<PAGE>
United
Asset Strategy
Fund, Inc.
ANNUAL
REPORT
---------------------------------------
For the period ended September 30, 1995
<PAGE>
FUND MANAGER'S LETTER
- -----------------------------------------------------------------
SEPTEMBER 30, 1995
Dear Shareholder:
This report relates to the operation of the United Asset Strategy Fund for the
period ended September 30, 1995. The discussion, graphs and tables contained in
this report will provide you with information regarding the Fund's performance
during that period. The public offering of shares of the Fund began on March 9,
1995; performance data will reflect activity of the Fund for less than a full
year.
Since the beginning of the Fund's activity, long-term interest rates have
declined substantially. The decline in interest rates was accompanied by slow
economic growth and low inflation. Legislative proposals to reduce the federal
budget deficit have received wide publicity and have met with positive reaction
from the financial markets.
We have chosen to pursue a strategy of purchasing stocks that we believe carry
limited risk of depreciating in value. We have complemented our equity
portfolio with a mixture of debt securities of varying maturities as we continue
to build a diversified portfolio during the Fund's start-up period.
The strategies and techniques we applied resulted in the direction of the Fund's
overall performance, and the performance of its holdings in the various
categories of securities in which the Fund invests, remaining fairly consistent
with that of the indexes charted on the following page. Those indexes reflect
the performance of securities that generally represent the stock market (the S&P
500 Index), one-month certificates of deposit (Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit), the bond market (the Lehman Brothers
Aggregate Bond Index) and the universe of portfolios with similar investment
objectives (the Lipper Flexible Portfolio Universe Average). A variety of
indexes is presented because the Fund invests in stocks, bonds and other
instruments.
We anticipate that inflation will remain low and that the U.S. economy will grow
at a modest rate in the year ahead. We expect to continue to pursue the same
strategies we have recently employed, as we seek to produce solid returns in the
long term. We intend to enhance the equity structure of the Fund by investing
in stocks we perceive to offer excellent growth potential, including undervalued
stocks and those in the telecommunications and capital goods sectors. We also
plan to continue our strategy of investing in a mixture of short-term and long-
term bonds.
Thank you for your continued confidence.
Respectfully,
James D. Wineland
Manager, United Asset Strategy Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
UNITED ASSET STRATEGY FUND, INC.,
THE S&P'S 500 INDEX,
THE LEHMAN BROTHERS AGGREGATE BOND INDEX,
THE SALOMON BROTHERS SHORT-TERM INDEX FOR 1 MONTH CERTIFICATES OF DEPOSIT,
AND THE LIPPER FLEXIBLE PORTFOLIO UNIVERSE AVERAGE
Average Annual Total Return*
For the period
ended 9/30/95**
3.31%
Salomon
Brothers
United LehmanShort-Term Lipper
Asset Brothers Index Flexible
StrategyS&PAggregatefor 1 monthPortfolio
Fund, 500 BondCertificatesUniverse
Inc. Index Indexof Deposit Average
------------------------------------------------
4/1/95 Purchase 9,425 10,000 10,000 10,000 10,000
9/30/95 10,27111,825 10,818 10,301 11,321
++++ S&P's 500 Index -- $11,825
---- Lipper Flexible Portfolio Universe Average -- $11,321
**** Lehman Brothers Aggregate Bond Index -- $10,818
*--*-- Salomon Brothers Short-Term Index for 1 Month Certificates of
Deposit -- $10,301
==== United Asset Strategy Fund -- $10,271***
Past performance is not predictive of future performance. Indexes are
unmanaged.
*Performance data quoted represents past performance and is based on deduction
of a 5.75% sales load on the initial purchase. Investment return and
principal value will fluctuate and an investor's shares, when redeemed, may
be worth more or less than their original cost.
**4/1/95 (inception) through 9/30/95.
***The value of the investment in the Fund is impacted by the sales load at the
time of the investment and by the ongoing expenses of the Fund.
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
United Asset Strategy Fund, Inc.
PORTFOLIO STRATEGY:
Stocks 40% OBJECTIVE: High total return with
(can range from 10-60%) reduced risk over the
long-term.
Bonds 40%
(can range from 20-60%) STRATEGY: Invests in stocks, bonds
and short-term
Short-Term Instruments 20% instruments, both in the
(can range from 0-70%) United States and abroad, which are
allocated in a mix that varies based on
the current outlook for the different
markets. (May purchase securities
subject to repurchase agreements. May
invest in certain options, futures and
other hedging techniques.)
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the Asset Strategy
Fund from time to time.
Moving into cash reserve positions at
times thought to be near a major stock
market peak allows the Fund the
opportunity to capture profits and
attempts to cushion the impact of market
declines. The added flexibility
provided by our CASH RESERVES STRATEGY
may from time to time be an important
element in our success and, when deemed
appropriate, may be used in the
management of the portfolio in the
future.
FOUNDED: 1995
SCHEDULED DIVIDEND FREQUENCY: QUARTERLY
(MARCH, JUNE, SEPTEMBER, DECEMBER)
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Period Ended September 30, 1995
- ---------------------------------------
DIVIDENDS PAID $0.05
=====
NET ASSET VALUE ON
9/30/95 $5.42
3/9/95 5.00
-----
CHANGE PER SHARE $0.42
=====
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Aggregate Total Return
---------------------------
With Without
Period Sales Load** Sales Load***
- ------ ----------- ------------
For the Period from 3-9-95*
through 9-30-95 3.13% 9.42%
*Initial public offering of the Fund.
**Performance data quoted represents past performance and is based on
deduction of 5.75% sales load on the initial purchase.
***Performance data quoted in this column represents past performance without
taking into account the sales load deducted on an initial purchase.
Investment return and principal value will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1995, the Fund had net assets totaling $22,250,963 invested in
a diversified portfolio of:
33.15% Common Stocks
29.71% United States Government Securities
26.07% Cash and Cash Equivalents
10.60% Corporate Debt Securities
0.47% Preferred Stock
As a shareholder in United Asset Strategy Fund, Inc., for every $100 you had
invested on September 30, 1995, your Fund owned:
$29.71 United States Government Securities
26.07 Cash and Cash Equivalents
13.40 Consumer Stocks
10.60 Corporate Debt Security
8.87 Technological Stocks
6.62 Basic Industries Stocks
2.99 Financial Stocks
1.27 Energy and Energy-Related Stocks
0.47 Preferred Stock
<PAGE>
- -----------------------------------------------------------------
These STOCK CATEGORIES are provided as a reference only. Not all categories or
subcategories will be represented in a portfolio at all times. Refer to the
following pages for a more detailed portfolio listing.
BASIC INDUSTRIES
Airlines
Automotive
Building
Chemicals Major
Electrical Equipment
Engineering and Construction
Machinery
Manufacturers
Metals and Mining
Multi-Industry
Paper
Precious Metals
Railroad Equipment
Railroads
Shipping
Steel
Tire and Rubber
Trucking
CONSUMER
Beverages
Consumer Electronics and Appliances
Food and Related
Hospital Management
Household Products
Leisure Time
Packaging and Containers
Publishing and Advertising
Retailing
Services, Consumer and Business
Textiles and Apparel
Tobacco
ENERGY AND ENERGY-RELATED
Canadian Oil
Coal
Domestic Oil
International Oil
Oil Services
Propane
FINANCIAL
Banks and Savings and Loans
Financial
Insurance
PUBLIC UTILITIES
Electric
Gas
Pipelines
TECHNOLOGICAL
Aerospace
Biotechnology and Medical Services
Chemicals Specialty and Miscellaneous Technology
Computers and Office Equipment
Drugs and Hospital Supply
Electronics
Telecommunications
<PAGE>
THE INVESTMENTS OF
UNITED ASSET STRATEGY FUND, INC.
SEPTEMBER 30, 1995
Shares Value
COMMON STOCKS
Automotive - 1.19%
Ford Motor Company ..................... 8,500 $ 264,563
Banks and Savings and Loans - 2.99%
Compass Bancshares, Inc. ............... 12,000 372,000
CoreStates Financial Corp. ............. 8,000 293,000
Total ................................. 665,000
Beverages - 0.47%
Buenos Aires Embotelladora S.A., ADR ... 4,500 104,625
Biotechnology and Medical Services - 0.76%
Genentech, Inc.* ....................... 3,500 170,187
Chemicals Specialty and Miscellaneous Technology - 2.72%
Crompton & Knowles Corporation ......... 15,000 223,125
Geon Company (The) ..................... 15,000 382,500
Total ................................. 605,625
Consumer Electronics and Appliances - 2.60%
Corning Incorporated ................... 5,000 143,125
Samsung Electronics Co., Ltd., GDR, (A)* 6,000 430,500
Samsung Electronics Co., Ltd., GDR,
New (A)* .............................. 62 4,325
Total ................................. 577,950
Domestic Oil - 1.27%
Enron Oil & Gas Company ................ 13,000 282,750
Electronics - 5.39%
Burr-Brown Corporation* ................ 32,000 1,200,000
Engineering and Construction - 1.71%
Empresas ICA Sociedad Controladora,
S.A. de C.V., ADS ..................... 33,000 379,500
Hospital Management - 6.06%
American Oncology Resources, Inc.* ..... 5,500 234,437
LTC Properties, Inc. ................... 30,000 435,000
PacifiCare Health Systems, Inc.* ....... 6,400 434,400
United HealthCare Corporation .......... 5,000 244,375
Total ................................. 1,348,212
Machinery - 0.87%
Keystone International, Inc. ........... 9,000 193,500
Paper - 1.01%
James River Corporation of Virginia .... 7,000 224,000
Railroads - 1.84%
Kansas City Southern Industries, Inc. .. 9,000 409,500
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED ASSET STRATEGY FUND, INC.
SEPTEMBER 30, 1995
Shares Value
COMMON STOCKS (Continued)
Retailing - 2.71%
Melville Corporation ................... 17,500 $ 603,750
Services, Consumer and Business - 1.56%
Dun & Bradstreet Corporation (The) ..... 6,000 347,250
TOTAL COMMON STOCKS - 33.15% $ 7,376,412
(Cost: $6,797,486)
PREFERRED STOCK - 0.47%
Drugs and Hospital Supply
United States Surgical Corporation,
Class A, Convertible .................. 3,500 $ 105,000
(Cost: $84,745)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Electronics - 3.67%
VLSI Technology, Inc.,
8.25%, 10-1-2005 ...................... $ 800 816,000
Leisure Time - 6.70%
Time Warner Incorporated,
8.75%, 1-10-2015 ...................... 500 522,500
Viacom International, Inc.,
9.125%, 8-15-99 ....................... 925 968,938
Total ................................. 1,491,438
Multi-Industry - 0.23%
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 50 51,000
TOTAL CORPORATE DEBT SECURITIES - 10.60% $ 2,358,438
(Cost: $2,340,576)
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
6.875%, 2-28-97 ....................... 270 273,839
6.125%, 5-31-97 ....................... 2,000 2,007,820
7.25%, 2-15-98 ........................ 270 277,930
7.125%, 2-29-2000 ..................... 270 281,305
7.5%, 2-15-2005 ....................... 270 294,090
9.125%, 5-15-2018 ..................... 2,700 3,474,549
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 29.71%.................... $ 6,609,533
(Cost: $6,437,727)
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED ASSET STRATEGY FUND, INC.
SEPTEMBER 30, 1995
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES
Banks and Savings and Loans - 1.59%
U.S. Bancorp,
Master Note ........................... $ 353 $ 353,000
Financial - 8.07%
BHP Finance (U.S.A.) Inc.,
5.75%, 10-4-95 ........................ 800 799,616
GTE Finance Corp.,
5.83%, 10-23-95 ....................... 1,000 996,437
Total ................................. 1,796,053
Food and Related - 2.49%
Sara Lee Corporation,
Master Note ........................... 555 555,000
Public Utilities - Electric - 4.47%
Dominion Resources Inc.,
5.83%, 10-31-95 ....................... 1,000 995,142
Services, Consumer and Business - 4.16%
Hertz Corp.,
5.73%, 10-2-95 ........................ 925 924,853
Telecommunications - 3.36%
NYNEX Corp.,
5.81%, 10-23-95 ....................... 750 747,337
TOTAL SHORT-TERM SECURITIES - 24.14% $ 5,371,385
(Cost: $5,371,385)
TOTAL INVESTMENT SECURITIES - 98.07% $21,820,768
(Cost: $21,031,919)
CASH AND OTHER ASSETS, NET OF
LIABILITIES - 1.93% 430,195
NET ASSETS - 100.00% $22,250,963
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED ASSET STRATEGY FUND, INC.
SEPTEMBER 30, 1995
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) As of September 30, 1995, the following restricted securities were owned:
Acquisition Market
Security Date Shares Cost Value
-------- ----------- ------ ------ -------
Samsung Electronics Co.,
Ltd., GDR 4/27/95 1,000 $ 47,350 $ 71,750
7/06/95 4,000 219,000 287,000
8/21/95 1,000 58,500 71,750
Samsung Electronics Co.,
Ltd., GDR, New 8/17/95 62 3,629 4,325
-------- --------
$328,479 $434,825
======== ========
The total market value of restricted securities represents approximately
1.95% of the total net assets at September 30, 1995.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 4 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1995
Assets
Investment securities -- at value
(Notes 1 and 4) ................................. $21,820,768
Cash ............................................ 6,702
Receivables:
Fund shares sold ................................ 298,882
Dividends and interest .......................... 196,054
Unamortized organization expenses (Note 2) ....... 44,577
Prepaid insurance premium ........................ 264
-----------
Total assets .................................. 22,367,247
-----------
Liabilities
Payable for Fund shares redeemed ................. 53,524
Organization expenses payable .................... 44,577
Accrued service fee .............................. 4,770
Accrued transfer agency and dividend
disbursing ...................................... 4,728
Accrued accounting services fee .................. 833
Other liabilities ................................ 7,852
-----------
Total liabilities ............................. 116,284
-----------
Total net assets ............................. $22,250,963
===========
Net Assets
$0.01 par value capital stock, authorized --
1,000,000,000; shares outstanding -- 4,108,443
Capital stock ................................... $ 41,085
Additional paid-in capital ...................... 21,327,571
Accumulated undistributed income:
Accumulated undistributed net investment
income ......................................... 67,250
Accumulated undistributed net realized gain on
investment transactions ...................... 26,208
Net unrealized appreciation in value of
investments at end of period ................... 788,849
-----------
Net assets applicable to outstanding
units of capital ............................. $22,250,963
===========
Net asset value per share (net assets divided
by shares outstanding) ........................... $5.42
Sales load (offering price x 5.75%)................. .33
-----
Offering price per share (net asset value
divided by 94.25%) ................................ $5.75
=====
See notes to financial statements.
On sales of $100,000 or more the sales load is reduced as set forth in
the prospectus.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
STATEMENT OF OPERATIONS
For the Period Ended SEPTEMBER 30, 1995
Investment Income
Income:
Interest ........................................ $ 279,577
Dividends ....................................... 40,745
----------
Total income .................................. 320,322
----------
Expenses (Notes 2 and 3):
Investment management fee ....................... 41,415
Transfer agency and dividend disbursing ......... 19,463
Service fee ..................................... 10,604
Prospectus expense .............................. 8,283
Amortization of organization expenses ........... 4,953
Custodian fees .................................. 3,187
Audit fees ...................................... 2,671
Accounting services fee ......................... 2,500
Legal fees ...................................... 1,147
Other ........................................... 4,054
----------
Total expenses ................................ 98,277
----------
Net investment income ........................ 222,045
----------
Realized and Unrealized Gain on Investments
Realized net gain on securities .................. 26,208
Realized net gain on foreign currency
transactions .................................... 60
----------
Realized net gain on investments ................ 26,268
Unrealized appreciation in value of investments
during the period ............................... 788,849
----------
Net gain on investments ....................... 815,117
----------
Net increase in net assets resulting
from operations ............................ $1,037,162
==========
See notes to financial statements.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended SEPTEMBER 30, 1995
Increase in Net Assets
Operations:
Net investment income ............ $ 222,045
Realized net gain on
investments .................... 26,268
Unrealized appreciation........... 788,849
-----------
Net increase in net assets
resulting from operations ..... 1,037,162
-----------
Dividends to shareholders from
net investment income* ........... (154,855)
-----------
Capital share transactions:
Proceeds from sale of shares
(4,404,731 shares) ............. 22,939,173
Proceeds from reinvestment of
dividends (28,713 shares) ...... 154,520
Payments for shares redeemed
(345,001 shares) ............... (1,825,037)
-----------
Net increase in net assets
resulting from capital
share transactions ............ 21,268,656
-----------
Total increase ................ 22,150,963
Net Assets
Beginning of period ............... 100,000
-----------
End of period, including undistributed
net investment income of $67,250 . $22,250,963
===========
*See "Financial Highlights" on page 13.
See notes to financial statements.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
FINANCIAL HIGHLIGHTS
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
period
from
March 9,
1995
through
September
30, 1995*
-------
Net asset value,
beginning of period $5.00
-----
Income from investment
operations:
Net investment
income .......... 0.07
Net realized and
unrealized gain
on investments... 0.40
-----
Total from investment
operations ........ 0.47
Less dividends from
net investment
income ............ (0.05)
-----
Net asset value,
end of period ..... $5.42
=====
Total return** ..... 9.42%
Net assets, end of
period (000
omitted) ......... $22,251
Ratio of expenses
to average net
assets ............ 1.64%
Ratio of net investment
income to average net
assets ............ 3.71%
Portfolio
turnover rate ..... 16.60%
*The Fund's inception date is August 25, 1994; however, since the Fund did
not have investment activity or incur expenses prior to the date of
public offering, the per share information is for a capital share
outstanding for the period from March 9, 1995 (initial public offering)
through September 30, 1995. Ratios and the portfolio turnover rate have
been annualized.
**Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1 -- Significant Accounting Policies
United Asset Strategy Fund, Inc. (the "Fund") is registered under the In-
vestment Company Act of 1940 as a diversified, open-end management investment
company. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a major dealer in bonds. Convertible bonds are
valued using this pricing system only on days when there is no sale re-
ported. Stocks which are traded over-the-counter are priced using Nasdaq
(National Association of Securities Dealers Automated Quotations) which
provides information on bid and asked or closing prices quoted by major
dealers in such stocks. Short-term debt securities are valued at amortized
cost, which approximates market.
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 are calculated on the
identified cost basis. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on the accrual basis. See Note 4 --
Investment Security Transactions.
C. Foreign currency translations -- All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars daily. Purchases and
sales of investment securities and accruals of income and expenses are
translated at the rate of exchange prevailing on the date of the
transaction. For assets and liabilities other than investments in
securities, net realized and unrealized gains and losses from foreign
currency translations arise from changes in currency exchange rates. The
Fund combines fluctuations from currency exchange rates and fluctuations in
market value when computing net realized and unrealized gain or loss from
investments.
D. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code. In
addition, the Fund intends to pay distributions as required to avoid
imposition of excise tax. Accordingly, provision has not been made for
Federal income taxes. See Note 5 -- Federal Income Tax Matters.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards.
F. Repurchase agreements -- Repurchase agreements are collateralized by the
value of the resold securities which, during the entire period of the
agreement, remains at least equal to the value of the loan, including
accrued interest thereon. The collateral for the repurchase agreement is
held by the Fund's custodian bank.
NOTE 2 -- Organization
The Fund, a Maryland corporation, was organized on August 25, 1994 and was
inactive (except for matters relating to its organization and registration as an
investment company under the Investment Company Act of 1940 and the registration
of its shares under the Securities Act of 1933) until March 9, 1995 (the date of
the initial public offering.)
On February 23, 1995, Waddell & Reed, Inc. ("W&R") purchased for investment
20,000 shares of the Fund at their net asset value of $5.00 per share.
The Fund's organizational expenses in the amount of $49,530 were advanced
to the Fund by W&R and are an obligation to be paid by it. These expenses are
being amortized and are payable evenly over 60 months following the date of the
initial public offering. In the event that all or a part of W&R's initial
investment in the Fund's shares is redeemed prior to the full reimbursement of
these organizational expenses, the Fund's obligation to make further
reimbursement will cease.
NOTE 3 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .30% of net assets and (ii)
a "Group" fee computed each day on the combined net asset values of all of the
funds in the United Group of mutual funds (approximately $13.3 billion of
combined net assets at September 30, 1995) at annual rates of .51% of the first
$750 million of combined net assets, .49% on that amount between $750 million
and $1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between
$2.25 billion and $3 billion, .43% between $3 billion and $3.75 billion, .40%
between $3.75 billion and $7.5 billion, .38% between $7.5 billion and $12
billion, and .36% of that amount over $12 billion. The Fund accrues and pays
this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and 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 for transfer agency
and dividend disbursement services of $1.0208 for each shareholder account which
was in existence at any time during the prior month, plus $0.30 for each account
on which a dividend or distribution of cash or shares had a record date in that
month. The Fund also reimburses W&R and WARSCO for certain out-of-pocket costs.
As principal underwriter for the Fund's shares, W&R received direct and
indirect gross sales commissions (which are not an expense of the Fund) of
$714,944, out of which W&R paid sales commissions of $410,319 and all expenses
in connection with the sale of Fund shares, except for registration fees and
related expenses.
Under a Service Plan adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund may pay monthly a fee to W&R in an
amount not to exceed .25% of the Fund's average annual net assets. The fee is
to be paid to reimburse W&R for amounts it expends in connection with the
provision of personal services to Fund shareholders and/or maintenance of
shareholder accounts.
The Fund paid no Directors' fees.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 4 -- Investment Security Transactions
Purchases of investment securities, other than[ U.S. Government and short-
term securities, aggregated $9,808,818 while proceeds from maturities and sales
aggregated $611,254. Purchases of short-term securities aggregated $53,977,101
while proceeds from maturities and sales aggregated $48,733,762. Purchases of
U.S. Government securities aggregated $6,442,207. There were no sales of U.S.
Government securities .
For Federal income tax purposes, cost of investments owned at September 30,
1995 was $21,031,919, resulting in net unrealized appreciation of $788,849, of
which $839,675 related to appreciated securities and $50,826 related to
depreciated securities.
NOTE 5 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $26,208 during its fiscal year ended September 30, 1995, which will be
distributed to the Fund's shareholders.
NOTE 6 -- Commencement of Multiclass Operations
On September 12, 1995, the Fund was authorized to offer investors a choice
of two classes of shares, Class A and Class Y. 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.
The Fund commenced multiclass operations on September 28, 1995. The
following class specific information is presented in footnote format in lieu of
presentation in the principal financial statements due to the small amount of
Class Y share transactions during the reporting period:
Class A Class Y Total
------------ ---------- ------------
Value issued from sale
of shares.......... $22,935,757 $3,416 $22,939,173
Value issued from
reinvestment of
dividends ......... 154,505 15 154,520
Value redeemed ..... (1,825,037) --- (1,825,037)
----------- ---------- -----------
Increase in
outstanding capital $21,265,225 $3,431 $21,268,656
============= ============ =============
Shares outstanding . 4,107,814 629 4,108,443
Net asset value per share $5.42 $5.42
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United Asset Strategy Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United Asset Strategy Fund, Inc.
(the "Fund") at September 30, 1995, the results of its operations, the changes
in its net assets and the financial highlights for the period March 9, 1995
(commencement of operations) through September 30, 1995, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at September 30, 1995 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Kansas City, Missouri
November 3, 1995
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends below, multiplied by the number of shares owned by
you on the record dates, will give you the total amounts to be reported in your
Federal income tax return for the years in which they were received or
reinvested.
PER-SHARE AMOUNTS REPORTABLE AS:
-----------------------------------------------
For Individuals For Corporations
----------------- -----------------------------
Record Ordinary Long-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
- --------- ----- ---------------------------------------------------
06-16-95 $0.020 $0.0200 $0.0000 $0.0036 $0.0164 $0.0000
09-15-95 0.030 0.0300 0.0000 0.0054 0.0246 0.0000
------- ------- ------- ------- ------- -------
Total $0.050 $0.0500 $0.0000 $0.0090 $0.0410 $0.0000
======= ======= ======= ======= ======= =======
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction in the
year received as provided by Section 243 of the Internal Revenue Code.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Shareholders are advised to consult with their tax adviser concerning the tax
treatment of dividends and distributions from the Fund.
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
James B. Judd, Kansas City, Missouri
William T. Morgan, Los Angeles, California
Doyle Patterson, Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
Leslie S. Wright, Birmingham, Alabama
OFFICERS
Keith A. Tucker, President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Sharon K. Pappas, Vice President and Secretary
James D. Wineland, Vice President
This report is submitted for the general information of the shareholders of
United Asset Strategy Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United Asset Strategy Fund, Inc. current prospectus.
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
<PAGE>
The United Group of Mutual Funds
United Cash Management, Inc.
United Government Securities Fund, Inc.
United Bond Fund
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Continental Income Fund, Inc.
United Retirement Shares, Inc.
United Asset Strategy Fund, Inc.
United Income Fund
United Accumulative Fund
United Vanguard Fund, Inc.
United New Concepts Fund, Inc.
United Science and Technology Fund
United International Growth Fund, Inc.
United Gold & Government Fund, Inc.
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(913) 236-1303
Our INTERNET address is:
http://www.waddell.com
NUR1017A(9-95)
printed on recycled paper
