May 17, 1999
Dear United Gold & Government Fund Shareholder:
The attached proxy materials describe a proposal that United Gold & Government
Fund, Inc. ("Gold & Government Fund") reorganize and become part of United
Asset Strategy Fund, Inc. ("Asset Strategy Fund"). If the proposal is approved
and implemented, each shareholder of Gold & Government Fund will automatically
become a shareholder of Asset Strategy Fund.
Your Board of Directors recommends a vote FOR this proposal. The Board believes
that combining the two Funds is in the best interests of and may benefit Gold &
Government Fund's shareholders by providing them with a larger, growing
investment vehicle that has an investment goal similar to that of Gold &
Government Fund, but which is subject to investment policies that permit
broader asset allocation than those of Gold & Government Fund.
Your vote is important no matter how many shares you own. Voting your shares
early will permit Gold & Government Fund to avoid costly follow-up mail and
telephone solicitation. After reviewing the attached materials, please
complete, date, and sign the enclosed proxy card and mail it in the enclosed
return envelope today. As an alternative to using the paper proxy card to vote,
you may vote by telephone, through the Internet, or in person.
Very truly yours,
/s/ Robert L. Hechler
Robert L. Hechler
President
United Gold & Government Fund, Inc.
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
[logo: Waddell & Reed Financial Services]
6300 Lamar Avenue
Overland Park, Kansas 66202
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
----------------
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
June 22, 1999
To The Shareholders:
Notice is hereby given that a special meeting of the shareholders of
United Gold & Government Fund, Inc. ("Gold & Government Fund") will be held on
June 22, 1999, at 11:00 a.m., local time, at 6300 Lamar Avenue, Overland Park,
Kansas 66202, or any adjournment thereof ("Special Meeting"), for the following
purposes:
(1) To approve an Agreement and Plan of Reorganization and Termination
under which United Asset Strategy Fund, Inc. ("Asset Strategy Fund") would
acquire all of the assets of Gold & Government Fund in exchange solely for
shares of Asset Strategy Fund and the assumption by Asset Strategy Fund of all
of Gold & Government Fund's liabilities, followed by the distribution of those
shares to the shareholders of Gold & Government Fund, all as described in the
accompanying Prospectus/Proxy Statement ("Proxy Statement"); and
(2) To transact such other business as may properly come before the Special
Meeting.
The Board of Directors of Gold & Government Fund has fixed the close of
business on April 12, 1999, as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting ("Record Date").
You are entitled to vote at the Special Meeting if you owned shares of Gold &
Government Fund at the close of business on the Record Date.
Retain this Notice and Proxy Statement.
By order of the Board of Directors,
Kristen A. Richards
Assistant Secretary
May 17, 1999
Overland Park, Kansas
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy card, sign and
date the card, and return it in the envelope provided. IF YOU SIGN, DATE, AND
RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE
VOTED "FOR" THE PROPOSAL DESCRIBED ABOVE. To avoid the additional expense of
further solicitation, we ask your cooperation in mailing your proxy card
promptly.
As an alternative to using the paper proxy card to vote, you may vote by
telephone, through the Internet, or in person. Shares that are registered in
your name, as well as shares held in "street name" through a broker, may be
voted via the Internet or by telephone. To vote in this manner, you will need
the "control" number that appears on your proxy card. To vote via the Internet,
please access http://www.proxyweb.com on the World Wide Web. You may also call
1-888-221-0697 and vote by telephone. If we do not receive your completed proxy
card after several weeks, you may be contacted by our proxy solicitor,
Management Information Services. Our proxy solicitor will remind you to vote
your shares or will record your vote over the telephone if you choose to vote
in that manner.
Unless the proxy card submitted by a corporation or partnership is signed by
the appropriate persons as indicated in the voting instructions on the proxy
card, it will not be voted.
<PAGE>
UNITED ASSET STRATEGY FUND, INC.
UNITED GOLD & GOVERNMENT FUND, INC.
6300 Lamar Avenue
Overland Park, Kansas 66202
(Toll Free) 1-800-366-5465
PROSPECTUS/PROXY STATEMENT
May 17, 1999
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of United Gold & Government Fund, Inc. ("Gold & Government Fund")
in connection with the solicitation of proxies by its Board of Directors for
use at a special meeting of its shareholders to be held on June 22, 1999, at
11:00 a.m., local time, at 6300 Lamar Avenue, Overland Park, Kansas 66202, or
any adjournment thereof, if the meeting is adjourned for any reason ("Special
Meeting").
As more fully described in this Proxy Statement, the main purpose of the
Special Meeting is to vote on a proposed reorganization. In the reorganization,
United Asset Strategy Fund, Inc. ("Asset Strategy Fund") would acquire all of
the assets of Gold & Government Fund, in exchange solely for shares of Asset
Strategy Fund and the assumption by Asset Strategy Fund of all of the
liabilities of Gold & Government Fund. Those shares of Asset Strategy Fund
would then be distributed to the shareholders of Gold & Government Fund, so
that each shareholder would receive a number of full and fractional shares of
Asset Strategy Fund having an aggregate net asset value that, on the effective
date of the reorganization, is equal to the aggregate net asset value of the
shareholder's shares of Gold & Government Fund. As soon as practicable
following the distribution of those shares, Gold & Government Fund would be
terminated.
Asset Strategy Fund is a diversified open-end management investment
company. Its investment goal is high total return over the long term. Asset
Strategy Fund seeks to achieve its goal by allocating its assets among stocks,
bonds of any quality including junk bonds (rated BB and below by Standard and
Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), and Ba and below
by Moody's Investors Service, Inc. ("Moody's")), and short-term instruments,
both in the United States and abroad.
This Proxy Statement, which should be retained for future reference, sets
forth concisely the information about the reorganization and Asset Strategy
Fund that a shareholder should know before voting on the reorganization. A
Statement of Additional Information, dated May 17, 1999, relating to the
reorganization and including historical financial statements, has been filed
with the Securities and Exchange Commission ("SEC") and is incorporated herein
by this reference (that is, the Statement of Additional Information is legally
a part of this Proxy Statement). A Prospectus and a Statement of Additional
Information for Asset Strategy Fund, each dated January 31, 1999, and Asset
Strategy Fund's Annual Report to Shareholders for the fiscal year ended
September 30, 1998, have been filed with the SEC and are incorporated herein by
this reference. A Prospectus and a Statement of Additional Information for Gold
& Government Fund, each dated April 15, 1999, and Gold & Government Fund's
Annual Report to Shareholders for the fiscal year ended December 31, 1998, have
been filed with the SEC and also are incorporated herein by this reference. A
copy of Asset Strategy Fund's Prospectus and Annual Report accompany this Proxy
Statement. Copies of the other referenced documents may be obtained without
charge, and further inquiries may be made, by writing to Gold & Government Fund
or Asset Strategy Fund, P.O. Box 29217, Shawnee Mission, Kansas 66201-9217, or
by calling toll-free 1-800-366-5465.
The SEC maintains a website (http://www.sec.gov) that contains the
Statement of Additional Information and other material incorporated by
reference, together with other information regarding Asset Strategy Fund and
Gold & Government Fund.
The SEC has not approved or disapproved the shares of Asset Strategy Fund
or determined whether this Proxy Statement is accurate or adequate. It is a
criminal offense to state otherwise.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
VOTING INFORMATION ................................................. 1
SYNOPSIS ........................................................... 2
COMPARISON OF PRINCIPAL RISK FACTORS ............................... 6
THE PROPOSED TRANSACTION ........................................... 8
OTHER BUSINESS ..................................................... 13
MISCELLANEOUS ...................................................... 13
APPENDIX A: FORM OF AGREEMENT AND PLAN OF REORGANIZATION
AND TERMINATION ................................................... A-1
</TABLE>
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
----------------
PROSPECTUS/PROXY STATEMENT
Special Meeting of Shareholders
June 22, 1999
----------------
VOTING INFORMATION
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of United Gold & Government Fund, Inc. ("Gold & Government Fund")
in connection with the solicitation of proxies from those shareholders by the
Board of Directors ("Board") of Gold & Government Fund for use at a special
meeting of shareholders to be held on June 22, 1999 ("Special Meeting"), and at
any adjournment thereof. This Proxy Statement will first be mailed to
shareholders on or about May 17, 1999.
One-third of Gold & Government Fund's shares outstanding on April 12, 1999
("Record Date"), represented in person or by proxy, constitutes a quorum and
must be present for the transaction of business at the Special Meeting. If a
quorum is not present at the Special Meeting or a quorum is present but
sufficient votes to approve the reorganization proposal described below
("Proposal") are not received, the persons named as proxies may propose one or
more adjournments of the Special Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a majority
of those shares represented at the Special Meeting in person or by proxy. The
persons named as proxies will vote those proxies that they are entitled to vote
FOR the Proposal in favor of such an adjournment and will vote those proxies
required to be voted AGAINST the Proposal against such adjournment.
Broker non-votes are shares held in street name for which the broker
indicates that instructions have not been received from the beneficial owners
or other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be
counted as shares present for purposes of determining whether a quorum is
present but will not be voted for or against any adjournment or the Proposal.
Accordingly, abstentions and broker non-votes effectively will be a vote
against adjournment or against the Proposal because the required vote is a
percentage of the shares outstanding. Abstentions and broker non-votes will not
be counted, however, as votes cast for purposes of determining whether
sufficient votes have been received to approve the Proposal.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your directions as indicated on the card, if it is received
properly executed by you or by your duly appointed agent or attorney-in-fact.
If you sign, date, and return the proxy card, but give no voting instructions,
your shares will be voted in favor of approval of the Proposal. In addition, if
you sign, date, and return the proxy card, but give no voting instructions, the
duly appointed proxies may, in their discretion, vote on other matters that may
come before the Special Meeting. The proxy card may be revoked by giving
another proxy or by letter or telegram revoking the initial proxy. To be
effective, revocation must be received by Gold & Government Fund prior to the
Special Meeting and must indicate your name and account number. If you attend
the Special Meeting in person you may, if you wish, vote by ballot at the
Special Meeting, thereby canceling any proxy previously given.
To reduce costs, notices to a shareholder having more than one account in
Gold & Government Fund listed under the same Social Security number at a single
address have been combined. The proxy cards have been coded so that a
shareholder's votes will be counted for each such account.
As of the Record Date, Gold & Government Fund had 2,006,854.526 shares of
common stock outstanding. The solicitation of proxies, the cost of which will
be divided equally between Gold & Government Fund and United Asset Strategy
Fund, Inc. ("Asset Strategy Fund"), will be made primarily by mail, but also
may be made by telephone or oral communications by representatives of Waddell &
Reed Investment Management Company ("WRIMCO"), who will not receive any
compensation for these activities from either Gold & Government Fund or Asset
Strategy Fund (each a "Fund"), or by Management Information Services,
professional proxy solicitors, who will be paid fees and expenses of up to
approximately $1500.00 for soliciting services. If votes are recorded by
telephone, Management
1
<PAGE>
Information Services will use procedures designed to authenticate shareholders'
identities, to allow shareholders to authorize the voting of their shares in
accordance with their instructions, and to confirm that a shareholder's
instructions have been properly recorded. You may also vote by mail or through
an Internet site. Proxies voted by telephone or Internet may be revoked at any
time before they are voted in the same manner that proxies voted by mail may be
revoked.
WRIMCO does not know of any person who owned beneficially 5% or more of
the shares of either Fund as of the Record Date. Directors and officers of Gold
& Government Fund owned in the aggregate less than 1% of the shares of Gold &
Government Fund as of the Record Date.
Vote Required. Approval of the Proposal requires the affirmative vote of a
majority of Gold & Government Fund's shares outstanding on the Record Date,
with both classes voting together. Each outstanding full share of Gold &
Government Fund is entitled to one vote, and each outstanding fractional share
thereof is entitled to a proportionate fractional share of one vote. If the
Proposal is not approved by the requisite vote of shareholders of Gold &
Government Fund, the persons named as proxies may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies.
REORGANIZATION PROPOSAL. TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION
AND TERMINATION ("REORGANIZATION PLAN") UNDER WHICH ASSET STRATEGY FUND
WOULD ACQUIRE ALL OF THE ASSETS OF GOLD & GOVERNMENT FUND IN EXCHANGE
SOLELY FOR SHARES OF ASSET STRATEGY FUND AND THE ASSUMPTION BY ASSET
STRATEGY FUND OF ALL OF GOLD & GOVERNMENT FUND'S LIABILITIES, FOLLOWED BY
THE DISTRIBUTION OF THOSE SHARES TO THE SHAREHOLDERS OF GOLD & GOVERNMENT
FUND ("REORGANIZATION")
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, the Prospectus and Statement of Additional Information of
Asset Strategy Fund (which are incorporated herein by reference), the
Prospectus and Statement of Additional Information of Gold & Government Fund
(which are incorporated herein by reference), and the Reorganization Plan (a
form of which is attached as Appendix A to this Proxy Statement). As discussed
more fully below, Gold & Government Fund's Board believes that the
Reorganization will benefit Gold & Government Fund's shareholders by providing
them with a larger, growing investment vehicle that has an investment goal
similar to that of Gold & Government Fund, but which is subject to investment
policies that permit broader asset allocation than those of Gold & Government
Fund.
The Proposed Reorganization
Gold & Government Fund's Board considered and approved the Reorganization
Plan at a meeting held on April 6, 1999. The Reorganization Plan provides for
the acquisition of all assets of Gold & Government Fund by Asset Strategy Fund,
in exchange solely for shares of common stock of Asset Strategy Fund and the
assumption by Asset Strategy Fund of the liabilities of Gold & Government Fund.
Gold & Government Fund then will distribute those shares of Asset Strategy Fund
to its shareholders, by class, so that each Gold & Government Fund shareholder
will receive the number of full and fractional shares of the corresponding
class of Asset Strategy Fund in terms of fees and other characteristics,
including nomenclature ("corresponding class"), that is equal in aggregate net
asset value to the aggregate net asset value of the shareholder's holdings in
Gold & Government Fund as of the day the Reorganization is completed. Gold &
Government Fund will be terminated as soon as practicable thereafter.
The Reorganization is anticipated to occur as of the close of business on
June 30, 1999, or at a later date when the Reorganization is approved and all
contingencies have been met ("Closing Date").
For the reasons set forth below under "The Proposed Transaction--Reasons
for the Reorganization," Gold & Government Fund's Board, including its
directors who are not "interested persons," as that term is defined in the
Investment Company Act of 1940, as amended ("1940 Act"), of either Fund,
WRIMCO, or Waddell & Reed, Inc. ("Independent Directors"), has determined that
the Reorganization is in the best interests of Gold & Government Fund, that the
terms of the Reorganization are fair and reasonable, and that the interests of
Gold & Government Fund's shareholders will not be diluted as a result of the
Reorganization. Accordingly, Gold & Government Fund's Board recommends approval
of the transaction.
2
<PAGE>
Comparative Fee Table
The following tables show (1) fees currently incurred by shareholders of
each Fund and fees that each shareholder will incur after giving effect to the
Reorganization and (2) the current annual fund operating expenses incurred for
the fiscal year ended September 30, 1998, by Asset Strategy Fund and the fiscal
year ended December 31, 1998, by Gold & Government Fund, and pro forma fees for
Asset Strategy Fund after the Reorganization.
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Gold & Government Asset Strategy Fund
Asset Strategy Fund Fund (Pro Forma)
------------------- ------------------- ------------------
Class A Class Y Class A Class Y Class A Class Y
--------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases 5.75% None 5.75% None 5.75% None
Sales charge (load) on reinvested dividends None None None None None None
Redemption fee or deferred sales charge (load) None None None None None None
</TABLE>
Annual Fund Operating Expenses (expenses that are deducted from fund
assets)
<TABLE>
<CAPTION>
Gold & Government Asset Strategy Fund
Asset Strategy Fund Fund (Pro Forma)
------------------- ------------------- --------------------
Class A Class Y Class A Class Y Class A Class Y
--------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management Fees 0.69% 0.69% 0.69% 0.69% 0.69% 0.69%
Distribution (12b-1) Fees* 0.24% None 0.25% None 0.25% None
Other Expenses (including transfer agency,
registration fees, accounting services fees,
and other expenses) 0.69% 0.49% 1.52% 1.16% 0.78% 0.48%
---- ---- ---- ---- ---- ----
Total Annual Fund Operating Expenses 1.62% 1.18% 2.46% 1.85% 1.72% 1.17%
</TABLE>
* Because each Fund pays distribution fees with respect to Class A shares,
long-term Class A shareholders could pay more than the economic equivalent
of the maximum front-end sales charge permitted by the National Association
of Securities Dealers, Inc.
Example of Effect on Fund Expenses
This Example is intended to help you compare the cost of investing in Gold
& Government Fund with the cost of investing in Asset Strategy Fund and the
cost of investing in Asset Strategy Fund assuming the Reorganization has been
completed.
The Example assumes that you invest $10,000 in the specified Fund for the
time periods indicated. The Example also assumes that your investment has a 5%
return each year, that all dividends and other distributions are reinvested,
and that the Fund's operating expenses remain the same. Although your actual
costs or returns may be higher or lower, based on these assumptions, your costs
would be:
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
---------- ------------- ------------ ----------
<S> <C> <C> <C> <C>
Class A Shares:
Asset Strategy Fund $730 $1,057 $1,406 $2,386
Gold & Government Fund $810 $1,297 $1,810 $3,210
Pro Forma Combined Fund $739 $1,083 $1,450 $2,478
Class Y Shares:
Asset Strategy Fund $120 $ 375 $ 648 $1,432
Gold & Government Fund $188 $ 582 $1,001 $2,169
Pro Forma Combined Fund $119 $ 372 $ 644 $1,420
</TABLE>
Form of Organization
Asset Strategy Fund is an open-end, diversified management investment
company that was organized as a Maryland corporation on August 25, 1994. Gold &
Government Fund is an open-end, diversified management investment company that
was organized as a Maryland corporation on February 28, 1985. Neither Fund is
required to (nor do they) hold annual shareholder meetings.
Investment Manager
WRIMCO is the investment manager of each Fund. In this capacity, WRIMCO
supervises all aspects of each Fund's operations and makes and implements all
investment decisions for each Fund. WRIMCO's address is 6300 Lamar Avenue, P.O.
Box 29217, Shawnee Mission, Kansas 66201-9217.
3
<PAGE>
Each Fund currently pays WRIMCO a management fee that combines a specific
fee and a group fee. For each Fund, the specific fee is 0.30% of the Fund's
average daily net assets. The group fee is calculated on the basis of the
combined average daily net assets of all the funds in the United Group of
Mutual Funds based on the following schedule:
<TABLE>
<CAPTION>
Group Net Asset Level (in millions) Annual Group Fee Rate
----------------------------------- ---------------------
<S> <C>
From $0 to $750 0.51%
From $750 to $1,500 0.49%
From $1,500 to $2,250 0.47%
From $2,250 to $3,000 0.45%
From $3,000 to $3,750 0.43%
From $3,750 to $7,500 0.40%
From $7,500 to $12,000 0.38%
Over $12,000 0.36%
</TABLE>
For the fiscal year ended September 30, 1998, Asset Strategy Fund paid
WRIMCO an investment management fee of 0.69% of its average daily net assets.
For the fiscal year ended December 31, 1998, Gold & Government Fund paid WRIMCO
an investment management fee of 0.69% of its average daily net assets.
Following the Reorganization, the initial management fee for the combined
Fund is expected to be 0.69% of average daily net assets. However, this fee may
change if proposals currently under separate consideration by shareholders of
both Funds are approved. Those proposals would change the management fee
schedule to eliminate the group fee component and to modify the fee based on
each Fund's average daily net assets. If Asset Strategy Fund's shareholders
approve the proposed fee schedule, its management fee would be calculated at
the annual rate of: 0.70% of average daily net assets up to $1 billion; 0.65%
of such assets from $1 billion to $2 billion; 0.60% of such assets from $2
billion to $3 billion; and 0.55% of such assets thereafter. If Gold &
Government Fund's shareholders approve the proposed fee schedule, its
management fee would be calculated at the annual rate of: 0.85% of average
daily net assets up to $1 billion; 0.83% of such assets from $1 billion to $2
billion; 0.80% of such assets from $2 billion to $3 billion; and 0.76% of such
assets thereafter. WRIMCO intends, however, to waive Gold & Government Fund's
management fee if that Fund's net assets are less than $25 million, but this
waiver may be terminated by WRIMCO at any time. WRIMCO will consider
termination of this waiver if Gold & Government Fund's shareholders fail to
approve the Reorganization. If the Reorganization is approved by Gold &
Government Fund's shareholders, the proposed change in its fee schedule will
not become effective.
Investment Goals and Policies
The investment goal and policies of each Fund are set forth below. There
can be no assurance that either Fund will achieve its investment goal.
Asset Strategy Fund. Asset Strategy Fund's investment goal is high total
return over the long term. The Fund seeks to achieve its goal by allocating its
assets among stocks, bonds of any quality including junk bonds (rated BB and
below by S&P, and Ba and below by Moody's), and short-term instruments, both in
the United States and abroad. The Fund may invest up to 100% of its assets in
any of those three classes of investments, but generally allocates 70% of its
assets to stocks, 25% to bonds, and 5% to short-term instruments. This mix will
vary based on WRIMCO's outlook for the different markets. Changes in this mix
may be based on such factors as interest rate changes, security valuation
levels, and a rise in the potential for growth stocks.
Asset Strategy Fund may also invest in and use other types of instruments
in seeking to achieve its goals. For example, the Fund may invest in options,
futures contracts, asset-backed securities, and other derivative instruments if
it is permitted to invest in the type of asset by which the return on, or the
value of, the derivative is measured. The Fund can invest in securities of
companies of any size. See its Statement of Additional Information for more
information about permitted investments and strategies, as well as the
restrictions that apply to them.
As a defensive measure, Asset Strategy Fund may increase its holdings in
the bond or short-term instrument classes when WRIMCO believes that there is a
potential bear market, prolonged downturn in stock prices, or significant loss
in stock value. The Fund may also, as a temporary defensive measure, invest up
to 100% of its assets in high-quality money market instruments or precious
metals.
Gold & Government Fund. Gold & Government Fund's investment goal is high
total return. The Fund seeks to achieve its goal by concentrating its
investments in gold-related and other minerals-related securities, usually in
4
<PAGE>
the common stock of U.S. and foreign companies, and precious metals (i.e.,
gold, silver, and platinum) during periods of actual or expected inflation or
when the environment for investing in precious metals otherwise appears to
WRIMCO to be favorable and by investing in U.S. Government securities during
periods of actual or expected disinflation or low inflation.
Minerals-related securities are securities that offer an investment
participation in the mining, processing, production, exploration, refining, or
sales of gold, platinum, silver, or hydrocarbons. The six largest producers of
gold are the Republic of South Africa, the United States, Australia, the New
Independent States of the former Soviet Union, Canada, and China. As such, the
Fund may invest a significant portion of its assets in the securities of
companies located in these countries.
Although Gold & Government usually invests in common stock, it may also
invest in other kinds of securities, such as debt securities of any quality
(including junk bonds), preferred stock, and convertible securities. It may
also invest in and use other types of instruments in seeking to achieve its
goals. For example, the Fund is permitted to invest in options, futures
contracts, asset-backed securities, and other derivative instruments if it is
permitted to invest in the type of asset by which the return on, or value of,
the derivative is measured. The Fund may invest in companies of any size.
Unlike Asset Strategy Fund, which normally allocates assets among stocks,
bonds, and short-term instruments, Gold & Government Fund does not follow such
an allocation methodology. Rather, as described above, Gold & Government Fund
allocates assets, depending upon inflationary conditions, between (1)
gold-related and other minerals-related securities and precious metals and (2)
U.S. government securities.
Both Funds. Each Fund's investment portfolio is actively traded--
securities may be bought and sold relatively quickly during certain market or
economic conditions. At times, each Fund's portfolio turnover rate may exceed
200%, resulting in greater brokerage commissions and acceleration of capital
gains, which are taxable when distributed to shareholders.
Operations of Asset Strategy Fund Following the Reorganization
As indicated above, the investment goal of Asset Strategy Fund is similar
to that of Gold & Government Fund, and Asset Strategy Fund's investment
policies are broader than those of Gold & Government Fund. Based on its review
of the Funds' investment portfolios, WRIMCO believes that a substantial portion
of the assets held by Gold & Government Fund will be consistent with the
investment policies of Asset Strategy Fund and thus can be transferred to and
held by Asset Strategy Fund if the Reorganization Plan is approved. If,
however, Gold & Government Fund has any assets that may not be held by Asset
Strategy Fund, those assets will be sold prior to the Reorganization. The
proceeds of such sales will be held in temporary investments or reinvested in
assets that qualify to be held by Asset Strategy Fund. The possible need for
Gold & Government Fund to dispose of assets prior to the Reorganization could
result in selling securities at a disadvantageous time and could result in its
realizing losses that might not otherwise be realized until a later date.
Alternatively, these sales could result in Gold & Government Fund realizing
gains that might not otherwise be realized until a later date, the net proceeds
of which would be included in a distribution to its shareholders prior to the
Reorganization.
As discussed above, WRIMCO serves as investment manager of both Funds.
After the Reorganization, WRIMCO, in its capacity as investment manager of
Asset Strategy Fund, will have sole responsibility for managing the Funds'
combined assets. In addition, Asset Strategy Fund's Directors and officers,
distributor, and other outside agents will continue to serve the Fund in their
current capacities.
Purchases and Redemptions
Purchases. Class A shares of each Fund may be purchased by mail or
automatic investment transactions, and Class Y shares thereof may also be
purchased by wire or through certain third parties. The shares of each Fund are
sold on a continuous basis at the net asset value per share ("NAV") next
calculated after receipt of a purchase order in good form, plus, for Class A
shares, any applicable sales charge. The NAV for each Fund is computed
separately and is determined once each day that the New York Stock Exchange is
open ("Business Day") as of the close of regular trading on the Exchange, but
may also be computed at other times. For a more complete discussion of share
purchases, see "Your Account--Buying Shares" in either Fund's Prospectus.
Redemptions. Class A shares of each Fund may be redeemed by mail, and
Class Y shares may also be redeemed by telephone or fax or through certain
third parties. Redemptions are made at the NAV next determined
5
<PAGE>
after a request in proper form is received at the Fund's office. Normally,
payments for shares redeemed will be mailed within seven days following receipt
of the required documents. For a more complete discussion of share redemption
procedures, see "Your Account--Selling Shares" in either Fund's Prospectus.
Gold & Government Fund's shares have been unavailable for purchase since
April, 1999. If the Reorganization is approved, redemptions of Gold &
Government Fund's shares may be effected through the Closing Date.
Exchanges
Shares of each Fund may be exchanged for shares of the corresponding class
of another fund in the United Group of Mutual Funds on the basis of their
respective NAVs at the time of the exchange. After the Reorganization, shares
of Asset Strategy Fund will continue to be exchangeable for shares of the
corresponding class of another fund in the United Group of Mutual Funds. For a
more complete discussion of the Funds' exchange policies, see "Your Account--
Shareholder Services: Exchanges" in either Fund's Prospectus.
Dividends and Other Distributions
Each Fund earns investment income in the form of interest and dividends on
investments. Dividends paid by each Fund are based solely on its investment
income. Each Fund's policy is to distribute substantially all of its investment
income, less expenses, to shareholders on a quarterly basis (March, June,
September, and December), at the discretion of its Board. Dividends are
automatically reinvested in additional shares of the class of the Fund at the
NAV on the payable date unless otherwise requested.
Each Fund also realizes capital gains and losses when it sells securities
or derivatives for more or less than it paid. If total gains on these sales
exceed total losses (including losses carried forward from previous years), the
Fund has capital gain net income. Net realized capital gains, if any, together
with net gains realized on foreign currency transactions, if any, are
distributed to each Fund's shareholders at least annually, usually in December.
Capital gains distributions are automatically reinvested in additional shares
of the distributing class of the Fund at the NAV on the payable date unless
otherwise requested.
On or before the Closing Date, Gold & Government Fund will declare a
distribution of substantially all of its net investment income and realized net
capital gain, if any, and distribute that amount plus any previously declared
but unpaid distributions, in order to continue to maintain its tax status as a
regulated investment company.
Federal Income Tax Consequences of the Reorganization
The Funds will receive an opinion of their counsel, Kirkpatrick & Lockhart
LLP, to the effect that the Reorganization will constitute a tax-free
reorganization within the meaning of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended ("Code"). Accordingly, neither Fund nor,
except as noted below, any of their shareholders will recognize any gain or
loss as a result of the Reorganization. See "The Proposed Transaction--Federal
Income Tax Considerations," below. If Gold & Government Fund sells securities
prior to the Closing Date, it may realize gains or losses that might not
otherwise be realized until a later date. Any such net gains would increase the
amount of any distribution made to shareholders of Gold & Government Fund prior
to the Closing Date.
COMPARISON OF PRINCIPAL RISK FACTORS
Primary Differences in Risks of the Funds
Gold & Government Fund, like Asset Strategy Fund, invests in equity and
debt securities, including foreign securities, junk bonds, and derivatives. As
a result, an investment in Gold & Government Fund is subject to the same
general risks, described below, as an investment in Asset Strategy Fund.
However, because Gold & Government Fund generally invests heavily in precious
metals and in minerals-related securities, it is particularly subject to the
risks of such investments, and the price of its shares may vary more widely
than the price of shares of Asset Strategy Fund, which invests more broadly.
Investments in minerals-related securities and precious metals can
fluctuate sharply and are considered speculative. A substantial portion of Gold
& Government Fund's minerals-related securities may be invested in foreign
securities, which present additional risks such as currency fluctuations and
political or economic conditions affecting the foreign country. Depending on
international monetary or political conditions or short-term supplies of
precious metals, Gold & Government Fund's assets may be more volatile than
other types of investments.
Gold & Government Fund's investment success depends to a high degree on
the validity of the premise that the values of minerals-related securities will
move in different directions than the values of U.S. Government securities
6
<PAGE>
during periods of inflation or disinflation. If the values of both types of
securities move down during the same period of time, the value of a
shareholder's investment will decline rather than stabilize or increase as
anticipated, regardless of whether Gold & Government Fund is invested in
minerals-related securities or U.S. Government securities.
The concentration of the supply of gold and the control of gold sales
present additional risks to Gold & Government Fund. The six largest producers
of gold are the Republic of South Africa, the United States, Australia, the New
Independent States of the former Soviet Union, Canada, and China. Economic,
social, and political conditions and goals prevailing in these countries may
have a direct effect on the production and marketing of newly produced gold and
sales of central bank holdings.
There is also the possibility that, under unusual international monetary
or political conditions, Gold & Government Fund's assets may be less liquid, or
the change in value of its assets might be more volatile, than would be the
case with other investments. In particular, the price of gold is affected by
direct and indirect use of it to settle net deficits between nations.
Risks Common to Both Funds
An investment in each Fund is subject to market risk, financial risk, and,
in some cases, prepayment risk.
o Market risk is the possibility of a change in the price of a security or
other asset because of market factors. Bonds with longer maturities are more
interest-rate sensitive. For example, if interest rates increase, the value
of a bond with a longer maturity is more likely to decrease. Because of
market risk, the share price of a Fund will likely change as well.
o Financial risk is based on the financial situation of the issuer of the
security. For an equity investment, a Fund's financial risk may depend, for
example, on the earnings performance of the company issuing the stock. To
the extent that a Fund invests in debt securities, its financial risk
depends on the credit quality of the securities in which it invests.
o Prepayment risk is the possibility that, during periods of falling interest
rates, a debt security with a high stated interest rate will be prepaid
prior to its expected maturity date.
Because each Fund owns different types of investments, its performance
will be affected by a variety of factors. The value of each Fund's investments
and the income it generates will vary from day to day, generally due to changes
in interest rates, market conditions, and other company and economic news.
Performance will also depend on WRIMCO's skill in allocating each Fund's
assets. Asset Strategy Fund diversifies across investment types more than most
mutual funds; Gold & Government Fund allocates its assets in a narrow range.
Neither Fund can provide an appropriate balanced investment plan for all
investors.
Market risk for small- or medium-sized companies may be greater than that
for large companies. Smaller companies are more likely to have limited
financial resources and inexperienced management. Stock of smaller companies
may also experience more volatile trading and greater price fluctuations.
Certain types of each Fund's authorized investments and strategies (such
as foreign securities, "junk bonds," and derivative instruments) involve
special risks. Depending on how much each Fund invests or uses these
strategies, these special risks may become significant. Foreign securities and
foreign currencies may involve risks relating to currency fluctuations,
political or economic conditions in the foreign country, and the potentially
less stringent investor protection and disclosure standards of foreign markets.
These factors could make foreign investments, especially those in developing
countries, more volatile. "Junk bonds" are more susceptible to the risk of
non-payment or default, and their prices may be more volatile, than
higher-rated bonds.
As with any mutual fund, the value of each Fund's shares will change and
you could lose money on your investment. An investment in each Fund is not a
bank deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Year 2000 and Euro Issues
Like other mutual funds, financial institutions, business organizations,
and individuals around the world, each Fund could be adversely affected if the
computer systems used by WRIMCO and the Fund's other service providers do not
properly process and calculate date-related information and data from and after
January 1, 2000. WRIMCO is taking steps that it believes are reasonably
designed to address year 2000 computer-related problems with respect to the
computer systems that it uses and to obtain assurances that comparable steps
are being taken by each Fund's
7
<PAGE>
other major service providers. Although there can be no assurances, WRIMCO
believes that these steps will be sufficient to avoid any adverse impact on
each Fund. Similarly, the companies and other issuers in which each Fund
invests could be adversely affected by year 2000 computer-related problems, and
there can be no assurance that the steps taken, if any, by these issuers will
be sufficient to avoid any adverse impact on the Fund.
Each Fund may also be adversely affected by the conversion of certain
European currencies to the Euro. This conversion, which is under way, is
scheduled to be completed in 2002. However, problems with the conversion
process and delays could increase volatility in world capital markets and
affect European capital markets in particular.
THE PROPOSED TRANSACTION
Reorganization Plan
The terms and conditions under which the proposed transaction will be
consummated are set forth in the Reorganization Plan. Significant provisions of
the Reorganization Plan are summarized below; however, this summary is
qualified in its entirety by reference to the Reorganization Plan, a form of
which is attached as Appendix A to this Proxy Statement.
The Reorganization Plan provides for (a) the acquisition by Asset Strategy
Fund on the Closing Date of all the assets of Gold & Government Fund in
exchange solely for Asset Strategy Fund shares and the assumption by Asset
Strategy Fund of Gold & Government Fund's liabilities and (b) the distribution
of those Asset Strategy Fund shares to the shareholders of Gold & Government
Fund.
The assets of Gold & Government Fund to be acquired by Asset Strategy Fund
include all cash, cash equivalents, securities, receivables, claims and rights
of action, rights to register shares under applicable securities laws, books
and records, deferred and prepaid expenses shown as assets on Gold & Government
Fund's books, and all other property owned by Gold & Government Fund. Asset
Strategy Fund will assume from Gold & Government Fund all liabilities, debts,
obligations, and duties of Gold & Government Fund of whatever kind or nature;
provided, however, that Gold & Government Fund will use its best efforts to
discharge all of its known liabilities before the Closing Date. Asset Strategy
Fund will deliver its shares to Gold & Government Fund, which will distribute
the shares to Gold & Government Fund's shareholders.
The value of Gold & Government Fund's assets to be acquired by Asset
Strategy Fund and the NAV per Class A and Class Y share of the Asset Strategy
Fund shares to be exchanged for those assets will be determined as of the close
of regular trading on the New York Stock Exchange on the Closing Date
("Valuation Time"), using the valuation procedures described in each Fund's
then-current Prospectus and Statement of Additional Information. Gold &
Government Fund's net asset value shall be the value of its assets to be
acquired by Asset Strategy Fund, less the amount of Gold & Government Fund's
liabilities, as of the Valuation Time.
On, or as soon as practicable after, the Closing Date, Gold & Government
Fund will distribute pro rata to its shareholders of record the Asset Strategy
Fund shares it receives, by class, as of the effective time of the
Reorganization, so that each Gold & Government Fund shareholder will receive a
number of full and fractional Asset Strategy Fund shares of the corresponding
class or classes equal in aggregate value to the shareholder's holdings in Gold
& Government Fund. Gold & Government Fund will be terminated as soon as
practicable after the share distribution. The shares will be distributed by
opening accounts on the books of Asset Strategy Fund in the names of Gold &
Government Fund shareholders and by transferring to those accounts the shares
of each class previously credited to the account of Gold & Government Fund on
those books. Fractional shares in each class of Asset Strategy Fund will be
rounded to the third decimal place.
Because Asset Strategy Fund shares will be issued at NAV in exchange for
the net assets of Gold & Government Fund, the aggregate value of shares of each
class of Asset Strategy Fund issued to each Gold & Government Fund shareholder
will equal the aggregate value of the shareholder's shares of the corresponding
class of Gold & Government Fund immediately prior to the Reorganization. The
NAV of Asset Strategy Fund will be unchanged by the transaction. Thus, the
Reorganization will not result in a dilution of any shareholder's interest.
Any transfer taxes payable on the issuance of Asset Strategy Fund shares
in a name other than that of the registered Gold & Government Fund shareholder
will be paid by the person to whom those shares are to be issued as a condition
of the transfer. Any reporting responsibility of Gold & Government Fund to a
public authority will continue to be its responsibility until it is dissolved.
8
<PAGE>
The cost of the Reorganization, including professional fees and the cost
of soliciting proxies for the Special Meeting, consisting principally of
printing and mailing expenses, together with the cost of any supplementary
solicitation, will be divided equally between the Funds. The Board of Gold &
Government Fund considered these expenses in approving the Reorganization and
finding that the Reorganization is in the best interests of the Fund.
The consummation of the Reorganization is subject to a number of
conditions set forth in the Reorganization Plan, some of which may be waived by
either Fund. In addition, the Reorganization Plan may be amended in any
mutually agreeable manner, except that no amendment may be made subsequent to
the Special Meeting that has a material adverse effect on the interests of Gold
& Government Fund's shareholders.
Reasons for the Reorganization
The Board of Gold & Government Fund, including a majority of its
Independent Directors, has determined that the Reorganization is in the best
interests of the Fund, that the terms of the Reorganization are fair and
reasonable, and that the interests of the Fund's shareholders will not be
diluted as a result of the Reorganization.
In approving the Reorganization, the Board of Gold & Government Fund,
including a majority of its Independent Directors, considered a number of
factors, including the following:
(1) the compatibility of the Funds' investment goals, policies, and
restrictions;
(2) the effect of the Reorganization on the Fund's expected investment
performance;
(3) the effect of the Reorganization on the expense ratio of the Fund
relative to its current expense ratio;
(4) the costs to be incurred by the Fund as a result of the Reorganization;
(5) the tax consequences of the Reorganization;
(6) possible alternatives to the Reorganization, including whether Gold &
Government Fund could continue to operate on a stand-alone basis or
should be liquidated; and
(7) the potential benefits of the Reorganization to WRIMCO and to other
persons.
The Reorganization was recommended to the Board of Gold & Government Fund
by WRIMCO. In recommending the Reorganization, WRIMCO advised the Board that
the overall fees of Asset Strategy Fund are lower than those of Gold &
Government Fund. The Board considered the fact that Asset Strategy Fund has
generally had a better performance record, based on average annual total
returns, than Gold & Government Fund and that Gold & Government Fund has had
more difficulty in attracting assets than Asset Strategy Fund.
The Board of Gold & Government Fund also considered that the
Reorganization would permit Gold & Government Fund shareholders to move into a
new investment with broader investment strategies without undergoing a taxable
transaction. The Board recognized, however, that those Gold & Government Fund
shareholders who wished to remain invested in a narrowly-focused gold fund
would be required to redeem their investments in Gold & Government Fund, which
would be a taxable transaction, and invest elsewhere.
The Board of Gold & Government Fund also considered that the
Reorganization would place the Gold & Government Fund shareholders in a fund
with a lower expense ratio than Gold & Government Fund. The Board of the Fund
also considered that management proposed, in view of the immediate, direct
benefit to Gold & Government Fund shareholders, to divide the costs of the
Reorganization equally between the Funds, rather than to allocate those costs
between the Funds on a pro rata basis, which would impose a greater burden on
Asset Strategy Fund shareholders.
The Board also considered that, prior to the consummation of the
Reorganization, Gold & Government Fund would have losses, either from prior
periods or as a result of selling off all or a portion of its bullion
positions, that Asset Strategy Fund could use following the Reorganization to
offset future gains.
The Board considered that any benefit to WRIMCO as a result of the
Reorganization is anticipated to be minimal.
The Gold & Government Fund Board also considered whether there were other
alternatives to the Reorganization. In particular, the Board considered whether
to liquidate the Fund. The Board determined to revisit that option if Gold &
Government Fund's shareholders reject the proposed Reorganization.
9
<PAGE>
Description of Securities to be Issued
Asset Strategy Fund is registered with the SEC as an open-end management
investment company. Shares of Asset Strategy Fund entitle their holders to one
vote per full share and fractional votes for fractional shares held.
Asset Strategy Fund does not hold annual meetings of shareholders. There
normally will be no meetings of shareholders for the purpose of electing
Directors unless fewer than a majority of the Directors holding office have
been elected by shareholders, at which time the Directors then in office will
call a shareholders' meeting for the election of Directors. The Directors will
call annual or special meetings of shareholders for action by shareholder vote
as may be required by the 1940 Act or the Fund's Articles of Incorporation, or
at their discretion.
Temporary Waiver of Investment Restrictions
Certain fundamental investment restrictions of Gold & Government Fund
might be construed as restricting its ability to carry out the Reorganization.
By approving the Reorganization Plan, Gold & Government Fund's shareholders
will be agreeing to waive, for the purpose of the Reorganization only, those
fundamental investment restrictions that could prohibit or otherwise impede the
transaction.
Federal Income Tax Considerations
The exchange of Gold & Government Fund's assets for Asset Strategy Fund
shares and Asset Strategy Fund's assumption of Gold & Government Fund's
liabilities is intended to qualify for federal income tax purposes as a
tax-free reorganization under section 368(a)(1)(C) of the Code. The Funds will
receive an opinion of their counsel, Kirkpatrick & Lockhart LLP, substantially
to the effect that--
(1) Asset Strategy Fund's acquisition of Gold & Government Fund's
assets in exchange solely for Asset Strategy Fund shares and Asset Strategy
Fund's assumption of Gold & Government Fund's liabilities, followed by Gold
& Government Fund's distribution of those shares pro rata to its
shareholders constructively in exchange for their Gold & Government Fund
shares, will qualify as a "reorganization" within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(2) Gold & Government Fund will recognize no gain or loss on the
transfer to Asset Strategy Fund of its assets in exchange solely for Asset
Strategy Fund shares and Asset Strategy Fund's assumption of Gold &
Government Fund's liabilities or on the subsequent distribution of those
shares to Gold & Government Fund's shareholders in constructive exchange
for their Gold & Government Fund shares:
(3) Asset Strategy Fund will recognize no gain or loss on its receipt
of the transferred assets in exchange solely for Asset Strategy Fund shares
and its assumption of Gold & Government Fund's liabilities;
(4) Asset Strategy Fund's basis for the transferred assets will be the
same as the basis thereof in Gold & Government Fund's hands immediately
before the Reorganization, and Asset Strategy Fund's holding period for
those assets will include Gold & Government Fund's holding period therefor;
(5) A Gold & Government Fund shareholder will recognize no gain or
loss on the constructive exchange of all its Gold & Government Fund shares
solely for Asset Strategy Fund shares pursuant to the Reorganization; and
(6) A Gold & Government Fund shareholder's aggregate basis for the
Asset Strategy Fund shares to be received by it in the Reorganization will
be the same as the aggregate basis for its Gold & Government Fund shares to
be constructively surrendered in exchange for those Asset Strategy Fund
shares, and its holding period for those Asset Strategy Fund shares will
include its holding period for those Gold & Government Fund shares,
provided they are held as capital assets by the shareholder on the Closing
Date.
The tax opinion may state that no opinion is expressed as to the effect of
the Reorganization on the Funds or any shareholder with respect to any asset as
to which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Shareholders of Gold & Government Fund should consult their tax advisors
regarding the effect, if any, of the Reorganization in light of their
individual circumstances. Because the foregoing discussion only relates to the
federal
10
<PAGE>
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisors about state and local tax consequences, if any, of
the Reorganization.
Capitalization
The following table shows the capitalizations of Asset Strategy Fund and
Gold & Government Fund as of September 30, 1998 (unaudited) and on a pro forma
combined basis (unaudited) as of September 30, 1998, giving effect to the
Reorganization as of that date, without reflecting any expenses of the
Reorganization:
<TABLE>
<CAPTION>
Asset Strategy Fund
Asset Strategy Fund Gold & Government Fund (Pro Forma)
--------------------- ------------------------ --------------------
<S> <C> <C> <C>
Net Assets $ 33,110,651 $ 14,144,419 $ 47,255,070
Net Asset Value Per Share--Class A $ 5.78 $ 6.65 $ 5.78
--Class Y $ 5.78 $ 6.68 $ 5.78
Shares Outstanding 5,723,568 2,126,628 8,170,669
</TABLE>
Additional Information about Asset Strategy Fund
Financial Highlights
The tables below provide selected per share data and ratios for one Class
A share and one Class Y share of Asset Strategy Fund for each of the periods
shown. The total returns in the tables represent the rate that investors would
have earned (or lost) on an investment in a share of the applicable class of
the Fund (assuming reinvestment of all dividends and distributions). This
information is supplemented by the financial statements and accompanying notes
in Asset Strategy Fund's Annual Report to Shareholders for the fiscal year
ended September 30, 1998, which is incorporated by reference into the Statement
of Additional Information. This information has been audited by Deloitte &
Touche LLP, whose independent auditors' report is included in the Annual Report
to Shareholders for the fiscal year ended September 30, 1998.
Class A Share
<TABLE>
<CAPTION>
For the Period
For the Fiscal Year Ended from 3/9/95*
September 30, through 9/30/95
--------------------------------------- ----------------
<S> <C> <C> <C> <C>
PER SHARE DATA
1998 1997 1996
Net Asset Value -
Beginning of Period $ 5.99 $ 5.24 $ 5.42 $ 5.00
-------- -------- -------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.15 0.16 0.15 0.07
Net Gains (Losses) on Securities (Both Realized and
Unrealized) 0.28 0.74 (0.17) 0.40
-------- -------- -------- ------
Total from Investment Operations 0.43 0.90 (0.02) 0.47
-------- -------- -------- ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.17) (0.15) (0.15) (0.05)
Distribution from Capital Gains (0.47) (0.00) (0.00) (0.00)
In Excess of Capital Gains (0.00) (0.00) (0.01) (0.00)
-------- -------- -------- --------
Total Distributions (0.64) (0.15) (0.16) (0.05)
-------- -------- -------- --------
Net Asset Value--End of Period $ 5.78 $ 5.99 $ 5.24 $ 5.42
-------- -------- -------- --------
Total Return** 7.89% 17.46% -0.49% 9.42%
- --------------
RATIOS
Net Assets--End of Period ($000 Omitted) $32,868 $28,221 $31,828 $22,248
Ratio of Expenses to Average Net Assets 1.62% 1.70% 1.68% 1.64%***
Ratio of Net Investment Income
(Loss) to Average Net Assets 2.45% 2.87% 2.93% 3.71%***
Portfolio Turnover Rate 230.09% 173.88% 91.06% 9.32%
</TABLE>
* Commencement of operations
** Total return calculated without taking into account the sales load deducted
on an initial purchase
*** Annualized
11
<PAGE>
Class Y Share
<TABLE>
<CAPTION>
For the Period
For the Fiscal Year Ended from 9/27/95*
September 30, through 9/30/95
------------------------------------ ----------------
1998 1997 1996
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $ 5.99 $ 5.24 $ 5.42 $ 5.41
------- ------- ------- ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.16 0.17 0.16 0.00
Net Gains (Losses) on Securities (Both Realized
and Unrealized) 0.29 0.75 (0.17) 0.01
------- ------- -------- ------
Total from Investment
Operations 0.45 0.92 (0.01) 0.01
------- ------- -------- ------
LESS DISTRIBUTIONS
Dividends from Net Investment Income (0.19) (0.17) (0.16) (0.00)
Distribution from Capital Gains (0.47) (0.00) (0.00) (0.00)
In Excess of Capital Gains (0.00) (0.00) (0.01) (0.00)
-------- -------- -------- --------
Total Distributions (0.66) (0.17) (0.17) (0.00)
-------- -------- -------- --------
Net Asset Value--End of Period $ 5.78 $ 5.99 $ 5.24 $ 5.42
-------- -------- -------- --------
Total Return 8.26% 17.93% -0.21% 0.18%
- ------------
RATIOS
Net Assets--End of Period
($000 Omitted) $ 243 $ 322 $ 330 $ 3
Ratio of Expenses to Average Net Assets 1.37% 1.28% 1.29% 0.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets 2.79% 3.29% 3.43% 0.00%
Portfolio Turnover Rate 230.09% 173.88% 91.06% 9.32%**
</TABLE>
* Commencement of operations
** Annualized
12
<PAGE>
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE REORGANIZATION PROPOSAL
OTHER BUSINESS
The Board knows of no other business to be brought before the Special
Meeting. If, however, any other matters properly come before the Special
Meeting, it is the intention that proxies that do not contain specific
instructions to the contrary will be voted on such matters in accordance with
the judgment of the persons designated in the proxies.
PROPOSALS OF SHAREHOLDERS
Shareholders wishing to submit proposals for inclusion in a proxy
statement for a shareholder meeting subsequent to the Meeting, if any, should
send their written proposals to the Secretary of Gold & Government Fund, 6300
Lamar Avenue, P.O. Box 29217, Shawnee Mission, Kansas 66201-9217 within a
reasonable time before the solicitation of proxies for such a meeting. The
timely submission of a proposal does not guarantee its inclusion. Normally,
there will be no annual meeting of shareholders in any year.
MISCELLANEOUS
Available Information
Each Fund is subject to the information requirements of the Securities
Exchange Act of 1934 and the 1940 Act and, in accordance with those
requirements, files reports, proxy material, and other information with the
SEC. These reports, proxy material, and other information can be inspected and
copied at the Public Reference Room maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, the Midwest Regional office of the SEC, Northwest
Atrium Center, 500 West Madison Street, Suite 400, Chicago, Illinois 60611, and
the Northeast Regional Office of the SEC, Seven World Trade Center, Suite 1300,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20459 at prescribed rates.
Legal Matters
Certain legal matters in connection with the issuance of Asset Strategy
Fund shares as part of the Reorganization have been passed upon by Asset
Strategy Fund's counsel, Kirkpatrick & Lockhart LLP.
Experts
The audited financial statements of each Fund, incorporated herein by
reference and incorporated by reference or included in their respective
Statements of Additional Information, have been audited by Deloitte & Touche
LLP, independent auditors for the Funds, whose reports thereon are included in
the Funds' respective Annual Report to Shareholders for the fiscal year periods
ended September 30, 1998 with respect to Asset Strategy Fund and December 31,
1998 with respect to Gold & Government Fund. The financial statements audited
by Deloitte & Touche LLP have been incorporated herein by reference in reliance
on their reports given on their authority as experts in auditing and accounting
matters.
May 17, 1999
By order of the Board of Directors,
Kristen A. Richards, Assistant Secretary
13
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of April 9, 1999, between United Gold & Government Fund, Inc., a
Maryland corporation ("Target"), and United Asset Strategy Fund, Inc., a
Maryland corporation ("Acquiring Fund"). (Acquiring Fund and Target are
sometimes referred to herein individually as a "Fund" and collectively as the
"Funds.")
This Agreement is intended to be, and is adopted as, a plan of a
reorganization described in section 368(a)(1)(C) of the Internal Revenue Code
of 1986, as amended ("Code"). The reorganization will involve the transfer to
Acquiring Fund of Target's assets in exchange solely for voting shares of
common stock of Acquiring Fund, par value $0.01 per share ("Acquiring Fund
Shares"), and the assumption by Acquiring Fund of Target's liabilities,
followed by the constructive distribution of the Acquiring Fund Shares pro rata
to the holders of shares of common stock of Target ("Target Shares") in
exchange therefor, all on the terms and conditions set forth herein. The
foregoing transactions are referred to herein collectively as the
"Reorganization."
Acquiring Fund Shares are currently divided into two classes, designated
Class A and Class Y shares ("Class A Acquiring Fund Shares" and "Class Y
Acquiring Fund Shares," respectively). The classes differ as follows:
1. Class A Acquiring Fund Shares are offered at net asset value ("NAV")
plus a front-end sales charge ("FESC") and are subject to a service fee
("Rule 12b-1 Fee"), at the annual rate of up to 0.25% of its average
daily net assets, imposed pursuant to a plan of distribution adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended ("1940 Act"); and
2. Class Y Acquiring Fund Shares are offered at NAV but are not subject to
either a FESC or a Rule 12b-1 Fee.
Target Shares also are divided into two classes, likewise designated Class
A and Class Y shares ("Class A Target Shares" and "Class Y Target Shares,"
respectively). Each class of Target Shares is substantially similar to the
correspondingly designated class of Acquiring Fund Shares.
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor--
(a) to issue and deliver to Target the number of full and fractional
(rounded to the third decimal place) (i) Class A Acquiring Fund
Shares determined by dividing the net value of Target (computed as
set forth in paragraph 2.1) ("Target Value") attributable to the
Class A Target Shares by the NAV (computed as set forth in
paragraph 2.2) of a Class A Acquiring Fund Share, and (ii) Class Y
Acquiring Fund Shares determined by dividing the Target Value
attributable to the Class Y Target Shares by the NAV (as so
computed) of a Class Y Acquiring Fund Share; and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities").
Such transactions shall take place at the Closing (as defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement.
Notwithstanding the foregoing, Target agrees to use its best efforts to
discharge all its known Liabilities before the Effective Time.
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1.4. At or immediately before the Effective Time, Target shall declare and
pay to its shareholders a dividend and/or other distribution in an amount large
enough so that it will have distributed substantially all (and in any event not
less than 90%) of its investment company taxable income (computed without
regard to any deduction for dividends paid) and substantially all of its
realized net capital gain, if any, for the current taxable year through the
Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by Acquiring Fund's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited
with the respective pro rata number of full and fractional (rounded to the
third decimal place) Acquiring Fund Shares due that Shareholder, by class
(i.e., the account for a Shareholder of Class A Target Shares shall be credited
with the respective pro rata number of Class A Acquiring Fund Shares due that
Shareholder, and the account for a Shareholder of Class Y Target Shares shall
be credited with the respective pro rata number of Class Y Acquiring Fund
Shares due that Shareholder). All outstanding Target Shares, including any
represented by certificates, shall simultaneously be canceled on Target's share
transfer books. Acquiring Fund shall not issue certificates representing the
Acquiring Fund Shares issued in connection with the Reorganization.
1.6. As soon as reasonably practicable after distribution of the Acquiring
Fund Shares pursuant to paragraph 1.5, but in all events within twelve months
after the Effective Time, Target shall be terminated and any further actions
shall be taken in connection therewith as required by applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in
a name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a) the
value of the Assets computed as of the close of regular trading on the New York
Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"), using
the valuation procedures set forth in Target's then-current prospectus and
statement of additional information ("SAI") less (b) the amount of the
Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV of an Acquiring Fund Share
shall be computed as of the Valuation Time, using the valuation procedures set
forth in Acquiring Fund's then-current prospectus and SAI.
2.3. All computations pursuant to paragraphs 2.1 and 2.2 shall be made by
or under the direction of Waddell & Reed Services Company.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at the Funds' principal office on
June 30, 1999, or at such other place and/or on such other date as to which the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the close of business on the date thereof or at such
other time as to which the parties may agree ("Effective Time"). If,
immediately before the Valuation Time, (a) the NYSE is closed to trading or
trading thereon is restricted or (b) trading or the reporting of trading on the
NYSE or elsewhere is disrupted, so that accurate appraisal of the Target Value
and the NAV of an Acquiring Fund Share is impracticable, the Effective Time
shall be postponed until the first business day after the day when such trading
shall have been fully resumed and such reporting shall have been restored.
3.2. Target's fund accounting and pricing agent shall deliver at the
Closing a certificate of an authorized officer verifying that the information
(including adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, transferred by Target to Acquiring Fund, as
reflected on Acquiring Fund's books immediately following the Closing, does or
will conform to such information on Target's books immediately before the
Closing. Target's custodian shall deliver at the Closing a certificate of an
authorized officer stating that (a) the Assets held by the custodian will be
transferred to Acquiring Fund at the Effective Time and (b) all necessary taxes
in conjunction with the delivery of the Assets, including all applicable
federal and state stock transfer stamps, if any, have been paid or provision
for payment has been made.
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3.3. Target shall deliver to Acquiring Fund at the Closing a list of the
names and addresses of the Shareholders and the number (by class) of
outstanding Target Shares owned by each Shareholder, all as of the Effective
Time, certified by the Secretary or Assistant Secretary of Target. Acquiring
Fund's transfer agent shall deliver at the Closing a certificate as to the
opening on Acquiring Fund's share transfer books of accounts in the
Shareholders' names. Acquiring Fund shall issue and deliver a confirmation to
Target evidencing the Acquiring Fund Shares (by class) to be credited to Target
at the Effective Time or provide evidence satisfactory to Target that such
Acquiring Fund Shares have been credited to Target's account on Acquiring
Fund's books. At the Closing, each party shall deliver to the other such bills
of sale, checks, assignments, stock certificates, receipts, or other documents
as the other party or its counsel may reasonably request.
3.4. Each Fund shall deliver to the other at the Closing a certificate
executed in its name by its President or a Vice President in form and substance
satisfactory to the recipient and dated the Effective Time, to the effect that
the representations and warranties it made in this Agreement are true and
correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. Target is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Maryland; and a copy of its
Articles of Incorporation is on file with the Secretary of the State of
Maryland;
4.1.2. Target is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time;
4.1.3. At the Closing, Target will have good and marketable title to the
Assets and full right, power, and authority to sell, assign, transfer, and
deliver the Assets free of any liens or other encumbrances; and upon delivery
and payment for the Assets, Acquiring Fund will acquire good and marketable
title thereto;
4.1.4. Target's current prospectus and SAI conform in all material
respects to the applicable requirements of the Securities Act of 1933, as
amended ("1933 Act"), and the 1940 Act and the rules and regulations
thereunder and do not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading;
4.1.5. Target is not in violation of, and the execution and delivery of
this Agreement and consummation of the transactions contemplated hereby will
not conflict with or violate, Maryland law or any provision of Target's
Articles of Incorporation or By-Laws or of any agreement, instrument, lease,
or other undertaking to which Target is a party or by which it is bound or
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Target is a party
or by which it is bound, except as previously disclosed in writing to and
accepted by Acquiring Fund;
4.1.6. Except as otherwise disclosed in writing to and accepted by
Acquiring Fund, all material contracts and other commitments of or applicable
to Target (other than this Agreement and investment contracts, including
options, futures, and forward contracts) will be terminated, or provision for
discharge of any liabilities of Target thereunder will be made, at or prior
to the Effective Time, without either Fund's incurring any liability or
penalty with respect thereto and without diminishing or releasing any rights
Target may have had with respect to actions taken or omitted or to be taken
by any other party thereto prior to the Closing;
4.1.7. Except as otherwise disclosed in writing to and accepted by
Acquiring Fund, no litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or (to Target's
knowledge) threatened against Target that, if adversely determined, would
materially and adversely affect its financial condition or the conduct of its
business; Target knows of no facts that might form the basis for the
institution of any such litigation, proceeding, or investigation and is not a
party to or subject to the provisions of any order, decree, or judgment of
any court or governmental body that materially or adversely affects its
business or its ability to consummate the transactions contemplated hereby;
4.1.8. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of Target's board of directors, which has made the determinations
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required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders, this Agreement constitutes a valid and legally
binding obligation of Target, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
4.1.9. At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by Target's shareholders;
4.1.10. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the Securities Exchange Act of 1934, as
amended ("1934 Act"), or the 1940 Act for the execution or performance of
this Agreement by Target, except for (a) the filing with the Securities and
Exchange Commission ("SEC") of a registration statement by Acquiring Fund on
Form N-14 relating to the Acquiring Fund Shares issuable hereunder, and any
supplement or amendment thereto ("Registration Statement"), including therein
a prospectus/ proxy statement ("Proxy Statement"), and (b) such consents,
approvals, authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.1.11. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material respects
with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940
Act and the rules and regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading; provided
that the foregoing shall not apply to statements in or omissions from the
Proxy Statement made in reliance on and in conformity with information
furnished by Acquiring Fund for use therein;
4.1.12. The Liabilities were incurred by Target in the ordinary course
of its business; and there are no Liabilities other than liabilities
disclosed or provided for in Target's financial statements referred to in
paragraph 4.1.18 and liabilities incurred by Target in the ordinary course of
its business subsequent to December 31, 1998, or otherwise previously
disclosed to Acquiring Fund, none of which has been materially adverse to the
business, assets, or results of Target operations;
4.1.13. Target qualified for treatment as a regulated investment company
under Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for such
qualification for its current taxable year; and it has no earnings and
profits accumulated in any taxable year in which the provisions of Subchapter
M did not apply to it. The Assets shall be invested at all times through the
Effective Time in a manner that ensures compliance with the foregoing;
4.1.14. Target is not under the jurisdiction of a court in a proceeding
under Title 11 of the United States Code or similar case within the meaning
of section 368(a)(3)(A) of the Code;
4.1.15. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested in
the stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five or fewer
issuers;
4.1.16. Target will be terminated as soon as reasonably practicable
after the Effective Time, but in all events within twelve months thereafter;
4.1.17. Target's federal income tax returns, and all applicable state
and local tax returns, for all taxable years to and including the taxable
year ended December 31, 1997, have been timely filed and all taxes payable
pursuant to such returns have been timely paid; and
4.1.18. The financial statements of Target for the year ended December
31, 1998, to be delivered to Acquiring Fund, fairly represent the financial
position of Target as of that date and the results of its operations and
changes in its net assets for the year then ended.
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4.2. Acquiring Fund represents and warrants as follows:
4.2.1. Acquiring Fund is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Maryland; and a copy of
its Articles of Incorporation is on file with the Secretary of the State of
Maryland;
4.2.2. Acquiring Fund is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in full
force and effect at the Effective Time;
4.2.3. Acquiring Fund has 1,000,000,000 authorized shares of common
stock, par value $0.01 per share, of which 5,682,000 shares were outstanding,
as of September 30, 1998. Because Acquiring Fund is an open-end investment
company engaged in the continuous offering and redemption of its shares, the
number of outstanding Acquiring Fund Shares may change prior to the Effective
Time;
4.2.4. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to Target
hereunder will, at the Effective Time, have been duly authorized and, when
issued and delivered as provided herein, will be duly and validly issued and
outstanding shares of Acquiring Fund, fully paid and non-assessable;
4.2.6. Acquiring Fund's current prospectus and SAI conform in all
material respects to the applicable requirements of the 1933 Act and the 1940
Act and the rules and regulations thereunder and do not include any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions contemplated
hereby will not conflict with or violate, Maryland law or any provision of
Acquiring Fund's Articles of Incorporation or By-Laws or of any provision of
any agreement, instrument, lease, or other undertaking to which Acquiring
Fund is a party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement, judgment,
or decree to which Acquiring Fund is a party or by which it is bound, except
as previously disclosed in writing to and accepted by Target;
4.2.8. Except as otherwise disclosed in writing to and accepted by
Target, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to Acquiring
Fund's knowledge) threatened against Acquiring Fund that, if adversely
determined, would materially and adversely affect Acquiring Fund's financial
condition or the conduct of its business; Acquiring Fund knows of no facts
that might form the basis for the institution of any such litigation,
proceeding, or investigation and is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental
body that materially or adversely affects its business or its ability to
consummate the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement have
been duly authorized as of the date hereof by all necessary action on the
part of Acquiring Fund's board of directors (together with Target's board of
directors, the "Boards"), which has made the determinations required by Rule
17a-8(a) under the 1940 Act; and this Agreement constitutes a valid and
legally binding obligation of Acquiring Fund, enforceable in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, and similar laws relating to
or affecting creditors' rights and by general principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or filings
are required under the 1933 Act, the 1934 Act, or the 1940 Act for the
execution or performance of this Agreement by Acquiring Fund, except for (a)
the filing with the SEC of the Registration Statement and (b) such consents,
approvals, authorizations, and filings as have been made or received or as
may be required subsequent to the Effective Time;
4.2.11. On the effective date of the Registration Statement, at the time
of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material respects
with the applicable provisions of the 1933 Act, the 1934 Act, and the 1940
Act and the rules and regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading; provided
that the foregoing shall not apply to statements in or omissions from the
Proxy Statement made in reliance on and in conformity with information
furnished by Target for use therein;
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4.2.12. Acquiring Fund qualified for treatment as a RIC for each past
taxable year since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year; Acquiring
Fund intends to continue to meet all such requirements for the next taxable
year; and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M of the Code did not apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as an open-end investment company; nor
does Acquiring Fund have any plan or intention to redeem or otherwise
reacquire any Acquiring Fund Shares issued to the Shareholders pursuant to
the Reorganization, except to the extent it is required by the 1940 Act to
redeem any of its shares presented for redemption at net asset value in the
ordinary course of that business;
4.2.14. Following the Reorganization, Acquiring Fund (a) will continue
Target's "historic business" (within the meaning of section 1.368-1(d)(2) of
the Income Tax Regulations under the Code), (b) use a significant portion of
Target's historic business assets (within the meaning of section
1.368-1(d)(3) of the Income Tax Regulations under the Code) in a business,
(c) has no plan or intention to sell or otherwise dispose of any of the
Assets, except for dispositions made in the ordinary course of that business
and dispositions necessary to maintain its status as a RIC, and (d) expects
to retain substantially all the Assets in the same form as it receives them
in the Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be dissolved
or merged into another corporation or a business trust or any "fund" thereof
(within the meaning of section 851(g)(2) of the Code) following the
Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25% of
the value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will be
invested in the stock and securities of five or fewer issuers;
4.2.17. Acquiring Fund does not own, directly or indirectly, nor at the
Effective Time will it own, directly or indirectly, nor has it owned,
directly or indirectly, at any time during the past five years, any shares of
Target;
4.2.18. Acquiring Fund's federal income tax returns, and all applicable
state and local tax returns, for all taxable years to and including the
taxable year ended September 30, 1997, have been timely filed and all taxes
payable pursuant to such returns have been timely paid;
4.2.19. The financial statements of Acquiring Fund for the year ended
September 30, 1998, to be delivered to Target, fairly represent the financial
position of Acquiring Fund as of that date and the results of its operations
and changes in its net assets for the year then ended; and
4.2.20. If the Reorganization is consummated, Acquiring Fund will treat
each Shareholder that receives Acquiring Fund Shares in connection with the
Reorganization as having made a minimum initial purchase of Acquiring Fund
Shares for the purpose of making additional investments in Acquiring Fund
Shares, regardless of the value of the Acquiring Fund Shares so received.
4.3. Each Fund represents and warrants as follows:
4.3.1. The aggregate fair market value of the Acquiring Fund Shares,
when received by the Shareholders, will be approximately equal to the
aggregate fair market value of their Target Shares constructively surrendered
in exchange therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person related (within
the meaning of section 1.368-1(e)(3) of the Income Tax Regulations under the
Code) to either Fund or (ii) any portion of the Acquiring Fund Shares to be
received by them in the Reorganization to any person related (as so defined)
to Acquiring Fund, (b) does not anticipate dispositions of those Acquiring
Fund Shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of dispositions of shares of Target as an open-end
investment company, (c) expects that the percentage of Shareholder interests,
if any, that will be disposed of as a result
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of or at the time of the Reorganization will be de minimis, and (d) does
not anticipate that there will be extraordinary redemptions of Acquiring
Fund Shares immediately following the Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto (in addition to the assets and liabilities
Acquiring Fund then held or was subject to), plus any liabilities and
expenses of the parties incurred in connection with the Reorganization;
4.3.5. The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those to
which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market value
of the net assets, and at least 70% of the fair market value of the gross
assets, held by Target immediately before the Reorganization. For the
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and to make redemptions and distributions immediately
before the Reorganization (except (a) redemptions not made as part of the
Reorganization and (b) distributions made to conform to its policy of
distributing all or substantially all of its income and gains to avoid the
obligation to pay federal income tax and/or the excise tax under section 4982
of the Code) will be included as assets held thereby immediately before the
Reorganization;
4.3.8. None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration for,
or allocable to, any of the Target Shares held by such Shareholder; none of
the Acquiring Fund Shares received by any such Shareholder will be separate
consideration for, or allocable to, any employment agreement, investment
advisory agreement, or other service agreement; and the consideration paid to
any such Shareholder will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's-length
for similar services;
4.3.9. Immediately after the Reorganization, the Shareholders will not
own shares constituting "control" of Acquiring Fund within the meaning of
section 304(c) of the Code; and
4.3.10. Neither Fund will be reimbursed for any expenses incurred by it
or on its behalf in connection with the Reorganization unless those expenses
are solely and directly related to the Reorganization (determined in
accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B. 187)
("Reorganization Expenses").
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the
ordinary course between the date hereof and the Closing, it being understood
that:
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and such changes in operations as are
contemplated by each Fund's normal business activities; and
(b) each Fund will retain exclusive control of the composition of its
portfolio until the Closing; provided that (1) Target shall not dispose
of more than an insignificant portion of its historic business assets
during such period without Acquiring Fund's prior consent and (2) if
Target's shareholders' approve this Agreement (and the transactions
contemplated hereby), then between the date of such approval and the
Closing, the Funds shall coordinate their respective portfolios so that
the transfer of the Assets to Acquiring Fund will not cause it to fail
to be in compliance with all of its investment policies and
restrictions immediately after the Closing.
5.2. Target covenants to call a shareholders' meeting to consider and act
on this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
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5.4. Target covenants that it will assist Acquiring Fund in obtaining such
information as Acquiring Fund reasonably requests concerning the beneficial
ownership of Target Shares.
5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to Acquiring Fund at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and
possession of all the Assets, and (b) Target, title to and possession of the
Acquiring Fund Shares to be delivered hereunder, and otherwise to carry out the
intent and purpose hereof.
5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to be
taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all its obligations to be performed hereunder at or before
the Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Boards and shall have been approved by
Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an
unfavorable report with respect to the Reorganization under section 25(b) of
the 1940 Act nor instituted any proceedings seeking to enjoin consummation of
the transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Fund to permit consummation, in all material respects, of
the transactions contemplated hereby shall have been obtained, except where
failure to obtain same would not involve a risk of a material adverse effect on
the assets or properties of either Fund, provided that either Fund may for
itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Target shall have received an opinion of Kirkpatrick & Lockhart LLP
substantially to the effect that:
6.4.1. Acquiring Fund is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Maryland with power under
its Articles of Incorporation to own all its properties and assets and, to
the knowledge of such counsel, to carry on its business as presently
conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by Acquiring Fund and (b) assuming due authorization, execution,
and delivery of this Agreement by Target, is a valid and legally binding
obligation of Acquiring Fund, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
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6.4.3. The Acquiring Fund Shares to be issued and distributed to the
Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable;
6.4.4. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Acquiring Fund's Articles of Incorporation or By-Laws or any
provision of any agreement (known to such counsel, without any independent
inquiry or investigation) to which Acquiring Fund is a party or by which it
is bound or (to the knowledge of such counsel, without any independent
inquiry or investigation) result in the acceleration of any obligation, or
the imposition of any penalty, under any agreement, judgment, or decree to
which Acquiring Fund is a party or by which it is bound, except as set forth
in such opinion or as previously disclosed in writing to and accepted by
Target;
6.4.5. To the knowledge of such counsel (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Acquiring Fund
of the transactions contemplated herein, except such as have been obtained
under the 1933 Act, the 1934 Act, and the 1940 Act and such as may be
required under state securities laws;
6.4.6. Acquiring Fund is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Acquiring Fund or any of its properties or assets and (b)
Acquiring Fund is not a party to or subject to the provisions of any order,
decree, or judgment of any court or governmental body that materially and
adversely affects its business, except as set forth in such opinion or as
otherwise disclosed in writing to and accepted by Target.
In rendering such opinion, such counsel may (1) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(2) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (3)
limit such opinion to applicable federal and state law, and (4) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.5. Acquiring Fund shall have received an opinion of Kirkpatrick &
Lockhart LLP substantially to the effect that:
6.5.1. Target is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Maryland with power under its
Articles of Incorporation to own all its properties and assets and, to the
knowledge of such counsel, to carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Target and (b) assuming due authorization, execution, and
delivery of this Agreement by Acquiring Fund, is a valid and legally binding
obligation of Target, enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not, materially
violate Target's Articles of Incorporation or By-Laws or any provision of any
agreement (known to such counsel, without any independent inquiry or
investigation) to which Target is a party or by which it is bound or (to the
knowledge of such counsel, without any independent inquiry or investigation)
result in the acceleration of any obligation, or the imposition of any
penalty, under any agreement, judgment, or decree to which Target is a party
or by which it is bound, except as set forth in such opinion or as previously
disclosed in writing to and accepted by Acquiring Fund;
6.5.4. To the knowledge of such counsel (without any independent inquiry
or investigation), no consent, approval, authorization, or order of any court
or governmental authority is required for the consummation by Target of the
transactions contemplated herein, except such as have been obtained under the
1933 Act, the 1934 Act, and the 1940 Act and such as may be required under
state securities laws;
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6.5.5. Target is registered with the SEC as an investment company, and
to the knowledge of such counsel no order has been issued or proceeding
instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any independent inquiry
or investigation), (a) no litigation, administrative proceeding, or
investigation of or before any court or governmental body is pending or
threatened as to Target or any of its properties or assets and (b) Target is
not a party to or subject to the provisions of any order, decree, or judgment
of any court or governmental body that materially and adversely affects
Target's business, except as set forth in such opinion or as otherwise
disclosed in writing to and accepted by Acquiring Fund.
In rendering such opinion, such counsel may (1) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(2) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (3)
limit such opinion to applicable federal and state law, and (4) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.6. Each Fund shall have received an opinion of Kirkpatrick & Lockhart
LLP, addressed to and in form and substance satisfactory to it, as to the
federal income tax consequences mentioned below ("Tax Opinion"). In rendering
the Tax Opinion, such counsel may rely as to factual matters, exclusively and
without independent verification, on the representations made in this Agreement
(or in separate letters addressed to such counsel) and the certificates
delivered pursuant to paragraph 3.4. The Tax Opinion shall be substantially to
the effect that, based on the facts and assumptions stated therein, for federal
income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities,
followed by Target's distribution of those shares pro rata to the
Shareholders constructively in exchange for the Shareholders' Target Shares,
will constitute a reorganization within the meaning of section 368(a)(1)(C)
of the Code, and each Fund will be "a party to a reorganization" within the
meaning of section 368(b) of the Code;
6.6.2. Target will recognize no gain or loss on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares and
Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange for
their Target Shares;
6.6.3. Acquiring Fund will recognize no gain or loss on its receipt of
the Assets in exchange solely for Acquiring Fund Shares and its assumption of
the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as the
basis thereof in Target's hands immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's holding
period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares pursuant
to the Reorganization; and
6.6.6. A Shareholder's aggregate basis for the Acquiring Fund Shares to
be received by it in the Reorganization will be the same as the aggregate
basis for its Target Shares to be constructively surrendered in exchange for
those Acquiring Fund Shares, and its holding period for those Acquiring Fund
Shares will include its holding period for those Target Shares, provided they
are held as capital assets by the Shareholder at the Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that
no opinion is expressed as to the effect of the Reorganization on the Funds or
any Shareholder with respect to any asset as to which any unrealized gain or
loss is required to be recognized for federal income tax purposes at the end of
a taxable year (or on the termination or transfer thereof) under a
mark-to-market system of accounting.
At any time before the Closing, either Fund may waive any of the foregoing
conditions (except that set forth in paragraph 6.1) if, in the judgment of its
Board, such waiver will not have a material adverse effect on its Fund's
shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Fund represents and warrants to the other that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
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7.2. Except as otherwise provided herein, Reorganization Expenses will be
borne 50% by each Fund.
8. ENTIRE AGREEMENT; NO SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
9.1. By either Fund (a) in the event of the other Fund's material breach
of any representation, warranty, or covenant contained herein to be performed
at or prior to the Effective Time, (b) if a condition to its obligations has
not been met and it reasonably appears that such condition will not or cannot
be met, or (c) if the Closing has not occurred on or before December 31, 1999;
or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or its directors or officers,
to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as
may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Maryland; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2. Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
11.3. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been executed by each Fund and
delivered to the other party hereto. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
<TABLE>
<S> <C>
ATTEST: United Gold & Government Fund, Inc.
_____________________________________ By _________________________________
Secretary Vice President
ATTEST: United Asset Strategy Fund, Inc.
_____________________________________ By _________________________________
Secretary Vice President
</TABLE>
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<PAGE>
From: ------------
PROXY TABULATOR FIRST CLASS
P.O. Box 9132 U.S. POSTAGE
HINGHAM, MA 02043-9132 PAID
PROXY
TABULATOR
------------
YOUR VOTE IS IMPORTANT. IF YOU ARE NOT VOTING BY PHONE OR INTERNET,
PLEASE DATE AND SIGN THIS PROXY BELOW AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE.
--------------------------------------------------------------
IF YOU PREFER TO VOTE BY PHONE, CALL TOLL-FREE 1-888-221-0697.
TO VOTE VIA THE INTERNET, ACCESS WWW.PROXYWEB.COM.
--------------------------------------------------------------
SEE THE ENCLOSED INSERT FOR FURTHER INSTRUCTIONS ON VOTING BY PHONE OR INTERNET.
Please fold and detach card at perforation before mailing
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UNITED GOLD & GOVERNMENT FUND
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This proxy is being solicited on behalf of the Board of Directors of United
Gold & Government Fund (the "Fund") and relates to a proposal with respect to
the Fund. The undersigned hereby appoints as proxies Keith A. Tucker and Helge
K. Lee, and each of them (with power of substitution), to vote all shares of
common stock of the undersigned in the Fund at the Special Meeting of
Shareholders to be held on June 22, 1999, at 11:00 a.m., local time, at 6300
Lamar Avenue, Overland Park, Kansas 66202, and any adjournment thereof
("Meeting"), with all the power the undersigned would have if personally
present. This proxy shall remain in effect for a period of one year from its
date.
The shares represented by this proxy will be voted as instructed. Unless
indicated to the contrary, this proxy shall be deemed to grant authority to vote
"FOR" the proposal relating to the Fund with discretionary power to vote upon
such other business as may properly come before the Meeting.
Date ___________________________________
Please sign exactly as your name appears
hereon. If shares are registered in more
than 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
<PAGE>
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IS SIGNED.
Please fold and detach at perforation. Return bottom portion only.
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WHEN PROPERLY SIGNED, THE VOTING INTEREST WILL BE DIRECTED IN THE MANNER
INDICATED BELOW. IF NO INDICATION IS GIVEN, VOTING WILL BE DIRECTED FOR THE
PROPOSAL STATED BELOW.
Please vote by filling in the appropriate boxes below.
Vote On Proposal FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Approval of an Agreement and Plan of
Reorganization and Termination under which
United Asset Strategy Fund, Inc. ("Asset
Strategy Fund"), would acquire all of the
assets of the Fund, in exchange solely for
shares of Asset Strategy Fund and the
assumption by Asset Strategy Fund of all of
the Fund's liabilities, followed by the
distribution of those shares to the
shareholders of the Fund, all as described |_ |_ |_
in the accompanying Prospectus/Proxy
Statement.
