United Investors Life Insurance Company
2001 Third Avenue South
P. O. Box 10207
Birmingham, Alabama 35202-0207
May , 1997July 7, 1998
To our Variable Annuity Contractholders and Variable Life Policyowners:
As an owner of a variable annuity contract or a variable life insurance
policy (each of which is referred to here as a "Policy") issued by United
Investors Life Insurance Company ("United Investors"), you have the right to
instruct United Investors how to vote certain shares of the Portfolios of
TMK/United Funds, Inc., ("Portfolios"), at the special meeting of shareholders to
be held on July 24, 1997,August 21, 1998, at 6300 Lamar Avenue, Overland Park, Kansas
("Meeting").
United Investors, as the legal owner of the Portfolios' shares, is entitled
to vote those shares at the Meeting. As an owner of record on April
30, 1997,June 22, 1998 of
a Policy having all or part of its value invested in shares of a Portfolio, you
have the right to instruct us as to how we should vote the Portfolio's shares
attributable to your Policy.
To assist you in giving us your instructions, we have enclosed the
following: (1) a Notice of Special Meeting of Shareholders; (2) a Proxy
Statement to Shareholders; and (3) an Instruction Card. Please read the Notice
of Special Meeting and Proxy Statement carefully before filling out the
Instruction Card with your voting instructions.
If you do not return the enclosed Instruction Card, United Investors will
vote the shares of the Portfolios attributable to your Policy in the same
proportion as the shares for which we have received instructions. If we receive
your executed Instruction Card and no instruction is indicated on it, we will
vote such shares "For" the Proposals.
You are cordially invited to attend the Meeting. You may, at that time,
alter instructions which you have previously given to us.
YOUR INSTRUCTIONS ARE IMPORTANT. You are urged to complete the enclosed
Instruction Card with your voting instructions and return it promptly in the
enclosed postage-paid envelope. (Please note: if you own more than one variable Policy,
you will receive a separate Instruction Card for each Policy.Policy). Please execute
and return each Instruction Card you receive.)
Sincerely,
James L. Sedgwick
President
TMK/UNITED FUNDS, INC.
WHEN PROPERLY SIGNED, THE VOTING INTEREST WILL BE DIRECTED IN THE MANNER
INDICATED BELOW. IF NO INDICATION IS GIVEN, VOTING WILL BE DIRECTED FOR THE
PROPOSAL STATED BELOW.
Please vote by filling in the appropriate boxes below, as shown, using blue or
black ink or dark pencil. Do not use red ink. / /
1. To change the name of FOR AGAINST ABSTAIN
the Fund / / / / / /
2. To ratify the selection of FOR AGAINST ABSTAIN
Deloitte & Touche LLP as the / / / / / /
Fund's independent auditors
for its current fiscal year
3. For Money Market Portfolio only:
To approve a change in the FOR AGAINST ABSTAIN
Portfolio's concentration / / / / / /
policy
4. To adopt the Service Plan FOR AGAINST ABSTAIN
pursuant to Rule 12b-1 / / / / / /
5. To change the quorum FOR AGAINST ABSTAIN
requirements / / / / / /
PLEASE MARK, SIGN, DATE AND RETURN THE INSTRUCTION CARD PROMPTLY USING THE
ENCLOSED POSTAGE-FREE ENVELOPE. This proxy may be revoked at any time before it
is voted at the meeting.
[Name of Portfolio] THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS
The undersigned hereby appoints Keith A. Tucker and Sharon K. Pappas, or
either of them, attorneys and proxies with full power of substitution to
represent and direct the voting interest of the undersigned held as of the
record date at the Special Meeting of Shareholders on August 21, 1998, or at any
adjournment(s) thereof as designated (on the reverse side). As to any other
matter, the attorneys are authorized to represent and direct the voting interest
in accordance with their best judgment. This proxy shall remain in effect for a
period of one year from its date. Receipt of the Proxy Statement is hereby
acknowledged.
Date: ____________________________, 1998
PLEASE SIGN IN BOX BELOW. Signature(s) should
conform to name(s) as printed hereon. Executors,
administrators, trustees and corporate officers
should indicate capacity or office.
___________________________________
/ /
/_________________________________/
Signature(s)
Preliminary CopyProxy
IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD(S)
IN THE ENCLOSED ENVELOPE
TMK/UNITED FUNDS, INC.
6300 Lamar Avenue . Overland Park, Kansas 66202
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
July 24, 19977, 1998
To Shareholders:
Notice is hereby given that a Special Meeting of Shareholders of TMK/United
Funds, Inc. (the "Fund"), will be held at 6300 Lamar Avenue, Overland Park,
Kansas, on July 24, 1997,August 21, 1998, at 11:10:00 a.m., ("Meeting") or at any adjournment
thereof, ("Meeting"), for the following purposes:
1. To electchange the Board of Directorsname of the Fund;
2. To ratify the selection of Deloitte & Touche LLP as independent accountants
of the Fund for its current fiscal year;
3. For Money Market Portfolio only: To approve changesa change in the Portfolio's
concentration policy;
4. To adopt a Service Plan pursuant to certain ofRule 12b-1 under the Portfolios' fundamental
investment policies1940 Act;
5. To change the requirements for a quorum for a shareholders meeting; and
restrictions; and
4.6. To transact such other business as may properly come before the Meeting or
any adjournment(s) thereof.
The Board of Directors of the Fund has fixed the close of business on April 30, 1997June
22, 1998 as the record date ("Record Date") for the determination of
Shareholders entitled to notice of and to vote at the Meeting. The number of
shares held by you according to the Fund's records on the record date determines
the number of shares you may vote at the Meeting.
If you attend the meeting, you may vote your shares in person. If you do
not expect to attend the meeting, please complete, date, sign and properly
return the enclosed proxy card(s) in the enclosed postage paid envelope. If you
do not sign and return your proxy card(s), the PortfoliosUnited Investors may incur the
additional expense of subsequent mailings in order to have a sufficient number
of cards signed and returned.
Retain this Notice and Proxy Statement. This is a joint Notice and Proxy
Statement for each of the Portfolios of the above-named Fund. The shares you own in a
particular Portfolio may only be voted with respect to that Portfolio. If you
own shares in more than one of the Portfolios listed,Portfolio, please vote with respect to each
Portfolio on the instructionproxy card provided with respect to that Fund.Portfolio. Please
sign, date and return any and all instructionproxy cards that are mailed to you.
May __, 1997
By Order of the Board of Directors
SHARON K. PAPPAS,KRISTEN RICHARDS,
Assistant Secretary
July 7, 1998
TMK/UNITED FUNDS, INC.
6300 Lamar Avenue . Overland Park, Kansas 66202
PROXY STATEMENT
INTRODUCTION
This document is a joint proxy statement with respect to TMK/United Funds,
Inc. (the "Fund") furnished in connection with the solicitation of proxies by
the Fund's Board of Directors to be used at the Fund's special meeting of
shareholders ("Meeting") or any adjournment(s) thereof. The Meeting will be
held on July 24, 1997, 11:August 21, 1998, 10:00 a.m., local time, at 6300 Lamar Avenue, Overland
Park, Kansas, for the purposes set forth in the attached Notice of the Meeting.
This Proxy Statement is being first mailed to shareholders on or about May __,
1997.July 7,
1998.
The Fund has eleven series of shares outstanding, each of which represents
a separate investment portfolio, as follows: Money Market Portfolio, Bond
Portfolio, High Income Portfolio, Growth Portfolio, Income Portfolio, Limited-
Term Bond Portfolio, Small Cap Portfolio, International Portfolio, Balanced
Portfolio, Asset Strategy Portfolio and Science and Technology Portfolio.
(These Portfolios are referred to in this Proxy Statement collectively as the
"Portfolios" and individually as a "Portfolio.") One-thirdThe Fund is an open-end,
management investment company managed by Waddell & Reed Investment Management
Company ("WRIMCO"), as described below.
A majority of the shares outstanding on the record date, April 30, 1997June 22, 1998
("Record Date"), represented in person or by proxy, of the Fund must be present
for the transaction of business at the Fund's Meeting. In the event that a
quorum is not present or if a quorum is present at the Meeting but sufficient
votes to approve any one of the Proposals are not received, the persons named as
proxies (or their substitutes) may propose one or more adjournments of the
Meeting to permit the further solicitation of proxies. Any adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. The persons named as proxies will vote those
proxies that they are entitled to vote FOR such Proposal in favor of an
adjournment and will vote those proxies required to be voted AGAINST such
Proposal against such adjournment. A shareholder vote may be taken on one or
more of the Proposals described in this Proxy Statement prior to any such
adjournment if sufficient votes have been received and it is otherwise
appropriate.
The purpose of this Proxy Statement is to give you information on which you
may base your decisions as to the choices, if any, you make on the enclosed
Instruction Card. This Proxy Statement also contains certain information
regarding the Portfolios, the funds in the United Group of Mutual Funds
("United Group"), which consists of fourteen corporations and four series of
one of those corporations, and the funds in Waddell & Reed Funds, Inc., which
consists of six series. The Fund and each of the
funds in the United Group and
Waddell & Reed Funds, Inc. are open-end, management investment companies
managed by Waddell & Reed Investment Management Company ("WRIMCO"), as
described below.Proposals.
The enclosed proxy card or, for policyowners, Instruction Card, authorizes
the persons named or their substitutes ("proxy holders") to represent and direct
your voting interest. You may direct the proxy holders to vote your interest in a Portfolio on a
proposal applicable to that Portfolio by checking the appropriate
box "For" or "Against" or you may instruct them not to vote your interest by
checking the"Abstain"the "Abstain" box. If you merely sign, date and return your
Instruction Card with no specific instructions as to a proposal on which you are
entitled to vote, the proxy holders will vote your interest "For" the proposal.Proposal.
You may revoke your instructions at any time prior to their exercise by
providing written notice of revocation or signing a new and different
Instruction Card, each delivered to the Fund prior to the Meeting, or by
attending the Meeting and voting in person. Attendance at the Meeting will not
in and of itself constitute revocation of your instructions.
Information as to the number of outstanding shares of each Portfolio, as of
the Record Date, is set forth in Exhibit A. A listing of the owners of more
than 5% of the shares of any Portfolio as of April 30, 1997June 19, 1998 is set forth in
Exhibit B. To the knowledge of the Fund's management, the executive officers
and Directors of the Fund, as a group, owned less than 1% of the outstanding
shares of each Portfolio as of April 30, 1997.June 19, 1998.
Each share of a Portfolio is entitled to one vote. Any fractional share of
a Portfolio is entitled to a proportionate share of one vote. The
shareholders of each Portfolio vote separately with respect to each sub-
proposal in Proposal 3 that affects that Portfolio. All shareholders
of the Fund vote together with respect to Proposals 1, 2 and 2.5. Only the
shareholders of Money Market Portfolio are entitled to vote with respect to
Proposal 3. Shareholders of each Portfolio vote separately with respect to
Proposal 4.
ANNUAL REPORT
Copies of each Portfolio'sthe Fund's most recent annual and semiannual reports have been
sent to shareholders of that Portfoliothe Fund on or before the mailing of this Proxy
Statement. Shareholders of any Portfolio may obtain, free of charge, copies of
that Portfolio'sthe Fund's annual and semiannual reports by writing to Waddell & Reed, Inc. at
6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission, KS 66201-
921766201-9217 or calling
(800) 366-5465.
POLICYOWNERS' RIGHT TO INSTRUCT UNITED INVESTORS
The shares of the PortfoliosFund are currently sold only to variable life insurance
separate accounts and variable annuity separate accounts (hereinafter
collectively referred to as the "Variable Accounts") as a funding vehicle for
a
variable life insurance policypolicies and a variable annuity policycontract (collectively,
the "Policies") offered by the Variable Accounts of certain life insurance
companies. As of the date of this Proxy Statement, the only participating life
insurance company is United Investors.Investors Life Insurance Company ("United
Investors"). Each of the Variable Accounts has eleven Investment Divisions, the
assets of which are invested in the corresponding Portfolio of the Fund. United
Investors is the legal owner of all shares of the Fund held by the Variable
Accounts. In accordance with its view of currently applicable law, United
Investors is soliciting voting instructions from the owners of the Policies
("Policyowners") with respect to all matters to be acted upon at the Meeting.
Policyowners permitted to give instructions for a Portfolio and the number of
shares for which instructions may be given will be determined as of the record dateRecord
Date for the Meeting. The number of votes which a Policyowner has the right to
instruct will be calculated separately for each Variable Account. That number
will be determined by applying the Policyowner's percentage interest, if any, in
the Investment Division holding shares of the Portfolio to the total number of
votes attributable to that Investment Division. In connection with its
solicitation of voting instructions, it is understood and expected that United
Investors will furnish a copy of this Proxy Statement to Policyowners. All
shares held by the Variable Accounts will be voted by United Investors in
accordance with voting instructions received from Policyowners. United
Investors will vote shares attributable to the Policies as to which no timely
instructions are received, and any Portfolio shares held by United Investors as
to which Policyowners have no beneficial interest, in proportion to the voting
instructions, including abstentions, which are received with respect to allthe
Policies participating in that Portfolio.
THE BOARD OF DIRECTORS UNANIMOUSLY APPROVED THESE
PROPOSALS AND
RECOMMENDS THAT YOU VOTE IN FAVOR OF THEM.
PROPOSAL 1: ELECTIONCHANGE OF DIRECTORSNAME OF FUND
The persons set forth below have been nominated for election as Directorsname of the Fund and each has consentedis proposed to his or her nomination and agreed to
serve if elected. Each nominee (except James M. Concannon and John A.
Dillingham) is currently a Directorbe changed in light of the Fund. Each current Director serves
pursuant to election by shareholders. If anyanticipated
restructuring of certain subsidiaries of Torchmark Corporation ("Torchmark").
Torchmark is the nominees should not be
available for election, the persons named as proxies (or their substitutes) may
vote for other persons in their discretion. Management has no reason to
believe that any nominee will be unavailable for election.
The namespublicly owned, indirect corporate parent company of the Fund's
Directors, nomineesinvestment manager, WRIMCO, and executive officers, their
respective offices and principal occupations during the last five years are set
forth below.
Directors and Nominees of the Fund
As of the date of this Proxy Statement, six of the Fund's Directors were
"interested persons," as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), of Waddell & Reed, Investment Management Company,Inc. ("Waddell & Reed"), the
investment managerdistributor of each Portfolio ("WRIMCO"),the Policies. The Fund's current name reflects the existing
relationship among Torchmark, WRIMCO, Waddell & Reed and United Investors, also
a subsidiary of Torchmark. If the restructuring is accomplished as planned
later in 1998, WRIMCO and Waddell & Reed Inc.,will remain at that time ultimately
owned by the principal underwriter and distributor of the Policies issued by United
Investors ("W&R"). The Directorspersons who are "interested persons" are indicated as
such by an asterisk. Messrs. Morgan, Richey, and Tucker are interested persons
because they are present or former officers, directors and/orthen shareholders of WRIMCO and/or certain of its affiliates. Ms. Graves and Mr. Hayes are
interested persons because ofTorchmark, but their ownership
of shares of Torchmark
Corporation, which indirectly controls WRIMCO and W&R, and because Ms. Graves
is a member of Mr. Richey's immediate family. Mr. Ross is an interested person
because he is a partner in a law firm which has acted as legal counsel for W&R.
Each ofwill not be through Torchmark. After the Fund's Directors is also a Director of each of the funds in the
Fund Complex, and each of the Fund's officers listed below is also an officer
of each of the funds in the Fund Complex. For purposes of this section, the
term "Fund Complex" includes the Fund, with its eleven series, each of the
seventeen funds in the United Group, which consists of fourteen corporate
entities, andanticipated restructuring, Waddell &
Reed Funds, Inc.,may not use printed materials that suggest, or may not otherwise represent,
that it has affiliation with six funds, each of which is
managed by WRIMCO. Waddell & Reed Services Company, an affiliate of W&RTorchmark.
Accordingly, Fund management has proposed, and WRIMCO, is the accounting services agent for each Portfolio. A table
indicating each Director's and nominee's ownership of Portfolio shares is
attached hereto as Exhibit C.
RONALD K. RICHEY* (age 70) -- Director of the Fund since May 1, 1993;
Chairman of the Board of Directors of the Fund; Chairman of the Board of
Directors of Waddell & Reed Financial Services, Inc., United Investors
Management Company and United Investors Life Insurance Company; Chairman of the
Board of Directors and Chief Executive Officer of Torchmark Corporation;
Chairman of the Board of Directors of Vesta Insurance Group, Inc.; formerly,
Chairman of the Board of Directors of W&R. Father of Linda Graves, Director of
the Fund.
KEITH A. TUCKER* (age 52) -- Director of the Fund since July 17, 1991.
President of the Fund; President, Chief Executive Officer and Director of
Waddell & Reed Financial Services, Inc.; Chairman of the Board of Directors of
WRIMCO, W&R, Waddell & Reed Services Company, Waddell & Reed Asset Management
Company and Torchmark Distributors, Inc., each an affiliate of W&R; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; Director of Southwestern Life Corporation; formerly,
partner in Trivest, a private investment concern; formerly, Director of
Atlantis Group, Inc., a diversified company.
HENRY L. BELLMON (age 75) -- Director of the Fund since February 1, 1991.
Rancher; Professor, Oklahoma State University; formerly, Governor of Oklahoma.
DODDS I. BUCHANAN (age 66) -- Director of the Fund since July 13, 1987.
Advisory Director, The Hand Companies, an actuarial consulting company;
President, Buchanan Ranch Corporation; formerly, Senior Vice President and
Director of Marketing Services, The Meyer Group of Management Consultants;
formerly, Professor and Chairman of Marketing, College of Business, University
of Colorado.
JAMES M. CONCANNON (age 49) -- Dean and Professor of Law, Washburn
University School of Law.
JOHN A. DILLINGHAM (age 58) -- Director and consultant, McDougal
Construction Company; formerly Senior Vice President-Sales and Marketing,
Garney Companies, Inc., a specialty utility contractor.
LINDA GRAVES* (age 43) -- Director of the Fund since July 12, 1995. First
Lady of Kansas; formerly, partner, Levy and Craig, P.C., a law firm. Daughter
of Ronald K. Richey, Chairman of the Board of the Fund.
JOHN F. HAYES* (age 77) -- Director of the Fund since June 28, 1988.
Director, Central Bank and Trust; Director, Central Kansas Bankshares;
Director, Central Properties, Inc.; Chairman, Gilliland & Hayes, P.A., a law
firm; formerly, President, Gilliland & Hayes, P.A.
GLENDON E. JOHNSON (age 73) -- Director of the Fund since July 13, 1987.
Director and Chief Executive Officer of John Alden Financial Corporation and
subsidiaries.
WILLIAM T. MORGAN* (age 69) -- Director of the Fund since July 13, 1987.
Retired; formerly, Chairman of the Board of Directors and President of the Fund
(Mr. Morgan retired as Chairman of the Board of Directors and President of the
Fund on April 30, 1993); formerly, President, Director and Chief Executive
Officer of WRIMCO and W&R; formerly, Chairman of the Board of Directors of
Waddell & Reed Services Company; formerly, Director of Waddell & Reed Asset
Management Company, United Investors Management Company and United Investors
Life Insurance Company, affiliates of W&R.
WILLIAM L. ROGERS (age 50) -- Director of the Fund since November 22,
1996. Principal, Colony Capital, Inc., a real estate-related investment
company; formerly, partner in Trivest, a private investment concern.
FRANK J. ROSS, JR.* (age 44) -- Director of the Fund since November 22,
1996. Partner, Polsinelli, White, Vardeman & Shalton, a law firm.
ELEANOR B. SCHWARTZ (age 60) -- Director of the Fund since July 12, 1995.
Chancellor, University of Missouri-Kansas City; formerly, Interim Chancellor,
University of Missouri-Kansas City.
FREDERICK VOGEL III (age 61) -- Director of the Fund since July 13, 1987.
Retired.
PAUL S. WISE (age 76) -- Director of the Fund since July 13, 1987.
Director of Potash Corporation of Saskatchewan, a fertilizer company.
Based on the recommendation of the Fund's Nominating Committee, at the
meeting of the Board of Directors on April 23, 1997, the Directors of the Fund,
including the Directors who are not "interested persons" of the Fund, as
defined in the 1940 Act ("Independent Directors"), unanimously approved the
nomination of the foregoing persons to serve or continue to serve as Directors,
as applicable, and directed that the election of these nominees be submitted to
Fund shareholders.
The Board of Directors of the Fund met six times during the Fund's fiscal
year ended December 31, 1996. Except for Messrs. Rogers and Ross, who were
elected to the Fund's Board of Directors effective November 22, 1996, each
nominee for re-election as Director attended at least 75% of the meetings of
the Board and each of its committees on which he or she serves during the
Fund's most recent fiscal year.
The Fund has an Audit Committee that reviews and evaluates the audit
function, including recommending to the Directors the independent public
accountants to be selected for the Fund. The Audit Committee currently
consists of Messrs. Buchanan (Chairman) and Vogel and Ms. Schwartz, each of
whom is an Independent Director, and Messrs. Morgan and Hayes. Each was
elected to the Audit Committee on August 30, 1995. The Fund's Audit Committee
met four times during the Fund's most recent fiscal year.
The Fund also has a Nominating Committee that is responsible for the
selection and nomination of the Independent Directors. The Nominating
Committee currently consists of Messrs. Johnson and Wise, each of whom is an
Independent Director. The Fund's Nominating Committee met once during the
Fund's most recent fiscal year. The Nominating Committee generally does not
consider unsolicited Director nominations recommended by Fund policyholders.
Officers and Directors who are affiliated persons of the Fund, as defined
in the 1940 Act, receive no salary, fees, or compensation from the Fund. Each
of the Directors, other than Messrs. Richey and Tucker, receives $44,000 per
year, plus $1,000 for each meeting of the Board of Directors attended, plus
reimbursement of expenses of attending such meeting, and $500 for each
committee meeting attended which is not in conjunction with a Board of
Directors meeting. The fees and reimbursed expenses paid to the Directors are
divided among the Fund, the United Group and Waddell & Reed Funds, Inc.
During the Fund's fiscal year ended December 31, 1996, the Fund's
Directors received the following fees for service as a director:
COMPENSATION TABLE
Total
Aggregate Compensation
Compensation From Fund
From and Fund
Director Fund Complex*
- -------- ------------ ------------
Ronald K. Richey $ 0 $ 0
Keith A Tucker 0 0
Henry L. Bellmon 3,673 49,000
Dodds I. Buchanan 3,673 49,000
Linda Graves 3,673 49,000
John F. Hayes 3,673 49,000
Glendon E. Johnson 3,595 48,000
William T. Morgan 3,673 49,000
William L. Rogers 864 11,000
Frank J. Ross, Jr. 864 11,000
Eleanor B. Schwartz 3,600 48,000
Frederick Vogel III 3,673 49,000
Paul S. Wise 3,673 49,000
*No pension or retirement benefits have been accrued as a part of Fund
expenses.
The officers are paid by WRIMCO or its affiliates.
The Board of Directors of
the Fund has created an honorary position of
Director Emeritus. The Director Emeritus policy providesdetermined that an incumbent
Director who has attainedit is advisable, to change the age of 75 and was initially elected as a Director
prior to May 31, 1993, may, or if initially elected as a Director on or after
May 31, 1993, must, resign his or her position as a Director and, unless he or
she elects otherwise, will serve as a Director Emeritus provided that the
Director has served as a Director of one or morename of the Fund to
Target/United Funds, Inc. and, further, to avoid the necessity of a shareholders
meeting for at least five
years, which need not have been consecutive. A Director Emeritus receives an
annual fee in an amount equalany future name change, to permit the annual retainer he or she was receiving at
the time he or she resigned as a Director; provided that a Director initially
elected to a Board of Directors on or after May 31, 1993, receives such annual
fee for a period of three years commencing uponto change
the date the Director began his
or her service as a Director Emeritus or in an equivalent lump sum. A Director
Emeritus receives fees in recognition of his or her past services, whether or
not services are rendered in his or her capacity as Director Emeritus, but has
no authority or responsibility with respect to managementname of the Fund. Messrs.
Jay B. DillinghamFund without shareholder approval. To do so requires amendment
of Article SECOND of the Fund's Articles of Incorporation to substitute
Target/United Funds, Inc. for the current name and Doyle Patterson currently serveamendment of Article EIGHTH
of the Fund's Articles of Incorporation (which generally provides for amendment
of the Articles by vote of the shareholders) expressly to permit the name of the
Fund to be changed by action of the Board of Directors without shareholder
approval.
If this Proposal is approved by the shareholders of the Fund and the
restructuring proceeds substantially as Directors Emeritus.planned, the name change will become
effective prior to the implementation of the restructuring. If elected,this Proposal is
not approved by shareholders of the Fund or the proposed name change is no
longer necessary or advisable, the Directors will hold office without limittake such action as they then
deem appropriate and in time except
(a) any Director may resign, (b) any Director may be removed by Policyholders
upon anthe best interests of the Fund and its shareholders.
Required Vote: Approval of Proposal 1 requires the affirmative vote of a
majority of all the outstanding shares entitled to be cast
for the election of Directors, and (c) in connection with the Director Emeritus
policy described above.
Executive Officers of the Fund,
The executive officers of the Fund, other than those who serve as
Directors, are set forth below. Each executive officer, as such, is an
"interested person" of the Fund. Each executive officer set forth below holds
the same position with the United Group and Waddell & Reed Funds, Inc.
Robert L. Hechler (age 60) -- Vice President and Principal Financial
Officer of the Fund since 1987; Vice President, Chief Operations Officer,
Director and Treasurer of Waddell & Reed Financial Services, Inc.; Executive
Vice President, Principal Financial Officer, Director and Treasurer of WRIMCO;
President, Chief Executive Officer, Principal Financial Officer, Director and
Treasurer of W&R; Director and Treasurer of Waddell & Reed Asset Management
Company; President, Director and Treasurer of Waddell & Reed Services Company;
Vice President, Treasurer and Director of Torchmark Distributors, Inc.
Henry J. Herrmann (age 54) -- Vice President of the Fund since 1987; Vice
President, Chief Investment Officer and Director of Waddell & Reed Financial
Services, Inc.; Director of W&R; President, Chief Executive Officer, Chief
Investment Officer and Director of WRIMCO and Waddell & Reed Asset Management
Company; Senior Vice President and Chief Investment Officer of United Investors
Management Company.
Theodore W. Howard (age 54) -- Vice President, Treasurer and Principal
Accounting Officer of the Fund since 1987; Vice President of Waddell & Reed
Services Company.
Sharon K. Pappas (age 38) -- Secretary of the Fund since 1989, Vice
President of the Fund since 1992, and General Counsel of the Fund since 1994;
Vice President, Secretary and General Counsel of Waddell & Reed Financial
Services, Inc.; Senior Vice President, Secretary and General Counsel of WRIMCO
and W&R; Director, Senior Vice President, Secretary and General Counsel of
Waddell & Reed Services Company; Director, Secretary and General Counsel of
Waddell & Reed Asset Management Company; Vice President, Secretary and General
Counsel of Torchmark Distributors, Inc.; formerly, Assistant General Counsel of
the Fund, WRIMCO, Waddell & Reed Financial Services, Inc., W&R, Waddell & Reed
Asset Management Company and Waddell & Reed Services Company.
Required Vote: The election of Directors of the Fund requires the
favorable vote of the holders of a plurality of the shares cast in person or by
proxy, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR PROPOSAL 1.
PROPOSAL 2: RATIFICATION OF THE SELECTION OF DELOITTE &
TOUCHE LLP AS THE FUND'S INDEPENDENT ACCOUNTANTS
Discussion. Deloitte & Touche LLP has been selected by the Board of
Directors, with the approval of the Audit Committee, as the Fund's independent
public accountants for the Fund's current fiscal year. The shareholders of the
Fund are entitled to vote for or against the ratification of the selection of
Deloitte & Touche LLP.
Deloitte & Touche LLP has advised the Fund that neither it nor any of its
partners has any direct or indirect financial interest or connection (other than
as independent accountants) in or with the Fund or any of its affiliates.
Deloitte & Touche LLP has been given the opportunity to make a statement at the
Meeting if it so desires. Deloitte & Touche LLP is not expected to have a
representative present at the Meeting but will be available should any matter
arise requiring its presence.
On November 5, 1996, Price Waterhouse LLP, the then independent accountants
of the Fund, resigned as the independent accountants of the Fund. Price
Waterhouse LLP audited the Fund's financial statements during the Fund's two
most recent fiscal years that ended on or before December 31, 1995, and forthefor the
period from January 1, 1996 through November 5, 1996. During such period, the
Fund did not have any disagreements with Price Waterhouse LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement if not resolved to the satisfaction of
Price Waterhouse LLP would have caused them to make reference thereto in their
report on the financial statements for such periods.
Price Waterhouse LLP did not at any time during the Fund's two most recent
fiscal years, and any subsequent interim period, advise the Fund (i) that
internal controls necessary for the Fund to develop reliable financial
statements did not exist, (ii) that it had received information that led it to
no longer be able to rely on management's representations that made it unwilling
to be associated with the financial statements prepared by management, (iii) of
the need to expand significantly the scope of its audit or that it had received
information that if further investigated may materially impact the fairness or
reliability of a previously issued or subsequent audit report or the underlying
financial statements or cause it to be unwilling to rely on management's
representations or be associated with the financial statements prepared by
management, or (iv) that it had received information that it concluded
materially impacted the fairness or reliability of a previously issued or
subsequent audit report or the underlying financial statements. Price
Waterhouse LLP did not so expand any such audit or conduct further
investigation, and no issues existed which were not resolved to the accountants'
satisfaction prior to resignation.
Required Vote: Approval of this Proposal 2 requires the affirmative vote of a
majority of the outstanding securitiesshares of the Fund, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR PROPOSAL 2.
PROPOSAL 3: APPROVAL OF CHANGES TO CERTAINFOR MONEY MARKET PORTFOLIO ONLY:
CHANGE IN FUNDAMENTAL INVESTMENT RESTRICTIONS
AND POLICIESRESTRICTION
REGARDING CONCENTRATION OF EACH PORTFOLIO
Relevant Portfolios. Changes are proposed for allINVESTMENTS
The Fund's Money Market Portfolio currently has an investment restriction
which prohibits it from investing more than 25% of its assets in the Portfolios, but
somesecurities
(other than U.S. Government securities) of issuers in the proposed changes apply only to certain Portfolios. See the
individual sub-proposals below for listings of the Portfolios to which each
specific change applies.
Reasons for the Proposed Changes. Pursuant to the 1940 Act, each of the
Portfolios has adopted certainsame industry. This
is a fundamental investment restrictionsrestriction and, policies, which are set forth in the Fund's prospectus or statement of
additional information, and whichas such, may be changed only with
shareholder
approval. Restrictions and policies that a Portfolio has not specifically
designated as being fundamental are considered to be "non-fundamental" or
"operating" and may be changed by the Fund's Board of Directors without
shareholder approval.
Certainapproval of the fundamental restrictionsshareholders of that the Portfolios have adopted
in the past reflect business or industry conditions or practices or federal
requirements that are no longer in effect. Other fundamental restrictions
reflect regulatory requirements that remain in effect, but which are not
required to be stated as fundamental, or in some cases even as non-fundamental,
restrictions. Also, as new Portfolios have been created over a period of
years, substantially similar fundamental restrictions often have been phrased
in slightly different ways, sometimes resulting in minor but unintended
differences in effect or potentially giving rise to unintended differences in
interpretation.
Accordingly,Portfolio.
WRIMCO has proposed, and the Board of Directors of the Fund has approved revisionssubject to
certainapproval by shareholders of Money Market Portfolio, modification of this
restriction to exclude bank obligations from the Portfolios' fundamental restrictions in order to simplify,
modernize and standardize certain investment restrictions that are required to
be fundamental, and to eliminate certain fundamental restrictions that are not
legally required. In several instances, if an existing fundamental restriction
is eliminated because it is not required to be fundamental, the Portfolio
intends to implement a similar restriction as a non-fundamental, operating
policy.25% limit.
The Board of Directors believes that eliminating disparities among certainmodifying this limit to permit a
greater percentage of the Portfolios' fundamental restrictions will enhance WRIMCO's abilityPortfolio's assets to manage efficientlybe invested in bank obligations
would provide additional investment flexibility and effectivelyfacilitate the Portfolios'management of
the Portfolio. In general, the Portfolio invests in certain prescribed money
market instruments, including bank obligations. Under the Portfolio's
investment policies, the Portfolio may invest in a bank obligation only if it is
an obligation of a bank that is subject to regulation by the U.S. Government
(including foreign branches of these banks) or an obligation of a foreign bank
having total assets in changing
regulatoryequal to at least U.S. $500,000,000. Further, as a money
market fund that uses the amortized cost method of valuation, the Portfolio is
subject to and investment environments and will facilitate monitoring ofoperates in compliance with fundamentalRule 2a-7 under the Investment
Company Act of 1940, as amended ("1940 Act"). Among its other requirements,
Rule 2a-7 limits the Portfolio's investments in securities of any one issuer
(other than U.S. Government securities, as defined in the 1940 Act) to no more
than 5% of the Portfolio's assets. Further, under Rule 2a-7, all of the
Portfolio's investments must be rated in one of the two highest rating
categories by the requisite nationally recognized statistical rating
organizations or be comparable unrated securities, and non-fundamental investment limitations. In
addition, by reducing those policies that can be changed only by shareholder
vote, each Portfolio will be ableinvestments rated in the
second highest rating category (or comparable unrated securities) are limited to
avoid5% of the costs and delays associated with
a shareholder meeting when making changes to its investment policies that, at a
future time,Portfolio's assets. With these continuing requirements, the Board
of Directors may consider desirable. Althoughdoes not believe that the proposed changes in fundamental restrictions will allow the Portfolios greater
investment flexibility to respond to future investment opportunities, the Board
of Directors does not anticipate that the changes, individually or in the
aggregate,change will result at this time in a material
change in the level of investment risk associated with an investment in anythe
Portfolio.
With respect to investments in options, futures contracts and other
derivative instruments, the Board of Directors determined that the current
policies for certain Portfolios unnecessarily restrict these Portfolios from
taking advantage of potential investment and risk management opportunities and
techniques. The Board of Directors accordingly considered andIf this Proposal is approved modifications to certainby shareholders of the Portfolio's fundamental restrictions,Portfolio, its current
investment restriction would be amended to read as well
as eliminationfollows: (The proposed
change is reflected by the words in italics.)
Money Market Portfolio may not ... buy a security if more than
25% of certain other fundamental restrictions, thatits assets would provide
the Portfolios greater flexibility to attempt to enhance income or yield and to
attempt to hedge their investments through the usethen be invested in securities of options on securities
(including index options), options on foreign currencies, futures contracts for
the purchase or sale of instruments based on financial indices (including
interest rates or an index of U.S.companies in
any one industry (U.S. Government or foreign government securities
or equity or debt securities) and futures contracts on foreign currencies or
debt securities (hereinafter "futures contracts"), and options on futures
contracts, forward contracts, swaps and swap-related products, and indexed
securities. Exhibit D attached hereto sets forth a summary of the features of
options, futures contracts, forward contracts, swaps and certain swap-related
products, and indexed securities and the potential usesbank obligations and
risks of these
investments.
For certain Portfolios, the Board of Directors has determined that the
Portfolio would benefit from having greater flexibility with respect to
purchasing and selling options, futures contracts and other derivative
instruments. The Board of Directors of has concluded that amendment and/or
elimination of the Portfolio's current fundamental investment restrictions
regarding commodities, options, and other derivative instruments as set forthare not included in sub-proposal 3.2 is in the best interests of each Portfolio and its
shareholders.
The text and a summary description of each proposed change to the affected
Portfolios' fundamental restrictions are set forth below. For purposes of the
discussion of each proposed change, the terms "Portfolio" or "Portfolios" refer
only to those Portfolios named as to which the change applies.
Shareholders should refer to Exhibit E to this Proxy Statement for the
text of the existing fundamental restrictions that are proposed to be amended
or eliminated. Shareholders should note, however, that, for some Portfolios,
certain of the fundamental restrictions that are treated separately below
currently are combined within a single fundamental restriction.
The text below also describes those operating policies that the Portfolios
intend to implement in conjunction with the elimination of fundamental
restrictions underrestriction; ....
If this Proposal 3. To the extent that a current fundamental
investment restriction is replaced by a non-fundamental, operating policy, such
operating policy could in the future be changed by the Fund's Board of
Directors without approval of the affected shareholders, subject to such
disclosure to existing and prospective investors as may be required by law.
If approved by the shareholders of the affectedMoney Market Portfolio,
the amendment
or elimination of fundamentalthis investment restrictions shallrestriction, as so amended, will become operative concurrently
with the effectiveness of an amendment to the Fund's registration statement
describing the same. If athis Proposal is not approved, as to a
particular Portfolio, theMoney Market Portfolio's corresponding
current investment restriction will remain unchanged.
3.1 Modification of Fundamental Restriction Regarding Diversification of
Assets
Portfolios to which this change applies: All Portfolios, except Asset
Strategy Portfolio.
Discussion: The diversification requirement contained in the current
investment restriction of each Portfolio (except Asset Strategy Portfolio) is
more restrictive than required under the 1940 Act because the current
restriction applies to 100%, rather than 75%, of the Portfolio's total assets.
Accordingly, this Proposal will increase the amount of each Portfolio's assets
that may be invested in the securities of any one issuer. With respect to 75%
of the value of its total assets, a Portfolio would continue to be prohibited
from (a) investing in the securities of any one issuer in an amount exceeding
5% of the value of the Portfolio's total assets, and (b) owning more than 10%
of the outstanding voting securities of any one issuer. However, the Portfolio
would not be so restricted with respect to 25% of the value of its total
assets. Thus, for example, a Portfolio would be permitted to invest 25% of its
total assets in the securities of one issuer or to invest 10% of its total
assets in the securities of one issuer and 15% in the securities of another
issuer. However, Money Market Portfolio would continue to be subject to, and
operate in compliance with, the diversification requirements of Rule 2a-7 under
the 1940 Act as it is, or in the future may be, in effect.
The greater a Portfolio's holdings of a particular issuer, the greater the
impact that changes in the value of such securities may have on the Portfolio's
total investment portfolio. WRIMCO believes that the proposed amended
fundamental restriction will provide each Portfolio with additional flexibility
in connection with the purchase of portfolio securities, while maintaining full
compliance with the diversification requirements of the 1940 Act.
Proposed Text of Fundamental Investment Restriction: If the shareholders
of a Portfolio approve this sub-proposal 3.1, that Portfolio's current
fundamental restriction regarding diversification of its investments would be
amended to provide that the Portfolio may not:
With respect to 75% of its total assets, purchase securities of any one
issuer (other than cash items and "Government securities" as defined in
the 1940 Act), if immediately after and as a result of such purchase, (a)
the value of the holdings of the Portfolio in the securities of such
issuer exceeds 5% of the value of the Portfolio's total assets, or (b) the
Portfolio owns more than 10% of the outstanding voting securities of such
issuer.
3.2 Modification of Fundamental Restriction Regarding Options, Commodities,
Forward Contracts and/or Futures Contracts
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio.
Discussion: Approval of this sub-proposal 3.2 by the shareholders of a
Portfolio would modify that Portfolio's fundamental investment restriction
regarding investments in commodities and commodity contracts.
If this sub-proposal 3.2 is adopted by the shareholders of a Portfolio,
that Portfolio intends to implement a non-fundamental, operating policy, which
could be changed by the Board of Directors without the approval of shareholders
of the Portfolio, regarding investment in derivative instruments for that
Portfolio, as described below.
The primary purpose of this sub-proposal 3.2 is to authorize each
Portfolio to engage in certain transactions in options, futures contracts, and
other derivative instruments, which will provide the Portfolio greater
flexibility in the management of its investments. WRIMCO believes that it is
desirable for the Portfolios to be able to engage in options, futures contracts
and other derivative instruments in order to enhance income or yield to hedge
portfolio positions, as may be permitted under applicable law and regulations
and in a manner that is consistent with that Portfolio's goal and investment
policies.
Proposed Fundamental Investment Restriction and New Non-Fundamental,
Operating Policy: The fundamental investment restriction for each Portfolio
(other than Asset Strategy Portfolio) governing options, commodities, futures
contracts and other derivative instruments are proposed to be revised to
provide as follows:
A Portfolio may not purchase or sell physical commodities; however, this
policy shall not prevent a Portfolio from purchasing and selling foreign
currency, futures contracts, options, forward contracts, swaps, caps,
collars, floors and other financial instruments.
The fundamental investment restriction for Asset Strategy Portfolio
governing commodities is proposed to be revised to provide as follows:
The Portfolio may not purchase or sell physical commodities, except that
the Portfolio may purchase and sell bullion for temporary, defensive
purposes; however, this policy shall not prevent the Portfolio from
purchasing and selling foreign currency, futures contracts, options,
forward contracts, swaps, caps, collars, floors and other financial
instruments.
If the shareholders of a Portfolio approve the modification of its
fundamental restriction as proposed, that Portfolio intends to implement a non-
fundamental, operating policy that provides that:
Generally, the Portfolio may purchase and sell any type of derivative
instrument (including, without limitation, futures contracts, options,
forward contracts, swaps, caps, collars, floors and indexed securities).
However, the Portfolio will only purchase or sell a particular derivative
instrument if the Portfolio is authorized to invest in the type of asset
by which the return on, or value of, the derivative instrument is
primarily measured or, with respect to foreign currency derivatives, if
the Portfolio is authorized to invest in foreign securities.
3.3 Elimination of Fundamental Restrictions Regarding Mortgaging or Pledging
Securities
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio and Asset Strategy Portfolio.
Discussion: The primary purpose of this sub-proposal 3.3 is to permit the
Portfolios to mortgage or pledge their respective securities or other assets
under certain circumstances. If sub-proposal 3.3 is approved by the
shareholders of a Portfolio, that Portfolio intends to implement a non-
fundamental, operating policy that would prohibit the pledging of assets in
connection with borrowings and would make clear that assets deposited or
segregated in connection with transactions in options, futures contracts,
forward contracts, swaps and other derivative instruments are not subject to
the restriction.
New Non-Fundamental, Operating Policy: If this sub-proposal 3.3 is
approved by the shareholders of a Portfolio, that Portfolio will eliminate its
current fundamental investment restriction regarding mortgaging or pledging
securities or other assets and will implement the following non-fundamental,
operating policy, which could be changed by the Board of Directors of the Fund
without the approval of the shareholders of that Portfolio. The non-
fundamental, operating policy would provide that the Portfolio may not:
Pledge its assets in connection with any permitted borrowings. However,
this policy does not prevent the Portfolio from pledging its assets in
connection with its purchase and sale of futures contracts, options,
forward contracts, swaps, caps, collars, floors and other financial
instruments.
3.4 Modification of Fundamental Restriction Regarding Margin Purchases of
Securities
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio.
Discussion: Margin purchases involve the purchase of securities with
money borrowed from a broker. "Margin" is the cash or eligible securities that
the borrower places with the broker as collateral to secure the loan. Pursuant
to its current fundamental restriction, each Portfolio is prohibited from
purchasing securities on margin. With some exceptions, mutual funds are
prohibited from entering into most types of margin purchases by applicable
rules and policies adopted by the Securities and Exchange Commission ("SEC").
If this sub-proposal 3.4 is approved by the shareholders of a Portfolio, the
Portfolio intends to implement a revised fundamental investment restriction
(set forth below) that permits the Portfolio to purchase securities on margin
under certain circumstances and makes clear that short-term credits necessary
for the clearance of transactions and margin payments and other deposits makein
connection with options, futures contracts, forward contracts, swaps and
other derivative instruments are not considered purchasing securities on
margin.
Proposed Fundamental Investment Restriction: Each Portfolio's fundamental
investment restriction is proposed to be revised to prohibit margin purchases
except under conditions permitted by applicable SEC rules and would clarify
that the Portfolio may make margin payments in connection with options, futures
contracts and other financial instruments. The proposed fundamental investment
restriction would provide that each Portfolio may not:
Purchase securities on margin, except that the Portfolio may obtain such
short-term credits as are necessary for the clearance of transactions and
that the Portfolio may make margin payments in connection with futures
contracts, options, forward contracts, swaps, caps, collars, floors and
other financial instruments.
3.5 Modification of Fundamental Restriction Regarding Short Sales of
Securities
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio.
Discussion: In a short sale, an investor sells a borrowed security and
has a corresponding obligation to the lender to return the identical security.
In an investment technique known as a short sale "against the box," an investor
sells securities short while owning the same securities in the same amount, or
having the right to obtain equivalent securities. The investor could have the
right to obtain equivalent securities, for example, through its ownership of
warrants, options or convertible bonds.
The fundamental restriction, as it is proposed to be modified, would
permit the Portfolio to engage in short sales of securities against the box.
In addition, the revised fundamental restriction would clarify that options,
futures contracts, swaps, forward contracts and other financial instruments are
not considered short sales.
Proposed Fundamental Investment Restriction: Each Portfolio's fundamental
investment restriction on short selling is proposed to be revised to provide
that a Portfolio may not:
Sell securities short (unless it owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short);
except that this policy does not prevent the Portfolio from entering into
short positions in foreign currency, futures contracts, options, forward
contracts, swaps, caps, collars, floors and other financial instruments.
3.6 Elimination of Fundamental Restriction Regarding Arbitrage Transactions
Portfolios to which this change applies: All Portfolios, except Money
Market Portfolio and Asset Strategy Portfolio.
Discussion: If this sub-proposal 3.6 is approved by the shareholders of a
Portfolio, that Portfolio will eliminate its current fundamental restriction
that provides that the Portfolio may not engage in arbitrage transactions. The
Portfolio intends to operate in accordance with the proposed fundamental
restriction and new non-fundamental, operating policy as proposed in sub-
proposal 3.2 above.
3.7 Elimination of Fundamental Restriction Regarding Investments in Issuers
Whose Securities are Owned by Certain Persons
Portfolios to which this change applies: Asset Strategy Portfolio.
Discussion: Asset Strategy Portfolio currently has a fundamental
investment restriction that prohibits it from purchasing or holding the
securities of an issuer if the officers and directors of the Portfolio and
WRIMCO who beneficially own more than 1/2 of 1% of the securities of that
issuer together own beneficially more than 5% of the securities of that issuer.
This restriction was originally adopted to address state securities law
requirements that no longer apply.
WRIMCO believes that this fundamental investment restriction should be
eliminated. Although this restriction has not precluded Portfolio investments
in the past, elimination of the restriction will potentially increase WRIMCO's
flexibility when selecting investments for the Portfolio in the future. The
ability of the Portfolio to invest in companies in which its Directors and
officers, or its affiliates and their directors and officers, hold interests
would continue to be restricted by the 1940 Act, whether or not the current
fundamental investment restriction is eliminated.
3.8 Modification of Fundamental Policy Regarding Loans
Portfolios to which this change applies: All Portfolios.
Discussion: Each of the Portfolios currently has a fundamental investment
restriction that, in general, prohibits the Portfolio from making loans. For
the Portfolios other than Asset Strategy, the restriction expressly excludes
"debt securities" from the prohibition. For Asset Strategy, this exception
applies to the purchase of "a portion of an issue of debt securities."
To eliminate any ambiguity or potential disparity in interpretation of the
scope of these exceptions, each Portfolio's fundamental restriction regarding
its ability to make loans is proposed to be modified to make clear that the
Portfolio may buy "debt securities and other obligations consistent with its
goal and its other investment policies and restrictions."
Required Vote. Approval of each of the numbered changes contemplated by
Proposal 3 with respect to a Portfolio requires the affirmative vote of a
"majority of the outstanding voting securities" of thatMoney Market Portfolio, which
for this purpose means the affirmative vote of the lesser of (1) 67% or more of
the shares of the Portfolio present at the Meeting or represented by proxy if
more than 50% of the outstanding shares of the Portfolio are so present or
represented or (2) more than 50% of the outstanding shares of the Portfolio.
THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE FOR PROPOSAL 3.
PROPOSAL 4: ADOPTION OF THE SERVICE PLAN PURSUANT TO RULE 12B-1 UNDER THE 1940
ACT
The Board of Directors of the Fund has approved the adoption of a Service
Plan pursuant to Rule 12b-1 under the 1940 Act applicable to each Portfolio,
subject to the approval of the shareholders of the Portfolio. The Plan was
approved on May 13, 1998 by the unanimous votes of the full Board and of the
Directors who are not interested persons of the Fund and have no financial
interest in the operation of the Plan or any related agreement ("Independent
Plan Directors") cast in person at a meeting called for that purpose.
Description of the Plan
Under the Plan, a Portfolio may pay certain expenses in connection with the
provision of personal services to Policyowners and/or the maintenance of
Policyowner accounts. Payments under the Plan are to be made to Waddell & Reed
which will provide, or arrange for the provision of, certain services with
respect to Policyowners.
The Plan requires that Waddell & Reed furnish to the Board of Directors of
the Fund, at least quarterly, a written report of the amounts expended pursuant
to the Plan and the purposes for which such expenditures were made. While the
Plan is in effect, the selection and nomination of the directors who are not
interested persons of the Fund are committed to the discretion of the
Independent Directors.
The Plan may be terminated as to a Portfolio at any time, without penalty,
by the vote of a majority of the outstanding shares of that Portfolio. The Plan
may be amended by vote of the Directors, including a vote of the Independent
Plan Directors, cast in person at a meeting called for that purpose. Any
material amendment to the Plan, including amendments to increase materially the
amount of fees a Portfolio is authorized to pay thereunder, requires the
approval of the shareholders of the affected Portfolio(s).
The Plan will remain in effect from year to year provided such continuance
is approved annually by a vote of the Fund's Directors, including a majority of
the Independent Plan Directors, cast in person at a meeting called for the
purpose of voting on such continuance.
The Plan provides each Portfolio with the flexibility to pay Waddell & Reed
a "service fee" for the provision of personal services to Policyowners and/or
the maintenance of their accounts. The Plan provides that each Portfolio may
pay Waddell & Reed a service fee that does not exceed on an annual basis .25 of
1% of the Portfolio's average annual net assets.
For purposes of the Plan and the application of Rule 2830 of the National
Association of Securities Dealers, Inc. ("NASD") Conduct Rules, the "service
fee" is a payment for personal services and/or the maintenance of Policyowner
accounts, as defined pursuant to Rule 2830 of the Conduct Rules. If onethe NASD
adopts a definition of a "service fee" for purposes of Rule 2830 that differs
from the definition of "service fee" as used in the Proposed Plan, or if the
NASD adopts a related definition intended to define the same concept, the
definition of "service fee" will be amended to conform to the NASD definition.
For each Portfolio, the annual expenses as a percentage of average net
assets of its fiscal year ended December 31, 1997*, on both an actual and pro
forma basis including the maximum proposed service fee of 0.25%, are set forth
below:
Asset
Strategy Balanced Bond Growth
-------- -------- ---- ------
Pro Pro Pro Pro
Actual FormaActual FormaActual FormaActual Forma
------ ----------- ----------- ----------- -----
Annual Fund operating expenses
(as a percentage of average net assets)
Management fees 0.80% 0.80%0.60% 0.60%0.53% 0.53%0.70% 0.70%
12b-1 fees 0.00 0.25 0.00 0.25 0.00 0.25 0.00 0.25
Other expenses 0.13 0.13 0.07 0.07 0.05 0.05 0.02 0.02
Total Portfolio
operating expenses0.93 1.18 0.67 0.92 0.58 0.83 0.72 0.97
*Note the table of expenses (both actual and pro forma) does not reflect the
separate account expenses, including sales load.
Limited-
High Term
Income Income International Bond
------ ------ ------------- -------
Pro Pro Pro Pro
Actual FormaActual FormaActual FormaActual Forma
------ ----------- ----------- ----------- -----
Annual Fund operating expenses
(as a percentage of average net assets)
Management fees 0.65% 0.65%0.70% 0.70%0.80% 0.80%0.55% 0.55%
12b-1 fees 0.00 0.25 0.00 0.25 0.00 0.25 0.00 0.25
Other expenses 0.05 0.05 0.02 0.02 0.18 0.18 0.18 0.18
Total Portfolio
operating expenses0.70 0.95 0.72 0.97 0.98 1.23 0.73 0.98
*Note the table of expenses (both actual and pro forma) does not reflect the
separate account expenses, including sales load.
Science
Money and Small
Market Technology Cap
------ ---------- -----
Pro Pro Pro
Actual FormaActual FormaActual Forma
------ ----------- ----------- -----
Annual Fund operating expenses
(as a percentage of average net assets)
Management fees 0.50% 0.50%0.51% 0.51%0.85% 0.85%
12b-1 fees 0.00 0.25 0.00 0.25 0.00 0.25
Other expenses 0.08 0.08 0.18 0.18 0.05 0.05
Total Portfolio
operating expenses0.58 0.83 0.69 0.94 0.90 1.15
*Note the table of expenses (both actual and pro forma) does not reflect the
separate account expenses, including sales load.
Director Consideration of the Plan
Prior to approving adoption of the Plan, the Board of Directors of the
Fund, including the Independent Plan Directors, reviewed detailed information
relating to the Plan. The Board also consulted with independent counsel. Among
other matters, the Board considered with respect to the shares of the Fund were:
1. the level and consistency of personal services and/or maintenance of
shareholder accounts to be provided to Policyowners under the Plan;
2. the extent to which Waddell & Reed's provision of personal services
and/or other maintenance of Policyowner accounts might result in
increased Policyowner satisfaction and reduced redemptions of Fund
shares by the Variable Accounts;
3. the benefits to Policyowners from Waddell & Reed's ability to attract
and retain a professional staff to provide personal services to
Policyowners and/or maintenance of Policyowner accounts that may not
be present if Fund assets were declining;
4. the cost to Policyowners for Waddell & Reed to provide personal
services to them and/or maintenance of Policyowner accounts under the
Plan and the effect on the performance of Policyowner investment in
the Fund over various periods of time;
5. the mutual fund industry's practices in the past several years of
adopting and maintaining plans similar to the Plan and the competitive
benefits associated with the adoption of the Plan;
6. the benefit to WRIMCO whose fees for providing investment management
services to the respective Portfolios are based on the level of the
Portfolios' net assets if Portfolio assets are maintained (or possibly
increase) as a result of Waddell & Reed's personal services and
account maintenance activities under the Plan; and
7. the merits of possible alternatives to the Plan.
Following its consideration, the Board of Directors of the Fund, including
the Independent Plan Directors, concluded that the fees payable by the Fund
pursuant to the Plan were reasonable in view of the services that would be
provided by Waddell & Reed and the anticipated benefits of the Plan to the Fund.
The Directors of the Fund, including the Independent Plan Directors, determined
that the implementation of the Plan would be in the best interests of the Fund
and would have a reasonable likelihood of benefiting the Fund and the
Policyowners. The Directors, however, recognized that there was no assurance
that the benefits sought pursuant to the Plan would be achieved nor when or in
what period of time the benefits might be realized.
If this Proposal is not approved by the shareholders of a Portfolio, the
Board of Directors may consider such further action as may be appropriate and in
the best interests of the Fund.
Required Vote: The adoption of the Plan as to a Portfolio requires the
affirmative vote of "a majority of outstanding voting securities" of that
Portfolio which, for this purpose, means the affirmative vote of the lesser of
(1) 67% or more of the numbered changes contemplatedPortfolio's shares present at the Meeting or represented
by proxy if more than 50% of the outstanding shares of the Portfolio are so
present or represented or (2) more than 50% of the outstanding shares of the
Portfolio.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR PROPOSAL 4
PROPOSAL 5: CHANGE OF QUORUM REQUIREMENTS
FOR SHAREHOLDER MEETINGS
The Board of Directors has determined that it would be desirable to change
the number of shareholders required to be present in person or by proxy to
constitute a quorum for a shareholders meeting of the Fund. Currently, the
presence of the shareholders entitled to cast a majority of the votes entitled
to be cast at a shareholders meeting constitutes a quorum for the meeting. The
Fund is organized as a corporation under Maryland law, which would permit the
Fund to have a lesser number of votes sufficient for a quorum if the Fund's
Articles of Incorporation so provide.
Accordingly, Fund management has proposed, and the Board of Directors has
approved, amending Article FIFTH, paragraph (5), of the Fund's Articles of
Incorporation by addition of the following sentence: "The presence in person or
by proxy of stockholders entitled to cast one-third of all the votes entitled to
be cast at the meeting shall constitute a quorum for the meeting." This
proposed amendment does not affect the vote required to approve any particular
proposal at a shareholders meeting. If this Proposal 3 is not approved by
shareholders of that Portfolio, the related existing fundamental
restriction(s)Fund, the current quorum requirements will remain in effect.
Required Vote: Approval of Proposal 5 requires the affirmative vote of a
majority of the Portfolio will continue in effect for that Portfolio, but
disapprovaloutstanding shares of all or part of Proposal 3 by the shareholders of one Portfolio
will not affect any approvals of Proposal 3 that are obtained with respect to
any other Portfolio.Fund, provided a quorum is present.
THE BOARD OF DIRECTORS RECOMMENDRECOMMENDS THAT
YOU VOTE FOR PROPOSAL 3.5.
ADDITIONAL INFORMATION
The solicitation of proxies, the cost of which will be borne by the
Portfolios,United
Investors, will be made primarily by mail, telephone or oral communications by
representatives of the Fund, regular employees and sales representatives of
W&R, W&R'sWaddell & Reed, Waddell & Reed's affiliates, or certain broker-dealers (who may
be specifically compensated for such services), or by representatives of
Management Information Services Corp., professional proxy solicitors, retained
by the Portfolios who
will be paid the following approximate fees for soliciting services set forth
below. Each Portfolio will pay this firm for its share of the fees and out-of-
pocket expenses for proxy solicitation. Each Portfolio will pay a portion of
the costs of the Meeting, including the costs of solicitation, allocated on the
basis of the number of shareholder accounts of each Portfolio.
Soliciting Fees
and Expenses
Portfolio (Approximate)
Asset Strategy Portfolio
Balanced Portfolio
Bond Portfolio
Growth Portfolio
High Income Portfolio
Income Portfolio
International Portfolio
Limited-Term Bond Portfolio
Money Market Portfolio
Science and Technology Portfolio
Small Cap PortfolioPortfolios.
OTHER INFORMATION CONCERNING WRIMCO AND AFFILIATES
WRIMCO is a wholly owned, direct subsidiary of Waddell & Reed, the
distributor of the Policies. Waddell & Reed Services Company ("WARSCO"),
another wholly owned, direct subsidiary of Waddell & Reed, provides bookkeeping
and accounting services to the Fund. The address of WRIMCO and WARSCO is 6300
Lamar Avenue, Overland Park, Kansas 66202-
4200. WRIMCO is a wholly-owned direct subsidiary of W&R, the distributor of
the Policies. W&R is an indirect subsidiary of Torchmark Corporation, a
publicly-held company, and a direct subsidiary of United Investors Management
Company, a holding company. The address of Waddell & Reed, Inc. is 6300 Lamar
Avenue, Overland Park, Kansas 66202-4200. The address of Torchmark
Corporation and United Investors Management Company is 2001 Third Avenue South,
Birmingham, Alabama 35233. Torchmark Corporation indirectly owns 100% of the
outstanding common stock of United Investors Management Company.
RECEIPT OF SHAREHOLDER PROPOSALS
As a general matter, the Fund does not hold regular annual or other
meetings of shareholders. Any shareholder who wishes to submit proposals to be
considered at a special meeting of the Fund's shareholders should send such
proposals to the Fund at P.O. Box 29217, 6300 Lamar Avenue, Overland Park,
Kansas 66201-9217.
OTHER BUSINESS
The Fund does not know of any other business to be presented at the meeting
other than the matters set forth in this Proxy Statement. If any other matter
or matters are properly presented for action at the meeting, the proxy holders
will vote the shares which the Instruction Cards entitle them to vote in
accordance with their judgment on such matter or matters. By signing and
returning your Instruction Card, you give the proxy holders discretionary
authority as to any such matter or matters.
By Order of the Board of Directors
Sharon K. Pappas,July 7, 1998 Kristen Richards
Assistant Secretary
INDEX TO EXHIBITS TO PROXY STATEMENT
Exhibit A--NumberA - Number of Outstanding Shares of
Each Portfolio..............A-1Portfolio ............................................. A-1
Exhibit B--BeneficialB - Beneficial Ownership of Greater
than 5% of Portfolio Shares.B-1Shares ................................ B-1
Exhibit C--Portfolio Ownership of Nominees and Current Board Members...C-1
Exhibit D--Summary of Futures Contracts, Options, Forward..............D-1
Contracts, Swaps, Caps, Collars, Floors and
Indexed Securities
Exhibit E--Existing Fundamental Restrictions Proposed..................E-1
to Be Modified or EliminatedC - Proposed Service Plan .......................... C-1
EXHIBIT A
Total Variable Variable Universal
Shares Life Annuity Life
Outstanding Account Account Shares PercentSharesPercent
High Income PortfolioAnnuity Plus
SharesPercent SharesPercent SharesPercent
Money Market Portfolio
Bond Portfolio
High Income Portfolio
Growth Portfolio
BalancedIncome Portfolio
International Portfolio
Small Cap Portfolio
Balanced Portfolio
Limited-Term Bond Portfolio
Small Cap Portfolio
Asset Strategy Portfolio
Science and Technology Portfolio
EXHIBIT B
Shares
Beneficially Owned
Name and Address Beneficially Owned------------------
of Beneficial Owner Portfolio Shares Percent
- ------------------- --------- ------ -------
EXHIBIT C
FUND OWNERSHIP OF NOMINEES AND CURRENT BOARD MEMBERS
No.SERVICE PLAN
As Adopted May 13, 1998
This Plan is adopted by Target/United Funds, Inc. (the "Fund"), pursuant to
Rule 12b-1 under the Investment Company Act of Shares
Held1940, as of
Name of Nominee Portfolio April 30, 19971
Henry L. Bellmon
Dodds I. Buchanan
James M. Concannon
John A. Dillingham
Linda Graves
John F. Hayes
Glendon E. Johnson
William T. Morgan
Ronald K. Richey
William L. Rogers
Frank J. Ross, Jr.
Eleanor B. Schwartz
Keith A. Tucker
Frederick Vogel III
Paul S. Wise
EXHIBIT D
SUMMARY OF FUTURES CONTRACTS, OPTIONS, FORWARD CONTRACTS, SWAPS, CAPS, COLLARS,
FLOORS, AND INDEXED SECURITIES
Futures Contracts
When a Portfolio purchases a futures contract, it incurs an obligationamended (the "Act"), to
take delivery of a specified amountprovide for payment by each series ("Portfolio") of the obligation underlying the contract
at a specified time in the future for a specified price. When the Portfolio
sells a futures contract, it incurs an obligation to deliver the specified
amountFund of the underlying obligation at a specified time in return for an agreed
upon price. U.S. futures contracts are traded on exchanges that have been
designated "contract markets" by the Commodity Futures Trading Commission
("CFTC") and must be executed through a futures commission merchant ("FCM"), or
brokerage firm, which is a member of the relevant contract market. Through
their clearing corporations, the exchanges guarantee performance of the
contracts as between the clearing members of the exchange.
Options on Futures Contracts
When a Portfolio writes an option on a futures contract, it becomes
obligated, in return for the premium paid, to assume a position in the futures
contract at a specified exercise price at any time during the term of the
option. If a Portfolio has written a call, it assumes a short futures
position. If a Portfolio has written a put, it assumes a long futures
position. When a Portfolio purchases an option on a futures contract, it
acquires the right, in return for the premium it pays, to assume a position in
the futures contract (a long position if the option is a call and a short
position if the option is a put).
Options on Securities, Currencies and Indices
A put option gives the holder the right, upon payment of a premium, to
deliver a specified amount of a security or currency to the writer of the
option on or before a fixed date at a predetermined price. A call option gives
the holder the right, upon payment of a premium, to call upon the writer to
deliver a specified amount of a security or currency on or before a fixed date
at a predetermined price. Puts and calls on indices are similar to puts and
calls on securities or futures contracts except that all settlements are in
cash and gain or loss depends on changes in the index in question rather than
on price movements in individual securities or futures contracts.
Forward Contracts
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days
(term) from the date of the forward contract agreed upon by the parties, at a
price set at the time of the forward contract. These forward contracts are
traded directly between currency traders (usually large commercial banks) and
their customers.
Swaps, Caps, Collars and Floors
Swap agreements, including caps, collars and floors, can be individually
negotiated and structured to include exposure to a variety of different types
of investments or market factors. Depending on their structure, swap
agreements may increase or decrease a Portfolio's exposure to long- or short-
term interest rates (in the United States or abroad), foreign currency values,
mortgage-backed security values, corporate borrowing rates or other factors
such as security prices or inflation rates.
Swap agreements will tend to shift a Portfolio's investment exposure from
one type of investment to another. For example, if a Portfolio agrees to
exchange payments in dollars for payments in foreign currency, the swap
agreement would tend to decrease a Portfolio's exposure to U.S. interest rates
and increase its exposure to foreign currency and interest rates. Caps and
floors have an effect similar to buying or writing options.
Indexed Securities
Indexed securities are securities whose prices are indexed to the prices
of other securities, securities indices, currencies, precious metals or other
commodities, or other financial indicators. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic. The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the United States and
abroad. At the same time, indexed securities are subject to the credit risks
associated with the issuer of the security, and their values may decline
substantially if the issuer's creditworthiness deteriorates. Indexed
securities may be more volatile than the underlying instruments.
Special Investments Considerations and Risks
The use of options, futures contracts, options on futures contracts,
forward currency contracts, swaps, caps, collars and floors, and the investment
in indexed securities, involve special risks, including (i) possible imperfect
or no correlation between price movements of the portfolio investments (held or
intended to be purchased) involved in the transaction and price movements of
the instruments involved in the transaction, (ii) possible lack of a liquid
secondary market for any particular instrument at a particular time, (iii) the
need for additional portfolio management skills and techniques, (iv) losses due
to unanticipated market price movements, (v) the fact that, while such
strategies can reduce the risk of loss, they can also reduce the opportunity
for gain, or even result in losses, by offsetting favorable price movements in
investments involved in the transaction, (vi) incorrect forecasts by WRIMCO
concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result in
the strategy being ineffective, (vii) loss of premiums paid by the Portfolio on
options it purchases, and (viii) the possible inability of the Portfolio to
purchase or sell a portfolio security at a time when it would otherwise be
favorable for it to do so, or the possible need for the Portfolio to sell a
portfolio security at a disadvantageous time, due to the need for the Portfolio
to maintain "cover" or to segregate securitiescertain expenses
in connection with such
transactions and the possible inabilityprovision of personal services to the owners of variable
life insurance policies or variable annuity contracts funded by Portfolio shares
("Policies") and/or maintenance of the Portfolio to close out or
liquidate its position.
For a hedging strategyaccounts of such Policies
("Policyowners"). Payments under the Plan are to be completely effective, the price change of the
hedging instrument must equal the price change of the investment being hedged.
The risk of imperfect correlation of these price changes increases as the
composition of the Portfolio's portfolio diverges from instruments underlying a
hedging instrument. Such equal price changes aremade to Waddell & Reed,
Inc. ("W&R").
Service Fee
Each Portfolio is authorized to pay to W&R an amount not always possible because
the investment underlying the hedging instruments may not be the same
investment that is being hedged. WRIMCO will attempt to create a
closelycorrelated hedge but hedging activity may not be completely successful in
eliminating market value fluctuation.
WRIMCO may use derivative instruments for hedging purposes to adjust the
risk characteristics of the Portfolio's portfolio of investments and may use
these instruments to adjust the return characteristics of the Portfolio's
portfolio of investments. The use of derivative instruments for speculative
purposes can increase investment risk. If WRIMCO judges market conditions
incorrectly or employs a strategy that does not correlate well with the
Portfolio's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return. These techniques may
increase the volatility of the Portfolio and may involve a small investment of
cash relative to the magnitude of the risk assumed. In addition, these
techniques could result in a loss if the counterparty to the transaction does
not perform as promised or if there is not a liquid secondary market to close
out a position that the Portfolio has entered into.
The ordinary spreads between prices in the cash and futures markets, due
to the differences in the natures of those markets, are subject to distortion.
Due to the possibility of distortion, a correct forecast of general interest
rate, foreign currency exchange rate or stock market trends by WRIMCO may still
not result in a successful transaction. WRIMCO may be incorrect in its
expectations as to the extent of various interest or foreign exchange rate
movements or stock market movements or the time span within which the movements
take place.
Options and futures contracts may increase portfolio turnover rates, which
results in correspondingly greater commission expenses and transactions costs
and may result in certain tax consequences.
EXHIBIT E
Existing Investment Restrictions Proposed to Be Modified or Eliminated
A Portfolio (other than Asset Strategy Portfolio) may not:
(i) Buy or sell commodities or commodity contracts except that each
Portfolio may use options, futures contracts, forward currency
contracts and interest rate swaps, caps and floors, and purchase and
sell foreign currencies, in the manner described in the Prospectus and
this SAI;
(ii) Sell securities short, buy securitiesexceed on margin or engage in arbitrage
transactions;
(iii) Pledge, mortgage or hypothecate assets as security for indebtedness
except to secure permitted borrowings;
(iv) Buy a security if, as a result, a Portfolio would own more than 10% of
the issuer's voting securities, or if more than five percent of its
total assets would be invested in securities of that issuer, or if
more than 25% of its assets would then be invested in securities of
companies in any one industry (U.S. Government securities are not
included in these restrictions); provided, however, that Science and
Technology Portfolio may invest more than 25% of its assets in
securities of companies in the science and technology industries;
(v) Make loans, except loans of portfolio securities and except to the
extent that investment in debt securities may be deemed to be a loan.
Asset Strategy Portfolio may not:
(i) Sell securities short, provided that transactions in futures
contracts, options and other financial instruments are not deemed to
constitute short sales;
(ii) Purchase securities on margin, except that the Portfolio may obtain
such short-term credits as are necessary for the clearance of
transactions, and provided that the Portfolio may make initial and
variation margin payments in connection with transactions in futures
contracts, options and other financial instruments;
(iii) Purchase or sell physical commodities unless acquired as a result of
ownership of securities (but this shall not prevent the Portfolio
from purchasing and selling currencies, futures contracts, options,
forward currency contracts or other financial instruments);
(iv) Purchase or retain the securities of an issuer if the officers and
directors of the Portfolio and of [WRIMC O] owning beneficially more
than .5annual
basis .25 of 1% of the securities of an issuer together own
beneficially more than 5% of the securities of that issuer;
(v) Make loans, except (a) by lending portfolio securities provided that
no securities loan will be made if,Portfolio's average net assets as a result thereof, more than
10% of"service fee" to
finance Policyowner servicing by W&R, its affiliated companies, broker-dealers
who may sell the Portfolio's total assets (takenshares and other third parties and to encourage and
foster the maintenance of Policyowner accounts. The amounts shall be payable to
W&R monthly or at current value) wouldsuch other intervals as the board of directors may determine.
NASD Definition
The "service fee" shall be lentconsidered a payment made by the Portfolio for
personal service and/or maintenance of Policyowner accounts, as such is now
defined by the National Association of Securities Dealers, Inc. ("NASD"),
provided, however, if the NASD adopts a definition of "service fee" for purposes
of Rule 2830 and the NASD Conduct Rules that differs from the definition of
"service fee" as presently used, or if the NASD adopts a related definition
intended to another party; (b) throughdefine the purchasesame concept, the definition of a portion"service fee" as used
herein shall be automatically amended to conform to the NASD definition.
Quarterly Reports
W&R shall provide to the board of an
issue of debt securities in accordance with its investment objective,
policies, and limitations; and (c) by engaging in repurchase
agreements with respect to portfolio securities.
TMK/UNITED FUNDS, INC.
WHEN PROPERLY SIGNED, THE VOTING INTEREST WILL BE DIRECTED IN THE MANNER
INDICATED BELOW. IF NO INDICATION IS GIVEN, VOTING WILL BE DIRECTED FOR THE
PROPOSAL STATED BELOW.
Please vote by filling in the appropriate boxes below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
NOTE: YOUR PROXY IS NOT VALID UNLESS IT IT SIGNED.
Please fold and detach card at perforation. Return bottom portion only.
Please vote by filling in the boxes below.
1. To elect as Directorsdirectors of the Fund, H. Bellmon; D. Buchanan; J. Concannon; J. Dillingham; L. Graves; J. Hayes;
G. Johnson; W. Morgan; R. Richey; W. Rogers; F. Ross; E. Schwartz; K.
Tucker; F. Vogel; P. Wise
/ / FOR ALL NOMINEES EXCEPT THOSE BELOW*
/ / AGAINSTand the board of
directors shall review, at least quarterly a written report of the amounts so
expended of the service fee paid or ABSTAIN AS TO ALL NOMINEES
*To withhold authoritypayable to it under this Plan and the
purposes for which such expenditures were made.
Approval of Plan
This Plan shall become effective as to a Portfolio when it has been approved by
a vote for any individual nominee, please write name onof at least a majority of that Portfolio's outstanding voting securities
(as defined in the line below.
___________________________________________________________________
2. To ratifyAct) and by a vote of the selectionboard of FOR AGAINST ABSTAIN
Deloitte & Touche LLP as the / / / / / /
Fund's independent auditors for
its current fiscal year
3. To approve changes to certain FOR AGAINST ABSTAIN
fundamental investment ALL* ALL ALL
policies and restrictions / / / / / /
*To vote against a particular proposed change, refer to the proxy statement for
the changes applicable todirectors of the Fund and
write the number of the sub-proposals
you do NOT want to change ondirectors who are not interested persons of the line below.
3.1 Diversification of Assets
3.2 Options, CommoditiesFund and Futures
3.3 Pledging of Assets
3.4 Margin Sales
3.5 Short Sales
3.6 Arbitrage Transactions
3.7 Securities Owned by Certain Persons
3.8 Loans
______________________________________________________________________
YOUR VOTE IS IMPORTANT!
To avoid the expense of adjourning the meeting to a subsequent date,
Please sign, date and return all proxies receivedhave no direct
or indirect financial interest in the enclosed post-paid envelope.
Please fold and detach card at perforation. Return bottom portion only.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Keith A. Tucker and Sharon K. Pappas, or either
of them (or their substitutes), as attorneys and proxiesoperation of the undersigned
with full power of substitutionPlan or any agreement
related to represent and direct the voting interestthis Plan (other than as directors of the undersigned heldFund or as Policyowners)
("independent directors") cast in person at a meeting called for the purposes of
the record date at the Special Meeting of
Shareholdersvoting on July 24, 1997, at 11:00 a.m. local time, at 6300 Lamar Avenue,
Overland Park, Kansas 66202, and any adjournment(s) thereof, and revoking all
proxies heretofore given, as designated on the reverse side of the card. As to
any other matter, the attorneys and proxiessuch Plan.
Continuance
This Plan shall be authorized to represent
and direct the voting interest in accordance with their best judgment. This
proxy shall remaincontinue in effect for a period of one (1) year and thereafter
from its date. Receiptyear to year only so long as such continuance is approved by the directors,
including the independent directors, as specified hereinabove for the adoption
of the Proxy StatementPlan by the directors and independent directors.
Director Continuation
In considering whether to adopt, continue or implement this Plan, the directors
shall have a duty to request and evaluate, and W&R shall have a duty to furnish,
such information as may be reasonably necessary to an informed determination of
whether this Plan should be adopted, implemented or continued.
Termination
This Plan may be terminated at any time by a vote of a majority of the
independent directors of the Fund or, as to a Portfolio, by a vote of the
majority of the outstanding voting securities of that Portfolio without penalty.
On termination, the payment of all service fees shall cease, and the Fund shall
have no obligation to W&R to reimburse it for any cost or expenditure it has
made or may make to service Policyowner accounts.
Amendments
This Plan may not be amended to increase materially the amount to be spent by a
Portfolio for personal service and/or maintenance of Policyowner accounts
without approval of the shareholders of that Portfolio, and all material
amendments of this Plan must be approved in the manner prescribed for the
adoption of the Plan as provided hereinabove.
Directors
While this Plan is hereby acknowledged.
Dated: __________________________, 1997
SIGN BELOW. Please sign exactlyin effect, the selection and nomination of the directors who
are not interested persons of the Fund shall be committed to the discretion of
the directors who are not interested persons of the Fund.
Records
Copies of this Plan and reports made pursuant to this Plan shall be preserved as
your name
appears hereon. If shares are registeredprovided in more
that one name, all should sign but if one signs,
it bindsRule 12b-1(f) under 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 applicableAct.