, date and return your Instruction Card with
no specific instructions as to a proposal on which you are entitled to vote,
the proxy holders will vote your interest "For" the proposal.
You may revoke your instructions at any time prior to their exercise by
providing written notice of revocation or signing a new and different
Instruction Card, each delivered to the Fund prior to the Meeting, or by
attending the Meeting and voting in person. Attendance at the Meeting will not
in and of itself constitute revocation of your instructions.
Information as to the number of outstanding shares of each Portfolio, as
of the Record Date, is set forth in Exhibit A. A listing of the owners of more
than 5% of the shares of any Portfolio as of April 30, 1997 is set forth in
Exhibit B. To the knowledge of the Fund's management, the executive officers
and Directors of the Fund, as a group, owned less than 1% of the outstanding
shares of each Portfolio as of April 30, 1997.
Each share of a Portfolio is entitled to one vote. Any fractional share
of a Portfolio is entitled to a proportionate share of one vote. The
shareholders of each Portfolio vote separately with respect to each sub-
proposal in Proposal 3 that affects that Portfolio. All shareholders of the
Fund vote together with respect to Proposals 1 and 2.
ANNUAL REPORT
Copies of each Portfolio's most recent annual and semiannual reports have
been sent to shareholders of that Portfolio on or before the mailing of this
Proxy Statement. Shareholders of any Portfolio may obtain, free of charge,
copies of that Portfolio's annual and semiannual reports by writing to Waddell
& Reed, Inc. at 6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission, KS 66201-
9217 or calling (800) 366-5465.
POLICYOWNERS' RIGHT TO INSTRUCT UNITED INVESTORS
The shares of the Portfolios are currently sold only to variable life
insurance separate accounts and variable annuity separate accounts (hereinafter
collectively referred to as the "Variable Accounts") as a funding vehicle for a
variable life insurance policy and a variable annuity policy (collectively, the
"Policies") offered by the Variable Accounts of certain life insurance
companies. As of the date of this Proxy Statement, the only participating life
insurance company is United Investors. Each of the Variable Accounts has
eleven Investment Divisions, the assets of which are invested in the
corresponding Portfolio of the Fund. United Investors is the legal owner of
all shares of the Fund held by the Variable Accounts. In accordance with its
view of currently applicable law, United Investors is soliciting voting
instructions from the owners of the Policies ("Policyowners") with respect to
all matters to be acted upon at the Meeting. Policyowners permitted to give
instructions for a Portfolio and the number of shares for which instructions
may be given will be determined as of the record date for the Meeting. The
number of votes which a Policyowner has the right to instruct will be
calculated separately for each Variable Account. That number will be
determined by applying the Policyowner's percentage interest, if any, in the
Investment Division holding shares of the Portfolio to the total number of
votes attributable to that Investment Division. In connection with its
solicitation of voting instructions, it is understood and expected that United
Investors will furnish a copy of this Proxy Statement to Policyowners. All
shares held by the Variable Accounts will be voted by United Investors in
accordance with voting instructions received from Policyowners. United
Investors will vote shares attributable to the Policies as to which no timely
instructions are received, and any Portfolio shares held by United Investors as
to which Policyowners have no beneficial interest, in proportion to the voting
instructions, including abstentions, which are received with respect to all
Policies participating in that Portfolio.
THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THESE PROPOSALS AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF THEM.
PROPOSAL 1: ELECTION OF DIRECTORS
The persons set forth below have been nominated for election as Directors
of the Fund, and each has consented to his or her nomination and agreed to
serve if elected. Each nominee (except James M. Concannon and John A.
Dillingham) is currently a Director of the Fund. Each current Director serves
pursuant to election by shareholders. If any of the nominees should not be
available for election, the persons named as proxies (or their substitutes) may
vote for other persons in their discretion. Management has no reason to
believe that any nominee will be unavailable for election.
The names of the Fund's Directors, nominees and executive officers, their
respective offices and principal occupations during the last five years are set
forth below.
Directors and Nominees of the Fund
As of the date of this Proxy Statement, six of the Fund's Directors were
"interested persons," as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), of Waddell & Reed Investment Management Company, the
investment manager of each Portfolio ("WRIMCO"), and Waddell & Reed, Inc., the
principal underwriter and distributor of the Policies issued by United
Investors ("W&R"). The Directors who are "interested persons" are indicated as
such by an asterisk. Messrs. Morgan, Richey, and Tucker are interested persons
because they are present or former officers, directors and/or shareholders of
WRIMCO and/or certain of its affiliates. Ms. Graves and Mr. Hayes are
interested persons because of their ownership of shares of Torchmark
Corporation, which indirectly controls WRIMCO and W&R, and because Ms. Graves
is a member of Mr. Richey's immediate family. Mr. Ross is an interested person
because he is a partner in a law firm which has acted as legal counsel for W&R.
Each of the Fund's Directors is also a Director of each of the funds in the
Fund Complex, and each of the Fund's officers listed below is also an officer
of each of the funds in the Fund Complex. For purposes of this section, the
term "Fund Complex" includes the Fund, with its eleven series, each of the
seventeen funds in the United Group, which consists of fourteen corporate
entities, and Waddell & Reed Funds, Inc., with six funds, each of which is
managed by WRIMCO. Waddell & Reed Services Company, an affiliate of W&R and
WRIMCO, is the accounting services agent for each Portfolio.
RONALD K. RICHEY* (age 70) -- Director of the Fund since May 1, 1993;
Chairman of the Board of Directors of the Fund; Chairman of the Board of
Directors of Waddell & Reed Financial Services, Inc., United Investors
Management Company and United Investors Life Insurance Company; Chairman of the
Board of Directors and Chief Executive Officer of Torchmark Corporation;
Chairman of the Board of Directors of Vesta Insurance Group, Inc.; formerly,
Chairman of the Board of Directors of W&R. Father of Linda Graves, Director of
the Fund.
KEITH A. TUCKER* (age 52) -- Director of the Fund since July 17, 1991.
President of the Fund; President, Chief Executive Officer and Director of
Waddell & Reed Financial Services, Inc.; Chairman of the Board of Directors of
WRIMCO, W&R, Waddell & Reed Services Company, Waddell & Reed Asset Management
Company and Torchmark Distributors, Inc., each an affiliate of W&R; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; Director of Southwestern Life Corporation; formerly,
partner in Trivest, a private investment concern; formerly, Director of
Atlantis Group, Inc., a diversified company.
HENRY L. BELLMON (age 75) -- Director of the Fund since February 1, 1991.
Rancher; Professor, Oklahoma State University; formerly, Governor of Oklahoma.
DODDS I. BUCHANAN (age 66) -- Director of the Fund since July 13, 1987.
Advisory Director, The Hand Companies, an actuarial consulting company;
President, Buchanan Ranch Corporation; formerly, Senior Vice President and
Director of Marketing Services, The Meyer Group of Management Consultants;
formerly, Professor and Chairman of Marketing, College of Business, University
of Colorado.
JAMES M. CONCANNON (age 49) -- Dean and Professor of Law, Washburn
University School of Law.
JOHN A. DILLINGHAM (age 58) -- Director and consultant, McDougal
Construction Company; formerly Senior Vice President-Sales and Marketing,
Garney Companies, Inc., a specialty utility contractor.
LINDA GRAVES* (age 43) -- Director of the Fund since July 12, 1995. First
Lady of Kansas; formerly, partner, Levy and Craig, P.C., a law firm. Daughter
of Ronald K. Richey, Chairman of the Board of the Fund.
JOHN F. HAYES* (age 77) -- Director of the Fund since June 28, 1988.
Director, Central Bank and Trust; Director, Central Kansas Bankshares;
Director, Central Properties, Inc.; Chairman, Gilliland & Hayes, P.A., a law
firm; formerly, President, Gilliland & Hayes, P.A.
GLENDON E. JOHNSON (age 73) -- Director of the Fund since July 13, 1987.
Director and Chief Executive Officer of John Alden Financial Corporation and
subsidiaries.
WILLIAM T. MORGAN* (age 69) -- Director of the Fund since July 13, 1987.
Retired; formerly, Chairman of the Board of Directors and President of the Fund
(Mr. Morgan retired as Chairman of the Board of Directors and President of the
Fund on April 30, 1993); formerly, President, Director and Chief Executive
Officer of WRIMCO and W&R; formerly, Chairman of the Board of Directors of
Waddell & Reed Services Company; formerly, Director of Waddell & Reed Asset
Management Company, United Investors Management Company and United Investors
Life Insurance Company, affiliates of W&R.
WILLIAM L. ROGERS (age 50) -- Director of the Fund since November 22,
1996. Principal, Colony Capital, Inc., a real estate-related investment
company; formerly, partner in Trivest, a private investment concern.
FRANK J. ROSS, JR.* (age 44) -- Director of the Fund since November 22,
1996. Partner, Polsinelli, White, Vardeman & Shalton, a law firm.
ELEANOR B. SCHWARTZ (age 60) -- Director of the Fund since July 12, 1995.
Chancellor, University of Missouri-Kansas City; formerly, Interim Chancellor,
University of Missouri-Kansas City.
FREDERICK VOGEL III (age 61) -- Director of the Fund since July 13, 1987.
Retired.
PAUL S. WISE (age 76) -- Director of the Fund since July 13, 1987.
Director of Potash Corporation of Saskatchewan, a fertilizer company.
Based on the recommendation of the Fund's Nominating Committee, at the
meeting of the Board of Directors on April 23, 1997, the Directors of the Fund,
including the Directors who are not "interested persons" of the Fund, as
defined in the 1940 Act ("Independent Directors"), unanimously approved the
nomination of the foregoing persons to serve or continue to serve as Directors,
as applicable, and directed that the election of these nominees be submitted to
Fund shareholders.
The Board of Directors of the Fund met six times during the Fund's fiscal
year ended December 31, 1996. Except for Messrs. Rogers and Ross, who were
elected to the Fund's Board of Directors effective November 22, 1996, each
nominee for re-election as Director attended at least 75% of the meetings of
the Board and each of its committees on which he or she serves during the
Fund's most recent fiscal year.
The Fund has an Audit Committee that reviews and evaluates the audit
function, including recommending to the Directors the independent public
accountants to be selected for the Fund. The Audit Committee currently
consists of Messrs. Buchanan (Chairman) and Vogel and Ms. Schwartz, each of
whom is an Independent Director, and Messrs. Morgan and Hayes. Each was
elected to the Audit Committee on August 30, 1995. The Fund's Audit Committee
met four times during the Fund's most recent fiscal year.
The Fund also has a Nominating Committee that is responsible for the
selection and nomination of the Independent Directors. The Nominating
Committee currently consists of Messrs. Johnson and Wise, each of whom is an
Independent Director. The Fund's Nominating Committee met once during the
Fund's most recent fiscal year. The Nominating Committee generally does not
consider unsolicited Director nominations recommended by Fund policyholders.
Officers and Directors who are affiliated persons of the Fund, as defined
in the 1940 Act, receive no salary, fees, or compensation from the Fund. Each
of the Directors, other than Messrs. Richey and Tucker, receives $44,000 per
year, plus $1,000 for each meeting of the Board of Directors attended, plus
reimbursement of expenses of attending such meeting, and $500 for each
committee meeting attended which is not in conjunction with a Board of
Directors meeting. The fees and reimbursed expenses paid to the Directors are
divided among the Fund, the United Group and Waddell & Reed Funds, Inc.
During the Fund's fiscal year ended December 31, 1996, the Fund's
Directors received the following fees for service as a director:
COMPENSATION TABLE
Total
Aggregate Compensation
Compensation From Fund
From and Fund
Director Fund Complex*
- -------- ------------ ------------
Ronald K. Richey $ 0 $ 0
Keith A Tucker 0 0
Henry L. Bellmon 3,673 49,000
Dodds I. Buchanan 3,673 49,000
Linda Graves 3,673 49,000
John F. Hayes 3,673 49,000
Glendon E. Johnson 3,595 48,000
William T. Morgan 3,673 49,000
William L. Rogers 864 11,000
Frank J. Ross, Jr. 864 11,000
Eleanor B. Schwartz 3,600 48,000
Frederick Vogel III 3,673 49,000
Paul S. Wise 3,673 49,000
*No pension or retirement benefits have been accrued as a part of Fund
expenses.
The officers are paid by WRIMCO or its affiliates.
The Board of Directors of the Fund has created an honorary position of
Director Emeritus. The Director Emeritus policy provides that an incumbent
Director who has attained the age of 75 and was initially elected as a Director
prior to May 31, 1993 may, or if initially elected as a Director on or after
May 31, 1993 must, resign his or her position as a Director and, unless he or
she elects otherwise, will serve as a Director Emeritus provided that the
Director has served as a Director of one or more of the Funds for at least five
years, which need not have been consecutive. A Director Emeritus receives an
annual fee from the Fund in an amount equal to the annual retainer he or she
was receiving at the time he or she resigned as a Director; provided that a
Director initially elected to a Board of Directors on or after May 31, 1993,
receives such annual fee for a period of three years commencing upon the date
the Director began his or her service as a Director Emeritus or in an
equivalent lump sum. 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 has no authority or responsibility with
respect to management of the Fund. Messrs. Jay B. Dillingham and Doyle
Patterson currently serve as Directors Emeritus.
If elected, the Directors will hold office without limit in time except
(a) any Director may resign, (b) any Director may be removed by Policyholders
upon an affirmative vote of a majority of all the shares entitled to be cast
for the election of Directors, and (c) in connection with the Director Emeritus
policy described above.
Executive Officers of the Fund
The executive officers of the Fund, other than those who serve as
Directors, are set forth below. Each executive officer, as such, is an
"interested person" of the Fund. Each executive officer set forth below holds
the same position with the United Group and Waddell & Reed Funds, Inc.
Robert L. Hechler (age 60) -- Vice President and Principal Financial
Officer of the Fund since 1987; Vice President, Chief Operations Officer,
Director and Treasurer of Waddell & Reed Financial Services, Inc.; Executive
Vice President, Principal Financial Officer, Director and Treasurer of WRIMCO;
President, Chief Executive Officer, Principal Financial Officer, Director and
Treasurer of W&R; Director and Treasurer of Waddell & Reed Asset Management
Company; President, Director and Treasurer of Waddell & Reed Services Company;
Vice President, Treasurer and Director of Torchmark Distributors, Inc.
Henry J. Herrmann (age 54) -- Vice President of the Fund since 1987; Vice
President, Chief Investment Officer and Director of Waddell & Reed Financial
Services, Inc.; Director of W&R; President, Chief Executive Officer, Chief
Investment Officer and Director of WRIMCO and Waddell & Reed Asset Management
Company; Senior Vice President and Chief Investment Officer of United Investors
Management Company.
Theodore W. Howard (age 54) -- Vice President, Treasurer and Principal
Accounting Officer of the Fund since 1987; Vice President of Waddell & Reed
Services Company.
Sharon K. Pappas (age 38) -- Secretary of the Fund since 1989, Vice
President of the Fund since 1992, and General Counsel of the Fund since 1994;
Vice President, Secretary and General Counsel of Waddell & Reed Financial
Services, Inc.; Senior Vice President, Secretary and General Counsel of WRIMCO
and W&R; Director, Senior Vice President, Secretary and General Counsel of
Waddell & Reed Services Company; Director, Secretary and General Counsel of
Waddell & Reed Asset Management Company; Vice President, Secretary and General
Counsel of Torchmark Distributors, Inc.; formerly, Assistant General Counsel of
the Fund, WRIMCO, Waddell & Reed Financial Services, Inc., W&R, Waddell & Reed
Asset Management Company and Waddell & Reed Services Company.
Required Vote: The election of Directors of the Fund requires the
favorable vote of the holders of a plurality of the shares cast in person or by
proxy, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL 1.
PROPOSAL 2: RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS THE
FUND'S INDEPENDENT ACCOUNTANTS
Discussion. Deloitte & Touche LLP has been selected by the Board of
Directors, with the approval of the Audit Committee, as the Fund's independent
public accountants for the Fund's current fiscal year. The shareholders of the
Fund are entitled to vote for or against the ratification of the selection of
Deloitte & Touche LLP.
Deloitte & Touche LLP has advised the Fund that neither it nor any of its
partners has any direct or indirect financial interest or connection (other
than as independent accountants) in or with the Fund or any of its affiliates.
Deloitte & Touche LLP has been given the opportunity to make a statement at the
Meeting if it so desires. Deloitte & Touche LLP is not expected to have a
representative present at the Meeting but will be available should any matter
arise requiring its presence.
On November 5, 1996, Price Waterhouse LLP, the then independent
accountants of the Fund, resigned as the independent accountants of the Fund.
Price Waterhouse LLP audited the Fund's financial statements during the Fund's
two most recent fiscal years that ended on or before December 31, 1995, and for
the period from January 1, 1996 through November 5, 1996. During such period,
the Fund did not have any disagreements with Price Waterhouse LLP on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement if not resolved to the
satisfaction of Price Waterhouse LLP would have caused them to make reference
thereto in their report on the financial statements for such periods.
Price Waterhouse LLP did not at any time during the Fund's two most recent
fiscal years, and any subsequent interim period, advise the Fund (i) that
internal controls necessary for the Fund to develop reliable financial
statements did not exist, (ii) that it had received information that led it to
no longer be able to rely on management's representations that made it
unwilling to be associated with the financial statements prepared by
management, (iii) of the need to expand significantly the scope of its audit or
that it had received information that if further investigated may materially
impact the fairness or reliability of a previously issued or subsequent audit
report or the underlying financial statements or cause it to be unwilling to
rely on management's representations or be associated with the financial
statements prepared by management, or (iv) that it had received information
that it concluded materially impacted the fairness or reliability of a
previously issued or subsequent audit report or the underlying financial
statements. Price Waterhouse LLP did not so expand any such audit or conduct
further investigation, and no issues existed which were not resolved to the
accountants' satisfaction prior to resignation.
Required Vote: Approval of this Proposal 2 requires the affirmative vote
of a majority of outstanding securities of the Fund, provided a quorum is
present.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSAL 2.
PROPOSAL 3: APPROVAL OF CHANGES TO CERTAIN FUNDAMENTAL INVESTMENT RESTRICTIONS
AND POLICIES OF EACH PORTFOLIO
The following table identifies generally the proposed changes and
Portfolios affected as discussed further below.
Proposal Action Proposed Portfolio(s) Affected
3.1 Diversification of Assets Modification All Portfolios, except
Asset Strategy Portfolio
3.2 Options, Commodities and Modification All Portfolios, except
Futures Money Market Portfolio
3.3 Pledging of Assets Elimination All Portfolios, except
Money Market and Asset
Strategy Portfolios
3.4 Margin Purchases Modification All Portfolios, except
Money Market Portfolio
3.5 Short Sales Modification All Portfolios, except
Money Market Portfolio
3.6 Arbitrage Transactions Elimination All Portfolios, except
Money Market and Asset
Strategy Portfolios
3.7 Securities Owned by Elimination Asset Strategy Portfolio
Certain Persons
3.8 Loans Modification All Portfolios
Reasons for the Proposed Changes. Pursuant to the 1940 Act, each of the
Portfolios has adopted certain fundamental investment restrictions and
policies, which are set forth in the Fund's prospectus or statement of
additional information, and which may be changed only with shareholder
approval. Restrictions and policies that a Portfolio has not specifically
designated as being fundamental are considered to be "non-fundamental" or
"operating" and may be changed by the Fund's Board of Directors without
shareholder approval.
Certain of the fundamental restrictions that the Portfolios have adopted
in the past reflect business or industry conditions or practices or federal
requirements that are no longer in effect. Other fundamental restrictions
reflect regulatory requirements that remain in effect, but which are not
required to be stated as fundamental, or in some cases even as non-fundamental,
restrictions. Also, as new Portfolios have been created over a period of
years, substantially similar fundamental restrictions often have been phrased
in slightly different ways, sometimes resulting in minor but unintended
differences in effect or potentially giving rise to unintended differences in
interpretation.
Accordingly, the Board of Directors of the Fund has approved revisions to
certain of the Portfolios' fundamental restrictions in order to simplify,
modernize and standardize certain investment restrictions that are required to
be fundamental, and to eliminate certain fundamental restrictions that are not
legally required. In several instances, if an existing fundamental restriction
is eliminated because it is not required to be fundamental, the Portfolio
intends to implement a similar restriction as a non-fundamental, operating
policy.
The Board of Directors believes that eliminating disparities among certain
of the Portfolios' fundamental restrictions will enhance WRIMCO's ability to
manage efficiently and effectively the Portfolios' assets in changing
regulatory and investment environments and will facilitate monitoring of
compliance with fundamental and non-fundamental investment limitations. In
addition, by reducing those policies that can be changed only by shareholder
vote, each Portfolio will be able to avoid the costs and delays associated with
a shareholder meeting when making changes to its investment policies that, at a
future time, the Board of Directors may consider desirable. Although the
proposed changes in fundamental restrictions will allow the Portfolios greater
investment flexibility to respond to future investment opportunities, the Board
of Directors does not anticipate that the changes, individually or in the
aggregate, will result at this time in a material change in the level of
investment risk associated with an investment in any Portfolio.
With respect to investments in options, futures contracts and other
derivative instruments, the Board of Directors determined that the current
policies for certain Portfolios unnecessarily restrict these Portfolios from
taking advantage of potential investment and risk management opportunities and
techniques. The Board of Directors accordingly considered and approved
modifications to certain of the Portfolio's fundamental restrictions, as well
as elimination of certain other fundamental restrictions, that would provide
the Portfolios greater flexibility to attempt to enhance income or yield and to
attempt to hedge their investments through the use of options on securities
(including index options), options on foreign currencies, futures contracts for
the purchase or sale of instruments based on financial indices (including
interest rates or an index of U.S. Government or foreign government securities
or equity or debt securities) and futures contracts on foreign currencies or
debt securities (hereinafter "futures contracts"), and options on futures
contracts, forward contracts, swaps and swap-related products, and indexed
securities. Exhibit C attached hereto sets forth a summary of the features of
options, futures contracts, forward contracts, swaps and certain swap-related
products, and indexed securities, and the potential uses and risks of these
investments.
For certain Portfolios, the Board of Directors has determined that the
Portfolio would benefit from having greater flexibility with respect to
purchasing and selling options, futures contracts and other derivative
instruments. The Board of Directors has concluded that amendment and/or
elimination of the Portfolio's current fundamental investment restrictions
regarding commodities, options, and other derivative instruments as set forth
in sub-proposal 3.2 is in the best interests of each Portfolio and its
shareholders.
The text and a summary description of each proposed change to the affected
Portfolios' fundamental restrictions are set forth below. For purposes of the
discussion of each proposed change, the terms "Portfolio" or "Portfolios" refer
only to those Portfolios named as to which the change applies.
Shareholders should refer to Exhibit D to this Proxy Statement for the
text of the existing fundamental restrictions that are proposed to be amended
or eliminated. Shareholders should note, however, that, for some Portfolios,
certain of the fundamental restrictions that are treated separately below
currently are combined within a single fundamental restriction.
The text below also describes those operating policies that the Portfolios
intend to implement in conjunction with the elimination of fundamental
restrictions under this Proposal 3. To the extent that a current fundamental
investment restriction is replaced by a non-fundamental, operating policy, such
operating policy could in the future be changed by the Fund's Board of
Directors without approval of the affected shareholders, subject to such
disclosure to existing and prospective investors as may be required by law.
If approved by the shareholders of the affected Portfolio, the amendment
or elimination of fundamental investment restrictions shall become operative
concurrently with the effectiveness of an amendment to the Fund's registration
statement describing the same. If a Proposal is not approved as to a
particular Portfolio, the Portfolio's corresponding current investment
restriction will remain unchanged.
3.1 Modification of Fundamental Restriction Regarding Diversification of
Assets
Portfolios to which this change applies: All Portfolios, except Asset
Strategy Portfolio.
Discussion: The diversification requirement contained in the current
investment restriction of each Portfolio (except Asset Strategy Portfolio) is
more restrictive than required under the 1940 Act because the current
restriction applies to 100%, rather than 75%, of the Portfolio's total assets.
Accordingly, this Proposal will increase the amount of each Portfolio's assets
that may be invested in the securities of any one issuer. With respect to 75%
of the value of its total assets, a Portfolio would continue to be prohibited
from (a) investing in the securities of any one issuer in an amount exceeding
5% of the value of the Portfolio's total assets, and (b) owning more than 10%
of the outstanding voting securities of any one issuer. However, the Portfolio
would not be so restricted with respect to 25% of the value of its total
assets. Thus, for example, a Portfolio would be permitted to invest 25% of its
total assets in the securities of one issuer or to invest 10% of its total
assets in the securities of one issuer and 15% in the securities of another
issuer. However, Money Market Portfolio would continue to be subject to, and
operate in compliance with, the diversification requirements of Rule 2a-7 under
the 1940 Act as it is, or in the future may be, in effect.
The greater a Portfolio's holdings of a particular issuer, the greater the
impact that changes in the value of such securities may have on the Portfolio's
total investment portfolio. WRIMCO believes that the proposed amended
fundamental restriction will provide each Portfolio with additional flexibility
in connection with the purchase of portfolio securities, while maintaining full
compliance with the diversification requirements of the 1940 Act.
Proposed Text of Fundamental Investment Restriction: If the shareholders
of a Portfolio approve this sub-proposal 3.1, that Portfolio's current
fundamental restriction regarding diversification of its investments would be
amended to provide that the Portfolio may not:
With respect to 75% of its total assets, purchase securities of any one
issuer (other than cash items and "Government securities" as defined in
the 1940 Act), if immediately after and as a result of such purchase, (a)
the value of the holdings of the Portfolio in the securities of such
issuer exceeds 5% of the value of the Portfolio's total assets, or (b) the
Portfolio owns more than 10% of the outstanding voting securities of such
issuer.
3.2 Modification of Fundamental Restriction Regarding Options, Commodities,
Forward Contracts and/or Futures Contracts
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio.
Discussion: Approval of this sub-proposal 3.2 by the shareholders of a
Portfolio would modify that Portfolio's fundamental investment restriction
regarding investments in commodities and commodity contracts.
If this sub-proposal 3.2 is adopted by the shareholders of a Portfolio,
that Portfolio intends to implement a non-fundamental, operating policy, which
could be changed by the Board of Directors without the approval of shareholders
of the Portfolio, regarding investment in derivative instruments for that
Portfolio, as described below.
The primary purpose of this sub-proposal 3.2 is to authorize each
Portfolio to engage in certain transactions in options, futures contracts, and
other derivative instruments, which will provide the Portfolio greater
flexibility in the management of its investments. WRIMCO believes that it is
desirable for the Portfolios to be able to engage in options, futures contracts
and other derivative instruments in order to enhance income or yield or to
hedge portfolio positions, as may be permitted under applicable law and
regulations and in a manner that is consistent with that Portfolio's goal and
investment policies.
Proposed Fundamental Investment Restriction and New Non-Fundamental,
Operating Policy: The fundamental investment restriction for each Portfolio
(other than Asset Strategy Portfolio) governing options, commodities, futures
contracts and other derivative instruments are proposed to be revised to
provide as follows:
A Portfolio may not purchase or sell physical commodities; however, this
policy shall not prevent a Portfolio from purchasing and selling foreign
currency, futures contracts, options, forward contracts, swaps, caps,
collars, floors and other financial instruments.
The fundamental investment restriction for Asset Strategy Portfolio
governing commodities is proposed to be revised to provide as follows:
The Portfolio may not purchase or sell physical commodities, except that
the Portfolio may purchase and sell precious metals for temporary,
defensive purposes; however, this policy shall not prevent the Portfolio
from purchasing and selling foreign currency, futures contracts, options,
forward contracts, swaps, caps, collars, floors and other financial
instruments.
If the shareholders of a Portfolio approve the modification of its
fundamental restriction as proposed, that Portfolio intends to implement a non-
fundamental, operating policy that provides that:
Generally, the Portfolio may purchase and sell any type of derivative
instrument (including, without limitation, futures contracts, options,
forward contracts, swaps, caps, collars, floors and indexed securities).
However, the Portfolio will only purchase or sell a particular derivative
instrument if the Portfolio is authorized to invest in the type of asset
by which the return on, or value of, the derivative instrument is
primarily measured or, with respect to foreign currency derivatives, if
the Portfolio is authorized to invest in foreign securities.
3.3 Elimination of Fundamental Restrictions Regarding Mortgaging or Pledging
Securities
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio and Asset Strategy Portfolio.
Discussion: The primary purpose of this sub-proposal 3.3 is to permit the
Portfolios to mortgage or pledge their respective securities or other assets
under certain circumstances. If sub-proposal 3.3 is approved by the
shareholders of a Portfolio, that Portfolio intends to implement a non-
fundamental, operating policy that would prohibit the pledging of assets in
connection with borrowings and would make clear that assets deposited or
segregated in connection with transactions in options, futures contracts,
forward contracts, swaps and other derivative instruments are not subject to
the restriction.
New Non-Fundamental, Operating Policy: If this sub-proposal 3.3 is
approved by the shareholders of a Portfolio, that Portfolio will eliminate its
current fundamental investment restriction regarding mortgaging or pledging
securities or other assets and will implement the following non-fundamental,
operating policy, which could be changed by the Board of Directors of the Fund
without the approval of the shareholders of that Portfolio. The non-
fundamental, operating policy would provide that the Portfolio may not:
Pledge its assets in connection with any permitted borrowings. However,
this policy does not prevent the Portfolio from pledging its assets in
connection with its purchase and sale of futures contracts, options,
forward contracts, swaps, caps, collars, floors and other financial
instruments.
3.4 Modification of Fundamental Restriction Regarding Margin Purchases of
Securities
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio.
Discussion: Margin purchases involve the purchase of securities with
money borrowed from a broker. "Margin" is the cash or eligible securities that
the borrower places with the broker as collateral to secure the loan. Pursuant
to its current fundamental restriction, each Portfolio is prohibited from
purchasing securities on margin. With some exceptions, mutual funds are
prohibited from entering into most types of margin purchases by applicable
rules and policies adopted by the Securities and Exchange Commission ("SEC").
If this sub-proposal 3.4 is approved by the shareholders of a Portfolio, the
Portfolio intends to implement a revised fundamental investment restriction
(set forth below) that permits the Portfolio to purchase securities on margin
under certain circumstances and makes clear that short-term credits necessary
for the clearance of transactions and margin payments and other deposits made
in connection with options, futures contracts, forward contracts, swaps and
other derivative instruments are not considered purchasing securities on
margin.
Proposed Fundamental Investment Restriction: Each Portfolio's fundamental
investment restriction is proposed to be revised to prohibit margin purchases
except under conditions permitted by applicable SEC rules and would clarify
that the Portfolio may make margin payments in connection with options, futures
contracts and other financial instruments. The proposed fundamental investment
restriction would provide that each Portfolio may not:
Purchase securities on margin, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of transactions and
that the Portfolio may make margin payments in connection with futures
contracts, options, forward contracts, swaps, caps, collars, floors and
other financial instruments.
3.5 Modification of Fundamental Restriction Regarding Short Sales of
Securities
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio.
Discussion: In a short sale, an investor sells a borrowed security and
has a corresponding obligation to the lender to return the identical security.
In an investment technique known as a short sale "against the box," an investor
sells securities short while owning the same securities in the same amount, or
having the right to obtain equivalent securities. The investor could have the
right to obtain equivalent securities, for example, through its ownership of
warrants, options or convertible bonds.
The fundamental restriction, as it is proposed to be modified, would
permit the Portfolio to engage in short sales of securities against the box.
In addition, the revised fundamental restriction would clarify that options,
futures contracts, swaps, forward contracts and other financial instruments are
not considered short sales.
Proposed Fundamental Investment Restriction: Each Portfolio's fundamental
investment restriction on short selling is proposed to be revised to provide
that a Portfolio may not:
Sell securities short (unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short);
except that this policy does not prevent the Portfolio from entering into
short positions in foreign currency, futures contracts, options, forward
contracts, swaps, caps, collars, floors and other financial instruments.
3.6 Elimination of Fundamental Restriction Regarding Arbitrage Transactions
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio and Asset Strategy Portfolio.
Discussion: If this sub-proposal 3.6 is approved by the shareholders of a
Portfolio, that Portfolio will eliminate its current fundamental restriction
that provides that the Portfolio may not engage in arbitrage transactions. The
Portfolio intends to operate in accordance with the proposed fundamental
restriction and new non-fundamental, operating policy as proposed in sub-
proposal 3.2 above.
3.7 Elimination of Fundamental Restriction Regarding Investments in Issuers
Whose Securities are Owned by Certain Persons
Portfolios to which this change applies: Asset Strategy Portfolio.
Discussion: Asset Strategy Portfolio currently has a fundamental
investment restriction that prohibits it from purchasing or holding the
securities of an issuer if the officers and directors of the Portfolio and
WRIMCO who beneficially own more than 1/2 of 1% of the securities of that
issuer together own beneficially more than 5% of the securities of that issuer.
This restriction was originally adopted to address state securities law
requirements that no longer apply.
WRIMCO believes that this fundamental investment restriction should be
eliminated. Although this restriction has not precluded Portfolio investments
in the past, elimination of the restriction will potentially increase WRIMCO's
flexibility when selecting investments for the Portfolio in the future. The
ability of the Portfolio to invest in companies in which its Directors and
officers, or its affiliates and their directors and officers, hold interests
would continue to be restricted by the 1940 Act, whether or not the current
fundamental investment restriction is eliminated.
3.8 Modification of Fundamental Policy Regarding Loans
Portfolios to which this change applies: All Portfolios.
Discussion: Each of the Portfolios currently has a fundamental investment
restriction that, in general, prohibits the Portfolio from making loans. For
the Portfolios other than Asset Strategy, the restriction expressly excludes
"debt securities" from the prohibition. For Asset Strategy, this exception
applies to the purchase of "a portion of an issue of debt securities."
To eliminate any ambiguity or potential disparity in interpretation of the
scope of these exceptions, each Portfolio's fundamental restriction regarding
its ability to make loans is proposed to be modified to make clear that the
Portfolio may buy "debt securities and other obligations consistent with its
goal and its other investment policies and restrictions."
Required Vote. Approval of each of the numbered changes contemplated by
Proposal 3 with respect to a Portfolio requires the affirmative vote of a
"majority of the outstanding voting securities" of that Portfolio, which for
this purpose means the affirmative vote of the lesser of (1) 67% or more of the
shares of the Portfolio present at the Meeting or represented by proxy if more
than 50% of the outstanding shares of the Portfolio are so present or
represented or (2) more than 50% of the outstanding shares of the Portfolio.
If one or more of the numbered changes contemplated by Proposal 3 is not
approved by shareholders of that Portfolio, the related existing fundamental
restriction(s) of the Portfolio will continue in effect for that Portfolio, but
disapproval of all or part of Proposal 3 by the shareholders of one Portfolio
will not affect any approvals of Proposal 3 that are obtained with respect to
any other Portfolio.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR PROPOSALS 3.1 THROUGH 3.8,
INCLUSIVE.
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by the
Portfolios, will be made primarily by mail, telephone or oral communications by
representatives of the Fund, regular employees and sales representatives of
W&R, W&R's affiliates, certain broker-dealers (who may be specifically
compensated for such services), or by representatives of Management Information
Services Corp., professional proxy solicitors, retained by the Portfolios who
will be paid the following approximate fees for soliciting services set forth
below. Each Portfolio will pay this firm for its share of the fees and out-of-
pocket expenses for proxy solicitation. Each Portfolio will pay a portion of
the costs of the Meeting, including the costs of solicitation, allocated on the
basis of the number of shareholder accounts of each Portfolio.
Soliciting Fees
and Expenses
Portfolio (Approximate)
Asset Strategy Portfolio $0
Balanced Portfolio 0
Bond Portfolio 0
Growth Portfolio 0
High Income Portfolio 0
Income Portfolio 0
International Portfolio 0
Limited-Term Bond Portfolio 0
Money Market Portfolio 0
Science and Technology Portfolio 0
Small Cap Portfolio 0
OTHER INFORMATION CONCERNING WRIMCO
The address of WRIMCO is 6300 Lamar Avenue, Overland Park, Kansas 66202-
4200. WRIMCO is a wholly-owned direct subsidiary of W&R, the distributor of
the Policies. W&R is an indirect subsidiary of Torchmark Corporation, a
publicly-held company, and a direct subsidiary of United Investors Management
Company, a holding company. The address of Waddell & Reed, Inc. is 6300 Lamar
Avenue, Overland Park, Kansas 66202-4200. The address of Torchmark
Corporation and United Investors Management Company is 2001 Third Avenue South,
Birmingham, Alabama 35233. Torchmark Corporation indirectly owns 100% of the
outstanding common stock of United Investors Management Company.
RECEIPT OF SHAREHOLDER PROPOSALS
As a general matter, the Fund does not hold regular annual or other
meetings of shareholders. Any shareholder who wishes to submit proposals to be
considered at a special meeting of the Fund's shareholders should send such
proposals to the Fund at P.O. Box 29217, 6300 Lamar Avenue, Overland Park,
Kansas 66201-9217.
OTHER BUSINESS
The Fund does not know of any other business to be presented at the
meeting other than the matters set forth in this Proxy Statement. If any other
matter or matters are properly presented for action at the meeting, the proxy
holders will vote the shares which the Instruction Cards entitle them to vote
in accordance with their judgment on such matter or matters. By signing and
returning your Instruction Card, you give the proxy holders discretionary
authority as to any such matter or matters.
By Order of the Board of Directors
May 30, 1997 Sharon K. Pappas, Secretary
INDEX TO EXHIBITS TO PROXY STATEMENT
Exhibit A--Number of Outstanding Shares of Each Portfolio A-1
Exhibit B--Beneficial Ownership of Greater than 5% of Portfolio Shares B-1
Exhibit C--Summary of Futures Contracts, Options, Forward C-1
Contracts, Swaps, Caps, Collars, Floors and
Indexed Securities
Exhibit D--Existing Fundamental Restrictions Proposed D-1
to Be Modified or Eliminated
EXHIBIT A
Total Variable Variable
Shares Life Annuity
Outstanding Account Account
Shares Percent Shares Percent
High Income Portfolio 21,424,838 913,004 4.26% 20,511,834 95.74%
Money Market Portfolio 41,716,009 1,399,445 3.35 40,316,564 96.65
Bond Portfolio 17,144,739 623,394 3.64 16,521,345 96.36
Income Portfolio 47,140,832 1,290,984 2.74 45,849,848 97.26
Growth Portfolio 76,206,347 2,799,761 3.67 73,406,586 96.33
Balanced Portfolio 7,590,573 240,847 3.17 7,349,726 96.83
International Portfolio 14,724,250 567,422 3.85 14,156,828 96.15
Limited-Term Bond Portfolio 739,091 125,397 16.97 613,694 83.0
Small Cap Portfolio 12,992,336 435,976 3.36 12,556,360 96.64
Asset Strategy Portfolio 1,635,936 92,870 5.68 1,543,066 94.32
Science and Technology
Portfolio 232,095 106,188 45.75 125,907 54.25
EXHIBIT B
Shares
Name and Address Beneficially Owned
of Beneficial Owner Portfolio Shares Percent
Russell F. Powell Science and 17,941 7.73%
1132 Punehurst Dr Technology
Hartsville, SC 29550
Barry D. Bassett Limited-Term 47,450 6.42%
146 Thornridge Dr Bond
Stamford, CT 06903
EXHIBIT C
SUMMARY OF FUTURES CONTRACTS, OPTIONS, FORWARD CONTRACTS, SWAPS, CAPS, COLLARS,
FLOORS, AND INDEXED SECURITIES
Futures Contracts
When a Portfolio purchases a futures contract, it incurs an obligation to
take delivery of a specified amount of the obligation underlying the contract
at a specified time in the future for a specified price. When the Portfolio
sells a futures contract, it incurs an obligation to deliver the specified
amount of the underlying obligation at a specified time in return for an agreed
upon price. U.S. futures contracts are traded on exchanges that have been
designated "contract markets" by the Commodity Futures Trading Commission
("CFTC") and must be executed through a futures commission merchant ("FCM"), or
brokerage firm, which is a member of the relevant contract market. Through
their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.
Options on Futures Contracts
When a Portfolio writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in the futures
contract at a specified exercise price at any time during the term of the
option. If a Portfolio has written a call, it assumes a short futures
position. If a Portfolio has written a put, it assumes a long futures
position. When a Portfolio purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position in
the futures contract (a long position if the option is a call and a short
position if the option is a put).
Options on Securities, Currencies and Indices
A put option gives the holder the right, upon payment of a premium, to
deliver a specified amount of a security or currency to the writer of the
option on or before a fixed date at a predetermined price. A call option gives
the holder the right, upon payment of a premium, to call upon the writer to
deliver a specified amount of a security or currency on or before a fixed date
at a predetermined price. Puts and calls on indices are similar to puts and
calls on securities or futures contracts except that all settlements are in
cash and gain or loss depends on changes in the index in question rather than
on price movements in individual securities or futures contracts.
Forward Contracts
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days
(term) from the date of the forward contract agreed upon by the parties, at a
price set at the time of the forward contract. These forward contracts are
traded directly between currency traders (usually large commercial banks) and
their customers.
Swaps, Caps, Collars and Floors
Swap agreements, including caps, collars and floors, can be individually
negotiated and structured to include exposure to a variety of different types
of investments or market factors. Depending on their structure, swap
agreements may increase or decrease a Portfolio's exposure to long- or short-
term interest rates (in the United States or abroad), foreign currency values,
mortgage-backed security values, corporate borrowing rates or other factors
such as security prices or inflation rates.
Swap agreements will tend to shift a Portfolio's investment exposure from
one type of investment to another. For example, if a Portfolio agrees to
exchange payments in dollars for payments in foreign currency, the swap
agreement would tend to decrease a Portfolio's exposure to U.S. interest rates
and increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options.
Indexed Securities
Indexed securities are securities whose prices are indexed to the prices
of other securities, securities indices, currencies, precious metals or other
commodities, or other financial indicators. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic. The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the United States and
abroad. At the same time, indexed securities are subject to the credit risks
associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates. Indexed
securities may be more volatile than the underlying instruments.
Special Investments Considerations and Risks
The use of options, futures contracts, options on futures contracts,
forward currency contracts, swaps, caps, collars and floors, and the investment
in indexed securities, involve special risks, including (i) possible imperfect
or no correlation between price movements of the portfolio investments (held or
intended to be purchased) involved in the transaction and price movements of
the instruments involved in the transaction, (ii) possible lack of a liquid
secondary market for any particular instrument at a particular time, (iii) the
need for additional portfolio management skills and techniques, (iv) losses due
to unanticipated market price movements, (v) the fact that, while such
strategies can reduce the risk of loss, they can also reduce the opportunity
for gain, or even result in losses, by offsetting favorable price movements in
investments involved in the transaction, (vi) incorrect forecasts by WRIMCO
concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result in
the strategy being ineffective, (vii) loss of premiums paid by the Portfolio on
options it purchases, and (viii) the possible inability of the Portfolio to
purchase or sell a portfolio security at a time when it would otherwise be
favorable for it to do so, or the possible need for the Portfolio to sell a
portfolio security at a disadvantageous time, due to the need for the Portfolio
to maintain "cover" or to segregate securities in connection with such
transactions and the possible inability of the Portfolio to close out or
liquidate its position.
For a hedging strategy to be completely effective, the price change of the
hedging instrument must equal the price change of the investment being hedged.
The risk of imperfect correlation of these price changes increases as the
composition of the Portfolio's portfolio diverges from instruments underlying a
hedging instrument. Such equal price changes are not always possible because
the investment underlying the hedging instruments may not be the same
investment that is being hedged. WRIMCO will attempt to create a closely
correlated hedge but hedging activity may not be completely successful in
eliminating market value fluctuation.
WRIMCO may use derivative instruments for hedging purposes to adjust the
risk characteristics of the Portfolio's portfolio of investments and may use
these instruments to adjust the return characteristics of the Portfolio's
portfolio of investments. The use of derivative instruments for speculative
purposes can increase investment risk. If WRIMCO judges market conditions
incorrectly or employs a strategy that does not correlate well with the
Portfolio's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques may
increase the volatility of the Portfolio and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction does
not perform as promised or if there is not a liquid secondary market to close
out a position that the Portfolio has entered into.
The ordinary spreads between prices in the cash and futures markets, due
to the differences in the natures of those markets, are subject to distortion.
Due to the possibility of distortion, a correct forecast of general interest
rate, foreign currency exchange rate or stock market trends by WRIMCO may still
not result in a successful transaction. WRIMCO may be incorrect in its
expectations as to the extent of various interest or foreign exchange rate
movements or stock market movements or the time span within which the movements
take place.
Options and futures contracts may increase portfolio turnover rates, which
results in correspondingly greater commission expenses and transactions costs
and may result in certain tax consequences.
EXHIBIT D
Existing Investment Restrictions Proposed to Be Modified or Eliminated
A Portfolio (other than Asset Strategy Portfolio) may not:
(i) Buy or sell commodities or commodity contracts except that each
Portfolio may use options, futures contracts, forward currency
contracts and interest rate swaps, caps and floors, and purchase and
sell foreign currencies, in the manner described in the Prospectus and
this SAI;
(ii) Sell securities short, buy securities on margin or engage in arbitrage
transactions;
(iii) Pledge, mortgage or hypothecate assets as security for indebtedness
except to secure permitted borrowings;
(iv) Buy a security if, as a result, a Portfolio would own more than 10% of
the issuer's voting securities, or if more than five percent of its
total assets would be invested in securities of that issuer, or if
more than 25% of its assets would then be invested in securities of
companies in any one industry (U.S. Government securities are not
included in these restrictions); provided, however, that Science and
Technology Portfolio may invest more than 25% of its assets in
securities of companies in the science and technology industries;
(v) Make loans, except loans of portfolio securities and except to the
extent that investment in debt securities may be deemed to be a loan.
Asset Strategy Portfolio may not:
(i) Sell securities short, provided that transactions in futures
contracts, options and other financial instruments are not deemed to
constitute short sales;
(ii) Purchase securities on margin, except that the Portfolio may obtain
such short-term credits as are necessary for the clearance of
transactions, and provided that the Portfolio may make initial and
variation margin payments in connection with transactions in futures
contracts, options and other financial instruments;
(iii) Purchase or sell physical commodities unless acquired as a result of
ownership of securities (but this shall not prevent the Portfolio
from purchasing and selling currencies, futures contracts, options,
forward currency contracts or other financial instruments);
(iv) Purchase or retain the securities of an issuer if the officers and
directors of the Portfolio and of [WRIMCO] owning beneficially more
than .5 of 1% of the securities of an issuer together own
beneficially more than 5% of the securities of that issuer;
(v) Make loans, except (a) by lending portfolio securities provided that
no securities loan will be made if, as a result thereof, more than
10% of the Portfolio's total assets (taken at current value) would be
lent to another party; (b) through the purchase of a portion of an
issue of debt securities in accordance with its investment objective,
policies, and limitations; and (c) by engaging in repurchase
agreements with respect to portfolio securities.
TMK/UNITED FUNDS, INC.
WHEN PROPERLY SIGNED, THE VOTING INTEREST WILL BE DIRECTED IN THE MANNER
INDICATED BELOW. IF NO INDICATION IS GIVEN, VOTING WILL BE DIRECTED FOR THAT
PROPOSAL.
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED.
Please fold and detach card at perforation. Return bottom portion only.
Please vote by filling in the boxes below.
1. To elect as Directors
H. Bellmon; D. Buchanan; J. Concannon; J. Dillingham; L. Graves; J. Hayes;
G. Johnson; W. Morgan; R. Richey; W. Rogers; F. Ross; E. Schwartz; K.
Tucker; F. Vogel; P. Wise
/ / FOR ALL
/ / WITHHOLD ALL
To withhold authority to vote for any individual nominee, print that nominee's
name on the line below.
___________________________________________________________________
2. To ratify the selection of FOR AGAINST ABSTAIN
Deloitte & Touche LLP as the / / / / / /
Fund's independent accountants for
its current fiscal year
3. For each Fund: To approve changes FOR AGAINST ABSTAIN
to certain fundamental investment ALL* ALL ALL
policies and restrictions / / / / / /
3.1 Diversification of Assets
3.2 Options, Commodities and Futures
3.3 Pledging of Assets
3.4 Margin Purchases
3.5 Short Sales
3.6 Arbitrage Transactions
3.7 Securities Owned by Certain Persons
3.8 Loans
To vote against or abstain with respect to a particular proposed change, refer
to the proxy statement for the changes applicable to the Fund and write the
number of the sub-proposal on the line below.
______________________________________________________________________
YOUR VOTE IS IMPORTANT!
To avoid the expense of adjourning the meeting to a subsequent date,
Please sign, date and return all proxies received in
the enclosed post-paid envelope.
Please fold and detach card at perforation. Return bottom portion only.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Keith A. Tucker and Sharon K. Pappas, or either
of them, as attorneys and proxies with full power of substitution to represent
and direct the voting interest of the undersigned held as of the record date at
the Special Meeting of Shareholders on July 24, 1997, at 11:00 a.m. local time,
at 6300 Lamar Avenue, Overland Park, Kansas 66202, and any adjournment(s)
thereof, and revoking all proxies heretofore given, as designated on the
reverse side of the card. As to any other matter that may properly come before
the meeting, the attorneys and proxies shall be authorized to represent and
direct the voting interest in accordance with their best judgment. This proxy
shall remain in effect for a period of one year from its date. Receipt of the
Proxy Statement is hereby acknowledged.
Dated: _________________________, 1997
PLEASE SIGN IN BOX BELOW
Please sign exactly as your name appears hereon.
If shares are registered in more that one name,
all should sign, but if one signs, it binds the
others. When signing as attorney, executor,
administrator, agent, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by an
authorized person. If a partnership, please sign
in partnership name by an authorized person.
_______________________________________
/ /
/ /
/ /
_______________________________________
Signature(s), Title(s), if applicable
6/3/97
4:03 PM
A-1
C-1
C-3
2
D-1
