United
Asset Strategy
Fund, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 1996
<PAGE>
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.
<PAGE>
PRESIDENT'S LETTER
- -----------------------------------------------------------------
MARCH 31, 1996
Dear Shareholder:
As President of your Fund, I would like to thank you for your continued
confidence in our products and services. We strive to provide the best service
possible to our shareholders: from the Fund's manager, to Waddell & Reed's
customer service representatives, to your personal account representative and
the Waddell & Reed office nearest you.
While personalized service has become increasingly rare in the investment
industry, we remain committed to locally based account representatives who
provide the personal service you need. They are ready to assist you through
regular reviews of your financial plan and to answer any financial questions you
may have. Your account representative is anxious to help you plan for your
retirement, fund a child's education or make plans for other long-term financial
goals.
We want to help you open the door to a better financial future. We will
continue to help you meet your specific financial needs through quality
investment products and personalized service that makes the investment process
more convenient and accessible for you.
Should you have any questions about your account or other financial issues,
contact your personal account representative or your local Waddell & Reed
office. They're ready to help you make the most of your financial future.
Respectfully,
Keith A. Tucker
President
<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 -- Class A Shares
PER SHARE DATA
For the Six Months Ended March 31, 1996
- ---------------------------------------
DIVIDENDS PAID $0.077
======
CAPITAL GAINS DISTRIBUTION $0.005
======
NET ASSET VALUE ON
3/31/96 $5.24 adjusted to:$5.25 (A)
9/30/95 5.42
-----
CHANGE PER SHARE ($0.17)
=====
(A)This number includes the capital gains distribution of $0.01 paid in December
1995 added to the actual net asset value on March 31, 1996.
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load** Sales Load***
- ------ ----------- ------------
1-year period ended 3-31-96 0.86% 7.01%
Period from 3-9-95*
through 3-31-96 1.19% 6.98%
*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 March 31, 1996, the Fund had net assets totaling $32,542,848 invested in a
diversified portfolio of:
37.53% Cash and Cash Equivalents
29.21% Common Stocks
20.03% United States Government Securities
13.23% Corporate Debt Securities
As a shareholder of United Asset Strategy Fund, Inc., for every $100 you had
invested on March 31, 1996, your Fund owned:
$37.53 Cash and Cash Equivalents
29.21 Common Stocks
20.03 United States Government Securities
13.23 Corporate Debt Securities
<PAGE>
THE INVESTMENTS OF
UNITED ASSET STRATEGY FUND, INC.
MARCH 31, 1996
Shares Value
COMMON STOCKS
Business Services - 4.68%
Adobe Systems Incorporated ............. 8,000 $ 257,496
Cerner Corporation* .................... 36,000 828,000
Intuit Inc.* ........................... 9,700 436,500
Total ................................. 1,521,996
Chemicals and Allied Products - 5.09%
Dow Chemical Company (The) ............. 10,800 938,250
Genentech, Inc.* ....................... 3,500 184,188
Geon Company (The) ..................... 20,000 532,500
Total ................................. 1,654,938
Communication - 1.84%
Nokia Corporation, Series A, ADS ....... 17,500 599,375
Depository Institutions -- 2.03%
Grupo Financiero Banamex Accival, S.A. de
C.V., B, CPO Shares (A)* .............. 310,000 662,268
Electronic and Other Electric Equipment - 4.09%
Motorola, Inc. ......................... 14,000 742,000
Samsung Electronics Co., Ltd., GDR (B)* 62 3,635
Texas Instruments Incorporated ......... 11,500 585,062
Total ................................. 1,330,697
Food and Kindred Products - 1.15%
Buenos Aires Embotelladora S.A., ADR ... 22,500 374,062
Health Services - 2.53%
Beverly Enterprises, Inc.* ............. 75,000 825,000
Holding and Other Investment Offices - 1.50%
LTC Properties, Inc. ................... 30,000 487,500
Industrial Machinery and Equipment - 3.16%
SanDisk Corporation* ................... 20,000 255,000
Silicon Valley Group, Inc.* ............ 31,900 773,575
Total ................................. 1,028,575
Instruments and Related Products - 1.03%
Teradyne, Inc.* ........................ 20,000 335,000
Oil and Gas Extraction - 2.11%
Enron Oil & Gas Company ................ 26,000 685,750
TOTAL COMMON STOCKS - 29.21% $ 9,505,161
(Cost: $10,189,331)
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED ASSET STRATEGY FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Communication - 5.80%
MFS Communications Company, Inc.,
0.00%, 1-15-2006 ...................... $1,500 $ 930,000
Viacom International, Inc.,
9.125%, 8-15-99 ....................... 925 957,375
Total ................................. 1,887,375
Electronic and Other Electric Equipment - 2.28%
VLSI Technology, Inc., Convertible,
8.25%, 10-1-2005 ...................... 800 742,504
Health Services - 1.99%
ARV Assisted Living, Inc., Convertible,
6.75%, 4-1-2006 (B) ................... 630 648,900
Instruments and Related Products - 0.16%
Mark IV Industries, Inc.,
8.75%, 4-1-2003 ....................... 50 52,000
Paper and Allied Products - 3.00%
Buckeye Cellulose Corporation,
8.5%, 12-15-2005 ...................... 1,000 975,000
TOTAL CORPORATE DEBT SECURITIES - 13.23%.. $ 4,305,779
(Cost: $4,432,928)
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
6.875%, 2-28-97 ....................... 270 273,291
6.125%, 5-31-97 ....................... 2,000 2,011,560
7.25%, 2-15-98 ........................ 270 276,834
7.125%, 2-29-2000 ..................... 270 279,871
7.5%, 2-15-2005 ....................... 270 289,743
9.125%, 5-15-2018 ..................... 2,700 3,388,068
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 20.03% $ 6,519,367
(Cost: $6,427,603)
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED ASSET STRATEGY FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES
Chemicals and Allied Products - 4.75%
Ciba-Geigy Corporation,
5.35%, 4-24-96 ........................ $1,550 $ 1,544,702
Depository Institutions - 3.41%
U.S. Bancorp,
Master Note ........................... 1,111 1,111,000
Electric, Gas and Sanitary Services - 11.25%
Nicor Inc.,
5.24%, 4-2-96 ......................... 1,100 1,099,840
Pacific Gas & Electric Co.,
5.42%, 4-2-96 ......................... 1,500 1,499,774
Public Service Electric & Gas Co.,
5.47%, 4-17-96 ........................ 1,065 1,062,411
Total ................................. 3,662,025
Food and Kindred Products - 3.41%
General Mills, Inc.,
Master Note ........................... 1,111 1,111,000
Nondepository Institutions - 4.60%
Caterpillar Financial Australia Ltd.,
5.25%, 4-11-96 ........................ 1,500 1,497,813
Tobacco Products - 3.40%
B.A.T. Capital Corp.,
5.37%, 4-4-96 ......................... 1,105 1,104,505
Wholesale Trade - Nondurable Goods - 4.04%
Sara Lee Corporation,
Master Note ........................... 1,314 1,314,000
TOTAL SHORT-TERM SECURITIES - 34.86% $11,345,045
(Cost: $11,345,045)
TOTAL INVESTMENT SECURITIES - 97.33% $31,675,352
(Cost: $32,394,907)
CASH AND OTHER ASSETS, NET OF
LIABILITIES - 2.67% 867,496
NET ASSETS - 100.00% $32,542,848
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED ASSET STRATEGY FUND, INC.
MARCH 31, 1996
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) Listed on an exchange outside the United States.
(B) As of March 31, 1996, the following restricted securities were owned:
Shares/
Principal
Acquisition Amount Market
Security Date in 000's Cost Value
-------- ----------- --------------------------------
Samsung Electronics Co.,
Ltd., GDR 8/17/95 62 $ 3,340 $ 3,635
ARV Assisted Living,
Inc., Convertible,
6.75%, 4-1-2006 3/28/96 $630 630,000 648,900
-------- --------
$633,340 $652,535
======== ========
The total market value of restricted securities represents approximately
2.01% of the total net assets at March 31, 1996.
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
MARCH 31, 1996
Assets
Investment securities -- at value
(Notes 1 and 4) ................................. $31,675,352
Cash ............................................ 5,771
Receivables:
Investment securities sold ...................... 1,242,631
Dividends and interest .......................... 255,011
Fund shares sold ................................ 172,777
Unamortized organization expenses (Note 2) ....... 39,624
Prepaid insurance premium ........................ 26
-----------
Total assets .................................. 33,391,192
-----------
Liabilities
Payable for investment securities purchased ...... 630,000
Payable for Fund shares redeemed ................. 153,402
Organization expenses payable .................... 39,624
Accrued service fee .............................. 10,520
Accrued transfer agency and dividend
disbursing ...................................... 7,597
Accrued accounting services fee .................. 1,667
Other liabilities ................................ 5,534
-----------
Total liabilities ............................. 848,344
-----------
Total net assets ............................. $32,542,848
===========
Net Assets
$0.01 par value capital stock
Capital stock ................................... $ 6,204,891
Additional paid-in capital ...................... 26,385,325
Accumulated undistributed income:
Accumulated undistributed net investment
income ......................................... 1,090
Accumulated undistributed net realized gain on
investment transactions ...................... 671,097
Net unrealized depreciation in value of
investments at end of period ................... (719,555)
-----------
Net assets applicable to outstanding
units of capital ............................. $32,542,848
===========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $5.24
Class Y .......................................... $5.25
Capital shares outstanding
Class A .......................................... 6,152,643
Class Y .......................................... 52,248
Capital shares authorized .......................... 1,000,000,000
See notes to financial statements.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended MARCH 31, 1996
Investment Income
Income:
Interest ........................................ $576,615
Dividends ....................................... 73,640
----------
Total income .................................. 650,255
----------
Expenses (Notes 2 and 3):
Investment management fee ....................... 102,378
Registration fees ............................... 45,767
Transfer agency and dividend disbursing - Class A 39,466
Service fee - Class A ........................... 25,627
Shareholder reports ............................. 15,140
Accounting services fee ......................... 9,167
Audit fees ...................................... 5,826
Amortization of organization expenses ........... 4,953
Legal fees ...................................... 4,577
Custodian fees .................................. 2,874
Shareholder servicing - Class Y ................. 51
Other ........................................... 14,148
----------
Total expenses ................................ 269,974
----------
Net investment income ........................ 380,281
----------
Realized and Unrealized Gain (Loss) on Investments
Realized net gain on securities .................. 672,210
Realized net loss on foreign currency
transactions .................................... (5,467)
----------
Realized net gain on investments ................ 666,743
Unrealized depreciation in value of investments
during the period ............................... (1,508,404)
----------
Net loss on investments ....................... (841,661)
----------
Net decrease in net assets resulting
from operations ............................ $(461,380)
==========
See notes to financial statements.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the six For the
months ended period ended
March 31, September 30,
1996 1995
Increase in Net Assets ------------ ------------
Operations:
Net investment income ............ $ 380,281 $ 222,045
Realized net gain on
investments .................... 666,743 26,268
Unrealized appreciation
(depreciation) ................. (1,508,404) 788,849
----------- -----------
Net increase (decrease) in net assets
resulting from operations ..... (461,380) 1,037,162
----------- -----------
Dividends to shareholders from:*
Net investment income
Class A ........................ (439,074) (154,855)
Class Y ........................ (1,900) ---
Realized gains on securities
transactions
Class A ........................ (27,304) ---
Class Y ........................ (17) ---
----------- -----------
(468,295) (154,855)
----------- -----------
Capital share transactions:
Proceeds from sale of shares:
Class A (2,672,827 and 4,404,105
shares, respectively) ......... 14,296,093 22,935,757
Class Y (51,255 and 626
shares, respectively) ......... 274,639 3,416
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (88,717 and 28,710
shares, respectively) ......... 465,572 154,505
Class Y (364 and 3
shares, respectively) ......... 1,917 15
Payments for shares redeemed:
Class A (716,715 and 345,001
shares, respectively) ......... (3,816,661) (1,825,037)
Class Y (0 and 0
shares, respectively) ......... --- ---
----------- -----------
Net increase in net assets
resulting from capital
share transactions ............ 11,221,560 21,268,656
----------- -----------
Total increase ................ 10,291,885 22,150,963
Net Assets
Beginning of period ............... 22,250,963 100,000
----------- -----------
End of period, including undistributed
net investment income of $1,090
and $67,250, respectively ........ $32,542,848 $22,250,963
=========== ===========
*See "Financial Highlights" on pages 13 - 14.
See notes to financial statements.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
For period
the six from March
months 9, 1995
ended through
March September
31, 1996 30, 1995*
------- -------
Net asset value,
beginning of period $5.42 $5.00
----- -----
Income from investment operations:
Net investment
income .......... 0.06 0.07
Net realized and
unrealized gain (loss)
on investments... (0.16) 0.40
----- -----
Total from investment
operations ........ (0.10) 0.47
----- -----
Less distributions:
Dividends from net
investment income (0.07) (0.05)
Distribution from
capital gains.... (0.01) (0.00)
----- -----
Total distributions. (0.08) (0.05)
----- -----
Net asset value,
end of period ..... $5.24 $5.42
===== =====
Total return** ..... -1.81% 9.42%
Net assets, end of period
(000 omitted) .... $32,269 $22,251
Ratio of expenses to
average net assets 1.85%*** 1.64%
Ratio of net investment
income to average net
assets ............ 2.54%*** 3.71%
Portfolio
turnover rate ..... 51.07% 9.32%
Average commission
rate paid ......... $0.0394
*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 have been annualized.
**Total return calculated without taking into account the sales load
deducted on an initial purchase.
***Annualized.
See notes to financial statements.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
For the period
six months from 9/27/95
ended through
3/31/96 9/30/95*
-------- --------
Net asset value,
beginning of period $5.42 $5.41
----- -----
Income from investment
operations:
Net investment
income .......... 0.06 0.00
Net realized and
unrealized gain
(loss) on
investments...... (0.14) 0.01
----- -----
Total from investment
operations ........ (0.08) 0.01
----- -----
Less distributions:
Dividends from net
investment
income........... (0.08) (0.00)
Distribution from
capital gains.... (0.01) (0.00)
----- -----
Total distributions. (0.09) (0.00)
----- -----
Net asset value,
end of period ..... $5.25 $5.42
===== =====
Total return ....... -1.70% 0.18%
Net assets, end of
period (000
omitted) ......... $274 $3
Ratio of expenses
to average net
assets ............ 1.45%** 0.00%
Ratio of net
investment income
to average net
assets ............ 3.07%** 0.00%
Portfolio
turnover rate ..... 51.07% 9.32%
Average commission
rate paid ......... $0.0394
*On September 12, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class A shares.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
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. Its investment objective is to provide a high total return with
reduced risk over the long term through investments in stocks, bonds and short-
term instruments. 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. Restricted securities and securities for which
market quotations are not readily available are valued at fair value as
determined in good faith under procedures established by and under the
general supervision of the Fund's Board of Directors. 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.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- 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 $14.0 billion of
combined net assets at March 31, 1996) 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
For Class A shares, 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. With respect to Class Y shares, the
Fund pays WARSCO a monthly fee at an annual rate of .15% of the average daily
net assets of the class for the preceding 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 for Class A shares (which are not an expense of
the Fund) of $536,265, out of which W&R paid sales commissions of $304,643 and
all expenses in connection with the sale of Fund shares, except for registration
fees and related expenses.
Under a Service Plan for Class A shares 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 $15,182,332 while proceeds from maturities and sales
aggregated $10,465,900. Purchases of short-term securities aggregated
$47,687,696 while proceeds from maturities and sales aggregated $41,870,506.
There were no purchases or sales of U.S. Government securities during the period
ended March 31, 1996.
For Federal income tax purposes, cost of investments owned at March 31,
1996 was $32,394,907, resulting in net unrealized depreciation of $719,555, of
which $659,936 related to appreciated securities and $1,379,491 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 period ended September 30, 1995, which has been
distributed to the Fund's shareholders.
<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 March 31, 1996, the results of its operations for the six months
then ended and the changes in its net assets and the financial highlights for
each of the periods indicated, 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 audits, which included
confirmation of securities at March 31, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Kansas City, Missouri
May 10, 1996
<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
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
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
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
NUR1017SA(3-96)
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