Waddell & Reed Financial Inc – IPO: ‘424B4’ on 3/5/98

As of:  Thursday, 3/5/98   ·   Accession #:  950109-98-1583   ·   File #:  333-43687

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Initial Public Offering (IPO):  Prospectus   —   Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Form S-1                                              96    584K 

Document Table of Contents

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                                              Filed pursuant to Rule 424(b)(4)
                                    SEC File No. 333-43687

21,700,000 Shares 
Waddell & Reed Financial, Inc.  
CLASS A COMMON STOCK  

----------------  

OF THE 21,700,000 SHARES  OF CLASS A COMMON  STOCK BEING OFFERED, 17,360,000  
SHARES ARE BEING OFFERED INITIALLY IN  THE UNITED STATES AND CANADA BY THE  
U.S.  UNDERWRITERS  AND 4,340,000  SHARES  ARE BEING  OFFERED  INITIALLY  
OUTSIDE  THE   UNITED  STATES   AND  CANADA  BY   THE  INTERNATIONAL  
UNDERWRITERS. ALL  SHARES OF CLASS  A COMMON STOCK  OFFERED HEREBY  
ARE  BEING  SOLD  BY  THE  COMPANY.  SEE  "UNDERWRITERS"  FOR  A  
DISCUSSION  OF THE  FACTORS  CONSIDERED  IN DETERMINING  THE  
INITIAL PUBLIC OFFERING PRICE.  

THE COMPANY HAS  TWO CLASSES OF AUTHORIZED COMMON STOCK CONSISTING  OF CLASS A  
COMMON STOCK  OFFERED HEREBY  AND  CLASS B  COMMON STOCK  (COLLECTIVELY, THE  
"COMMON  STOCK"). SEE  "DESCRIPTION OF  CAPITAL STOCK." HOLDERS  OF CLASS  A  
COMMON STOCK  ARE ENTITLED TO  ONE VOTE PER  SHARE AND HOLDERS  OF CLASS B  
COMMON STOCK  ARE  ENTITLED  TO  FIVE VOTES  PER  SHARE  ON  EACH  MATTER 
SUBMITTED TO A VOTE OF STOCKHOLDERS.  ALL OF THE CLASS B COMMON STOCK IS  
BENEFICIALLY OWNED BY TORCHMARK  CORPORATION. SUBSTANTIALLY ALL OF THE  
NET  PROCEEDS  OF THE  OFFERING  WILL BE  USED  TO PREPAY  OUTSTANDING  
INDEBTEDNESS TO TORCHMARK  CORPORATION AND ONE  OF ITS SUBSIDIARIES.  
SEE "USE OF PROCEEDS." ALL HOLDERS OF COMMON STOCK ARE  ENTITLED TO 
RECEIVE  SUCH  DIVIDENDS AND  DISTRIBUTIONS,  IF  ANY,  AS MAY  BE  
DECLARED FROM TIME TO TIME BY THE BOARD OF DIRECTORS. 

----------------  

THE CLASS A COMMON STOCK HAS BEEN APPROVED FOR LISTING, SUBJECT TO OFFICIAL 
NOTICE OF ISSUANCE, ON THE NEW YORK STOCK EXCHANGE UNDER THE TRADING SYMBOL 
"WDR."  

----------------  

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR RISK FACTORS THAT SHOULD BE 
CONSIDERED BY PROSPECTIVE INVESTORS.  

----------------  

THESE  SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES  AND  
EXCHANGE  COMMISSION  OR  ANY   STATE  SECURITIES  COMMISSION  NOR  HAS  THE  
SECURITIES  AND EXCHANGE  COMMISSION  OR ANY  STATE SECURITIES  COMMISSION  
PASSED   UPON  THE  ACCURACY  OR   ADEQUACY  OF  THIS  PROSPECTUS.   ANY  
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.   

----------------  

PRICE $23 A SHARE 

----------------  

                                                                [Download Table]

                                  PRICE TO   UNDERWRITING DISCOUNTS PROCEEDS TO 
                                   PUBLIC      AND COMMISSIONS(1)    COMPANY(2) 
                                ------------ ---------------------- ------------
                                                                                
Per Share......................   $23.000            $1.265           $21.735   
Total(3)....................... $499,100,000      $27,450,500       $471,649,500

--------                                                                        
(1) The Company and Torchmark Corporation have agreed to indemnify the      
 Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."         
(2) Before deducting expenses payable by the Company, estimated at          
$2,800,000.                                                         
(3) The Company has granted the U.S. Underwriters an option exercisable     
within 30 days of the date hereof to purchase up to an aggregate of 
   2,170,000 additional shares of Class A Common Stock at the price to the
  public shown above less underwriting discounts and commissions for the
 purpose of covering over-allotments, if any. If the U.S. Underwriters
exercise such option in full, the total price to the public,        
    underwriting discounts and commissions, and proceeds to the Company will
be $549,010,000, $30,195,550, and $518,814,450, respectively. See   
"Underwriters."                                                     

----------------  

The Class A Common Stock is offered subject to prior sale, when, as, and if 
accepted by the Underwriters and, subject to approval of certain legal matters  
by Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters, and  
to certain other conditions. It is expected that delivery of the Class A        
Common Stock will be made on or about March 10, 1998 at the offices of Morgan   
Stanley & Co. Incorporated, New York, New York, against payment therefor in     
immediately available funds.                                                    

----------------  

MORGAN STANLEY DEAN WITTER                                                      
GOLDMAN, SACHS & CO.  
                                                           MERRILL LYNCH & CO.

March 4, 1998                                                                   

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[MAP OF WADELL & REED FINANCIAL OFFICES APPEARS HERE]   

Map of the United States showing Division and District Offices in the Cities    
and states listed: Mobile, Alabama; Anchorage and Wasilla, Alaska; Temple and   
Tucson, Arizona; Bentonville, Arkansas; Capitola, Costa Mesa, Fairfield,        
Fullerton, Lodi, Napa (2), Oakland, Rancho Cucamon, Riverside, Sacramento, San  
Diego, San Mateo, Santa Clara, Torrance and Woodland Hills, California;         
Boulder, Colorado Springs, Denver, Fort Collins, Grand Junction, Greeley,       
Littleton (2) and Pueblo, Colorado; Hamden, Connecticut; Clearwater,            
Jacksonville, St. Petersburg, Tallahassee and Winter Park, Florida; Alpharetta  
and Atlanta (3), Georgia; Davenport and Des Moines, Iowa; Bose, Coeur           
D'Alene, Idaho Falls, Lewiston, Meridian, Mountain Home and Twin Falls, Idaho;  
Countryside, Elgin, Evergreen Park, Homewood, Joliet, Lombard, Park Ridge,      
Springfield and Sterling, Illinois; Indianapolis, Indiana; Dodge City, Garden   
City, Great Bend, Hays, Hutchinson, Lawrence, Manhattan, Oakley, Overland       
Park, Salina, Topeka and Wichita, Kansas; Fort Wright and Louisville            
Kentucky; Braintree, Waltham and Weburn, Massachusetts; Burton, Grand Rapids,   
Muskegon and Southfield, Michigan; Bloomington, Duluth, Edina, Plymouth,        
Rochester, and St. Paul, Minnesota; Columbia, Creve Coeur, Joplin, Kansas City  
(2) and Springfield, Missouri; Billings, Boulder, Bozeman, Great Falls,         
Helena, Kalispell and Missoula, Montana; Charlotte, Raleigh and Winston-Salem,  
North Carolina; Bismark, North Dakota; Grand Island, Kearney, Lincoln, Norfolk  
and Omaha, Nebraska; Las Vegas and Reno, Nevada; Nashua and Portsmouth, New     
Hampshire; Lawrenceville, New Jersey; Albuquerque, New Mexico; Albany (2) and   
Rochester, New York; Cincinnati, Dublin and Willoughby, Ohio; Edmond, Lawton    
and Tulsa, Oklahoma; Beaverton, Bend, Eugene, Medford, Portland and Salem,      
Oregon; Allentown, Erie (2), Harrisburg, Langhorne, Monroeville, Philadelphia,  
Pittsburgh and Wyomissing, Pennsylvania; Warwick, Rhode Island; Charleston and  
Columbia, South Carolina; Rapid City and Sioux Falls, South Dakota; Memphis     
and Nashville, Tennessee; Austin, Corpus Christi, Dallas, El Paso, Fort Worth,  
Harlingen, Houston (2), McAllen and San Antonio, Texas; Odgen and Salt Lake     
City, Utah; McLean, Richmond and Virginia Beach, Virginia; Bellevue,            
Bellingham, College Place, Federal Way, Lynnwood, Pullman, Silverdale,          
Spokane, Tacoma, Vancouver and Yakima, Washington; Brookfield and Madison,      
Wisconcin; Casper, Cody and Rock Springs, Wyoming.                              

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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE 
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS  
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED    
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS          
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER   
TO BUY ANY SECURITY OTHER THAN THE CLASS A COMMON STOCK OFFERED HEREBY, NOR     
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY    
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS      
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE      
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY WILL UNDER ANY             
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS IS        
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.               

UNTIL MARCH 29, 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL  
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT      
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.    
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO        
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR      
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.                                             

----------------  

TABLE OF CONTENTS 

                                                                [Download Table]

                                      PAGE
                                      ----
                                          
Prospectus Summary..................    4 
Risk Factors........................   11 
Special Note Regarding Forward-           
 Looking Information................   16 
Use of Proceeds.....................   16 
Dividend Policy.....................   17 
Dilution............................   17 
Capitalization......................   18 
Selected Financial and Operating          
 Data...............................   19 
Management's Discussion and Analysis      
 of Financial Condition and Results       
 of Operations......................   21 
Business............................   24 
Management..........................   42 
                                                        [Enlarge/Download Table]

                                                                                 PAGE
                                                                                 ----
                                                                                     
Certain Relationships and Related Transactions..................................  56 
Principal Stockholder...........................................................  60 
Description of Capital Stock....................................................  60 
Shares Eligible for Future Sale.................................................  68 
Certain United States Federal Tax Considerations for Non-United States Holders..  69 
Underwriters....................................................................  71 
Legal Matters...................................................................  74 
Experts.........................................................................  74 
Additional Information..........................................................  74 
Index to Consolidated Financial Statements...................................... F-1 

----------------  

The Company intends to furnish to its stockholders annual reports containing
audited consolidated financial statements and quarterly reports for the first   
three quarters of each fiscal year containing unaudited interim financial       
information.                                                                    

----------------  

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS    
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON   
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT THE CLASS A COMMON STOCK   
IN CONNECTION WITH THE OFFERING, AND MAY BID FOR AND PURCHASE THE SHARES OF     
CLASS A COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE             
ACTIVITIES, SEE "UNDERWRITERS."                                                 

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements        
(including notes) appearing elsewhere in this Prospectus. Unless otherwise      
indicated, the information contained in this Prospectus (i) gives effect to the 
transactions described below under "Background," which will have been           
consummated prior to or concurrently with the Offering, and (ii) assumes no     
exercise of the Underwriters' over-allotment option. Unless the context         
otherwise requires, (i) the "Company" and "Waddell & Reed" refer to Waddell &   
Reed Financial, Inc. and its subsidiaries and (ii) "Torchmark" refers to        
Torchmark Corporation and its subsidiaries other than the Company. References   
to "Common Stock" are to the Class A Common Stock and the Class B Common Stock  
of the Company.                                                                 

THE COMPANY 

OVERVIEW                                                                        

Waddell & Reed, founded in 1937, is one of the oldest mutual fund complexes 
in the United States, having introduced the United family of funds in 1940.     
Waddell & Reed sells its investment products primarily to middle income         
Americans through a virtually exclusive sales force consisting, at December 31, 
1997, of 2,160 financial advisers operating from 177 sales offices located      
throughout the United States. As of December 31, 1997, the Company had $23.4    
billion of assets under management, of which $20.6 billion were mutual fund     
assets and the remainder were institutional accounts, and more than 563,000     
mutual fund customers having an average account size of $33,200.                

The Company is the exclusive underwriter and distributor of 36 mutual fund  
portfolios (the "Funds"), including 17 comprising the United Group of Mutual    
Funds (the "United Funds"), eight comprising the Waddell & Reed Funds, Inc.     
(the "W&R Funds"), and 11 comprising the TMK/United Funds, Inc. (the            
"TMK/United Funds"). The Company also distributes Torchmark underwritten        
variable annuities and life insurance products to its customers as part of its  
financial planning services. For the year ended December 31, 1997, the          
Company's financial adviser sales force sold $1.5 billion of mutual fund and    
variable products.                                                              

The Company's sales force competes primarily with small broker/dealers and  
independent financial advisers. The Company's customers generally reside in     
smaller metropolitan areas and rural communities. The Company conducts          
investment seminars throughout the United States and also develops individual   
financial plans for clients (over 40,000 plans in 1997) through one-on-one      
consultations with financial advisers, who emphasize long-term relationships    
with a client through continuing service, rather than a one-time sale. The      
Company believes that it benefits from a developing industry trend toward       
"assisted sales"--sales of mutual fund products through a sales person--driven  
by the array of options now available to investors and the need for financial   
planning advice that has resulted from the recent increase in the average       
household's financial assets. According to the Investment Company Institute,    
assisted sales for the year ended December 31, 1997 constituted 61.9% of the    
total dollar value of mutual fund sales, a figure that has grown from 54.9% for 
1994.                                                                           

 The Company's investment philosophy and financial planning approach emphasize
long-term savings. The Company's portfolio managers seek consistent long-term   
performance and downside protection in turbulent markets. As a result, the      
Company has developed a loyal customer base with clients maintaining their      
accounts for approximately 13 years on average as compared to six years for the 
mutual fund industry, according to the Investment Company Institute. This       
loyalty is also evidenced by a relatively low fund redemption rate for the five 
years ended December 31, 1997 of 7.6% for the Funds (other than money market    
funds), which is less than one-half of the industry average of 18.4% and a      
relatively high dividend reinvestment rate of 86.6% for the Funds (other than   
money market funds) for the same period versus 66.9% for the mutual fund        
industry. Approximately 45% of the Company's assets under management were in    
retirement accounts as of December 31, 1997.                                    

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The Company has a seasoned team of portfolio managers, having an average of 
20 years industry experience and 14 years tenure with the Company. The five     
most senior portfolio managers have an average of 30 years industry experience  
and 26 years tenure with the Company. Portfolio managers usually were           
investment research analysts for a substantial length of time prior to          
acquiring money management assignments. The predominant style of the Company's  
investments is growth equity. As of December 31, 1997, approximately 78% of the 
Company's mutual fund assets under management were invested in equity funds and 
the remainder in fixed income and money market funds. This investment strategy  
emphasizes investment at attractive valuations in companies that the portfolio  
managers believe can produce above average growth in earnings.                  

BUSINESS STRATEGY                                                               

The Company's business strategy is outlined below.                          

.  INCREASE NUMBER OF FINANCIAL ADVISERS: The Company intends to expand its   
distribution network by recruiting high quality candidates to be financial
advisers. The Company's current objective is to increase the number of    
financial advisers by 10% per year. From December 31, 1996 to December 31,
1997, the number of financial advisers has increased from 2,010 to 2,160. 

In 1994, the Company also began implementing a "bridge income" program,     
which provides newly recruited financial advisers with a source of earnings 
until they can develop the skills and client base necessary to earn a       
stable income from commissions. Financial advisers recruited in 1997 who    
participated in the bridge income program produced, on average, at two and  
a half times the rate of non-participants.                                  

 .  CONTINUE TO INCREASE PERCENTAGE OF FULL-TIME FINANCIAL ADVISERS: Since 1993,
  the Company has emphasized increasing the proportion of its sales force that
sells financial services products on a full-time basis. At December 31,   
1997, the percentage of financial advisers whose annual production is the 
  equivalent of investment product sales in excess of $900,000 per year, which
the Company considers full-time ("Full-Time Advisers"), was 31% of the    
  Company's total sales force, up from 18% at December 31, 1992. Over the same
 period, the annual investment product sales per Full-Time Adviser increased
approximately 25% to a current annual rate of about $1.7 million.         

.  EXPAND GEOGRAPHIC SCOPE: The Company intends to pursue geographic expansion
of its sales force. In larger communities it intends to establish new     
division offices with the facilities to accommodate up to 20 financial    
 advisers, and in smaller communities or suburban areas it will open offices
with facilities to accommodate a smaller group of advisers. While         
historically the Company has opened new offices in areas that were        
contiguous with existing offices, it now intends to select new locations  
based on expected growth opportunities. Consistent with its focus on      
 retirement savings and planning, the Company expects to open new offices in
Florida and Arizona, as well as smaller offices in other areas of the     
country, in 1998.                                                         

.  ENHANCE MARKETING AND FINANCIAL PLANNING TOOLS: The Company expects to     
implement an improved financial planning package, which will allow its    
 financial advisers to customize solutions to a client's savings, retirement
income, estate planning, life insurance, and other personal financial     
planning needs. The Company has traditionally provided financial planning 
advice to its clients free of charge. The Company now intends to begin    
  charging a fee, typically $250, for such services. The Company believes that
  its program of selling its improved financial plans for a fee will stimulate
sales and result in a significantly higher average sale per plan. The     
Company expects to introduce the revised financial plan by the end of the 
first quarter of 1998.                                                    

.  INVEST IN PORTFOLIO MANAGERS AND INVESTMENT ANALYSTS: The Company's        
 objective is for its Fund families to achieve top quartile performance. The
Company is also focused on building its industry and geographic expertise.
To achieve this goal, the Company has begun to implement a plan to add    
several portfolio managers and investment analysts. The Company is        
implementing a new incentive compensation structure that relies on stock  
options and increases in cash compensation to bring total compensation for
portfolio managers and investment analysts to a more market-competitive   
level.                                                                    

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.  INVEST IN SYSTEMS AND TECHNOLOGY: In order to support its anticipated      
growth, the Company is engaged in projects to enhance its information     
systems. The Company will install a management system in all division     
  offices that it believes will better enable division managers to monitor the
activities of the individual financial advisers including the number of   
sales calls completed, the number of client contacts, and overall sales   
  results. The Company has recently completed agreements to outsource the data
processing components of its transfer agency activities to a third party  
provider by the fourth quarter of 1998. The Company has developed and is  
testing an intranet to be used by its financial advisers to obtain updated
 training materials, product information, and electronic interactive product
illustrations. In addition, the Company expects that clients will have    
access to the intranet to obtain data related to their personal accounts  
once information security concerns are addressed.                         

.  PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES TO EXPAND PRODUCT OFFERING AND 
DISTRIBUTION: The Company intends to selectively pursue acquisitions and  
alliances that will add new products or alternative distribution systems. 
The Company believes that it will be better positioned to pursue          
acquisitions as one of relatively few independent, public investment      
advisory and asset management companies. The Company has traditionally    
distributed its investment products only through its virtually exclusive  
financial adviser sales force. In the future, the Company may acquire     
another fund complex the products of which will likely not be marketed to 
the Company's existing customer base.                                     

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THE OFFERING

Class A Common Stock                                                            
Offered                                                                         
United States Offering......       17,360,000 shares                          

International Offering......        4,340,000 shares                          

Total.......................       21,700,000 shares                          

Common Stock to be                                                              
outstanding after the                                                         
Offering                                                                      

Class A Common Stock........       29,675,000 shares(1)                       

Class B Common Stock........       34,325,000 shares                          

Total.......................       64,000,000 shares(1)                       

Use of proceeds...............      Net proceeds (other than from any exercise  
                               of the over-allotment option) to prepay
                               amounts outstanding under the Notes (as
                                  defined below) payable to Torchmark, which
                                 prior to the Offering were prepaid to the
                              extent necessary so that the remaining
                                 aggregate principal amount thereof equals
                                   the net proceeds of the Offering (including
                               net proceeds from exercise of the over-
                           allotment option in excess of $35.0
                                   million). Net proceeds from any exercise of
                                   the over-allotment option to be retained by
                                  the Company for general corporate purposes
                               to the extent of $35.0 million, and the
                                  excess over $35.0 million, if any, will be
                                 paid to Torchmark. See "Use of Proceeds."

Dividend Policy...............      The Company currently intends to pay        
                                   quarterly dividends of approximately $.1325
                              per share to holders of Class A Common
                       Stock and Class B Common Stock.

Voting Rights                                                                   

Class A Common Stock........       1 vote per share                           

Class B Common Stock........       5 votes per share                          

NYSE Symbol...................      "WDR"                                       
--------                                                                        
(1) Does not include options to purchase 2,372,300 shares of Class A Common     
Stock to be issued pursuant to compensation and benefit plans of the    
Company or 200,000 shares of Class A Common Stock to be restricted stock
under the Company's compensation and benefit plans. See "Management--   
 Compensation, Benefits, and Retirement Plans." Also, does not include (i)
options issuable in connection with conversion of options issued under  
  Torchmark compensation and benefit plans and (ii) the conversion of 48,000
  shares of restricted stock of Torchmark Corporation issued under Torchmark
stock plans to Class A Common Stock at the time of consummation of the  
 Offering. See "Management--Conversion of Torchmark Equity Compensation to
Class A Common Stock of the Company."                                   

BACKGROUND

 From 1981 until the Offering, the Company has been a subsidiary of Torchmark,
and was known as United Investors Management Company until it effected a name   
change in December 1997 to Waddell & Reed Financial, Inc. The Company is a      
holding company that conducts its business through its subsidiaries. One        
subsidiary, Waddell & Reed, Inc. ("W&R"), is a registered broker-dealer and     
registered investment adviser that acts primarily as the nationwide distributor 
and underwriter for the shares of mutual funds and distributor of insurance     
products issued primarily by United Investors Life Insurance Company ("UILIC"), 
a subsidiary of Torchmark. Another subsidiary, Waddell & Reed Investment        
Management Company ("WRIMCO"), is a registered investment adviser that provides 
investment management and advisory services to the Funds and to institutions    
and other private clients through a subcontract with another subsidiary of      
Torchmark. Finally, Waddell & Reed Services Company ("WRSCO") provides transfer 
agency and accounting services to the Funds and their shareholders.             

The Company's outstanding capital stock currently consists solely of common 
stock, all of which is held by Torchmark. Prior to the consummation of the      
Offering, the Company will file an amended and restated certificate             

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of incorporation (the "Certificate of Incorporation") that will convert all     
currently outstanding common stock into 7,975,000 shares of Class A Common      
Stock and 34,325,000 shares of Class B Common Stock, all of which will be held  
by Torchmark (the "Recapitalization").                                          

After the consummation of the Offering, the Company will continue to be     
controlled by Torchmark, which will own more than 89% of the combined voting    
power of the Class A Common Stock and the Class B Common Stock of the Company.  
The holders of Class A Common Stock and Class B Common Stock have identical     
rights except that (i) holders of Class A Common Stock are entitled to one vote 
per share while holders of Class B Common Stock are entitled to five votes per  
share on all matters to be voted on by stockholders and (ii) holders of Class A 
Common Stock are not eligible to vote on any alteration or change in the        
powers, preferences, or special rights of the Class B Common Stock that would   
not adversely affect the rights of Class A Common Stock and vice versa. For     
example, holders of Class A Common Stock would not be entitled to vote on       
proposals to decrease the voting power of the Class B Common Stock, to decrease 
the right of Class B Common Stock to receive dividends, or to diminish the      
rights of the Class B Common Stock in liquidation, and vice versa. See "Risk    
Factors--Relationship with Torchmark"; "Risk Factors--Conflicts of Interest     
Between the Company and Torchmark"; and "Certain Relationships and Related      
Transactions--Relationship with Torchmark."                                     

The Company, in keeping with Torchmark's strategy for its subsidiaries, paid
virtually all of its earnings to Torchmark as dividends. Torchmark has advised  
the Company that, subject to certain conditions, it currently intends to divest 
its ownership interest in the Company by means of a special dividend to the     
stockholders of Torchmark Corporation of all of the Class A Common Stock and    
Class B Common Stock owned by Torchmark after the Offering (the "Spin-Off").    
The purpose of the Spin-Off is to allow the Company to devote more of its       
earnings to support future growth, to allow the Company to set compensation and 
other policies on a separate basis from Torchmark, and to maximize the value of 
the Offering. The Offering will allow the Company to pay down the Notes and     
thereby allow Torchmark to realize cash proceeds from its investment in the     
Company. In the event that the Spin-Off is effected, holders of record of the   
common stock of Torchmark Corporation as of the record date will be entitled to 
receive a dividend of Common Stock without payment of further consideration.    
The Company expects, however, that the market value of Torchmark Corporation    
common stock will diminish after the Spin-Off dividend is effected to reflect   
the value of the shares of Common Stock distributed in the Spin-Off. See "Risk  
Factors--Uncertainty of Planned Spin-Off of the Company" and "Certain           
Relationships and Related Transactions--Relationship With Torchmark--Spin-Off." 

As of the date of the Offering, the Company is indebted to Torchmark as a   
result of previous intercompany funding arrangements and from certain           
promissory notes issued to Torchmark as dividends (as defined below, the        
"Notes"). Prior to the Offering, the Company prepaid outstanding amounts        
remaining under the Notes to the extent necessary so that the remaining         
aggregate principal amount of the Notes equals the net proceeds of the Offering 
(including net proceeds from the exercise of the over-allotment option in       
excess of $35.0 million). The net proceeds of the Offering (including net       
proceeds from the exercise of the over-allotment option in excess of $35.0      
million) will be used to prepay the Notes. See "Use of Proceeds" and "Certain   
Relationships and Related Transactions--Relationship with Torchmark--           
Intercompany Debt."                                                             

The Company formerly held all of the issued and outstanding capital stock of
UILIC. The Company has declared and paid a dividend of all the capital stock of 
UILIC to Torchmark (the "UILIC Dividend"). See "Certain Relationships and       
Related Transactions--UILIC."                                                   

In connection with the Offering, the Company is either entering into or     
amending several agreements with Torchmark and its affiliates (the "Affiliate   
Agreements"), which will provide the basis for future relationships between the 
Company and Torchmark. See "Risk Factors--Relationship with Torchmark"; "Risk   
Factors-- Conflicts of Interest Between the Company and Torchmark"; and         
"Certain Relationships and Related Transactions--Relationship with Torchmark."  

 In order to address certain potential conflicts of interest that could affect
the Company and its officers and directors, the Certificate of Incorporation of 
the Company contains provisions concerning the conduct of certain affairs of    
the Company as it may involve Torchmark and its affiliates and the Company and  
its affiliates. Persons acquiring the Common Stock will be deemed to have       
consented to these provisions. These provisions allocate corporate              
opportunities between the Company and Torchmark and specify the terms on which  
transactions between the Company and Torchmark will not be voidable             
notwithstanding the existence of common directors. For a detailed description   
of these provisions, see "Description of Capital Stock--Corporate Opportunity   
and Conflict of Interest Policies."                                             

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SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA 

The following tables set forth summary historical financial and operating   
data for the five years ended December 31, 1997 as well as summary historical   
balance sheet data of the Company, as of December 31, 1997 and as adjusted to   
reflect the Offering and the application of the net proceeds therefrom and to   
reflect further repayment of certain affiliated indebtedness. See "Certain      
Relationships and Related Transactions." The information set forth should be    
read in conjunction with "Management's Discussion and Analysis of Financial     
Condition and Results of Operations," and the Consolidated Financial Statements 
and the related notes included elsewhere in this Prospectus.                    

                                                                [Download Table]

                                 FOR THE YEAR ENDED DECEMBER 31,               
                           --------------------------------------------        
                             1993     1994     1995     1996     1997          
                           -------- -------- -------- -------- --------        
                                          (DOLLARS IN THOUSANDS)               
                                                                               
INCOME STATEMENT DATA:                                                         
 Investment management                                                         
  fees...................  $ 64,208 $ 70,711 $ 85,289 $101,466 $117,784        
 Underwriting and                                                              
  distribution fees......    78,037   72,150   70,393   85,837   89,427        
 Shareholder service                                                           
  fees...................    21,280   22,297   23,527   28,378   30,763        
 Investment and other                                                          
  income.................    14,681    3,878    4,295    5,295    3,798        
                           -------- -------- -------- -------- --------        
  Total revenue..........   178,206  169,036  183,504  220,976  241,772        
 Goodwill                                                                      
  amortization(1)........     1,332    2,903    2,903    2,903    2,903        
 Other expenses..........   101,494   89,282   95,894  112,766  123,746        
                           -------- -------- -------- -------- --------        
  Total expenses.........   102,826   92,185   98,797  115,669  126,649        
                           -------- -------- -------- -------- --------        
  Income before interest                                                       
   and income taxes......    75,380   76,851   84,707  105,307  115,123        
 Interest income, net....       --     1,915    3,886    3,886       24        
                           -------- -------- -------- -------- --------        
  Income before income                                                         
   taxes.................    75,380   78,766   88,593  109,193  115,147        
 Income taxes............    28,873   31,140   35,092   42,493   44,855        
                           -------- -------- -------- -------- --------        
  Income before effect of                                                      
   change in accounting                                                        
   principle.............    46,507   47,626   53,501   66,700   70,292        
 Cumulative effect of                                                          
  change in accounting                                                         
  principle..............     4,125      --       --       --       --         
                           -------- -------- -------- -------- --------        
  Net income.............  $ 50,632 $ 47,626 $ 53,501 $ 66,700 $ 70,292        
                           ======== ======== ======== ======== ========        
 Pro forma net income per                                                      
  share:                                                                       
 Basic and diluted(2)....                                      $   1.10        
                                                               ========        

                                                                [Download Table]

                                                        AS OF DECEMBER 31, 1997  
                                                        -------------------------
                                                                         AS      
                                                          ACTUAL      ADJUSTED   
                                                        -----------  ------------
                                                        (DOLLARS IN THOUSANDS)   
                                                                                 
BALANCE SHEET DATA:                                                              
 Current assets........................................    $130,132     $116,534 
 Goodwill..............................................      98,831       98,831 
 Total assets..........................................     446,964      264,916 
 Total liabilities.....................................     676,855       67,807 
 Total stockholder's equity............................    (229,891)     197,109 

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                                                                [Download Table]

                                AS OF AND FOR THE YEAR ENDED DECEMBER 31,       
                               ------------------------------------------------ 
                                 1993      1994      1995      1996      1997   
                               --------  --------  --------  --------  -------- 
                                                                                
OTHER OPERATING DATA:                                                           
 Financial Advisers:                                                            
 Full time(3)................       546       487       505       634       660 
 Part time...................     2,141     1,770     1,830     1,376     1,500 
                               --------  --------  --------  --------  -------- 
  Totals.....................     2,687     2,257     2,335     2,010     2,160 
 Number of investors(4):                                                        
 Mutual funds................   499,400   517,600   537,100   522,600   563,800 
 Variable products...........    16,400    22,700    27,800    33,400    38,200 
 Average value per                                                              
  investor(5):                                                                  
 Mutual funds................  $ 22,500  $ 21,600  $ 26,100  $ 28,500   $33,200 
 Variable products...........  $ 33,700  $ 31,900  $ 39,600  $ 42,900   $49,600 
 Redemption rates of mutual                                                     
  funds:                                                                        
 Mutual funds................      7.55%     7.52%     7.64%     7.64%     7.61%
 Industry average(6).........     18.37%    21.27%    17.35%    16.95%    17.86%
 Dividend reinvestment rate:                                                    
 Mutual funds................      84.9%     86.0%     86.8%     87.5%     87.7%
 Industry average(6).........      53.9%     65.8%     71.7%     72.6%     73.2%
 Assets under management                                                        
  (millions):                                                                   
 Mutual fund:                                                                   
  Equity funds...............  $  7,563  $  8,174  $ 10,931  $ 12,990   $16,093 
  Fixed income funds.........     3,870     3,349     3,719     3,681     3,921 
  Money market funds.........       348       369       442       537       572 
                               --------  --------  --------  --------  -------- 
  Total mutual funds.........  $ 11,781  $ 11,892  $ 15,092  $ 17,208   $20,586 
 Institutional(7)............  $  2,659  $  2,606  $  3,397  $  1,862  $  2,831 

--------                                                                        
(1) Amortization relates to Torchmark's acquisition of the Company in 1981 and  
1993. Current annual amortization is $2.9 million.                      
(2) Pro forma basic and diluted net income per share has been computed by       
 dividing net income, as adjusted to eliminate the after tax interest cost
on the Notes, by 64,000,000 shares (the average number of shares        
 outstanding plus the number of shares the proceeds of which would be used
to pay the Notes).                                                      
(3) Financial advisers whose annual or annualized production is the equivalent  
of investment product sales in excess of $900 thousand.                 
(4) Mutual funds reflect the number of investors in the United Funds and W&R    
Funds. Variable products reflect the number of variable annuity and     
variable life policies.                                                 
(5) Mutual funds average value reflects the value for the United Funds and W&R  
Funds. The variable product average is based on the value of TMK/United 
Fund assets divided by the number of variable annuity and life policies.
(6) Source: Investment Company Institute. The industry dividend reinvestment    
rate average for 1997 is for the twelve months ended September 30, 1997.
(7) Institutional assets include assets of Torchmark affiliates of $0, $77.3    
 million, $373.8 million, $390.9 million, and $1,265.0 million at December
31, 1993, 1994, 1995, 1996, and 1997, respectively.                     

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RISK FACTORS  

Prospective investors should carefully consider the following risk factors  
and cautionary statements before making an investment in the Class A Common     
Stock offered by this Prospectus, as well as the other information set forth    
in this Prospectus.                                                             

TORCHMARK'S ABILITY TO CONTROL THE COMPANY                                      

Torchmark currently owns all of the outstanding capital stock of the        
Company. See "Certain Relationships and Related Transactions." Upon completion  
of the Offering, Torchmark will beneficially own approximately 66.1% of the     
Company's outstanding Common Stock, representing approximately 89.3% of the     
combined voting power of all classes of voting stock of the Company. In         
addition, Torchmark and the Company will have a majority of their directors in  
common upon completion of the Offering and the Spin-Off. As long as Torchmark   
beneficially owns a majority of the combined voting power of the Common Stock,  
it will have the ability to elect all of the members of the Board of Directors  
and thereby to control the management and affairs of the Company, including     
any determinations with respect to acquisitions, dispositions, borrowings,      
issuances of Common Stock or other securities of the Company, and the           
declaration and payment of any dividends on the Common Stock. In addition,      
Torchmark will be able to determine the outcome of any matter submitted to a    
vote of the Company's stockholders for approval and will be able to cause or    
prevent a change in control of the Company. As a result of Torchmark's control  
of the Company, none of the Affiliate Agreements resulted from "arm's-length"   
negotiations, although the parties endeavored to implement market based         
agreements. There can be no assurance that the Company would not have received  
more favorable terms from an unaffiliated party. For a description of the       
Affiliate Agreements, see "Certain Relationships and Related Transactions--     
Relationship with Torchmark."                                                   

CONTROL OF COMPANY BY TORCHMARK COULD RESULT IN LESS FAVORABLE RESOLUTION OF    
CONFLICTS                                                                       

Conflicts of interest may arise between the Company and Torchmark in a      
number of areas relating to their past and ongoing relationships, including     
the nature, quality, and pricing of services rendered by the Company to         
Torchmark or by Torchmark to the Company, potential competitive business        
activities, shared marketing functions, tax and employee benefit matters,       
indemnity agreements, sales or distributions by Torchmark of all or any         
portion of its ownership interest in the Company, or Torchmark's ability to     
control the management and affairs of the Company. There can be no assurance    
that Torchmark and the Company will be able to resolve any potential conflict   
or that, if resolved, the Company would not receive more favorable resolution   
if it were dealing with an unaffiliated party. See "Description of Capital      
Stock--Certificate of Incorporation and Bylaw Provisions--Corporate             
Opportunity and Conflict of Interest Policies."                                 

TORCHMARK'S ABILITY TO DISPOSE OF COMMON STOCK; NO ASSURANCE OF A PREMIUM TO    
HOLDERS OF CLASS A COMMON STOCK                                                 

If the Spin-Off does not occur, Torchmark could decide to sell or otherwise 
dispose of all or a portion of its Common Stock at some future date. See "--    
Availability of Common Stock for Sale or Distribution." There can be no         
assurance that any holders of Class A Common Stock will be allowed to           
participate in any transfer by Torchmark of a controlling interest in the       
Company or will realize any premium with respect to their shares of Class A     
Common Stock.                                                                   

POTENTIAL ADVERSE EFFECT ON CLASS A COMMON STOCK SHARE VALUE FROM DISPARATE     
VOTING RIGHTS OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK                  

The holders of Class A Common Stock and Class B Common Stock have identical 
rights except that (i) holders of Class A Common Stock are entitled to one      
vote per share while holders of Class B Common Stock are entitled to five       
votes per share on all matters to be voted on by stockholders and (ii) holders  
of Class A Common Stock are not eligible to vote on any alteration of the       
powers, preferences, or special rights of the Class B Common Stock that would   
not adversely affect the Class A Common Stock and vice versa. For example,      
holders of Class A Common Stock would not be entitled to vote on proposals to   
decrease the voting power of the Class B Common Stock, to decrease the right    
of Class B Common Stock to receive dividends, or to diminish the rights of the  
Class B Common Stock in liquidation, and vice versa. The differential in the    
voting rights could,                                                            

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however, adversely affect the value of the Class A Common Stock to the extent   
that investors or any potential future purchaser of the Company views the       
superior voting rights of the Class B Common Stock to have value. The           
existence of two separate classes of Common Stock could result in less          
liquidity for either class of Common Stock than if there were only one class    
of Common Stock.                                                                

UNCERTAINTY OF PLANNED SPIN-OFF OF THE COMPANY                                  

Torchmark has advised the Company that, subject to certain conditions,      
Torchmark intends to divest its ownership interest in the Company in the Spin-  
Off by means of a special dividend to Torchmark Corporation shareholders of     
all of the Class A Common Stock and Class B Common Stock owned by Torchmark.    
Torchmark has advised the Company that it presently anticipates that the Spin-  
Off will occur in the fourth quarter of 1998. Among other things, the Spin-Off  
is conditioned on the receipt of a ruling by the Internal Revenue Service to    
the effect that the Spin-Off will qualify as a tax-free distribution under (S)  
355 of the Internal Revenue Code of 1986, as amended (the "Code"). In           
connection therewith, it is a condition to the Offering that Liberty (as        
defined below), a wholly owned subsidiary of Torchmark (which, before the       
Offering owns more than 80% of the outstanding Common Stock and, after the      
Offering and the Recapitalization will own more than 80% of the voting power    
of the Common Stock) must control (within the meaning of (S)(S)355 and 368(c)   
of the Code) the Company. No assurance can be given that such conditions will   
be satisfied or waived, nor can any assurance be given that, in any event, the  
Spin-Off will occur or that Torchmark will not sell or retain its Common        
Stock. See "Certain Relationships and Related Transactions--Relationship with   
Torchmark--Public Offering and Separation Agreement."                           

POTENTIAL EXPENSE, DELAY, AND UNCERTAINTY TO SPIN-OFF ARISING FROM REGULATORY   
ENVIRONMENT                                                                     

The Company has been advised by counsel that the Spin-Off as presently      
contemplated should not result in an assignment of the Company's investment     
advisory agreements under the Investment Company Act of 1940, as amended (the   
"Investment Company Act") or the Investment Advisers Act of 1940, as amended    
(the "Investment Advisers Act") and, therefore, that the Company should not be  
required under the Investment Company Act or the Investment Advisers Act to     
obtain the consent of mutual fund shareholders to new investment advisory       
agreements. Were the Company required to seek shareholder approval of new       
investment advisory agreements as a result of a change in circumstances or      
otherwise, seeking such approval would result in expenses to the Company,       
could result in a delay of the Spin-Off, and would expose the Company to the    
prospect of not obtaining the requisite approval.                               

POTENTIAL ADVERSE EFFECTS ON THE COMPANY'S BUSINESS AND PROSPECTS FROM A        
DECLINE IN SECURITIES MARKETS                                                   

The Company's results of operations are affected by certain economic        
factors, including the level of the securities markets. Favorable performance   
by the United States securities markets over the last five years has attracted  
a substantial increase in the investments in these markets and has benefited    
the Funds and the Company. A decline in the securities markets, failure of the  
securities markets to sustain their recent levels of growth, or short-term      
volatility in the securities markets could result in investors withdrawing      
from the markets or decreasing their rate of investment, either of which could  
adversely affect the Company. Because the revenues of the Company are, to a     
large extent, based on the value of assets under management, a decline in the   
value of these assets would adversely affect revenues of the Company. The       
Company's growth is dependent to a significant degree upon the ability of the   
Funds to attract and retain mutual fund assets, and, in an adverse economic     
environment, this may prove difficult. The Company's growth rate has varied     
from year to year, and there can be no assurance that the average growth rates  
sustained in the recent past will continue.                                     

POTENTIAL ADVERSE EFFECTS ON THE COMPANY'S BUSINESS AND PROSPECTS IF THE        
FUNDS' PERFORMANCE DECLINES                                                     

Success in the investment management and mutual fund businesses is dependent
on the Funds' investment performance. Good performance stimulates sales of the  
Funds' shares and tends to keep redemptions low. Sales of Funds' shares         
generate higher management fees and distribution revenues (which are based on   
assets of the Funds). Good performance also attracts private institutional      
accounts to the Company. Conversely, relatively poor performance tends to       
result in decreased sales, increased redemptions of the Funds' shares, and the  
loss of                                                                         

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private institutional accounts, with corresponding decreases in revenues to     
the Company. Failure of the Funds to perform well could, therefore, have a      
material adverse effect on the Company.                                         

ADVERSE EFFECT OF TERMINATION OR FAILURE TO RENEW AGREEMENTS                    

A substantial majority of the Company's revenues are derived from investment
management agreements with the Funds that, as required by law, are terminable   
on 60 days' notice. In addition, each such investment management agreement      
must be approved and renewed annually by the disinterested members of each      
Fund's board or its shareholders, as required by law. See "Business--           
Investment Management Agreements." Any failure to renew or termination of a     
significant number of these agreements would have a material adverse effect on  
the Company.                                                                    

The Company estimates that it will receive revenues for investment services 
provided to Torchmark equal to approximately 2.5% of the Company's total        
revenues in 1998. After the Offering, the Company will perform these services   
pursuant to an Investment Services Agreement which agreement is terminable by   
either party on 30 days notice. Additionally, the Company has the right to      
distribute variable annuities, life insurance products, and Medicare            
supplement and long term care insurance underwritten by a Torchmark             
subsidiary. These activities resulted in revenues constituting approximately    
12.7% of the Company's total revenues for the year ended December 31, 1997.     
The agreements through which the Company has the right to distribute such       
products terminate on December 31, 1998. See "Certain Relationships and         
Related Transactions--Relationship with Torchmark--Services to WRAMCO" and      
"Certain Relationships and Related Transactions--Relationship with Torchmark--  
Agent Agreements." There can be no assurance that these agreements will not be  
terminated, or if not terminated, that they will be renewed.                    

DIFFICULTY OF EXECUTING STRATEGY IF KEY PERSONNEL AND SALES FORCE CANNOT BE     
RECRUITED AND RETAINED                                                          

The future success of the Company depends to a substantial degree on its    
ability to attract and retain qualified personnel to conduct its fund           
management and investment advisory business. The market for qualified fund      
managers, investment analysts, and financial advisers is extremely competitive  
and has grown more so in recent periods as the mutual fund management industry  
has experienced growth. The Company anticipates that it will be necessary for   
it to add fund managers and investment analysts, and it has adopted a strategy  
of which the Offering and Spin-Off are a significant part intended to attract   
and retain fund managers and investment analysts. See "Business--Business       
Strategy." There can be no assurance, however, that the Company will be         
successful in its efforts to recruit and retain the required personnel.         

The Company is currently dependent on its sales force to sell its mutual    
fund and other investment products. The Company's future growth prospects will  
be directly affected by the quality and quantity of financial advisers it is    
able to successfully recruit and retain.                                        

COMPETITORS WITH GREATER RESOURCES                                              

The mutual fund distribution and service and investment management          
industries are intensely competitive and are undergoing substantial             
consolidations. Many organizations in these industries are attempting to        
market to and service the same clients as the Company, not only with mutual     
fund investments and services but with a wide range of other financial          
products and services. Many of the Company's competitors have more products     
and product lines, services, and may also have substantially greater assets     
under management and financial resources. Many larger mutual fund complexes     
have developed relationships with brokerage houses with large distribution      
networks, which may enable these fund complexes to reach broader client bases.  
See "Business--Competition."                                                    

POTENTIAL EFFECT ON PREVAILING MARKET PRICE OF CLASS A COMMON STOCK RESULTING   
FROM THE AVAILABILITY OF COMMON STOCK FOR SALE OR DISTRIBUTION                  

Subject to applicable law, Torchmark will be free to sell any and all of the
shares of Common Stock it owns after completion of the Offering. In addition,   
the Affiliate Agreements provide that Torchmark will have the right in certain  
circumstances to require the Company to use its best efforts to register for    
resale its shares of                                                            

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Common Stock. See "Certain Relationships and Related Transactions--             
Relationship with Torchmark--Public Offering and Separation Agreement." Each    
of Torchmark and the Company has, however, entered into a lock up agreement     
(the "Lock Up Agreement") providing that, subject to certain exceptions, they   
will not sell or otherwise dispose of any shares of Common Stock (other than    
the shares offered by this Prospectus or pursuant to employee stock benefit     
plans that exist on, or are described in this Prospectus to be implemented      
after, the date of this Prospectus) for a period of 180 days after the date of  
this Prospectus without the prior written consent of Morgan Stanley & Co.       
Incorporated, on behalf of the Underwriters. Torchmark will be permitted to     
sell in the public market limited amounts of such Common Stock without          
registration pursuant to Rule 144 ("Rule 144") under the Securities Act of      
1933, as amended (the "Securities Act"), immediately after the shares of        
Common Stock owned by Torchmark are no longer subject to the Lock Up            
Agreement. Torchmark has also announced its intent, subject to certain          
conditions, to effect the Spin-Off. Torchmark will own approximately 66.1% of   
the outstanding Common Stock after the Offering. The Spin-Off as currently      
proposed could be effected without registration under the Securities Act and    
without regard to the limitations of Rule 144. It is also probable that         
holders of Class A Common Stock will experience dilution as a result of the     
conversion of Torchmark stock options and restricted stock to Class A Common    
Stock and related rights. See "Management--Conversion of Torchmark Equity       
Compensation to Class A Common Stock of the Company." No prediction can be      
made as to the effect, if any, that future sales or distributions of Class A    
Common Stock or Class B Common Stock by Torchmark, or the availability of       
Class A Common Stock and Class B Common Stock for future sale or distribution,  
will have on the market price of the Class A Common Stock prevailing from time  
to time. Sales or distributions of substantial amounts of Class A Common Stock  
or Class B Common Stock, or the perception that such sales or distributions     
could occur, could adversely affect prevailing market prices for the Class A    
Common Stock. See "Shares Eligible for Future Sale."                            

DIFFICULTY OF EXECUTING ACQUISITION STRATEGY                                    

The Company has no history of finding, acquiring, or integrating other      
companies. There can be no assurance that the Company will find suitable        
acquisition candidates at acceptable prices, have sufficient capital resources  
to realize its acquisition strategy, be successful in entering into definitive  
agreements for desired acquisitions, or successfully integrate acquired         
companies into the Company, or that any such acquisitions, if consummated,      
will prove to be advantageous to the Company.                                   

POTENTIAL MISUSE OF FUNDS AND INFORMATION IN POSSESSION OF ADVISERS             

The Company's financial advisers handle a significant amount of funds and   
financial and personal information for investors in the Funds and purchasers    
of other investment and insurance products. Although the Company has            
implemented a system of controls to minimize the risk of fraudulent taking or   
misuse of such funds and information, there can be no assurance that such       
controls will be adequate or that such taking or misuse can be prevented. The   
Company could have liability in the event of such taking or misuse and could    
also be subject to regulatory sanctions. Although the Company believes that it  
is adequately insured against such risks, there can be no assurance that such   
insurance will be maintained or that it will be adequate to meet any future     
liability.                                                                      

NO ASSURANCE OF DIVIDENDS; HOLDING COMPANY STRUCTURE MAY LIMIT AVAILABLE CASH   
FOR DISTRIBUTION                                                                

The Company's Board of Directors currently intends to declare quarterly     
dividends on both the Class A Common Stock and the Class B Common Stock. See    
"Dividend Policy." The declaration and payment of dividends by the Company are  
subject to the discretion of its Board of Directors. Any determination as to    
the payment of dividends, as well as the level of such dividends, will depend   
on, among other things, general economic and business conditions, the           
strategic plans of the Company, the Company's financial results and condition,  
contractual, legal, and regulatory restrictions on the payment of dividends by  
the Company or its subsidiaries, and such other factors as the Board of         
Directors of the Company may consider to be relevant. The Company is a holding  
company, and, as such, its ability to pay dividends is subject to the ability   
of the subsidiaries of the Company to provide cash to the Company. There can    
be no assurance that the initial quarterly dividend level will be maintained    
or that any dividends will be paid by the Company in any future period.         

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NO ASSURANCE THAT NEW INFORMATION SYSTEMS WILL BE IMPLEMENTED SUCCESSFULLY      

A number of the Company's key information technology systems were developed 
solely to handle the Company's particular information technology                
infrastructure. The Company is in the process of implementing new information   
technology and systems (internally and through outsourcing the data processing  
portion of its shareholder service functions) that it believes could facilitate 
the acquisition and integration of other mutual fund companies. See " --        
Difficulty of Executing Acquisition Strategy." There can be no assurance that   
the Company will be successful in implementing the new information technology   
and systems or that their implementation will be completed in a timely manner   
or within the Company's budget.                                                 

VOLATILITY OF STOCK PRICE                                                       

The market price for the Class A Common Stock may be highly volatile. The   
Company believes that factors such as announcements by the Company, or by its   
competitors, of quarterly variances in financial results could cause the market 
price of the Class A Common Stock to fluctuate substantially. In addition, the  
stock market may experience extreme price and volume fluctuations, which often  
are unrelated to the operating performance of specific companies. Market        
fluctuations or perceptions regarding the Company's industry, as well as        
general economic or political conditions, may adversely affect the market price 
of the Class A Common Stock.                                                    

OFFERING PRICE DETERMINED IN THE ABSCENCE OF A PUBLIC MARKET; MAY NOT INDICATE  
POST-OFFERING PRICE                                                             

 Prior to the Offering, there has been no public market for the Class A Common
Stock and there can be no assurance that an active trading market will develop  
or be sustained. The initial public offering price of the Class A Common Stock  
was determined through negotiation among the Company, Torchmark, and the        
Underwriters and may not be indicative of the market price for the Class A      
Common Stock after the Offering. See "Underwriters."                            

POTENTIAL COSTS AND ADVERSE EFFECTS ON THE COMPANY'S BUSINESS RESULTING FROM    
YEAR 2000 RISKS                                                                 

As the year 2000 approaches, an issue has emerged regarding how existing    
application software programs and operating systems can accommodate this date   
value. The Company is in the process of modifying its systems and working with  
its software vendors to prepare the Company for the year 2000. In addition, the 
Company and the Funds have relationships with third parties that have computer  
systems that may not be year 2000 compliant. The Company estimates that its     
compliance activities will be completed no later than the first quarter of      
1999. The remaining costs of this effort are estimated to be $1.7 million. To   
the extent the Company's or such third parties' systems are not fully year 2000 
compliant, there can be no assurance that potential systems interruptions or    
the cost necessary to update software would not have a material adverse effect  
on the Company's business, financial condition, results of operations, or       
business prospects.                                                             

CHANGES IN REGULATION COULD ADVERSELY AFFECT THE COMPANY                        

The Company's investment management business is subject to extensive        
regulation in the United States, primarily at the Federal level, including      
regulation by the Securities and Exchange Commission (the "Commission").        
Changes in laws or regulations or in governmental policies could materially and 
adversely affect the business and operations of the Company. See "Business--    
Regulation."                                                                    

CHARTER AND BYLAW PROVISIONS COULD DETER TAKEOVER ATTEMPTS                      

Under the Company's Certificate of Incorporation, the Board of Directors has
the authority, without action by the Company's stockholders, to fix certain     
terms and issue shares of Preferred Stock, par value $1.00 per share (the       
"Preferred Stock"). Actions of the Board of Directors pursuant to this          
authority may have the effect of delaying, deterring, or preventing a change in 
control of the Company. Other provisions in the Certificate of Incorporation    
and in the Bylaws of the Company (the "Bylaws") impose procedural and other     
requirements that could make it more difficult to effect certain corporate      
actions, including replacing incumbent directors. In                            

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addition, the Board of Directors of the Company is divided into three classes,  
each of which is to serve for a staggered three-year term after the initial     
classification and election, and, after Torchmark ceases to be the beneficial   
owner of an aggregate of at least a majority of the voting power of the         
Company, incumbent directors may not be removed without cause, all of which     
may make it more difficult for a third party to gain control of the Board of    
Directors. With certain exceptions, (S) 203 of the Delaware General             
Corporation Law (the "DGCL") imposes certain restrictions on mergers and other  
business combinations between the Company and any holder of 15% or more of the  
voting stock of the Company. Section 203 does not apply to Torchmark's          
interest in the Company. See "Description of Capital Stock--Certificate of      
Incorporation and Bylaw Provisions" and "Description of Capital Stock--         
Business Combination Statute."                                                  

POTENTIAL ISSUANCE OF PREFERRED STOCK COULD DETER TAKEOVER ATTEMPTS             

Although the Board of Directors has no current intention of doing so, it    
could issue a series of preferred stock that could have powers, rights, or      
preferences superior to that of the Class A Common Stock or that could impede   
the completion of a merger, tender offer, or other takeover attempt. Such       
issuance of preferred stock could be effected without a vote of the holders of  
the Class A Common Stock even though some or a majority of the Company's        
stockholders might believe that such merger, tender offer or takeover is in     
their best interests and even if such transactions could result in              
stockholders receiving a premium for their stock over the then current market   
price of such stock. See "Description of Capital Stock--Preferred Stock."       

SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION  

Certain statements under "Prospectus Summary"; "Risk Factors"; "Management's
Discussion and Analysis of Financial Condition and Results of Operations";      
"Business"; and elsewhere in this Prospectus constitute forward-looking         
statements, which involve known and unknown risks, uncertainties, and other     
factors that may cause the actual results, levels of activity, performance, or  
achievements of the Company, or industry results, to be materially different    
from any future results, levels of activity, performance, or achievements       
expressed or implied by such forward-looking statements. Such factors include,  
among others, those listed under "Risk Factors" and elsewhere in this           
Prospectus. As a result of the foregoing and other factors, no assurance can    
be given as to future results, levels of activity, or achievements, and         
neither the Company nor any other person assumes responsibility for the         
accuracy and completeness of such statements.                                   

USE OF PROCEEDS 

The net proceeds to be received by the Company from the sale of the shares  
of Class A Common Stock in the Offering at the initial public offering price    
of $23.00 per share, after deducting underwriting commissions and discounts     
and the estimated expenses of the Offering, are expected to be approximately    
$468.8 million. The Company intends to use the net proceeds from the Offering   
to repay the Notes.                                                             

The Notes comprise promissory notes payable to Torchmark, described below as
the Torchmark Note, the Second Liberty Note, and the First Liberty Note. The    
Company is indebted to Torchmark Corporation and to Liberty National Life       
Insurance Company, a wholly owned subsidiary of Torchmark Corporation           
("Liberty"), under the terms of two promissory notes dated November 22, 1997,   
in the original aggregate principal amounts of approximately $90 million        
payable to Torchmark Corporation (the "Torchmark Note") and of approximately    
$390 million payable to Liberty (the "Second Liberty Note"). The Torchmark      
Note and the Second Liberty Note each mature on November 25, 2002 and bear      
interest at an annual rate of 8%. The Torchmark Note and the Second Liberty     
Note were distributed by the Company as a dividend. In addition, the Company    
is indebted to Liberty under the terms of a promissory note dated December 31,  
1996, in the original aggregate principal amount of approximately $124          
million, that matures on May 1, 2000 and bears interest at an annual rate of    
6% (the "First Liberty Note"). The First Liberty Note was issued in connection  
with an intercompany funding arrangement.                                       

Prior to the Offering, the Company prepaid outstanding amounts remaining    
under the Notes to the extent necessary so that the remaining aggregate         
principal amount of the Notes equals the net proceeds of the Offering           
(including net proceeds to be realized from any exercise of the over-allotment  
option in excess of $35.0 million). See "Certain Relationships and Related      
Transactions--Relationship with Torchmark--Intercompany Debt."                  

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The net proceeds of the Offering (other than the net proceeds from any      
exercise of the over-allotment option) will be applied to prepay the            
outstanding amounts due under the Notes. Net proceeds from the exercise of the  
over-allotment option will be retained by the Company for general corporate     
purposes to the extent of $35.0 million, and the excess over $35.0 million, if  
any, will be used to prepay the Notes to Torchmark.                             

DIVIDEND POLICY 

The Company's Board of Directors currently intends to declare quarterly cash
dividends on both the Class A Common Stock and the Class B Common Stock. The    
Class A Common Stock and the Class B Common Stock will share equally in any     
cash dividend, subject to any preferential rights of any outstanding Preferred  
Stock. The Company expects that the first quarterly dividend payment will be    
approximately $.1325 per share (an annual rate of approximately $.53), with     
the initial dividend to be declared and paid in the second quarter of 1998.     
The declaration and payment of dividends by the Company are subject to the      
discretion of its Board of Directors. Any determination as to the payment of    
dividends, including the level of dividends, will depend on, among other        
things, general economic and business conditions, the strategic plans of the    
Company, the Company's financial results and condition, contractual, legal,     
and regulatory restrictions on the payment of dividends by the Company or its   
subsidiaries, and such other factors as the Board of Directors of the Company   
may consider to be relevant. The Company is a holding company, and as such,     
its ability to pay dividends is subject to the ability of the subsidiaries of   
the Company to provide cash to the Company. Because the Company was a wholly    
owned subsidiary of Torchmark prior to the Offering, its historic dividend      
payments should not be considered relevant to its future dividend policy. See   
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations--Liquidity and Capital Resources."                                   

DILUTION  

As of December 31, 1997, the Company's net tangible book value was          
approximately $(328.7) million, or approximately $(7.77) per share of Common    
Stock (based on 42,300,000 Shares of Common Stock). Net tangible book value     
per share represents the total book value of the Company's tangible assets      
reduced by the amount of the Company's total liabilities, divided by the        
number of shares of Common Stock outstanding. After giving effect to the        
Offering, the application of the net proceeds therefrom as described under      
"Use of Proceeds," and further repayment of the Notes as described in "Certain  
Relationships and Related Transactions--Relationship with Torchmark--           
Intercompany Debt," the net tangible book value of the Common Stock as of       
December 31, 1997 would have been $1.54 per share. This represents an           
immediate increase in net tangible book value of $9.31 per share to the         
Company's existing stockholders and an immediate dilution in tangible book      
value of $21.46 per share to new investors purchasing shares of Class A Common  
Stock in the Offering at the initial public offering price. The following       
table illustrates the per share dilution in net tangible book value to new      
investors:                                                                      

                                                                [Download Table]
                                                                            
Initial public offering price per share......................         $23.00
  Net tangible book value per share at December 31, 1997..... $(7.77)       
  Increase in net tangible book value per share attributable                
   to the sale of Class A Common Stock in the Offering.......   9.31        
                                                              ------        
Net tangible book value per share after giving effect to the                
 Offering and the repayment of the Notes.....................           1.54
                                                                      ------
Dilution in net tangible book value to the purchasers of                    
 Class A Common Stock in the Offering........................         $21.46
                                                                      ======

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CAPITALIZATION  

The following table sets forth the capitalization of the Company as of      
December 31, 1997 (i) on a historical basis and (ii) as adjusted to reflect     
the Offering and the application of proceeds therefrom and the further          
repayment of the Notes. See "Certain Relationships and Related Transactions--   
Relationship with Torchmark--Intercompany Debt" and Pro Forma Financial         
Statements. This table should be read in conjunction with the Consolidated      
Financial Statements and related notes and other financial and operating data   
appearing elsewhere in this Prospectus and "Management's Discussion and         
Analysis of Financial Condition and Results of Operations."                     

                                                                [Download Table]

                                                           DECEMBER 31, 1997   
                                                         ----------------------
                                                          ACTUAL    AS ADJUSTED
                                                         ---------  -----------
                                                            (IN THOUSANDS)     
                                                                               
Long-Term Debt:                                                                
  Due to Affiliates..................................... $ 509,186   $    --   
Stockholders' Equity:                                                          
  Common Stock, $.01 par value; 42,300,000 shares issued                       
   and outstanding......................................       423        --   
  Class A Common Stock, $.01 par value, 150,000,000                            
   shares authorized; 29,675,000 shares issued and                             
   outstanding as adjusted(1)...........................       --         297  
  Class B Common Stock, $.01 par value, 100,000,000                            
   shares authorized; 34,325,000 shares issued and                             
   outstanding, as adjusted.............................       --         343  
  Additional paid-in capital............................       --     196,125  
  Retained earnings.....................................       --         --   
  Unrealized gain on available-for-sale securities......       344        344  
  Dividends in excess of retained earnings and                                 
   additional paid-in capital...........................  (230,658)       --   
                                                         ---------   --------  
    Total Stockholders' Equity..........................  (229,891)   197,109  
                                                         ---------   --------  
      Total capitalization.............................. $ 279,295   $197,109  
                                                         =========   ========  

--------                                                                        
(1) Does not include options to purchase 2,372,300 shares of Class A Common     
Stock to be issued pursuant to compensation and benefit plans of the    
Company or 200,000 shares of Class A Common Stock to be restricted stock
under the Company's compensation and benefit plans. See "Management--   
 Compensation, Benefits, and Retirement Plans." Also, does not include (i)
 options issuable in connection with conversion of existing options issued
 under Torchmark compensation and benefit plans and (ii) the conversion of
48,000 shares of restricted stock of Torchmark Corporation issued under 
 Torchmark stock plans to Class A Common Stock at the time of consummation
of the Offering. See "Management--Conversion of Torchmark Equity        
Compensation to Class A Common Stock of the Company."                   

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SELECTED FINANCIAL AND OPERATING DATA 

The following tables set forth summary historical financial and operating   
data for the five years ended December 31, 1997, as well as summary historical  
balance sheet data of the Company as of the end of each of the last five        
years. The information set forth should be read in conjunction with             
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations," and the Consolidated Financial Statements and the related notes    
included elsewhere in this Prospectus.                                          

                                                                [Download Table]

                                   FOR THE YEAR ENDED DECEMBER 31,             
                              -----------------------------------------        
                               1993    1994    1995     1996     1997          
                              ------- ------- ------- -------- --------        
                                           (DOLLARS IN THOUSANDS)              
                                                                               
INCOME STATEMENT DATA:                                                         
 Investment management                                                         
  fees......................  $64,208 $70,711 $85,289 $101,466 $117,784        
 Underwriting and                                                              
  distribution fees.........   78,037  72,150  70,393   85,837   89,427        
 Shareholder service fees...   21,280  22,297  23,527   28,378   30,763        
 Investment and other                                                          
  income....................   14,681   3,878   4,295    5,295    3,798        
                              ------- ------- ------- -------- --------        
  Total revenue.............  178,206 169,036 183,504  220,976  241,772        
 Goodwill amortization(1)...    1,332   2,903   2,903    2,903    2,903        
 Other expenses.............  101,494  89,282  95,894  112,766  123,746        
                              ------- ------- ------- -------- --------        
  Total expenses............  102,826  92,185  98,797  115,669  126,649        
                              ------- ------- ------- -------- --------        
  Income before interest and                                                   
   income taxes.............   75,380  76,851  84,707  105,307  115,123        
 Interest income, net.......      --    1,915   3,886    3,886       24        
                              ------- ------- ------- -------- --------        
  Income before income                                                         
   taxes....................   75,380  78,766  88,593  109,193  115,147        
 Income taxes...............   28,873  31,140  35,092   42,493   44,855        
                              ------- ------- ------- -------- --------        
  Income before effect of                                                      
   change in accounting                                                        
   principle................   46,507  47,626  53,501   66,700   70,292        
 Cumulative effect of change                                                   
  in accounting principle...    4,125     --      --       --       --         
                              ------- ------- ------- -------- --------        
  Net income................  $50,632 $47,626 $53,501 $ 66,700 $ 70,292        
                              ======= ======= ======= ======== ========        
 Pro forma net income per                                                      
  share basic and                                                              
  diluted(2)................                                   $   1.10        
                                                               ========        

                                                                [Download Table]

                                           AS OF DECEMBER 31,                  
                              --------------------------------------------     
                                1993     1994     1995     1996     1997       
                              -------- -------- -------- -------- --------     
                                           (DOLLARS IN THOUSANDS)              
                                                                               
BALANCE SHEET DATA:                                                            
 Current assets(3)........... $162,933 $121,412 $ 98,608 $110,139 $130,132     
 Goodwill....................  110,443  107,540  104,637  101,734   98,831     
 Total assets(3).............  301,568  303,144  283,287  429,278  446,964     
 Total liabilities(3)........   58,574   80,852   65,081  196,723  676,855     
 Total stockholder's                                                           
  equity(4)..................  242,994  222,292  218,206  232,555 (229,891)    

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                                                                [Download Table]

                               AS OF AND FOR THE YEAR ENDED DECEMBER 31,       
                              ------------------------------------------------ 
                                1993      1994      1995      1996      1997   
                              --------  --------  --------  --------  -------- 
                                                                               
OTHER OPERATING DATA:                                                          
 Financial Advisers:                                                           
 Full time(5)................      546       487       505       634       660 
 Part time...................    2,141     1,770     1,830     1,376     1,500 
                              --------  --------  --------  --------  -------- 
  Totals.....................    2,687     2,257     2,335     2,010     2,160 
 Number of investors(6):                                                       
 Mutual funds................  499,400   517,600   537,100   522,600   563,800 
 Variable products...........   16,400    22,700    27,800    33,400    38,200 
 Average value per                                                             
  investor(7):                                                                 
 Mutual funds................ $ 22,500  $ 21,600  $ 26,100  $ 28,500   $33,200 
 Variable products........... $ 33,700  $ 31,900  $ 39,600  $ 42,900   $49,600 
 Redemption rates of mutual                                                    
  funds:                                                                       
 Mutual funds................     7.55%     7.52%     7.64%     7.64%     7.61%
 Industry average(8).........    18.37%    21.27%    17.35%    16.95%    17.86%
 Dividend reinvestment rate:                                                   
 Mutual funds................     84.9%     86.0%     86.8%     87.5%     87.7%
 Industry average(8).........     53.9%     65.8%     71.7%     72.6%     73.2%
 Assets under management                                                       
  (millions):                                                                  
 Mutual fund:                                                                  
  Equity funds............... $  7,563  $  8,174  $ 10,931  $ 12,990   $16,093 
  Fixed income funds.........    3,870     3,349     3,719     3,681     3,921 
  Money market funds.........      348       369       442       537       572 
                              --------  --------  --------  --------  -------- 
   Total mutual funds........ $ 11,781  $ 11,892  $ 15,092  $ 17,208   $20,586 
 Institutional(9)............ $  2,659  $  2,606  $  3,397  $  1,862  $  2,831 

--------                                                                        
(1) Amortization relates to Torchmark's acquisition of the Company in 1981 and  
1993. Current annual amortization is $2.9 million.                      
(2) Pro forma basic and diluted net income per share has been computed by       
 dividing net income, as adjusted to eliminate the after tax interest cost
on the Notes, by 64,000,000 shares (the average number of shares        
 outstanding plus the number of shares the proceeds of which would be used
to pay the Notes).                                                      
(3) The Company's current assets, total assets, and total liabilities can be    
significantly affected by amounts due both to and from affiliates. At   
  December 31, 1993, 1994, 1995, 1996, and 1997, amounts due from affiliates
amounted to $53.9 million, $96.3 million, $57.2 million, $184.5 million,
and $192.7 million, respectively. Amounts due to affiliates at December 
31, 1993, 1994, 1995, 1996, and 1997 amounted to $8.0 million, $41.7    
 million, $13.6 million, $126.6 million, and $611.6 million, respectively.
(4) Cash dividends paid to Torchmark for the years 1993, 1994, 1995, 1996, and  
1997 were $153.3 million, $80.0 million, $0, $10.0 million, and $51.7   
million, respectively.                                                  
(5) Financial advisers whose annual or annualized production is the equivalent  
of investment product sales in excess of $900 thousand.                 
(6) Mutual funds reflect the number of investors in the United Funds and W&R    
Funds. Variable products reflect the number of variable annuity and     
variable life policies.                                                 
(7) Mutual funds average value reflects the value for the United Funds and W&R  
Funds. The variable product average is based on the value of TMK/United 
Fund assets divided by the number of variable annuity and life policies.
(8) Source: Investment Company Institute. The industry dividend reinvestment    
rate average for 1997 is for the twelve months ended September 30, 1997.
(9) Institutional assets include assets of Torchmark affiliates of $0, $77.3    
 million, $373.8 million, $390.9 million, and $1,265.0 million at December
31, 1993, 1994, 1995, 1996, and 1997, respectively.                     

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MANAGEMENT'S DISCUSSION AND ANALYSIS  
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  

OVERVIEW                                                                        

The revenues of the Company are largely dependent on the total value and    
composition of assets under management and, accordingly, fluctuations in        
financial markets and in the composition of assets under management have a      
substantial effect on revenues and results of operations. Investment            
management fees, the Company's most substantial source of revenue, are based    
on the amount of assets under management and are affected by sales levels,      
financial market conditions, redemptions, and the composition of assets.        
Equity-oriented portfolios generally have higher management fee rates than      
fixed-income portfolios. See "Business--Investment Management Agreements."      

Underwriting and distribution revenues consist of sales charges and         
commissions derived from the sale of investment and insurance products and      
distribution fees earned from the W&R Funds for distributing their shares. The  
products sold have various sales charge structures, and the revenues received   
from the sale of products will vary based on the type and amount sold. The      
United Group of Funds have a front end load sales charge (sales charges are     
paid on purchase of fund shares) or no load sales charge (no sales charges are  
related to purchase of fund shares) while the W&R Funds have a contingent       
deferred sales charge (sales charges are paid upon redemption of fund shares    
within specified periods). Rule 12b-1 distribution and service fees earned for  
distributing shares of the W&R Funds are based upon a percentage of assets and  
fluctuate based on sales, redemptions, and financial market conditions. See     
"Business--Underwriting and Distribution." The Company earns a sales            
commission on insurance products sold pursuant to the Agent Agreements. See     
"Certain Relationships and Related Transactions--Relationship with Torchmark--  
Agent Agreements."                                                              

Shareholder service fees include transfer agency fees, custodian fees for   
retirement plan accounts, and portfolio accounting fees. The transfer agency    
fees and custodian fees are primarily based on annual charges per account,      
and, therefore, are affected by the number of accounts opened and closed.       
Portfolio accounting fees are charged based on the amount of assets in the      
portfolio subject to a maximum per portfolio. These fees vary based on the      
number of portfolios and the value of the assets in each portfolio. See         
"Business--Service Agreements."                                                 

Other expenses consist of underwriting and distribution expenses,           
compensation and related cost expenses, general and administrative expenses,    
and depreciation and amortization, excluding goodwill. Underwriting and         
distribution expenses include sales commissions and related amounts paid to     
financial advisers, various expenses associated with product promotion,         
expenses associated with education and training of financial advisers, and      
other marketing costs. Distribution expenses, principally selling commissions,  
related to the W&R Funds are deferred and amortized over a period not           
exceeding ten years. Compensation and related costs reflect the compensation    
and benefits for investment management, shareholder service, and                
administrative personnel. The amount of goodwill at December 31, 1997 was       
$98.8 million, and amortization of goodwill is $2.9 million annually.           

OPERATING RESULTS FOR 1997 AS COMPARED TO 1996                                  

Investment management fees increased $16.3 million or 16% to $117.8 million 
for the year ended December 31, 1997 primarily as the result of strong          
financial markets. Average assets under management in 1997 were up $2.3         
billion or 12% from 1996 to $21.3 billion. Assets under management were $23.4   
billion at December 31, 1997 compared with $19.1 billion at December 31, 1996.  
Mutual fund assets increased $3.4 billion from $17.2 billion at December 31,    
1996 to $20.6 billion at December 31, 1997. Institutional assets increased $.9  
billion from $1.9 billion at December 31, 1996 to $2.8 billion at December 31,  
1997. Market appreciation accounted for $3.3 billion of the increase with the   
remainder due to the nets inflow of assets. Growth in fee revenue exceeded the  
growth in average assets due to changes in the composition of assets. Mutual    
fund assets, which generally have a higher management fee rate than             
institutional accounts, constituted a greater percentage of total assets for    
1997.                                                                           

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Underwriting and distribution fee revenue was $89.4 million for 1997, up    
$3.6 million or 4% compared with that of 1996. Commission revenue from front-   
load investment products increased $1.4 million from $67.0 million in 1996 to   
$68.4 million in 1997 primarily as a result of higher sales volumes.            
Distribution revenue, which consists primarily of Rule 12b-1 distribution fees  
from the W&R Funds, increased from $4.7 million in 1996 to $6.5 million in      
1997 due to growth in assets. Commissions from the sale of other products       
(primarily insurance) were $14.1 million in 1996 and $14.5 million in 1997.     

Shareholder servicing fees in 1997 were $30.8 million, a $2.4 million or 8% 
increase over that of 1996. Approximately 47% of this increase was              
attributable to a fee increase that was effective April 1, 1996 with the        
remainder due to the increase in number of shareholder accounts. At December    
31, 1997, there were 1.38 million accounts, an increase of 5% from the 1.31     
million accounts at December 31, 1996.                                          

Other expenses increased from $112.8 million for 1996 to $123.7 million for 
1997, an increase of 10%. Underwriting and distribution costs of $80.0 million  
in 1997 were $1.1 million or 1% higher than that of 1996. The increase was      
primarily the result of increased sales. Compensation and related costs of      
$26.6 million were up $4.7 million or 22% compared with those of 1996. The      
increase was attributable to additional expenses of $1.5 million related to     
staff additions and normal salary and fringe benefit changes, $1.3 million for  
incentive compensation and adjustments of $1.9 million to make total            
compensation more competitive within the market. General and administrative     
expenses were 15.8 million in 1997, a $5.6 million or 55% increase from that    
of 1996. The increase is attributable to $6.8 million of non-recurring          
expenses primarily related to the outsourcing of the data processing component  
of transfer agency activities and the discontinuation of internally developed   
systems. This increase was partially offset by lower expenses of $2.2 million   
in 1997 for year 2000 compliance as compared to 1996.                           

The Company has considered the effect of year 2000 on its computer systems  
and application software programs and has developed a plan to become year 2000  
compliant. The Company estimates that its compliance activities will be         
completed no later than the first quarter of 1999. Costs to date approximate    
$2.4 million. The remaining costs of this effort are estimated to be $1.7       
million.                                                                        

Net interest income in 1997 declined $3.9 million from 1996 due to          
additional interest expense attributable to the Notes.                          

Income tax expense was $42.5 million and $44.9 million for 1996 and 1997,   
respectively, representing effective tax rates of 38.9% and 39.0%.              

Net income increased from $66.7 for 1996 to $70.3 million for 1997, an      
increase of 5%.                                                                 

OPERATING RESULTS FOR 1996 AS COMPARED TO 1995                                  

Investment management fees increased $16.2 million or 19% to $101.5 million 
for the year ended December 31, 1996 primarily as the result of strong          
financial markets. Average assets under management in 1996 were up $2.3         
billion or 14% from that of the year ended December 31, 1995 to $19.0 billion   
for 1996. Assets under management were $19.1 billion at December 31, 1996       
compared with $18.5 billion at December 31, 1995. Mutual fund assets increased  
$2.1 billion from $15.1 billion at December 31, 1995 to $17.2 billion at        
December 31, 1996, while institutional assets declined from $3.4 billion at     
December 31, 1995 to $1.9 billion at December 31, 1996 due to the loss of       
certain accounts. Market appreciation of $1.8 billion in 1996 was               
substantially offset by institutional account redemptions. Growth in fee        
revenue exceeded the growth in average assets due to changes in the             
composition of assets. Mutual fund assets, which generally have a higher        
management fee rate than institutional accounts, constituted a greater          
percentage of total assets for 1996.                                            

Underwriting and distribution fee revenue was $85.8 million for 1996, up    
$15.4 million or 22% compared with that of 1995. Commission revenue from        
front-load investment products increased $13.2 million from $53.8 million in    
1995 to $67.0 million in 1996 primarily as a result of higher sales volumes.    
Distribution revenue, which consists primarily of Rule 12b-1 distribution fees  
from the W&R Funds, increased from $2.8 million in 1995 to $4.7 million in      
1996 due to growth in assets. Commissions from the sale of other products       
(primarily insurance) were $13.8 million in 1995 and $14.1 million in 1996.     

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Shareholder servicing fees in 1996 were $28.4 million, a $4.9 million or 21%
increase over that of 1995. Approximately 70% of this increase was              
attributable to a fee increase effective April 1, 1996 with the remainder due   
to the increase in number of shareholder accounts. At December 31, 1996, there  
were 1.31 million accounts, an increase of 7% from the 1.22 million accounts    
at December 31, 1995.                                                           

Other expenses increased from $95.9 million for 1995 to $112.8 million for  
1996, an increase of 18%. Underwriting and distribution costs of $78.9 million  
in 1996 were $14.8 million or 23% higher than that of 1995. Most of the         
increase in underwriting and distribution costs was attributable to selling     
commissions and other costs associated with higher sales levels. Compensation   
and related costs of $21.9 million were up 3% over that of 1995 due primarily   
to an increase in the number of employees. General and administrative expenses  
were $10.2 million in 1996, a $1.6 million or 18% increase from that of 1995.   
This increase was primarily attributable to charges of approximately $2.3       
million in 1996 for modifying systems applications for year 2000 compliance,    
partially offset by a $1.2 million one time franchise tax assessment that was   
paid in 1995.                                                                   

Income tax expense was $35.1 million and $42.5 million for 1995 and 1996,   
respectively, representing effective tax rates of 39.6% and 38.9%.              

Net income increased from $53.5 million for 1995 to $66.7 million for 1996, 
an increase of 25%.                                                             

LIQUIDITY AND CAPITAL RESOURCES                                                 

The Company's operations have historically generated cash flows in excess of
the needs of its business plans. In keeping with Torchmark's strategy for       
subsidiaries, the Company historically paid virtually all of its earnings to    
Torchmark as dividends. Cash flow provided from the Company's operations was    
$62.3 million, $86.2 million, and $62.3 million for the years ended December    
31, 1995, 1996, and 1997, respectively. The timing of tax payments of $14.9     
million increased cash from operations for the year ended December 31, 1996,    
and reduced cash from the Company's operations in the same amount for the year  
ended December 31, 1997. Payments to affiliates for operating purposes in the   
amount of $5.9 million decreased cash from the Company's operations for the     
year ended December 31, 1997. Cash flows from investing activities generally    
include capital expenditures and the results of investment securities sales,    
purchases, and maturities. The Company is considering an expansion of its home  
office building, although no formal commitments have been entered into. The     
estimated capitalized cost of this proposed expansion is approximately $7.0     
million. Except for this possible expansion the Company has no material         
commitments for capital expenditures.                                           

Cash flows from financing activities include cash dividends to Torchmark,   
amounts paid or received from affiliates, and cash contributions from           
Torchmark. Historically, the Company has distributed its excess cash flow to    
Torchmark. The Company's Board of Directors currently intends to declare        
quarterly cash dividends on the Common Stock of approximately $34 million       
annually. The Company believes that its cash flows from operations will be      
sufficient to fund such dividends and its operations for at least the next two  
years. See "Dividend Policy."                                                   

RECENT ACCOUNTING DEVELOPMENTS                                                  

In 1997, FASB issued SFAS No. 130 ("Reporting Comprehensive Income") and    
SFAS No. 131 ("Disclosures about Segments of an Enterprise and Related          
Information"). These statements, which are effective for periods beginning      
after December 15, 1997, expand or modify disclosures. The Company does not     
expect implementation to have any significant effect on the Company's reported  
financial position, results of operations, or segment reporting.                

SEASONALITY AND INFLATION                                                       

The Company does not believe its operations are subject to significant      
seasonal fluctuations. The Company does not believe that inflation has had a    
significant impact on operations.                                               

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BUSINESS  

OVERVIEW                                                                        

Waddell & Reed, founded in 1937, is one of the oldest mutual fund complexes 
in the United States, having introduced the United family of funds in 1940.     
Waddell & Reed sells its investment products primarily to middle income         
Americans through a virtually exclusive sales force. As of December 31, 1997,   
the Company had $23.4 billion of assets under management, of which $20.6        
billion were mutual fund assets and the remainder institutional accounts and    
more than 563,000 customers holding an average mutual fund account of $33,200.  

The Company is the exclusive underwriter and distributor of 36 mutual fund  
portfolios, including 17 comprising the United Funds, eight comprising the W&R  
Funds, and 11 comprising the TMK/United Funds. The Company also distributes     
Torchmark underwritten variable annuities and life insurance products to its    
customers as part of its financial planning services. The Company sells mutual  
fund products with a front end load (sales charges are paid upon purchase of    
fund shares), contingent deferred sales charge (sales charges are paid upon     
redemption within specified periods, see "Business--Underwriting and            
Distribution"), and mutual fund products with no load (no sales charges are     
related to purchase of fund shares). For the year ended December 31, 1997, the  
Company's financial adviser sales force sold $1.5 billion of mutual fund and    
variable products.                                                              

The traditional market for the Company has generally been professionals and 
working families with annual incomes between $40,000 and $100,000 who are       
saving for retirement. The Company believes that demographic trends and shifts  
in attitudes toward retirement savings will continue to support increased       
consumer demand for its products. According to U.S. Census Bureau projections,  
the number of Americans between the ages of 45 and 64 will grow from 53.7       
million in 1996 to 71.1 million in 2005, making this "preretirement" age group  
the fastest growing segment of the U.S. population.                             

The Company distributes the Funds and other financial products through a    
financial adviser sales force that represents the Company on a virtually        
exclusive basis. At December 31, 1997, the Company's sales force consisted of   
2,160 financial advisers and 121 division managers operating from 177 sales     
offices located throughout the United States. The Company believes, based on    
industry data, that its financial adviser sales force is currently one of the   
largest sales force in the United States selling primarily mutual funds.        
Currently, 43% of the Company's financial advisers have been with the Company   
for more than 5 years and 28% for more than 10 years.                           

The financial adviser industry is fragmented, consisting primarily of       
relatively small companies generally employing fewer than 100 investment        
professionals. The Company's sales force competes primarily with small          
broker/dealers and independent financial advisers. The Company's marketing      
efforts are currently focused on customers residing in smaller metropolitan     
areas and rural communities. The Company conducts investment seminars           
throughout the United States to reach a large number of potential clients. The  
Company also develops individual financial plans for clients (over 40,000       
plans in 1997) through one-on-one consultations with financial advisers, who    
emphasize long-term relationships with a client through continuing service,     
rather than a one-time sale. The Company believes that it is well-positioned    
to benefit from a developing industry trend toward "assisted sales"--sales of   
mutual fund products through a sales person--driven by the array of options     
now available to investors and the need for financial planning advice that has  
resulted from the recent increase in the average household's financial assets.  
According to the Investment Company Institute, assisted sales for the year      
ended December 31, 1997 constituted 61.9% of the total dollar value of mutual   
fund sales, a figure that has grown from 54.9% for 1994.                        

The Company's investment philosophy and financial planning approach         
emphasize long-term savings. The Company's portfolio managers seek consistent   
long-term performance and downside protection in turbulent markets. As a        
result, the Company has developed a loyal customer base with clients            
maintaining their accounts for approximately 13 years on average as compared    
to six years for the mutual fund industry, according to the Investment Company  
Institute. This loyalty is evidenced by a relatively low fund redemption rate   
for the five years ended December 31, 1997 of 7.6% for the Funds (other than    
money market funds), which is less than one-half of the industry average of     
18.4% and a relatively high dividend reinvestment rate of 86.6% for the Funds   

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(other than money market funds) for the same period versus 66.9% for the        
mutual fund industry. Approximately 45% of the Company's assets under           
management are in retirement accounts as of December 31, 1997. The              
historically low redemption and high reinvestment rates have provided a stable  
source of asset and revenue growth at a relatively low cost. The Company's      
success with these strategies has been demonstrated in turbulent markets, as,   
for example, in 1994, the last year in which the Standard & Poor's 500          
Composite Stock Price Index declined, when the Company's net sales as a         
percentage of asset growth was more than three times better than that of the    
mutual fund industry.                                                           

The Company has a seasoned team of portfolio managers, having an average of 
20 years industry experience and 14 years tenure with the Company. The five     
most senior portfolio managers have an average of 30 years industry experience  
and 26 years tenure with the Company. The Company maintains an internal equity  
and fixed income investment research staff that has substantial resources       
available to it including hundreds of meetings annually with company            
management both on and off site. In addition, the Company utilizes research     
provided by brokerage firms and independent outside consultants. Portfolio      
managers usually were investment research analysts for a substantial length of  
time prior to acquiring money management assignments. The predominant style of  
the Company's investments is growth equity. As of December 31, 1997             
approximately 78% of the Company's mutual fund assets under management were     
invested in equity funds and the remainder in fixed income and money market     
funds. This investment strategy emphasizes investment at attractive valuations  
in companies that the portfolio managers believe can produce above average      
growth in earnings.                                                             

Waddell & Reed Financial, Inc. is a holding company that conducts its       
business through its subsidiaries, which are described briefly below. W&R, is   
a registered broker-dealer and registered investment adviser that acts          
primarily as the nationwide distributor and underwriter for the shares of       
mutual funds and distributor of insurance products issued primarily by UILIC.   
WRIMCO, is a registered investment adviser that provides investment management  
and advisory services to the Funds and to institutions and other private        
clients through a subcontract with another subsidiary of Torchmark. WRSCO       
provides transfer agency and accounting services to the Funds and their         
shareholders and to another subsidiary of Torchmark.                            

The executive office of the Company is located at 6300 Lamar Avenue,        
Overland Park, Kansas 66202, telephone number (913) 236-2000.                   

BUSINESS STRATEGY                                                               

The Company's business strategy is outlined below.                          

.  INCREASE NUMBER OF FINANCIAL ADVISERS: The Company intends to expand its 
distribution network by recruiting high quality candidates to be      
financial advisers. In early 1994 the Company began to focus on       
increasing the number of financial advisers. The Company's current    
objective is to increase the number of financial advisers by 10% per  
year. The Company has hired additional experienced sales managers and 
 reorganized its management and reporting lines and incentive structure.
The Company has revised the compensation system for its 121 division  
managers by tying the majority of their potential income to the       
  recruitment, retention, and training of the Company's financial advisers
and proportionately less to their personal sales production. From     
  December 31, 1996 to December 31, 1997, the number of financial advisers
has increased from 2,010 to 2,160.                                    

In 1994, the Company also began implementing a "bridge income" program, 
which provides newly recruited financial advisers with a source of      
earnings until they can develop the skills and client base necessary to 
earn a stable income from commissions. The Company believes this        
program, which currently provides qualifying individuals with $2,000    
per month for up to six months, has been critical in increasing the     
number of new financial advisers, improving retention, and increasing   
average first-year sales production. Financial advisers recruited in    
1997 who participated in the bridge income program produced, on         
average, at two and one half times the rate of non-participants.        

.  CONTINUE TO INCREASE PERCENTAGE OF FULL-TIME FINANCIAL ADVISERS: Since   
 1993, the Company has emphasized increasing the proportion of its sales
force that sells financial services products on a full-               

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time basis and generally has not allowed the renewal of the securities
licenses of financial advisers that fail to meet sales goals. The     
Company believes that these changes have enhanced productivity. At    
December 31, 1997, the percentage of Full-Time Advisers was 31% of the
 Company's total sales force, up from 18% at December 31, 1992. Over the
same period, the annual investment product sales per Full-Time Adviser
increased approximately 25% to a current annual rate of about $1.7    
million. In addition, the overall annual investment product sales per 
adviser increased from $380,000 to $703,000, or 85%, over this same   
  period as a result of both increasing the number and the productivity of
Full-Time Advisers and of not renewing the licenses of advisers who do
not meet sales goals.                                                 

.  EXPAND GEOGRAPHIC SCOPE: The Company intends to pursue geographic        
expansion of its sales force with two related strategies. In larger   
communities it intends to establish new division offices with the     
facilities to accommodate up to 20 financial advisers, and in smaller 
communities or suburban areas it will open offices with facilities to 
 accommodate a smaller group of advisers. While historically the Company
has opened new offices in areas that were contiguous with existing    
  offices, it now intends to select new locations based on expected growth
opportunities. Consistent with its focus on retirement savings and    
planning, the Company expects to open new offices in Florida and      
Arizona, as well as smaller offices in other areas of the country, in 
1998.                                                                 

.  ENHANCE MARKETING AND FINANCIAL PLANNING TOOLS: The Company expects to   
implement an improved financial planning package, which will allow its
financial advisers to customize solutions to a client's savings,      
retirement income, estate planning, life insurance, and other personal
financial planning needs. The Company has traditionally provided      
  financial planning advice to its clients free of charge. The Company now
 intends to begin charging a fee, typically $250, for such services. The
Company believes that its program of selling its improved financial   
plans for a fee will stimulate sales and result in a significantly    
higher average sale per plan. The Company expects to introduce the    
revised financial plan by the end of the first quarter of 1998.       

The Company has also implemented formal training programs for its new   
financial advisers. The program consists of field office classes that   
address prospecting techniques, product knowledge, and sales            
presentation skills. Field sales management personnel, assisted by six  
regional sales training specialists who receive direction and support   
from the Company's headquarters, conduct the field office classes.      
During 1998, the Company intends to increase the number of regional     
sales training specialists from six to twelve. In addition, new advisers
will attend a three day course conducted at the Company's headquarters  
intended to supplement and reinforce the field classes.                 

.  INVEST IN PORTFOLIO MANAGERS AND INVESTMENT ANALYSTS: The Company's      
 objective is for its Fund families to achieve top quartile performance.
The Company is also focused on building its industry and geographic   
expertise. To achieve this goal, the Company has begun to implement a 
 plan to add several portfolio managers and investment analysts. Through
these additions, the Company intends to increase the depth of its     
investment management team and to increase the scope of its expertise.
To assist in recruiting and retention, the Offering and Spin-Off will 
allow the Company to implement a new incentive compensation structure 
  that relies on stock options and increases in cash compensation to bring
total compensation for portfolio managers and investment analysts to a
more market-competitive level. The Company believes that providing    
equity-based compensation as a significant component of income will be
important in attracting new portfolio managers and investment analysts
as well as retaining present staff.                                   

.  INVEST IN SYSTEMS AND TECHNOLOGY: In order to support its anticipated    
growth, the Company is engaged in projects to enhance its information 
systems. The Company will install a management system in all division 
  offices that it believes will better enable division managers to monitor
  the activities of the individual financial advisers including the number
of sales calls completed, the number of client contacts, and overall  
sales results. The Company has recently completed agreements to       
outsource a portion of its data processing components of its transfer 
agency activities to a third party provider by the fourth quarter of  
1998. The Company expects that this arrangement will facilitate its   

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ability to introduce new products and enter new markets as well as    
enable the Company to improve its participant record-keeping services 
  offered to sponsors of 403(b) and 401(k) plans. In addition, the Company
  expects to realize operating efficiencies with respect to its processing
activities through the use of electronic imaging, which is a component
of the third party system. The Company has developed and is testing an
  intranet to be used by its financial advisers to obtain updated training
materials, product information, and electronic interactive product    
illustrations. In addition, the Company expects that clients will have
  access to the intranet to obtain data related to their personal accounts
once information security concerns are addressed.                     

.  PURSUE STRATEGIC ACQUISITIONS AND ALLIANCES TO EXPAND PRODUCT OFFERING   
  AND DISTRIBUTION: The Company intends to selectively pursue acquisitions
and alliances that will add new products or alternative distribution  
systems. The Company believes that it will be better positioned to    
pursue acquisitions as one of relatively few independent, public      
  investment advisory and asset management companies. The Company believes
 that potential investment management acquisition candidates may be more
 receptive to receiving publicly traded shares of the Company as opposed
  to stock in a company outside of the investment management industry. The
Company has traditionally distributed its investment products only    
through its virtually exclusive financial adviser sales force. In the 
future, the Company may acquire another fund complex the products of  
  which it can distribute outside its sales force. These mutual funds will
 likely not be marketed to the Company's existing customer base, thereby
avoiding competing with the Company's existing sales force and        
cannibalizing the Company's current revenues. The Company may also    
pursue opportunities to establish strategic relationships with        
alternative distribution systems such as broker/dealers and banks or  
acquire independent financial planning companies.                     

MARKETING                                                                       

The Company markets its mutual funds through a sales force that represents  
the Company on a virtually exclusive basis. As of December 31, 1997, the sales  
force comprised approximately 2,160 financial advisers of whom approximately    
660 are Full-Time Advisers. The Company's financial advisers are located        
primarily in smaller metropolitan areas and rural communities. The sales force  
is organized into divisions that are supervised, as of December 31, 1997, by    
one of approximately 121 division managers who, in turn, report to eight        
regional vice presidents.                                                       

The Company has taken several steps to increase the productivity of its     
sales force. Since 1992, the Company has been implementing a policy of          
developing a full-time sales force and has not allowed the renewal of the       
securities licenses of financial advisers that fail to meet sales goals. This   
policy has resulted in the reduction of the number of part-time financial       
advisers (those having annual or annualized production of less than $900,000    
of investment product sales) from 2,141 at December 31, 1993 to 1,500 at        
December 31, 1997. At the same time, the number of Full-Time Advisers           
increased from 546 at December 31, 1993 to 660 at December 31, 1997. Prior to   
1993, division managers were engaged in personal sales production as well as    
sales management. In order to emphasize the importance of recruiting and        
developing a full-time sales force, the Company implemented a compensation      
system that ties compensation of division managers to the development of new    
financial advisers and to division sales rather than personal sales. Beginning  
in 1997, the Company initiated a program to encourage members of its financial  
adviser sales force to expand the range of financial services they can offer    
by registering under applicable state laws. A majority of the Company's         
financial advisers have completed such registration.                            

The Company began implementing a bridge income program in 1994 to provide a 
source of earnings to newly recruited financial advisers for a period of three  
months while they developed the skills and client base necessary to earn an     
income from commissions. The Company enhanced the program in 1997 by            
increasing the monthly amount and extending the period to six months based on   
the success of the program in improving the productivity of new recruits. In    
order to qualify for the bridge income program, advisers must, within 90 days,  
make five joint sales calls with the division manager, five calls with another  
adviser to gather data for a financial plan, and make one sale. Once on the     
bridge income program, the adviser receives $2,000 per month with earned        

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commissions up to $2,000 applied against the bridge income and commission in    
excess of $2,000 held in escrow until the adviser is off of the bridge income   
program.                                                                        

The following tables set forth information about the Company's financial    
adviser sales force, product sales, and clients at the dates and for the        
periods indicated.                                                              

                                                                [Download Table]

                                                           DECEMBER 31,         
                                                   -----------------------------
                                                   1993  1994  1995  1996  1997 
                                                   ----- ----- ----- ----- -----
                                                                                
Financial Advisers:                                                             
  Full time(1)....................................   546   487   505   634   660
  Part time....................................... 2,141 1,770 1,830 1,376 1,500
                                                   ----- ----- ----- ----- -----
    Totals........................................ 2,687 2,257 2,335 2,010 2,160
                                                   ===== ===== ===== ===== =====

                                                                [Download Table]

                                            YEAR ENDED DECEMBER 31,           
                                  --------------------------------------------
                                    1993     1994     1995     1996     1997  
                                  -------- -------- -------- -------- --------
                                             (DOLLARS IN MILLIONS)            
                                                                              
Mutual fund sales(2)............. $1,033.4 $  988.3 $  995.7 $1,252.2 $1,268.5
Total investment product                                                      
 sales(3)........................ $1,239.2 $1,188.5 $1,187.6 $1,505.1 $1,518.3
Annualized life insurance premi-                                              
 ums............................. $    7.4 $    8.2 $    9.5 $    9.3 $    8.3
Number of clients(4).............  499,400  517,600  537,100  552,600  563,800
Number of mutual fund accounts                                                
 per client......................      2.2      2.2      2.3      2.4      2.4

--------                                                                        
(1) Based on minimum annual or annualized production that is the equivalent of  
investment product sales in excess of $900,000.                         
(2) Reflects sales of United Funds for which a sales charge was collected and   
sales of the W&R Funds.                                                 
(3) Reflects mutual fund and variable product sales. Reflects mutual fund and   
variable product sales.                                                 
(4) Defined as a person or entity having a single Federal tax identification    
number.                                                                 

The Company provides training and motivational programs for its sales force.
Six sales training specialists provide a regular program of training for new    
recruits as well as advanced training for experienced financial advisers.       
Programs for new recruits focus on prospecting techniques, product knowledge,   
and sales skills. Field office classes provide guidance in identifying target   
markets, practical exercises to learn interview skills and data collection,     
instruction in basic financial planning software, and guidance in matching      
products with various investment objectives. Sales presentation skills are      
taught and practiced in the classroom environment as well as on joint sales     
calls with field sales management. The programs for experienced advisers focus  
on skills related to dealing with larger investment sums (such as IRA           
rollovers) and include training in the use of asset allocation and estate       
planning software. In addition, the Company takes top producers to retreats     
where headquarters staff and experienced sales personnel conduct workshop       
seminars covering such subjects as product features, financial planning, and    
the use of illustrative software packages. The Company intends to increase the  
number of programs made available to new recruits and experienced advisers by   
increasing the number of sales training specialists from six to twelve in       
1998.                                                                           

FUNDS AND ASSET MANAGEMENT                                                      

The Company serves as underwriter for, and investment adviser to, the United
Funds, the W&R Funds, and the TMK/United Funds and distributes variable         
annuity products based on the TMK/United Funds. The Company's sales force also  
serves as distributor of insurance products such as single premium annuities    
and term and whole life insurance. The Company provides various administrative  
services to the Funds, including mutual fund transfer agency, accounting, and   
shareholder services.                                                           

The Company offers the Funds' shareholders a broad range of investment      
products designed to attract and retain clients with varying investment         
objectives. The predominant style of the Company's investments is growth        
equity. This investment strategy emphasizes investment at attractive            
valuations in companies that the portfolio managers believe can produce above   
average growth in earnings. The Company's United Funds rank in the top          

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10% of diversified mutual fund complexes for the year ended December 31, 1997,  
as measured by Lipper Analytical Services Corp. As of December 31, 1997, 78%    
of the assets under management in the Funds were invested in equity funds, 19%  
were invested in fixed income funds, and 3% were invested in money market       
funds. Fund shareholders are allowed to exchange funds within each group of     
funds as economic and market conditions and investor needs change at no         
additional cost. The Company periodically introduces new mutual funds designed  
to complement and expand its investment product offerings, respond to           
competitive developments in the financial marketplace, and meet the changing    
needs of clients. The Company's base of assets under management consists of a   
broad range of domestic and international stock, bond, and money market mutual  
funds that meet the varied needs and objectives of its individual and           
institutional investors. For summary information about each of the Funds, see   
"--Fund Summary" to this Prospectus.                                            

The Company has a seasoned team of portfolio managers, having an average of 
20 years industry experience and 14 years tenure with the Company. The five     
most senior portfolio managers have an average of 30 years industry experience  
and 26 years tenure with the Company. The Company maintains an internal equity  
and fixed income investment research staff that has substantial resources       
available to it including hundreds of meetings annually with company            
management both on and off site. In addition, the Company utilizes research     
provided by brokerage firms and independent outside consultants. Portfolio      
managers usually were analysts for a substantial length of time prior to        
acquiring money management assignments.                                         

In addition to performing investment management services for the Funds, the 
Company acts as an investment adviser and portfolio manager for institutional   
and other private investors. The Company receives a fee that is generally       
based on a percentage of assets under management for its services as an         
investment adviser or portfolio manager. Assets under management for            
institutional and private accounts totaled approximately $2.8 billion at        
December 31, 1997. Investment management fees from institutional accounts were  
approximately $6.2 million, or approximately 5% of total investment management  
fees, for the year ended December 31, 1997.                                     

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The following table sets forth beginning assets and ending assets for the   
Company's Funds by type as well as transactions related thereto for the         
periods shown.                                                                  

                                                                [Download Table]

                                       YEAR ENDED DECEMBER 31,                 
                           --------------------------------------------------- 
                             1993      1994      1995       1996       1997    
                           --------  --------  ---------  ---------  --------- 
                                        (DOLLARS IN MILLIONS)                  
                                                                               
MUTUAL FUNDS:                                                                  
CHANGE IN UNITED AND W&R                                                       
 FUNDS:                                                                        
Equity funds:                                                                  
  Beginning assets........ $6,078.8  $7,187.9  $ 7,627.5  $10,047.2  $11,786.4 
    Net sales (1).........    690.0     814.8      856.4    1,155.5    1,175.3 
    Reinvested Dividends &                                                     
     Distributions........    331.7     440.5      532.1      831.7    1,811.3 
    Redemptions...........   (479.0)   (503.1)    (624.1)    (785.8)    (977.9)
    Net exchanges in                                                           
     (out)................    (32.9)     91.7      (43.6)     (57.8)    (120.7)
    Dividends &                                                                
     Distributions Paid...   (353.6)   (463.0)    (558.3)    (866.6)  (1,889.0)
    Net investment                                                             
     income...............     90.6      94.1      109.0      110.0      112.2 
    Appreciation                                                               
     (depreciation).......    862.3     (35.4)   2,148.2    1,352.2    2,568.0 
                           --------  --------  ---------  ---------  --------- 
  Ending Assets........... $7,187.9  $7,627.5  $10,047.2  $11,786.4  $14,465.6 
                           ========  ========  =========  =========  ========= 
Fixed income funds:                                                            
  Beginning assets........ $3,249.1  $3,717.0  $ 3,200.1  $ 3,540.3  $ 3,487.6 
    Net sales (1).........    380.5     216.8      205.9      198.7      244.1 
    Reinvested Dividends &                                                     
     Distributions........    260.9     210.1      208.1      219.7      220.3 
    Redemptions...........   (281.4)   (320.9)    (317.1)    (315.8)    (316.4)
    Net exchanges in                                                           
     (out)................    (58.6)   (195.1)     (90.5)    (132.9)     (79.6)
    Dividends &                                                                
     Distributions Paid...   (310.2)   (249.7)    (248.3)    (260.1)    (259.8)
    Net investment                                                             
     income...............    239.8     242.6      239.9      238.7      240.4 
    Appreciation                                                               
     (depreciation).......    236.9    (420.7)     342.2       (1.0)     161.4 
                           --------  --------  ---------  ---------  --------- 
  Ending Assets........... $3,717.0  $3,200.1  $ 3,540.3  $ 3,487.6  $ 3,698.0 
                           ========  ========  =========  =========  ========= 
Money Market funds:                                                            
  Beginning assets........ $  393.3  $  321.6  $   338.6  $   405.5  $   499.5 
    Net sales.............    292.7     299.7      466.1      494.2      507.0 
    Reinvested Dividends &                                                     
     Distributions........      8.1      10.8       18.6       19.9       22.9 
    Redemptions...........   (464.0)   (396.9)    (551.9)    (610.8)    (701.3)
    Net exchanges in                                                           
     (out)................     91.5     103.4      134.1      190.7      200.3 
    Dividends &                                                                
     Distributions Paid...     (8.2)    (11.0)     (19.0)     (20.6)     (23.8)
    Net investment                                                             
     income...............      8.2      11.0       19.0       20.6       23.8 
    Appreciation                                                               
     (depreciation).......      0.0       0.0        0.0        0.0        0.0 
                           --------  --------  ---------  ---------  --------- 
  Ending assets........... $  321.6  $  338.6  $   405.5  $   499.5  $   528.4 
                           ========  ========  =========  =========  ========= 
VARIABLE PRODUCTS                                                              
 TMK/UNITED FUNDS:                                                             
  Beginning assets........ $  302.3  $  554.7  $   725.3  $ 1,098.8  $ 1,434.5 
    Net sales.............    205.8     200.2      191.8      252.8      249.8 
    Reinvested Dividends &                                                     
     Distributions........     38.6      34.9       95.4       92.9      161.2 
    Redemptions...........     (8.4)    (26.9)     (48.7)     (75.1)    (111.5)
    Net exchanges in                                                           
     (out)................      0.0       0.0        0.0        0.0        0.0 
    Dividends &                                                                
     Distributions Paid...    (38.6)    (34.9)     (95.4)     (92.9)    (161.3)
    Net investment                                                             
     income...............     12.5      20.7       24.3       27.4       29.6 
    Appreciation                                                               
     (depreciation).......     42.5    (23.4)      206.1      130.6      291.2 
                           --------  --------  ---------  ---------  --------- 
  Ending assets........... $  554.7  $  725.3  $ 1,098.8  $ 1,434.5  $ 1,893.5 
                           ========  ========  =========  =========  ========= 

--------                                                                        
(1) Sales net of sales charges.                                           

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The following table sets forth assets under management, client accounts, and
sales of the Funds by group as of the dates and for the periods shown.          

                                                                [Download Table]

                                               DECEMBER 31,                     
                          ------------------------------------------------------
                             1993       1994       1995       1996       1997   
                          ---------- ---------- ---------- ---------- ----------
                                          (DOLLARS IN MILLIONS)                 
                                                                                
Mutual Fund                                                                     
Assets Under Management:                                                        
  United Funds..........  $   11,102 $   10,948 $   13,574 $   15,130 $   17,847
  TMK/United Funds......         555        725      1,099      1,435      1,894
  W&R Funds.............         124        219        419        643        845
                          ---------- ---------- ---------- ---------- ----------
    Totals..............  $   11,781 $   11,892 $   15,092 $   17,208     20,586
                          ========== ========== ========== ========== ==========
Client accounts:                                                                
  United Funds(1).......   1,067,900  1,119,800  1,171,700  1,236,900  1,291,300
  TMK/United Funds(2)...      16,400     22,700     27,800     33,400     38,200
  W&R Funds(1)..........      17,700     30,500     48,400     69,100     84,900

                                                                [Download Table]

                                                   YEAR ENDED DECEMBER 31,      
                                              ----------------------------------
                                               1993   1994   1995   1996   1997 
                                              ------ ------ ------ ------ ------
                                                    (DOLLARS IN MILLIONS)       
                                                                                
Sales:                                                                          
  United Funds(3)............................ $  939 $  881 $  838 $1,025 $1,093
  TMK/United Funds...........................    206    200    192    253    250
  W&R Funds..................................     94    107    158    227    175
                                              ------ ------ ------ ------ ------
    Totals (4)............................... $1,239 $1,188 $1,188 $1,505 $1,518
                                              ====== ====== ====== ====== ======

--------                                                                        
(1) Number of mutual fund products.                                             
(2) Number of variable policies.                                                
(3) Reflects sales for which a sales charge was collected.                      
(4) Money market fund sales and United Fund sales for which there was no sales  
change are excluded.                                                    

INVESTMENT MANAGEMENT AGREEMENTS                                                

The Company provides investment advisory and management services pursuant to
an Investment Management Agreement with each Fund. While the specific terms of  
the Investment Management Agreements vary, the basic terms of the Investment    
Management Agreements are similar. The Investment Management Agreements         
provide that the Company renders overall management services to each of the     
Funds, subject to the oversight of each Fund's board of directors and in        
accordance with each Fund's fundamental investment objectives and policies.     
The Investment Management Agreements permit the Company to enter into separate  
agreements for shareholder services or accounting services with the respective  
Funds.                                                                          

For the United Funds and TMK/United Funds, the total management fee for each
Fund is the sum of (i) a fee computed on a Fund's net asset value as of the     
close of business on each business day at an annual rate specified in the       
respective Investment Management Agreements (the "Specific Fee") and (ii) a     
fee computed each day on the combined net asset values of all Funds in the      
group of Funds of which the particular Fund is a member (the "Group Fee"). For  
the Specific Fee for each Fund and the Group Fee for each group of Funds see    
"--Fund Summary."                                                               

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The following table sets forth information with respect to the Company's    
mutual fund investment management fees for the periods shown.                   

                                                                [Download Table]

                                              YEAR ENDED DECEMBER 31,         
                                      ----------------------------------------
                                       1993    1994    1995    1996     1997  
                                      ------- ------- ------- ------- --------
                                               (DOLLARS IN THOUSANDS)         
                                                                              
Mutual Fund Investment Management                                             
 Fees:                                                                        
  Equity funds....................... $37,759 $45,145 $59,651 $74,199 $ 90,870
  Fixed income funds.................  18,441  18,172  17,859  18,126   18,513
  Money market funds.................   1,603   1,462   1,670   1,989    2,179
                                      ------- ------- ------- ------- --------
      Total (1)...................... $57,803 $64,779 $79,180 $94,314 $111,562
                                      ======= ======= ======= ======= ========
As a percent of average assets:                                               
  Equity funds.......................   .554%   .566%   .619%   .618%    .610%
  Fixed income funds.................   .504%   .504%   .501%   .497%    .492%
  Money market funds.................   .426%   .423%   .420%   .414%    .406%

--------                                                                        

(1) Other advisory fees for the years ended December 31, 1993, 1994, 1995,      
1996, and 1997 in the amounts of $6,405, $5,932, $6,109, $7,152, and    
  $6,222, respectively are not reflected in this table. These fees fluctuate
based on the amounts and composition of assets managed and the effect of
performance based fees in some periods.                                 

Each Fund's board of directors, including a majority of the directors who   
are not "interested persons," of the Fund or the Company within the meaning of  
the Investment Company Act, and its shareholders must have approved the         
Investment Management Agreement between the respective Fund and the Company.    
These agreements may continue in effect from year to year if specifically       
approved at least annually by (i) the Fund's board of directors, including a    
majority vote of the directors who are not parties to the agreements or         
"interested persons" of any such party, or (ii) the vote of the holders of a    
majority of the outstanding voting securities of the Fund and the vote of a     
majority of the Fund's directors who are not parties to the agreement or        
"interested persons" of any such party, each vote being cast in person at a     
meeting called for such purpose. Each agreement automatically terminates in     
the event of its "assignment" as defined in the Investment Company Act or the   
Investment Advisers Act and may be terminated without penalty by the Fund by    
giving the Company 60 days' written notice, if the termination has been         
approved by a majority of the Fund's directors or shareholders. The Offering    
will not and the Spin-Off should not constitute an "assignment" for the         
purposes of the Investment Company Act or the Investment Advisers Act. The      
Company may terminate an Investment Management Agreement without penalty on     
120 days' written notice.                                                       

The Company receives fees for provision of investment advisory and          
management services to the Funds. See "--Fund Summary." The Company pays all    
of its own expenses incurred in performing investment advisory and management   
services for the Funds.                                                         

SERVICE AGREEMENTS                                                              

The Company provides various services to the Funds and their shareholders   
pursuant to a Shareholder Servicing Agreement with each Fund (except the        
TMK/United Funds) and an Accounting Services Agreement with each Fund.          
Pursuant to the Shareholder Servicing Agreements, the Company performs          
shareholder servicing functions, including the maintenance of shareholder       
accounts, the issuance, transfer, and redemption of shares, distribution of     
dividends and payment of redemptions, furnishing information related to the     
Fund, and handling shareholder inquiries. The Funds pay a monthly fee to the    
Company for such services. Pursuant to the Accounting Services Agreements, the  
Company provides the Funds with bookkeeping and accounting services and         
assistance, including maintenance of the Fund's records, pricing of the Fund's  
shares, and preparation of the prospectuses for existing shareholders, proxy    
statements, and certain reports. The Funds pay the Company a monthly fee for    
such services. A Fund's Shareholder Servicing Agreement or Accounting Services  
Agreement                                                                       

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may be adopted or amended with the approval of the Fund's directors. Each of    
the Shareholder Servicing Agreements and Accounting Services Agreements have    
terms of one year expiring on October 1, 1998. The following table sets forth   
the revenues received by the Company for accounting and shareholder services    
and number of shareholder accounts for the periods and at the dates indicated:  

                                                                [Download Table]

                                          YEAR ENDED DECEMBER 31,             
                             -------------------------------------------------
                               1993      1994      1995      1996      1997   
                             --------- --------- --------- --------- ---------
                                          (DOLLARS IN THOUSANDS)              
                                                                              
Transfer agent fees......... $  15,277 $  16,028 $  16,906 $  21,436 $  23,951
Custodian fees..............     4,767     4,958     5,179     5,352     5,123
Portfolio accounting                                                          
 services...................     1,236     1,311     1,442     1,590     1,689
                             --------- --------- --------- --------- ---------
  Totals.................... $  21,280 $  22,297 $  23,527 $  28,378 $  30,763
                             ========= ========= ========= ========= =========

                                               DECEMBER 31,                   
                             -------------------------------------------------
                               1993      1994      1995      1996      1997   
                             --------- --------- --------- --------- ---------
                                                                              
Number of Mutual Fund                                                         
 Accounts................... 1,085,600 1,150,300 1,220,100 1,306,000 1,376,200

UNDERWRITING AND DISTRIBUTION                                                   

The Company distributes the Funds pursuant to an Underwriting Agreement with
each Fund (except TMK/United Funds). The Company distributes products relating  
to the TMK/United Funds under an Underwriting Agreement between the Company     
and Torchmark. Under each Underwriting Agreement with a Fund, the Company       
offers and sells the Fund's shares on a continual basis and pays the costs of   
sales literature and printing of prospectuses furnished to it by the Fund. The  
Company receives underwriting commissions for such services, a major portion    
of which is paid to financial advisers and sales managers of the Company. The   
Company charges a sales charge to clients upon purchase of shares in the        
United Funds, which are front-end load funds, which ranges from zero to 5.75%   
of the net asset value of the shares purchased. The sales charge for the        
United Funds typically declines as the net asset value of the account           
increases, and there is generally no sales charge for purchases over $2.0       
million. In addition, investors may combine their purchases of these Funds'     
shares within the respective group of Funds to qualify for the reduced sales    
charge. Investors in the W&R Funds generally pay contingent deferred sales      
charges upon redemption of shares in W&R Funds of up to 3% of the net asset     
value of the redeemed shares if the shares are redeemed within two calendar     
years of their purchase, declining to zero if the shares are held for more      
than four calendar years. The following table sets forth the revenues received  
by the Company for underwriting commissions for distribution of the Funds for   
the periods indicated:                                                          

                                                                [Download Table]

                                                 YEAR ENDED DECEMBER 31,        
                                         ---------------------------------------
                                          1993    1994    1995    1996    1997  
                                         ------- ------- ------- ------- -------
                                                 (DOLLARS IN THOUSANDS)         
                                                                                
Underwriting/distribution fees:                                                 
  United Funds(1)....................... $49,444 $43,007 $39,802 $48,505 $50,134
  TMK/United Funds(1)...................  15,169  14,692  14,032  18,452  18,240
  W&R Funds(2)..........................     598   1,623   2,762   4,719   6,487
                                         ------- ------- ------- ------- -------
    Totals (3).......................... $65,211 $59,322 $56,596 $71,676 $74,861
                                         ======= ======= ======= ======= =======

--------                                                                        
(1) Underwriting fees.                                                          
(2) Distribution fees.                                                          
(3) Commissions from other products (primarily life insurance) for the years    
ended December 31, 1993, 1994, 1995, 1996, and 1997 in the amounts of   
$12,826, $12,828, $13,797, $14,161, and $14,566, respectively, are not  
reflected in the totals.                                                

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The Underwriting Agreements are subject to approval annually by the         
directors of the respective Funds, including a majority of the directors who    
are not "interested persons" of the Funds or the Company within the meaning of  
the Investment Company Act, or "interested persons" of any such party and who   
have no direct or indirect financial interest in the operation of the           
Distribution and Service Plan (as described below), as applicable, of the       
Funds or any agreements relating thereto ("independent directors"), cast in     
person at a meeting called for the purpose of voting on such approval. Each     
agreement automatically terminates in the event of its assignment, as defined   
in the Investment Company Act, and either party may terminate the agreement     
without penalty upon 60 days' written notice.                                   

Under a Distribution and Service Plan for Class A shares of the United Funds
(except the money market fund) and under a Distribution and Service Plan for    
the Class B shares of the money market fund and the W&R Funds, each of which    
plans are adopted under Rule 12b-1 of the Investment Company Act, the Funds     
may pay the Company a fee for its costs and expenses in connection with the     
provision of personal service to shareholders of the Fund and maintenance of    
shareholder accounts and distribution costs and expenses under the              
Distribution and Service Plan. Each Distribution and Service Plan is subject    
to approval annually by the directors, including the independent directors,     
cast in person at a meeting called for the purpose of voting on such approval.  
The Fund may terminate the Plan at any time without penalty.                    

PROPERTIES                                                                      

The Company operates from a 115,000 square foot facility that it owns, which
is located in United Investors Park, a commercial development at 6300 Lamar     
Avenue, Overland Park, Kansas. The Company leases additional property as sales  
office space at approximately 177 locations. The Company believes that its      
properties are in good repair and adequate for their purposes.                  

EMPLOYEES                                                                       

At December 31, 1997, the Company had 603 full-time employees. Its 2,160    
financial advisers are independent contractors.                                 

COMPETITION                                                                     

The Company is subject to substantial competition in all aspects of its     
business. The Company competes with hundreds of other mutual fund management    
distribution and service companies that distribute their fund shares through a  
variety of methods including affiliated and unaffiliated sales forces, broker-  
dealers, and direct sales to the public of shares offered at low or no sales    
charge. Many larger mutual fund complexes have developed relationships with     
brokerage houses with large distribution networks, which may enable these fund  
complexes to reach broader client bases. The Company competes with firms        
offering similar services and products to those of the Company, such as         
American Express Financial Advisors Inc. and Edward D. Jones & Co. In           
addition, the Company competes with brokerage and investment banking firms,     
insurance companies, banks, and other financial institutions and businesses     
offering other financial products in all aspects of its business. Although no   
one company or group of companies dominates the mutual fund management and      
services industry, many are larger than the Company and have greater resources  
and offer a wider array of financial services and products. Competition is      
based on the methods of distribution of fund shares, the ability to develop     
investment products for certain segments of the market, the ability to meet     
the changing needs of investors, the ability to achieve superior investment     
management performance, the type and quality of shareholder services, and the   
success of sales promotion efforts. The Company believes that competition in    
the mutual fund industry will increase as a result of increased flexibility     
afforded to banks and other financial institutions to sponsor mutual funds and  
distribute mutual fund shares, and as a result of consolidation and             
acquisition activity within the industry. In addition, barriers to entry to     
the investment management business are relatively few, and the Company thus     
anticipates that it will face a growing number of competitors. Many of the      
Company's competitors in the mutual fund industry are larger, better known,     
have penetrated more markets than the Company, and have more resources than     
those of the Company.                                                           

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The distribution of mutual fund products has undergone significant          
developments in recent years, which has increased the competitive environment   
in which the Company operates. These developments include growth in the number  
of mutual funds; introduction of service fees payable to broker-dealers that    
provide continual service to clients in connection with their mutual fund       
investments; and development of complex distribution systems with multiple      
classes of shares.                                                              

The Company's financial advisers compete primarily with small broker/dealers
and independent financial advisers. The market for financial advice and         
planning is extremely fragmented, consisting primarily of relatively small      
companies with fewer than 100 investment professionals. Competition is based    
on sales techniques, personal relationships and skills, the quality of          
financial planning products and services, the quality of the financial and      
insurance products offered, and the quality of service. Competition in this     
area is intense and some of the financial advisers' competitors are larger,     
better known, and have more resources.                                          

REGULATION                                                                      

Virtually all aspects of the Company's businesses are subject to various    
Federal and state laws and regulations. These laws and regulations are          
primarily intended to protect investment advisory clients and shareholders of   
registered investment companies. Under such laws and regulations, agencies      
that regulate investment advisers and broker-dealers such as the Company have   
broad administrative powers, including the power to limit, restrict, or         
prohibit such an adviser or broker-dealer from carrying on its business in the  
event that it fails to comply with such laws and regulations. In such event,    
the possible sanctions that may be imposed include the suspension of            
individual employees, limitations on engaging in certain lines of business for  
specified periods of time, revocation of investment adviser and other           
registrations, censures, and fines. The Company believes that it is in          
substantial compliance with all material laws and regulations.                  

The business of the Company is subject to regulation at both the Federal and
state level by the Commission and other regulatory bodies. Certain              
subsidiaries of the Company are registered with the Commission under the        
Investment Advisers Act and the Funds are registered with the Commission under  
the Investment Company Act and with various states under applicable state       
laws. A subsidiary of the Company is also registered as a broker-dealer with    
the Commission and is subject to regulation by the National Association of      
Securities Dealers, Inc. (the "NASD") and various states.                       

Certain subsidiaries of the Company are registered with the Commission under
the Investment Advisers Act and, as such, are regulated by and subject to       
examination by the Commission. The Investment Advisers Act imposes numerous     
obligations on registered investment advisers including fiduciary duties,       
recordkeeping requirements, operational requirements, and disclosure            
obligations. The Commission is authorized to institute proceedings and impose   
sanctions for violations of the Investment Advisers Act, ranging from censure   
to termination of an investment adviser's registration. The failure of a        
registered subsidiary of the Company to comply with the requirements of the     
Commission could have a material adverse effect on the Company. The Company     
believes it is in substantial compliance with the requirements of the           
Investment Advisers Act and the regulations under the Investment Advisers Act.  

The Company derives a large portion of its revenues from investment         
management agreements. Under the Investment Advisers Act, the Company's         
investment management agreements terminate automatically if assigned without    
the client's consent. Under the Investment Company Act, advisory agreements     
with registered investment companies such as the Funds terminate automatically  
upon assignment. The term "assignment" is broadly defined and includes direct   
assignments as well as assignments that may be deemed to occur, under certain   
circumstances, upon the transfer, directly or indirectly, of a controlling      
interest in the Company. The Offering will not and the Spin-Off should not      
constitute an assignment for these purposes. Accordingly, the Company does not  
intend to seek approvals of new investment advisory agreements from the         
shareholders of the registered investment companies it manages or other client  
consents in connection with these transactions. See "Risk Factors--Uncertainty  
of Planned Spin-Off of the Company."                                            

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A subsidiary of the Company is also a member of the Securities Investor     
Protection Corporation. In its capacity as a broker-dealer, the Company is      
required to maintain certain minimum net capital and cash reserves for the      
benefit of its customers, which may limit its ability to pay dividends. The     
Company's net capital, as defined, has consistently met or exceeded all         
minimum requirements. Various regulations cover certain investment strategies   
that may be used by the Funds for hedging purposes. To the extent that the      
Funds purchase futures contracts, the Funds are subject to the commodities and  
futures regulations of the Commodity Futures Trading Commission. Under the      
rules and regulations of the Commission promulgated pursuant to the Federal     
securities laws, the Company is subject to periodic examination by the          
Commission. The Company is also subject to periodic examination by the NASD. A  
subsidiary of the Company is registered under the Exchange Act as a transfer    
agent. The most recent examination of the Company and the Funds by the          
Commission was in 1997. The most recent examination of the Company by the NASD  
was February 1996.                                                              

LEGAL MATTERS                                                                   

From time to time the Company is a defendant in various lawsuits in routine 
matters incidental to its business. The Company does not believe that the       
outcome of any current litigation will have a material effect on the financial  
condition of the Company.                                                       

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FUND SUMMARY                                                                    

For the United Funds and TMK/United Funds, the total management fee for each
Fund is the sum of (i) a fee computed on a Fund's net asset value as of the     
close of business on each business day at an annual rate specified in the       
respective Investment Management Agreements (the "Specific Fee") and (ii) a     
fee computed each day on the combined net asset values of all Funds in the      
group of Funds of which the particular Fund is a member (the "Group Fee"). The  
Group Fee rate for the United Funds is computed each day on the basis of the    
combined net asset value of all of the United Funds at annual rates of .51% of  
the first $750 million of the United Funds' net asset values declining to .36%  
of the United Funds' net asset values in excess of $12 billion. The Group Fee   
rate for TMK/United Funds is computed each day on the basis of the combined     
net asset value of all the series at annual rates of .51% of the first $750     
million of the TMK/United Funds' net asset value declining to .45% of the       
TMK/United Funds' net asset value in excess of $2.25 billion. For the series    
of W&R Funds, the total management fee is the Specific Fee computed daily on    
each series' net assets value at the annual rate shown in the table set forth   
below.                                                                          

The following table sets forth, for each fund or portfolio within the Funds,
the date that shares in such Fund were first offered to the public, the net     
assets of such Fund or portfolio as of December 31, 1997, a description of its  
investment objective, and the Specific Fee for each Fund.                       

                                                        [Enlarge/Download Table]

                                       NET ASSETS                                 SPECIFIC FEE 
                           FIRST  AT DECEMBER 31, 1997                            AS A FRACTION
FUND/PORTFOLIO NAME       OFFERED (DOLLARS IN MILLIONS)   INVESTMENT  OBJECTIVE       OF 1%    
-------------------       ------- --------------------- ------------------------- -------------
                                                                                               
UNITED FUNDS                                                                                   
United Asset Strategy      1995          $   28         Seeks high total return        .30     
 Fund, Inc.                                             over the long term by                  
                                                        allocating its assets                  
                                                        among stocks, bonds and                
                                                        short-term instruments.                
United Cash Management,    1979          $  528         Seeks to maximize current     None     
 Inc.                                                   income to the extent                   
                                                        consistent with stability              
                                                        of principal by investing              
                                                        in money market                        
                                                        instruments.                           
United Continental         1970          $  577         Seeks to provide current       .15     
 Income                                                 income to the extent that              
 Fund, Inc.                                             market and economic                    
                                                        conditions permit with a               
                                                        secondary objective of                 
                                                        seeking long-term                      
                                                        appreciation of capital.               
United Bond Fund           1964          $  529         Seeks to achieve a             .03     
                                                        reasonable return with                 
                                                        more emphasis on                       
                                                        preservation of capital.               
United Income Fund         1940          $6,495         Seeks maintenance of           .15     
                                                        current income, subject                
                                                        to market conditions with              
                                                        a secondary goal of                    
                                                        capital growth.                        
United Accumulative Fund   1940          $1,599         Seeks capital growth,          .15     
                                                        with a secondary                       
                                                        objective of current                   
                                                        income.                                

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                                                        [Enlarge/Download Table]

                                       NET ASSETS                                 SPECIFIC FEE 
                           FIRST  AT DECEMBER 31, 1997                            AS A FRACTION
FUND/PORTFOLIO NAME       OFFERED (DOLLARS IN MILLIONS)   INVESTMENT OBJECTIVE        OF 1%    
-------------------       ------- --------------------- ------------------------- -------------
                                                                                               
United Science and         1950          $1,067         Seeks long-term capital        .20     
 Technology Fund                                        growth through a                       
                                                        portfolio emphasizing                  
                                                        science and technology                 
                                                        securities.                            
United Gold & Government   1985          $   18         Seeks high total return        .30     
 Fund, Inc.                                             through investing in                   
                                                        precious metals, mineral-              
                                                        related securities and                 
                                                        gold, silver and platinum              
                                                        during periods of actual               
                                                        or expected inflation or               
                                                        when the environment for               
                                                        investments in precious                
                                                        metals appears to be                   
                                                        favorable, and U.S.                    
                                                        Government securities                  
                                                        during periods of actual               
                                                        or expected disinflation               
                                                        or low inflation.                      
United Government          1982          $  131         Seeks high current income     None     
 Securities Fund, Inc.                                  consistent with safety of              
                                                        principal by investing                 
                                                        primarily in securities                
                                                        issued or guaranteed by                
                                                        the U.S. Government or                 
                                                        its agencies or                        
                                                        instrumentalities.                     
United High Income Fund,   1979          $1,076         Seeks a high level of          .15     
 Inc.                                                   current income, with a                 
                                                        secondary objective of                 
                                                        seeking capital growth                 
                                                        when consistent with its               
                                                        primary objective.                     
United High Income Fund    1986          $  417         Seeks a high level of          .15     
 II, Inc.                                               current income, with a                 
                                                        secondary objective of                 
                                                        seeking capital growth                 
                                                        when consistent with its               
                                                        primary objective.                     
United International       1970          $1,018         Seeks long-term capital        .30     
 Growth Fund, Inc.                                      appreciation, with a                   
                                                        secondary objective of                 
                                                        realization of income, by              
                                                        investing in securities                
                                                        issued by companies or                 
                                                        governments of any                     
                                                        nation.                                
United Municipal Bond      1976          $  989         Seeks income that is not       .03     
 Fund, Inc.                                             subject to Federal income              
                                                        taxation by investing                  
                                                        principally in tax-exempt              
                                                        municipal bonds.                       

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                                    NET ASSETS                                 SPECIFIC FEE 
                        FIRST  AT DECEMBER 31, 1997                            AS A FRACTION
FUND/PORTFOLIO NAME    OFFERED (DOLLARS IN MILLIONS)   INVESTMENT OBJECTIVE        OF 1%    
-------------------    ------- --------------------- ------------------------- -------------
                                                                                            
United Municipal High   1986          $  491         Seeks a high level of          .10     
 Income Fund, Inc.                                   income that is not                     
                                                     subject to Federal income              
                                                     taxation by investing                  
                                                     principally in medium and              
                                                     lower quality tax-exempt               
                                                     municipal bonds.                       
United New Concepts     1983          $  674         Seeks capital growth by        .35     
 Fund, Inc.                                          investing in securities                
                                                     issued by relatively new               
                                                     or unseasoned companies,               
                                                     companies in the early                 
                                                     stages of development or               
                                                     smaller companies in new               
                                                     and emerging industries                
                                                     with above average                     
                                                     opportunity for growth.                
United Retirement       1972          $  769         Seeks the highest long-        .15     
 Shares, Inc.                                        term total return                      
                                                     consistent with                        
                                                     reasonable safety of                   
                                                     capital.                               
United Vanguard Fund,   1969          $1,441         Seeks capital                  .30     
 Inc.                                                appreciation through                   
                                                     diversified holdings of                
                                                     securities issued                      
                                                     primarily by companies                 
                                                     that have appreciation                 
                                                     possibilities and through              
                                                     proper timing of                       
                                                     purchases and sales of                 
                                                     securities.                            
WADDELL & REED FUNDS,                                                                       
 INC.                                                                                       
Total Return Fund       1992          $  417         Seeks current income and       .71     
                                                     capital growth by                      
                                                     investing primarily in                 
                                                     securities issued by                   
                                                     companies that have a                  
                                                     record of paying regular               
                                                     dividends on common stock              
                                                     or have the potential for              
                                                     capital appreciation.                  
Growth Fund             1992          $  269         Seeks capital                  .81     
                                                     appreciation by investing              
                                                     primarily in securities                
                                                     issued by companies that               
                                                     offer above-average                    
                                                     growth potential,                      
                                                     including relatively new               
                                                     or unseasoned companies.               

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                                     NET ASSETS                                 SPECIFIC FEE 
                         FIRST  AT DECEMBER 31, 1997                            AS A FRACTION
FUND/PORTFOLIO NAME     OFFERED (DOLLARS IN MILLIONS)   INVESTMENT OBJECTIVE        OF 1%    
-------------------     ------- --------------------- ------------------------- -------------
                                                                                             
Limited-Term Bond Fund   1992           $ 19          Seeks a high level of          .56     
                                                      current income consistent              
                                                      with preservation of                   
                                                      capital by investing                   
                                                      primarily in debt                      
                                                      securities of investment               
                                                      grade, including U.S.                  
                                                      government securities,                 
                                                      and maintaining a dollar-              
                                                      weighted average maturity              
                                                      of the portfolio of two                
                                                      to five years.                         
Municipal Bond Fund      1992           $ 40          Seeks income that is not       .56     
                                                      subject to Federal income              
                                                      taxation by investing                  
                                                      primarily in municipal                 
                                                      bonds.                                 
International Growth     1992           $ 71          Seeks long-term                .81     
 Fund                                                 appreciation, with a                   
                                                      secondary goal of                      
                                                      realization of income, by              
                                                      investing in securities                
                                                      issued by companies or                 
                                                      governments of any                     
                                                      nation.                                
Asset Strategy Fund      1995           $ 17          Seeks high total return        .81     
                                                      over the long term by                  
                                                      allocating assets among                
                                                      stocks, bonds and short-               
                                                      term instruments.                      
Science and Technology   1997           $  5          Seeks long-term capital        .71     
 Fund                                                 growth through a                       
                                                      portfolio emphasizing                  
                                                      science and technology                 
                                                      securities.                            
High Income Fund         1997           $  7          Seeks a high level of          .66     
                                                      current income, with a                 
                                                      secondary objective of                 
                                                      seeking capital growth                 
                                                      when consistent with its               
                                                      primary objective.                     
TMK/UNITED FUNDS, INC.                                                                       
Money Market Portfolio   1987           $ 43          Seeks maximum current         None     
                                                      income consistent with                 
                                                      stability of principal by              
                                                      investing in money market              
                                                      securities.                            
Bond Portfolio           1987           $100          Seeks current income with      .03     
                                                      an emphasis on                         
                                                      preservation of capital.               
High Income Portfolio    1987           $120          Seeks high current             .15     
                                                      income, with a secondary               
                                                      objective of capital                   
                                                      growth.                                

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                                       NET ASSETS                                 SPECIFIC FEE 
                           FIRST  AT DECEMBER 31, 1997                            AS A FRACTION
FUND/PORTFOLIO NAME       OFFERED (DOLLARS IN MILLIONS)   INVESTMENT OBJECTIVE        OF 1%    
-------------------       ------- --------------------- ------------------------- -------------
                                                                                               
Growth Portfolio           1987           $639          Seeks capital growth with      .20     
                                                        current income as a                    
                                                        secondary objective.                   
Income Portfolio           1991           $637          Seeks maintenance of           .20     
                                                        current income, subject                
                                                        to market conditions with              
                                                        a secondary objective of               
                                                        capital growth.                        
International Portfolio    1994           $115          Seeks long-term                .30     
                                                        appreciation of capital,               
                                                        with current income as a               
                                                        secondary objective by                 
                                                        investing principally in               
                                                        securities issued by                   
                                                        companies or governments               
                                                        of any nation.                         
Small Cap Portfolio        1994           $148          Seeks capital growth by        .35     
                                                        investing primarily in                 
                                                        securities issued by                   
                                                        relatively new or                      
                                                        unseasoned companies,                  
                                                        companies in their early               
                                                        stages of development or               
                                                        smaller companies                      
                                                        positioned in new and                  
                                                        emerging industries with               
                                                        above average opportunity              
                                                        for rapid growth.                      
Balanced Portfolio         1994           $ 68          Seeks current income with      .10     
                                                        a secondary objective of               
                                                        long-term appreciation of              
                                                        capital.                               
Limited-Term Bond          1994           $  4          Seeks a high level of          .05     
 Portfolio                                              current income consistent              
                                                        with preservation of                   
                                                        capital by investing                   
                                                        primarily in debt                      
                                                        securities of investment               
                                                        grade and maintaining a                
                                                        dollar weighted average                
                                                        maturity of the portfolio              
                                                        of two to five years.                  
Asset Strategy Portfolio   1995           $ 10          Seeks high total return        .30     
                                                        over the long term by                  
                                                        allocating its assets                  
                                                        among stocks, bonds and                
                                                        short-term instruments.                
Science and Technology     1997           $ 10          Seeks long-term capital        .20     
 Portfolio                                              growth by investing                    
                                                        primarily in science and               
                                                        technology securities.                 

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MANAGEMENT  

DIRECTORS AND EXECUTIVE OFFICERS                                                

As of the date of the Offering, the Company's directors and executive       
officers are expected to be, and their ages as of December 31, 1997 are, as     
follows:                                                                        

                                                        [Enlarge/Download Table]

       NAME                        AGE                          POSITION                          
       ----                        ---                          --------                          
                                                                                                  
David L. Boren....................  56 Director                                                   
Joseph M. Farley..................  70 Director                                                   
Louis T. Hagopian.................  72 Director                                                   
Robert L. Hechler.................  60 Executive Vice President, Chief Operating Officer, Director
Henry J. Herrmann.................  55 President, Chief Investment Officer, Treasurer, Director   
Joseph L. Lanier, Jr..............  65 Director                                                   
Harold T. McCormick...............  68 Director                                                   
Sharon K. Pappas..................  38 Secretary                                                  
George J. Records.................  63 Director                                                   
R.K. Richey.......................  71 Director                                                   
Keith A. Tucker...................  52 Chairman of the Board and Chief Executive Officer, Director

--------                                                                        

Set forth below is a description of the backgrounds of the executive        
officers and directors of the Company.                                          

David L. Boren has been President of The University of Oklahoma, Norman,    
Oklahoma since November 1994, and prior thereto he served as United States      
Senator from Oklahoma, 1979-1994 and a member of the Senate Finance Committee.  
Mr. Boren is a director of Torchmark Corporation, Phillips Petroleum            
Corporation, AMR Corporation, and Texas Instruments, Inc. Mr. Boren's term on   
the Board of Directors of the Company expires in 2000.                          

Joseph M. Farley has been Of Counsel at Balch & Bingham, Attorneys and      
Counselors, Birmingham, Alabama since November 1992. Mr. Farley is a director   
of Torchmark Corporation. Mr. Farley's term on the Board of Directors of the    
Company expires in 2000.                                                        

Louis T. Hagopian has been owner of Meadowbrook Enterprises, Darien,        
Connecticut, an advertising and marketing consultancy, since January 1990 and   
is Vice Chairman, Partnership for a Drug-Free America, New York, New York. Mr.  
Hagopian is a director of Torchmark Corporation. Mr. Hagopian's term on the     
Board of Directors of the Company expires in 1999.                              

Robert L. Hechler has been President, Chief Executive Officer, and Treasurer
of Waddell & Reed, Inc. since April 1993 and President of Waddell & Reed        
Services Company since January 1982. Mr. Hechler's term on the Board of         
Directors expires in 2000.                                                      

Henry J. Herrmann has been Vice President and Chief Investment Officer of   
the Company since April 1993, and prior thereto was Senior Vice President and   
Chief Investment Officer of the Company since March 1987. Mr. Herrmann's term   
on the Board of Directors of the Company expires in 2001.                       

Joseph L. Lanier, Jr. has been Chairman of the Board and Chief Executive    
Officer of Dan River Incorporated, Danville, Virginia, a textile manufacturer,  
since November 1989. Mr. Lanier is a director of Torchmark Corporation,         
Flowers Industries, Inc., Dimon Inc., and SunTrust Banks, Inc. Mr. Lanier's     
term on the Board of Directors of the Company expires in 2001.                  

Harold T. McCormick has served as Chairman and Chief Executive Officer of   
Bay Point Yacht & Country Club, Panama City, Florida since March 1988 and as    
Chairman, First Ireland Spirits Co., Ltd., Dublin, Ireland, since February      
1996. Mr. McCormick is a director of Torchmark Corporation. Mr. McCormick's     
term on the Board of Directors of the Company expires in 2000.                  

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Sharon K. Pappas has been Senior Vice President, Secretary, and General     
Counsel of Waddell & Reed, Inc. and Waddell & Reed Services Company since       
September 1994. Ms. Pappas was Assistant General Counsel of Waddell & Reed,     
Inc. and Waddell & Reed Services Company from January 1992 until September      
1994.                                                                           

George J. Records has served as Chairman of Midland Financial Co., Oklahoma 
City, Oklahoma, a bank and financial holding company for retail banking and     
mortgage operations, since 1982. Mr. Records is a director of Torchmark         
Corporation. Mr. Records' term on the Board of Directors of the Company         
expires in 1999.                                                                

R. K. Richey is Chairman of and Chief Executive Officer of Torchmark        
Corporation and is a director of Full House Resorts, Inc., Vesta Insurance      
Group, Inc., and of each of the United Funds, the W&R Funds, and the            
TMK/United Funds. Mr. Richey's term on the Board of Directors of the Company    
expires in 1999.                                                                

Keith A. Tucker is a director and Vice Chairman of Torchmark Corporation. He
is a director of each of the United Funds, W&R Funds, and the TMK/United        
Funds. Mr. Tucker's term on the Board of Directors of the Company expires in    
1999.                                                                           

BOARD OF DIRECTORS                                                              

The Company's Board of Directors is divided into three classes with the     
initial term of the first class expiring at the annual meeting of stockholders  
to be held in 1999 (four directors), the second class expiring at the annual    
meeting of stockholders to be held in 2000 (four directors), and the third      
class expiring at the annual meeting of stockholders to be held in 2001 (two    
directors). The Company intends to add two independent directors to the third   
class of directors as soon as practicable after the Offering.                   

The executive officers of the Company are elected annually and serve at the 
discretion of the Board of Directors.                                           

After completion of the Offering, the Company intends to establish an Audit 
Committee and a Compensation Committee, each composed of at least two           
independent directors, an Executive Committee and a Nominating Committee. The   
Audit Committee will recommend the annual appointment of the Company's          
auditors, with whom the Audit Committee will review the scope of audit and      
non-audit assignments and related fees, accounting principles used by the       
Company in financial reporting, internal auditing procedures, and the adequacy  
of the Company's internal control procedures. The Compensation Committee will   
administer the Company's Plans (as defined below) and make recommendations to   
the Board of Directors regarding compensation for the Company's executive       
officers. In the absence of a meeting of the Board of Directors, the Executive  
Committee is empowered to exercise all the powers and authority of the Board    
of Directors in the management of the business affairs of the Company, except   
that the Executive Committee is not permitted to take any action that           
committees are expressly prohibited from taking under the terms of the          
Certificate of Incorporation, the Bylaws, or the laws of the State of           
Delaware. The Nominating Committee will review the qualifications of potential  
candidates for the Board of Directors, report its findings to the Board of      
Directors, and propose nominations for Board memberships for approval by the    
Board of Directors and submission to the stockholders of the Company for        
approval.                                                                       

COMPENSATION OF DIRECTORS                                                       

Directors of the Company who are also employees receive no additional       
compensation for their services as a director. It is currently anticipated      
that non-employee directors (the "Non-Employee Directors") will receive an      
annual retainer and a fee for each board and committee meeting that they        
attend, the amounts of which will be determined in the future. The Company      
reimburses all directors of the Company for travel expenses incurred in         
attending meetings of the Board of Directors and its committees.                

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EXECUTIVE COMPENSATION                                                          

The following table sets forth the compensation received by the persons who 
will be the Company's Chairman of the Board and Chief Executive Officer and     
the four other most highly paid executive officers of the Company (the "Named   
Executive Officers") for the Company's two most recent fiscal years. Mr.        
Tucker's compensation has been paid by Torchmark Corporation and Messrs.        
Herrmann, Hechler, Thompson, and Intagliata's compensation has been paid by     
the Company. Effective January 1, 1998, Mr. Tucker's compensation has been      
paid by the Company, and Mr. Tucker's compensation has been reflected in the    
financial statements included in the Prospectus as a Company expense for all    
periods presented.                                                              

SUMMARY COMPENSATION TABLE  

                                                        [Enlarge/Download Table]

                               ANNUAL COMPENSATION       LONG TERM COMPENSATION AWARDS    
                              ---------------------- -------------------------------------
                                                     SECURITIES UNDERLYING    ALL OTHER   
NAMES AND PRINCIPAL POSITION  YEAR  SALARY  BONUS(1)    OPTIONS/SARS(2)    COMPENSATION(3)
----------------------------  ---- -------- -------- --------------------- ---------------
                                                                                          
Keith A. Tucker.........      1997 $800,016 $      0        386,892            $6,619     
                              1996 $700,000 $      0        130,000            $6,114     
Henry J. Herrmann.......      1997 $420,000 $715,000        124,600            $4,800     
                              1996 $420,000 $392,000         36,000            $4,500     
Robert L. Hechler.......      1997 $300,000 $565,000         69,500            $4,800     
                              1996 $300,000 $295,000         16,000            $4,500     
Russell E. Thompson.....      1997 $364,000 $175,396          6,200            $4,800     
                              1996 $350,000 $146,254          8,000            $4,500     
Antonio Intagliata......      1997 $235,000 $140,000              0            $4,800     
                              1996 $235,000 $ 42,000          2,000            $4,500     

--------                                                                        
(1) Mr. Tucker elected to defer his 1997 bonus of $400,000, and Messrs.         
 Herrmann and Hechler each elected to defer $100,000 of their 1997 bonuses
  pursuant to the Torchmark Corporation 1996 Executive Deferred Compensation
Stock Option Plan (the "TMK Executive Deferral Plan"). Mr. Tucker also  
 elected to defer his 1996 bonus of $425,000 pursuant to the TMK Executive
Deferral Plan. These amounts are excluded from the table. Pursuant to a 
  Portfolio Manager's Deferred Compensation Plan, $75,000 and $60,000 of the
1997 portfolio manager's bonuses for Messrs. Thompson and Intagliata,   
respectively, were mandatorily deferred, and $54,000 and $18,000 of the 
1996 portfolio manager's bonuses were deferred by Messrs. Thompson and  
 Intagliata, respectively. These amounts are also excluded from the table.
(2) In January 1997, Mr Tucker elected to convert his 1996 interest bearing     
deferred compensation account in the TMK Executive Deferral Plan into   
options on 163,992 shares of Torchmark Corporation common stock. In     
 September 1997, officers and directors of Torchmark were allowed to elect
to participate in a program pursuant to the Torchmark Corporation 1987  
 Stock Incentive Plan, as amended, (the "TMK Incentive Plan") whereby they
could elect to exercise their existing options in Torchmark Corporation 
 common stock and receive new restoration options in Torchmark Corporation
common stock. Messrs. Tucker, Herrmann, Hechler, and Thompson elected to
participate in this exercise program and accordingly received option    
  grants shown in this table in Torchmark Corporation common stock under the
TMK Incentive Plan in 1997 (Mr. Tucker received an option for 223,900   
shares thereunder). Mr. Intagliata elected not to participate in the    
  exercise program and thus was not awarded options in Torchmark Corporation
common stock in 1997. Mr. Intagliata does continue to hold unexercised  
options in Torchmark Corporation common stock pursuant to the TMK       
 Incentive Plan. For 1996, securities underlying options reflect grants of
options pursuant to the TMK Incentive Plan.                             
(3) For Mr. Tucker, includes Torchmark contributions to Torchmark Corporation   
Savings and Investment Plan, a funded, qualified defined contribution   
plan, of $4,800 for 1997 and $4,500 for 1996; interest only on prior    
contributions to the Torchmark Corporation Supplemental Savings and     
 Investment Plan, an unfunded, non-qualified defined contribution plan, of
 $1,723 for 1997 and $1,614 for 1996 and interest on deferred compensation
in the Torchmark Corporation Restated Deferred Compensation Plan for    
  Directors, Advisory Directors, Directors Emeritus and Officers, as amended
of $96 for 1997. Includes Company contributions to the United Investors 
Management Company Saving and Investment Plan, a funded, qualified      
  contribution plan, for Messrs. Herrmann, Hechler, Thompson, and Intagliata
of $4,800 each for 1997 and $4,500 each for 1996.                       

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The following table provides information on grants of options in fiscal year
1997 to the Named Executive Officers to purchase shares of Torchmark            
Corporation common stock.                                                       

OPTIONS GRANTED DURING 1997 

                                                        [Enlarge/Download Table]

                                          INDIVIDUAL GRANTS                                              
                         ---------------------------------------------------                             
                                                                              POTENTIAL REALIZABLE VALUE 
                         NUMBER OF                                             AT ASSUMED ANNUAL RATES   
                         SECURITIES    % OF TOTAL                            OF STOCK PRICE APPRECIATION 
                         UNDERLYING  OPTIONS GRANTED  EXERCISE OR                  FOR OPTION TERM       
                          OPTIONS     TO EMPLOYEES    BASE PRICE  EXPIRATION ----------------------------
          NAME           GRANTED(1) IN FISCAL YEAR(2) (PER SHARE)    DATE         5%            10%      
          ----           ---------- ----------------- ----------- ---------- ------------- --------------
                                                                                                         
Keith A. Tucker(3)......  163,492         29.5%         $25.875    01/31/08  $   2,660,449 $    6,742,095
                          223,400         45.2%         $39.125    09/27/07     $5,496,872    $13,930,142
Henry J. Herrmann (3)...  124,600         25.2%         $39.125    09/27/07  $   3,065,847 $    7,769,452
Robert L. Hechler (3)...   69,500         14.1%         $39.125    09/27/07  $   1,710,083 $    4,333,683
Russell E. Thompson                                                                                      
 (3)....................    6,200          1.3%         $39.125    09/27/07  $     152,554 $      386,602
Antonio Intagliata (3)..        0            0%            N/A         N/A   $           0 $            0

--------                                                                        
(1) Mr. Tucker's option expiring January 31, 2008, is a non-qualified stock     
option acquired pursuant to his election to convert his 1996 interest   
bearing deferred compensation account in the TMK Executive Deferral Plan
to options in Torchmark Corporation common stock. Such options were     
  granted with an eleven year term at an exercise price equal to the closing
 price of Torchmark Corporation common stock on the date of his conversion
election (the grant date). All options granted to Messrs. Herrmann and  
Hechler and Mr. Tucker's option expiring on September 27, 2007 are non- 
qualified stock options granted on Torchmark Corporation common stock   
pursuant to a restoration option program under the TMK Incentive Plan.  
 Such options were granted with a ten year and two day term at an exercise
 price equal to the closing price of Torchmark Corporation common stock on
the grant date. As restoration options issued in connection with the    
exercise of fully vested options, these options are fully exercisable as
of their September 25, 1997 grant date.                                 
(2) Percentages calculated for Mr. Tucker are shown separately for grants       
 under the TMK Executive Deferral Plan (163,492 share option) in which Mr.
  Tucker was the only Company employee participating with other employees of
Torchmark and for grants under the TMK Incentive Plan (223,400 share    
option) based upon option grants to Mr. Tucker and all other Company    
employees (excluding all other Torchmark employees).                    
(3) The Company will, upon consummation of the Offering, grant to Messrs.       
Tucker, Herrmann, Hechler, Thompson, and Intagliata non-qualified stock 
options for 180,000 shares, 334,600 shares, 292,200 shares, 165,600     
shares, and 86,800 shares, respectively, under the Stock Incentive Plan 
described below as part of such persons' 1997 compensation and/or as    
 offering related options. Such options will be exercisable at the initial
  public offering price. In addition, the Company will, upon consummation of
  the Offering, make restricted stock awards to Messrs. Herrmann and Hechler
 of 110,000 and 90,000 shares of Class A Common Stock, respectively. Also,
 as of the date of the closing of the Offering, 48,000 shares of Torchmark
Corporation common stock previously issued to Mr. Tucker pursuant to a  
Torchmark stock plan will be converted into restricted stock under a    
 Company stock plan. See "--Conversion of Torchmark Equity Compensation to
  Class A Common Stock of the Company." These grants and conversions are not
reflected in the table.                                                 

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The following table provides information on option exercises in 1997 by the 
Named Executive Officers and the value of each such Named Executive Officers'   
unexercised options to acquire common stock of Torchmark Corporation at         
December 31, 1997.                                                              

AGGREGATED OPTION EXERCISES DURING 1997 AND OPTION VALUES AT DECEMBER 31, 1997  

                                                        [Enlarge/Download Table]

                                                                                        VALUE OF UNEXERCISED   
                                                        NUMBER OF SECURITIES                IN-THE-MONEY       
                                                       UNDERLYING UNEXERCISED                OPTIONS AT        
                         NUMBER OF SHARES            OPTIONS AT FISCAL YEAR END           FISCAL YEAR END      
                             ACQUIRED       VALUE    ------------------------------   -------------------------
          NAME           ON EXERCISE (1)   REALIZED  EXERCISABLE     UNEXERCISABLE    EXERCISABLE UNEXERCISABLE
          ----           ---------------- ---------- -------------   --------------   ----------- -------------
                                                                                                               
Keith A. Tucker.........     357,224      $7,068,164         388,400          393,492 $4,371,350   $6,967,588  
Henry J. Herrmann.......     198,200      $4,204,512         166,100           58,000 $1,323,744   $1,074,250  
Robert L. Hechler.......     127,622      $3,250,168          81,500           28,000 $  458,844   $  530,000  
Russell E. Thompson.....      10,000      $  221,250          10,200           12,000 $  100,988   $  220,500  
Antonio Intagliata......           0      $        0          10,074            5,000 $  239,676   $   96,125  

--------                                                                        
(1) Of shares shown as acquired on exercise, Messrs. Tucker, Herrmann,          
 Hechler, and Thompson retained 106,500, 57,000, 44,100, and 3,000 shares,
respectively, after cashless stock option exercises.                    

COMPENSATION, BENEFITS, AND RETIREMENT PLANS                                    

The Company intends to implement the following stock plans: The 1998 Stock  
Incentive Plan (the "Stock Incentive Plan"), The 1998 Non-Employee Director     
Stock Option Plan (the "Non-Employee Director Plan"), and The 1998 Executive    
Deferred Compensation Stock Option Plan (the "Executive Deferral Plan")         
(collectively, the "Plans"). Terms not expressly defined in the descriptions    
of the Plans below have the same meaning as assigned to such terms in the       
Plans. Each Plan will be filed as an exhibit to the Registration Statement of   
which this Prospectus is a part.                                                

Upon consummation of the Offering and after giving effect to the grants made
in connection with the Offering referred to below, under the Plans the Company  
will have (on a fully diluted basis and assuming the exercise of all options    
granted to them and excluding shares of stock purchased outside of the Plans)   
reserved 16.3 million shares of Class A Common Stock, or approximately 25% of   
the outstanding Common Stock after the Offering, for issuance under the Plans,  
including (i) awarded options to purchase up to 1,069,200 shares of Class A     
Common Stock, approximately 1.7% of the outstanding Common Stock, to the Named  
Executive Officers; and (ii) issued 200,000 shares of restricted Class A        
Common Stock, less than 1% of the outstanding Common Stock, to the Named        
Executive Officers. In addition, 48,000 shares of restricted stock of           
Torchmark Corporation previously issued to Mr. Tucker pursuant to a Torchmark   
stock plan will be converted into Restricted Stock under the Stock Incentive    
Plan. See "--Conversion of Torchmark Equity Compensation to Class A Common      
Stock of the Company." The following is a brief summary of each of the Plans,   
which are qualified in their entirety by the Plans, copies of which will be     
filed as an exhibit to the Registration Statement of which the Prospectus is a  
part.                                                                           

Stock Incentive Plan                                                          

The Stock Incentive Plan, covering 13,000,000 shares, will permit (i) the   
grant of options to purchase shares of Class A Common Stock intended to         
qualify as incentive stock options under (S) 422 of the Code ("Incentive        
Options"); (ii) the grant of options that do not so qualify ("Non-Qualified     
Options"); (iii) the issuance of Class A Common Stock that may be subject to    
certain restrictions ("Restricted Stock"); (iv) stock appreciation rights,      
which entitle the holder, upon exercise, to receive cash or shares of Class A   
Common Stock in value not to exceed the appreciation in value of Class A        
Common Stock since the date of grant (an "SAR"); and (v) deferred stock awards  
("Deferred Stock Awards"), which entitle the recipient to receive shares at     
future dates without any payment in cash or property. The Stock Incentive Plan  
was designed and intended as a performance incentive for officers, employees,   
consultants, and other key persons performing services for the                  

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Company to encourage such persons to acquire or increase a proprietary          
interest in the success and progress of the Company. Upon consummation of the   
Offering and giving effect to the grants made in connection with the Offering,  
2,372,300 options will be awarded under the Stock Incentive Plan, and the       
Company will issue an aggregate of 200,000 shares of Restricted Stock under     
the Stock Incentive Plan (excluding the conversion of Mr. Tucker's Torchmark    
restricted stock). These stock options will be initially exercisable at the     
initial public offering price, and such stock options and the restricted stock  
grants will generally vest in equal one-third increments on the second, third,  
and fourth anniversaries of the consummation of the Offering.                   

The Stock Incentive Plan is administered by the Compensation Committee (the 
"Compensation Committee"). All members of the Compensation Committee are        
"disinterested persons" as that term is defined under the rules promulgated by  
the Commission. On and after the date the Stock Incentive Plan becomes subject  
to (S) 162(m) of the Code, all members of the Compensation Committee will be    
"outside directors" as defined in (S) 162(m) of the Code and the regulations    
thereunder. The Compensation Committee has full power to select, from among     
the employees and other persons eligible for awards, the individuals to whom    
awards will be granted, to make any combination of awards to participants, and  
to determine the specific terms and conditions of each award, subject to the    
provisions of the Stock Incentive Plan. Persons eligible to participate in the  
Stock Incentive Plan will be those officers, employees, and other key persons,  
such as consultants, of the Company who are responsible for or contribute to    
the management, growth, or profitability of the Company, as selected from time  
to time by the Compensation Committee. SARs may be granted in conjunction with  
options, entitling the holder upon exercise to receive an amount in any         
combination of cash or unrestricted common stock of the Company (as determined  
by the Compensation Committee), not greater in value than the increase in the   
value of the shares covered by such right since the date of grant. Each SAR     
will terminate upon the termination of the related option.                      

Only employees of the Company may be granted Incentive Options. The option  
exercise price of each option will be determined by the Compensation Committee  
but may not be less than 100% of the fair market value of the Class A Common    
Stock on the date of grant in the case of Incentive Options and Non-Qualified   
Options.                                                                        

The Stock Incentive Plan provides that automatic formula-based Non-Qualified
Options for 6,000 shares will be awarded to non-employee directors on the date  
of consummation of the Offering with an exercise price equal to the offering    
price and 3,000 shares will be awarded to non-employee directors on the first   
day of each calendar year on which the Company's Class A Common Stock is        
traded on the New York Stock Exchange at 100% of the market value of the Class  
A Common Stock on that date. Additionally, non-employee directors may be        
granted non-formula based Non-Qualified Options at the discretion of the        
Compensation Committee, which may have an exercise price equal to the market    
value of the stock on the grant date or at a discount not to exceed 25% of the  
market value on the grant date.                                                 

The Compensation Committee may make Deferred Stock Awards under the Stock   
Incentive Plan. These non-transferable awards entitle the recipient to receive  
shares at a future date or dates without any payment in cash or property in     
one or more installments, as determined by the Compensation Committee. Receipt  
of deferred stock may be conditioned on such matters as the Compensation        
Committee determines, including continued employment or attainment of           
performance goals. Such rights will generally terminate upon the participant's  
termination of employment. Any deferral restrictions under a Deferred Stock     
Award may be accelerated or waived by the Compensation Committee at any time    
(including following termination of employment).                                

The Compensation Committee may also award shares of Restricted Stock to     
officers, other employees, and key persons of the Company. The conditions and   
restrictions applicable to the Restricted Stock may include the achievement of  
certain performance goals and continued employment with the Company through a   
specified restricted period. These conditions and restrictions, as well as the  
purchase price of shares of Restricted Stock, will be determined by the         
Compensation Committee. If the performance goals and other restrictions are     
not attained, the employees will forfeit their awards of Restricted Stock.      

The Board of Directors may at any time amend or discontinue the Stock       
Incentive Plan and the Compensation Committee may at any time amend or cancel   
outstanding awards for the purpose of satisfying                                

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changes in the law or for any other lawful purpose. No such action may be       
taken, however, that adversely affects any rights under outstanding awards      
without the holder's consent. Further, amendments to the Stock Incentive Plan   
will be subject to approval by the Company's stockholders if and to the extent  
required by the Code to preserve the qualified status of Incentive Options or   
to preserve tax deductibility of compensation earned under stock options and    
stock appreciation rights.                                                      

The Stock Incentive Plan provides that in the event of a "Change of Control"
(as defined in the Stock Incentive Plan), unless otherwise determined by the    
Compensation Committee prior to such Change of Control or to the extent         
expressly provided by the Compensation Committee at or after the time of        
grant, or in the event of a "Potential Change of Control" (as defined in the    
Stock Incentive Plan), in each case occurring after the first anniversary of    
completion of the Offering, (i) all stock options and related SARs will become  
immediately excisable, (ii) the restrictions and deferral limitations           
applicable to outstanding Restricted Stock Awards and Deferred Stock Awards     
will lapse and the shares in question will fully vest, and (iii) the value of   
such options and awards, to the extent determined by the Compensation           
Committee, will be settled on the basis of the highest price paid (or offered)  
during the preceding 60-day period, as determined by the Compensation           
Committee. In the sole discretion of the Compensation Committee, such           
settlements may be made in cash or in stock, as is a necessary to effect the    
Change of Control. In addition, at any time prior to or after a Change of       
Control, the Compensation Committee may accelerate awards and waive conditions  
and restrictions on any awards to the extent it may determine appropriate.      
Generally, if an optionee's employment or consultant status with the Company    
or a director's status as an outside director terminates by reason of or        
within three months following a merger or other business combination resulting  
in a Change of Control, the Stock Incentive Plan provides that such optionee's  
stock options will terminate upon the latest of (i) six months and one day      
after the merger or business combination, (ii) ten business days following the  
expiration of the period during which publication of financial results          
covering at least thirty days of post-merger combined operations has occurred,  
and (iii) the expiration of the stated term of such stock option or director    
stock option.                                                                   

Approximately 60 employees are currently eligible to participate in the     
Stock Incentive Plan.                                                           

Non-Employee Director Plan                                                  

The Non-Employee Director Plan will permit Non-Employee Directors to elect  
to defer on an annual basis all or a designated portion of their director       
compensation payable in 1998 or thereafter into the interest-bearing account    
of the Non-Employee Director Plan (the "Interest Account"). Such deferrals      
would be made subject to a one-time opportunity by the Non-Employee Director    
to convert that particular year's deferred director compensation into options,  
granted either at market value or at a designated discount not to exceed 25%    
of market value, to acquire Class A Common Stock. The Company's current Non-    
Employee Directors as well as any subsequently elected Non-Employee Directors   
constitute the class of persons eligible to participate in this plan. Up to     
800,000 shares of Class A Common Stock are proposed to be reserved for          
issuance pursuant to the Non-Employee Director Plan.                            

On or before December 31 of each year, each Non-Employee Director will      
determine whether to receive all or a portion of his or her annual retainer     
and Board of Directors and committee meeting fees for the following calendar    
year in cash or to defer all or a portion (in 10% increments, but not less      
than 50%) of such Annual Compensation (as defined in the Non-Employee Director  
Plan) (assuming maximum attendance at scheduled Board of Directors and          
committee meetings) into an interest-bearing account in the Non-Employee        
Director Plan. In the case of a newly elected Non-Employee Director, such       
determination to defer compensation must be made within the 30-day period       
immediately following election to the Board of Directors. The determination to  
defer, if made, will be indicated upon a Primary Election Form, which will      
specify the percentage of compensation deferred and the basis for payment of    
the interest-bearing account balance (a lump sum or designated number of        
monthly payments not to exceed 120) to the Non-Employee Director upon the       
earliest of (i) December 31 of the fifth year after the year with respect to    
which the deferral was made; (ii) the first business day of the fourth month    
after such Non-Employee Director's death; or (iii) termination as a Non-        
Employee Director, for any reason other than by death.                          

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At any time, but only once, during the calendar year immediately following  
the filing of a Primary Election Form, a participating Non-Employee Director    
may elect to convert the then current balance in his or her Interest Account    
for the calendar year to which such Primary Election Form relates into options  
to acquire Class A Common Stock. For example, if a Primary Election Form was    
filed in December 1997 deferring Annual Compensation to be earned in 1998, the  
Non-Employee Director may elect at any time during 1998 to convert such         
deferred amount plus accrued interest to the conversion election date into      
stock options. The irrevocable election to receive options as of this election  
date, which is made on a Secondary Election Form, will specify the percentage   
of such stock options to be granted at an exercise price of 100% of the Fair    
Market Value per Share on the Option Grant Date and the percentage of options   
to be granted at an exercise price of not less than 75% of the Fair Market      
Value per Share (with the discount of up to 25% to be determined by the         
Compensation Committee in its discretion). Non-Employee Directors may elect to  
receive discounted stock options, market value stock options, or a combination  
of both. To the extent that a Non-Employee Director chooses to receive          
discounted stock options, he or she will receive options on a smaller number    
of shares with a lower exercise price per share while a decision to receive     
market value options will result a larger number of shares subject to option    
with a higher exercise price per share.                                         

Options granted pursuant to the Non-Employee Director Plan will be non-     
qualified stock options. Based upon the Non-Employee Director's decision as to  
the exercise price (discounted or market value) of the options to be received,  
the number of Shares subject to such option will be the whole number of Shares  
equal to (a) the dollar amount which the Non-Employee Director has elected to   
convert to options divided by (b) the per share value of an option on the       
Option Grant Date, as determined using an option valuation model selected by    
the Compensation Committee. Options are first exercisable, cumulatively, as to  
10% of the Shares on each of the first through tenth anniversaries of the       
Option Grant Date. The term of the option will be as specified by the           
Compensation Committee but in no event may the period of time over which an     
option may be exercised exceed eleven years from the Option Grant Date. In no   
event will death, disability, retirement, other termination of directorship,    
or failure to be reelected as a director shorten the term of any outstanding    
option. Options may be subject to accelerated vesting and will be immediately   
exercisable upon the Non-Employee Director's death or Disability, a Change in   
Control of the Company as defined in the plan or the unanimous decision of the  
Compensation Committee to accelerate. Upon acceleration, an option remains      
exercisable for the remainder of its original term. Options may be exercised    
in whole or in part. Shares will be issued pursuant to the exercise of an       
option only upon receipt by the Company of payment in full of the aggregate     
purchase price for the Shares subject to the option or portion thereof being    
exercised. The Compensation Committee may determine the specific method of      
payment, including permitting "cashless exercises," and other terms and         
provisions of options in its sole discretion.                                   

Options will not be assignable or transferable other than by will or by the 
laws of descent and distribution, except that the Compensation Committee may    
permit transfers that it, in its sole discretion, concludes do not result in    
accelerated taxation and that are otherwise appropriate and desirable taking    
into account any applicable securities laws.                                    

Based upon current Federal tax laws, a Non-Employee Director will not       
recognize income upon the making of a proper and timely deferral to the         
Interest Account nor will income be recognized upon the conversion of such      
account balance to options. The Non-Employee Director will recognize income     
for purposes of Federal income tax when the amount in his or her Interest       
Account is paid out or immediately upon the exercise of the options, generally  
in an amount equal to the difference between the fair market value of the       
Common Stock on the date of exercise and the exercise price of the option. The  
Company generally will receive a corresponding tax deduction when the Non-      
Employee Director recognizes income subject to any applicable deductibility     
limitations of the Code.                                                        

The Non-Employee Director Plan will be administered by the Compensation     
Committee, which will have the authority to interpret and construe the Non-     
Employee Director Plan, make necessary rules and regulations to administer the  
plan, and designate persons as its agents who are neither members of the        
Compensation Committee or the Board of Directors to carry out administrative    
responsibilities under the Plan.                                                

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Adjustments will be made to the total number of Shares reserved for issuance
under the Non-Employee Director Plan, the number of Shares covered by, and the  
exercise price of each outstanding option if the Company at any time changes    
the number of issued Shares through a stock dividend, stock split,              
recapitalization, reorganization, or other change in corporate structure        
affecting the Shares. The Compensation Committee will authorize the issuance,   
continuation, or assumption of outstanding options or provide for other         
equitable adjustments after changes in Shares resulting from any merger,        
consolidation, sale of assets, acquisition of property or stock, or similar     
occurrence in which the Company is the surviving or continuing corporation      
upon such terms and conditions as it deems necessary. In the case of an         
acquisition where the Company is not the surviving or continuing corporation    
and outstanding Shares are not converted into or exchanged for different        
securities, cash, or other property, a Non-Employee Director who holds an       
outstanding option will have the right then and during the remaining term of    
the option to receive the same acquisition consideration received by the        
Company's other shareholders.                                                   

The Board of Directors may amend, suspend, or terminate the Non-Employee    
Director Plan or any stock option award notice under the plan at any time,      
except that it may condition amendments or modifications on shareholder         
approval if necessary or advisable because of tax, securities, or other         
applicable laws, policies, or regulations. No amendment, modification, or       
termination will adversely affect any outstanding options or Interest Accounts  
without the consent of the participant.                                         

Executive Deferral Plan                                                     

The Executive Deferral Plan will permit Eligible Executives to defer salary 
and bonus into interest-bearing accounts in the plan, subject to a one time     
opportunity to elect to convert within a designated time period any deferred    
salary for that year as well as a one time opportunity to elect within a        
designated time period to convert any deferred bonus for that calendar year     
into options to acquire Class A Common Stock. Such options may be granted with  
an exercise price of the fair market value of the stock or at a discount not    
to exceed 25% of its market value. The Eligible Executives will be determined   
from time to time by the Compensation Committee or its designee or by the       
Chairman of the Board. Currently, three persons have been designated as         
eligible to participate in the Executive Deferral Plan, and it is contemplated  
that the number of Eligible Executives will not in any case exceed 10 persons.  
Up to 2,500,000 shares of Class A Common Stock have been reserved for issuance  
pursuant to the Executive Deferral Plan.                                        

On or before the last day of each calendar quarter, an Eligible Executive   
may elect to receive all or a portion of his or her salary for the next         
calendar quarter in cash or may irrevocably elect to defer all or a portion in  
10% or $10,000 increments of next quarter's salary into an Interest Account     
for Salary under the Executive Deferral Plan by delivering a Primary Election   
Form for Salary to the plan administrator. Such Primary Election Form for       
Salary will specify the amount of Salary to be deferred into the interest-      
bearing account and the form and timing of the payout of deferred amounts,      
except that if an executive elects to defer Salary for more than one quarter    
in a calendar year, the form and timing of payout for each quarter's deferral   
must be identical.                                                              

At any time prior to December 31 of each year, an Eligible Executive may    
also elect to receive all or a portion of his or her bonus for the current      
calendar year in cash or may irrevocably elect to defer all or a portion (in    
10% or $10,000 increments) of such current calendar year bonus into an          
Interest Account for Bonus under the Executive Deferral Plan by delivering a    
Primary Election Form for Bonus to the Plan administrator. Such Primary         
Election Form for Bonus will specify the amount of Annual Bonus to be deferred  
and the form and timing of payout of the deferred amount, except that if an     
executive elects to defer both Salary and Annual Bonus for a particular         
calendar year, the form and timing must be identical.                           

The Interest Accounts of an Eligible Executive will be segregated to reflect
deferred compensation on a year-by-year basis and as to the type of             
compensation deferred (salary or bonus). Interest will be credited to such      
Interest Accounts at the rate determined from time to time by the Compensation  
Committee. Payment of the balances in an executive's Interest Accounts will be  
made as designated by the executive in a lump sum or in the number of           
approximately equal monthly installments not to exceed 120 which have been      
selected by the                                                                 

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executive. Such payments will begin on the earliest of (a) December 31 of the   
fifth year after the year with respect to which the deferral was made, (b) the  
first business day of the fourth month after the executive's death, or (c)      
termination as an employee of the Company for any reason other than by death.   

At any time, but only once, during the twelve-month period following the end
of the calendar year with respect to which an executive deferred Salary into    
the Executive Deferral Plan, such executive will have the right to convert his  
or her Interest Account for Salary for the previous year into options in Class  
A Common Stock by filing an irrevocable Secondary Election Form for Salary.     
Also, at any time, but only one time, during the twelve month period following  
the end of a calendar year with respect to which an executive has deferred      
Annual Bonus into the Plan, such executive will have the right to convert his   
or her Interest Account for Bonus for such previous year into options in Class  
A Common Stock by filing an irrevocable Secondary Election Form for Bonus. The  
filing of such Secondary Election Form for Salary or Secondary Election Form    
for Bonus will result in receipt by the executive of options as of the date of  
such filing. The Secondary Election Form will specify the percentage of         
options to be granted at an exercise price of 100% of the Fair Market Value     
per Share on the Option Grant Date and the percentage of options to be granted  
at an exercise price of not less than 75% of the Fair Market Value per Share    
on the Option Grant Date (with the discount of up to 25% to be determined by    
Compensation Committee in its discretion). An Eligible Executive may elect to   
receive market value stock options, discounted stock options or a combination   
of both. To the extent that an executive selects market value options, he or    
she will receive options on a larger number of shares with a higher exercise    
price than if discounted options on fewer shares with a lower exercise price    
were selected.                                                                  

Options issued pursuant to the Executive Deferral Plan will be non-qualified
stock options. Based upon the Eligible Executive's decision as to the exercise  
price (discounted or market value) of the options to be received, the number    
of Shares subject to such option will be the whole number of Shares equal to    
(i) the dollar amount that the executive has elected to convert to options      
divided by (ii) the per share value of an option on the Option Grant Date, as   
determined using an option valuation model selected by the Compensation         
Committee. Options are first exercisable, cumulatively, as to 10% of the        
Shares on each of the first through tenth anniversaries of the Option Grant     
Date, except that any option held by a "Covered Employee," as defined in (S)    
162(m) of the Code, will not be exercisable before the first day of the         
calendar year immediately following the year in which the executive ceased to   
be a Covered Employee. The term of the option will be as specified by the       
Compensation Committee but in no event may the period of time over which an     
option may be exercised exceed the longer of eleven years from the Option       
Grant Date or the thirtieth day of the calendar year immediately following the  
year in which the executive ceased to be a Covered Employee. In no event will   
death, disability, retirement, or other termination of employment shorten the   
term of any outstanding option. Options will be subject to accelerated vesting  
and will be immediately exercisable upon the executive's death or disability,   
a Change in Control, or the unanimous decision of the Compensation Committee    
to accelerate. Upon acceleration, an option remains exercisable for the         
remainder of its original term.                                                 

Options may be exercised in whole or in part. Shares will be issued pursuant
to the exercise of an option only upon receipt by the Company of payment in     
full of the aggregate purchase price for the Shares subject to the option or    
portion thereof being exercised. The Compensation Committee may determine the   
specific method of payment, including permitting "cashless exercises," and      
other terms and provisions of options in its sole discretion.                   

Options will not be assignable or transferable other than by will or by the 
laws of descent and distribution, except that the Compensation Committee may    
permit transfers that it, in its sole discretion, concludes do not result in    
accelerated taxation and that are otherwise appropriate and desirable taking    
into account any applicable securities laws.                                    

Based on current Federal tax laws, a participating executive will not       
recognize income upon the making of a proper and timely deferral to Interest    
Accounts nor will income be recognized upon the conversion of such account      
balances to options. The executive will recognize income for purposes of        
Federal income tax when the amounts in his or her Interest Accounts are paid    
out or immediately upon the exercise of the non-qualified                       

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options, generally in an amount equal to the option spread on the date of       
exercise. The Company generally will receive a corresponding tax deduction      
when the executive recognizes income, subject to any applicable deductibility   
limitations of the Code.                                                        

The Executive Deferral Plan will be administered by the Compensation        
Committee, which will have the authority to interpret and construe the plan,    
make necessary rules and regulations to administer the Plan and designate       
persons as its agents who are neither members of the Compensation Committee or  
the Board of Directors to carry out administrative responsibilities under the   
Plan.                                                                           

Adjustments will be made to the total number of Shares reserved for issuance
under the Executive Deferral Plan, the number of Shares covered by and the      
exercise price of each outstanding option if the Company at any time changes    
the number of issued Shares through a stock dividend, stock split,              
recapitalization, reorganization, or other change in corporate structure        
affecting the Shares. The Compensation Committee will authorize the issuance,   
continuation or assumption of outstanding options or provide for other          
equitable adjustments after changes in the number of Shares resulting from any  
merger, consolidation, sale of assets, acquisition of property or stock, or     
similar occurrence in which the Company is the surviving or continuing          
corporation upon such terms and conditions as it deems necessary. In the case   
of an acquisition where the Company is not the surviving or continuing          
corporation and outstanding Shares are not converted into or exchanged for      
different securities, cash, or other property, a participating executive who    
holds an outstanding option will have the right then and during the remaining   
term of the option to receive the same acquisition consideration received by    
the Company's other shareholders.                                               

The Board of Directors may amend, suspend, or terminate the Executive       
Deferral Plan or any Stock Option Award Notice under the Plan at any time,      
except that it may condition amendments or modifications on shareholder         
approval if necessary or advisable because of tax, securities, or other         
applicable laws, policies, or regulations. No amendment, modification, or       
termination will adversely affect any outstanding options or Interest Accounts  
without the consent of the participating executive.                             

Other Plans                                                                 

Waddell & Reed Financial, Inc. Savings and Investment Plan (formerly the    
United Investors Management Company Savings and Investment Plan). This plan     
will be amended and restated, effective as of a date no sooner than the date    
of the Offering, to rename it the Waddell & Reed Financial, Inc. Savings and    
Investment Plan, bring it into compliance with recent legislative and           
regulatory changes, and change the investment options available to              
participants. Effective as of the same date as the adoption of this plan,       
assets and liabilities related to the following categories of current and       
former employees will be transferred from the plan to the Torchmark             
Corporation Savings and Investment Plan: (i) current and former employees of    
UILIC who have an account balance under this plan, (ii) current employees of    
WRAMCO employed in the marketing division; and (iii) former employees of the    
Company or one of its affiliates who are currently employed by Torchmark or     
its affiliates. Effective as of the same date, the Torchmark Corporation        
Savings and Investment Plan will also transfer to the Waddell & Reed            
Financial, Inc. Savings And Investment Plan assets and liabilities related to   
former employees of Torchmark or its affiliates who are currently employees of  
the Company. The Waddell & Reed Financial, Inc. Savings and Investment Plan is  
a tax-qualified, defined contribution plan that allows eligible employees of    
the Company to contribute up to 16% of compensation, as described below, on an  
after-tax basis. Employees of the Company are eligible to begin contributing    
to the plan after completing one year of service. The Company makes a matching  
contribution to the Plan, on behalf of each employee who elects to              
participate, equal to 50% of the participant's contributions up to the first    
6% of compensation. The plan defines compensation as total compensation         
(including amounts deferred pursuant to a cafeteria plan under (S) 125 of the   
Code) less annual service awards and other non-cash prizes, deferred            
compensation, director's fees, expense reimbursements or allowances, and        
amounts in excess of $150,000 per year (as adjusted). Participants may invest   
their account balances in a Torchmark stock fund or one or more of 15 mutual    
funds that are sponsored by the Company and made available under the plan.      
Effective no sooner than the date of the Offering, participants may elect to    
invest their account balances in Class A Common Stock. Effective as of this     
same date, participants will be permitted                                       

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to make investment transfers out of the Torchmark stock fund but will not be    
permitted to make transfers into it. Cash dividends on stock held in the        
Torchmark stock fund will be reinvested in Torchmark common stock. The plan     
permits investment transfers to take place up to eight times per year.          
Transfers take effect during the valuation period that begins after the         
valuation period during which a change is requested. There are 24 semi-monthly  
valuation periods under the plan. Participants may receive in-service           
distributions from their accounts under the plan. Distributions are also        
available upon normal retirement (age 65), disability, death, or termination    
of employment before normal retirement age. Upon the occurrence of this latter  
event, only the vested portion of the matching contributions account is         
distributable. The vesting schedule is a graded six-year schedule, beginning    
at 20% at two years of service and increasing in 20% increments per year of     
service until six years of service have been completed.                         

Waddell & Reed Financial, Inc. Retirement Income Plan (formerly the United  
Investors Management Company Retirement Income Plan). This plan will be         
amended and restated, effective as of a date no sooner than the date of the     
Offering, to rename it the Waddell & Reed Financial, Inc. Retirement Income     
Plan and bring it into compliance with recent legislative and regulatory        
changes. Effective upon adoption of this plan, assets and liabilities related   
to the following categories of employees will be transferred to the Torchmark   
Corporation Pension Plan: (i) existing employees of WRAMCO employed in the      
marketing division and (ii) former employees of the Company who are currently   
employed by Torchmark or its affiliates. Effective as of the same date, the     
Torchmark Corporation Pension Plan will also transfer to the Waddell & Reed     
Financial, Inc. Retirement Income Plan assets and liabilities related to        
former employees of Torchmark or its affiliates who are currently employees of  
the Company. The plan is a tax-qualified, non-contributory pension plan that    
covers all eligible employees of the Company who are 21 years of age or older   
and have one or more years of credited service. The benefits under the plan     
are determined by multiplying the average of the participant's earnings in the  
five consecutive years in which they were highest during the last ten years     
before the participant's retirement by a percentage equal to 2% for each year   
of credited service up to 30 years and by 1% for each year of credited service  
for the next ten years and then reducing that result by a Social Security       
offset and by other benefits from certain other plans of the Company and        
Torchmark or its affiliates. Earnings for purposes of the plan do not include   
bonuses or commissions (other than for Regional Vice Presidents, and Division   
Managers), directors' fees, expense reimbursements, employer contributions to   
retirement plans, deferred compensation, or any amounts in excess of $150,000   
per year (as adjusted). Benefits under the plan vest 100% after five years.     
Upon the participant's retirement, benefits under the plan are payable as an    
annuity or in a lump sum.                                                       

Waddell & Reed, Inc. Career Field Retirement Plan. Until January 1, 1973,   
Company employees participated in the Waddell & Reed, Inc. Career Field         
Retirement Plan. Under this plan, the Company contributed annually up to 10%    
of its profits less forfeitures, which were allocated to the participants on    
the basis of their compensation. Voluntary employee contributions were          
permitted under the plan but not required. Since January 1, 1973, no new        
participants have been admitted to the plan, and participants and the employer  
make no further contributions. All participants are fully vested. Upon the      
participant's retirement, termination of employment, disability, death, or      
reaching age 65, his account is used to purchase an annuity or is paid in a     
lump sum. Benefits paid under the plan do not offset benefits paid under any    
other pension plan.                                                             

Control Group Issues. Following the consummation of the Offering, the       
Company will continue to be a member of the Torchmark controlled group, within  
the meaning of (S) 414(b) of the Code, and will continue to be treated as a     
trade or business under common control with Torchmark, within the meaning of    
(S) 414(c) of the Code. All members of a controlled group or group of trades    
or businesses under common control are required to be treated as one employer   
for purposes of many of the Code's provisions relating to tax qualification,    
such as (S) 401 (nondiscrimination in benefits and various other                
nondiscrimination rules), (S) 410 (coverage rules), (S) 411 (benefit accrual    
and vesting rules), (S) 415 (maximum benefit rules), and (S) 416 (top-heavy     
rules). Application of these rules may require a change of benefits, coverage,  
or structure of the Company's qualified plans in order to maintain the          
qualified status of the plans.                                                  

Continuing Interrelationships with Torchmark. Both the Company's and        
Torchmark's qualified plans will continue to pay benefits to former employees   
of Torchmark who were entitled to benefits under the predecessor                

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plans maintained by the Company (except to the extent that assets and           
liabilities related to such benefits are spun off to other qualified plans of   
Torchmark). For example, employees of Torch Energy Advisors Incorporated who    
participated in the Company's plans prior to January 1, 1996, will continue to  
be entitled to receive benefit payments under the Company's tax-qualified       
plans.                                                                          

CONVERSION OF TORCHMARK EQUITY COMPENSATION TO CLASS A COMMON STOCK OF THE      
COMPANY                                                                         

As of March 4, 1998, there are outstanding options (the "Torchmark Options")
to purchase 7,354,844 shares of common stock of Torchmark Corporation granted   
by Torchmark to officers, directors, and employees of Torchmark Corporation     
and its affiliates, including the Company, under various Torchmark Corporation  
stock compensation plans (the "Torchmark Plans"). It is currently anticipated   
that in connection with the Spin-Off existing Torchmark Options will be         
adjusted (the "Adjusted Torchmark Options") and the Company will provide for    
the issuance of options (the "Conversion Options") to purchase Class A Common   
Stock to the holders of outstanding Torchmark Options (except for employee      
options granted on or after December 24, 1997). The Company and Torchmark will  
then provide (i) holders of Torchmark Options that are employees of the         
Company an election to receive either solely Conversion Options or a            
combination of Conversion Options and Adjusted Torchmark Options in a ratio     
that is reflective of the pro rata distribution of Class A Common Stock to      
Torchmark stockholders in the Spin-Off and (ii) holders of Torchmark Options    
who are employees of Torchmark an election to receive either solely Adjusted    
Torchmark Options or a combination of Conversion Options and Adjusted           
Torchmark Options in a ratio that is reflective of the pro rata distribution    
of Class A Common Stock to Torchmark stockholders in the Spin-Off. The number   
of options that the option holder will be entitled to receive and respective    
exercise prices will be determined so that (i) the ratio of the exercise price  
of each of the Conversion Options and the Adjusted Torchmark Options to the     
market value of their respective underlying common stock will not be less than  
the ratio of the exercise price of Torchmark Options to the underlying market   
value of the Torchmark Corporation common stock immediately prior to the Spin-  
Off and (ii) the aggregate intrinsic value of the Conversion Options and        
Adjusted Torchmark Options (the difference between the aggregate exercise       
price and aggregate market value of the underlying stock) will not exceed the   
aggregate intrinsic value inherent in Torchmark Options immediately prior to    
the Spin-Off. The Company and Torchmark reserve the right to adjust the         
foregoing procedures as it deems necessary in its sole discretion so that the   
purposes of the conversion are effected in a manner suitable to the Company     
and Torchmark. All other terms and conditions of the options issued in the      
conversions described above will be the same as the original options.           

As of the date of the closing of the Offering, Messrs. Tucker, Herrmann, and
Hechler will be able to elect to convert deferrals of bonus for 1997 under TMK  
Executive Deferral Plan into options to purchase Class A Common Stock at a      
formula price set forth in such plan. Such options to purchase Class A Common   
Stock will vest on the original schedule provided for in the Torchmark Plans.   
The number of shares to be subject to such options and the exercise price for   
the options to purchase Class A Common Stock will be computed in a manner       
consistent with the conversions referred to above. Finally, as of the date of   
the closing of the Offering, 48,000 shares of restricted stock of Torchmark     
Corporation previously issued to Mr. Tucker pursuant to a Torchmark stock plan  
will be converted into a number of shares of Restricted Stock under the Stock   
Incentive Plan equal to 48,000 times the market value of the Torchmark          
Corporation common stock divided by the offering price of the Class A Common    
Stock. Such shares of Restricted Stock will vest on the original schedule,      
which provides for ratable vesting over four years from the date of grant.      

As of the date of this Prospectus, it is not possible to determine how many 
shares of Class A Common Stock will be issued in the conversions described      
above. It is probable that holders of Class A Common Stock will experience      
dilution as a result of such conversions. Holders of Torchmark Options are not  
contractually bound to make either election outlined above.                     

Solely as an example of the potential dilution that could result to holders 
of Class A Common Stock, assuming that (i) the market value per share of        
Torchmark Corporation common stock is $46.00 (its closing price on the NYSE on  
March 4, 1998); (ii) the market value per share of the Class A Common Stock     
after giving effect to the Spin-Off is $23.00 (the initial public offering      
price set forth on the cover page of this Prospectus);                          

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and (iii) the market value per share of the Torchmark Corporation common stock  
after giving effect to the Spin-Off reflects the assumed value of the Class A   
Common Stock; and (iv) all persons eligible to receive Class A Common Stock     
options elect to receive the maximum available, then the conversions described  
above would result in the issuance of options to purchase approximately         
4,584,348 shares of Class A Common Stock with an average exercise price of      
approximately $14.503 per share. The foregoing example is for purposes of       
illustration only, and represents only the Company's and Torchmark's present    
intentions. Actual results of the conversions described above could vary.       

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS  

The following is a summary of certain arrangements between the Company and  
Torchmark. Although the Company believes that these arrangements embody terms   
and conditions no less favorable to the Company than could be obtained in       
negotiations between independent parties, these arrangements were established   
before the Offering and were not the subject of arm's-length negotiations. See  
"Risk Factors--Relationship with Torchmark" and "Risk Factors--Conflicts of     
Interest Between the Company and Torchmark."                                    

RELATIONSHIP WITH TORCHMARK                                                     

Intercompany Debt. From 1981 until the Offering, the Company has been a     
subsidiary of Torchmark. The Company, in keeping with Torchmark's strategy for  
its subsidiaries, paid virtually all of its earnings to Torchmark as            
dividends. In November 1997, the Company paid Torchmark a dividend of           
unsecured promissory notes in the original aggregate principal amount of        
approximately $480 million that mature on November 25, 2002 and bear interest   
at an annual rate of 8%, of which approximately $390 million was payable to     
Liberty (the "Second Liberty Note") and approximately $90 million was payable   
to Torchmark Corporation (the "Torchmark Note"). The Torchmark Note and the     
Second Liberty Note are mandatorily prepayable from any capital raised from     
any public or private offering of debt or equity securities, including the      
Offering. The Torchmark Note and the Second Liberty Note were issued to permit  
Torchmark to withdraw the Company's surplus earnings plus a portion of          
Torchmark's capital investment in the Company.                                  

The Company is also indebted to Liberty under the First Liberty Note, a     
promissory note dated December 23, 1996, originally in the aggregate principal  
amount of approximately $124 million, that matures on May 1, 2000 and bears     
interest at an annual rate of 6%. The First Liberty Note was issued in          
connection with an intercompany funding arrangement with Liberty and Torchmark  
Corporation.                                                                    

The Torchmark Note, the First Liberty Note, and the Second Liberty Note     
constitute the "Notes." Prior to the Offering, the Company prepaid the          
outstanding amounts remaining under the Notes to the extent necessary so that   
the remaining aggregate principal amount of the Notes equals the net proceeds   
of the Offering (including net proceeds to be realized from any exercise of     
the over-allotment option in excess of $35.0 million).                          

Spin-Off. From 1981 until the Offering, the Company has been a subsidiary of
Torchmark. After the consummation of the Offering, the Company will continue    
to be controlled by Torchmark, which will own more than 80% of the combined     
voting power of the Class A Common Stock and the Class B Common Stock of the    
Company. The holders of Class A Common Stock and Class B Common Stock have      
identical rights except that (i) holders of Class A Common Stock are entitled   
to one vote per share while holders of Class B Common Stock are entitled to     
five votes per share on all matters to be voted on by stockholders and (ii)     
holders of Class A Common Stock are not eligible to vote on matters relating    
exclusively to Class B Common Stock and vice versa. Torchmark Corporation has   
advised the Company that, subject to certain conditions, Torchmark currently    
intends to divest its ownership interest in the Company by means of the Spin-   
Off. Torchmark has advised the Company that it expects to complete the Spin-    
Off in the last quarter of 1998. Conditions to the Spin-Off include the         
receipt by Torchmark of a ruling by the Internal Revenue Service to the effect  
that such dividend will qualify as a tax-free distribution under (S) 355 of     
the Code and receipt of necessary regulatory approvals to the Spin-Off and      
related transactions. There can be no assurance that such conditions will be    
fulfilled or waived by Torchmark, nor can there be any assurance that, in any   
event, the Spin-Off will occur or that Torchmark will not sell or otherwise     
dispose of its Class A Common Stock and Class B Common Stock. See "Risk         
Factors--Uncertainty of Planned Spin-Off of the Company."                       

Several purposes underlie the Spin-Off. Torchmark, in keeping with its      
strategy for its subsidiaries, has caused the Company to pay virtually all of   
its earnings to Torchmark as dividends. The Company desires to be able to       
devote substantially more of its earnings to support its future growth. In      
addition, the Company believes that its future growth would be enhanced if it   
is able to set compensation and other policies for its core business on a       
separate basis from Torchmark. Also, in keeping with the strategy of enhancing  
shareholder value,                                                              

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Torchmark desires to access the capital markets and has determined that         
raising funds through the completion by the Company of a public offering of     
its Class A Common Stock will maximize value to Torchmark and its               
shareholders. The Offering will allow the Company to pay down the Notes and     
thereby allow Torchmark to realize cash proceeds from its investment in the     
Company. In the event that the Spin-Off is effected, holders of record of the   
common stock of Torchmark Corporation as of the record date will be entitled    
to receive a dividend of Common Stock without payment of further                
consideration. The Company expects, however, that the market value of           
Torchmark Corporation common stock will diminish after the Spin-Off dividend    
is effected to reflect the value of the shares of Common Stock distributed in   
the Spin-Off.                                                                   

The following are summaries of the Affiliate Agreements. Reference should be
made to the Affiliate Agreements themselves, which have been filed as exhibits  
to the Registration Statement of which this Prospectus is part.                 

Public Offering and Separation Agreement. The Company and Torchmark have    
agreed in principle to a public offering and separation agreement (the          
"Separation Agreement") setting forth the parties' agreements with respect to   
the Offering, the Spin-Off, and certain relationships of the parties prior to   
and following the Offering.                                                     

The Separation Agreement provides for certain conditions precedent to the   
parties obligation to consummate the Offering, including, that as of the date   
of the Offering, Liberty, a wholly owned subsidiary of Torchmark (which,        
before the Offering, owns more than 80% of the outstanding Common Stock and,    
after the Offering and the Recapitalization will own more than 80% of the       
voting power of the Common Stock) must control (within the meaning of (S)(S)    
355 and 368(c) of the Code) the Company, all other conditions to permit the     
Spin-Off to qualify as a tax-free distribution to Torchmark and the             
shareholders of Torchmark, must, to the extent applicable as of the time of     
the Offering, be satisfied, and there must be no event or condition that is     
likely to cause any of the foregoing not to be satisfied as of the time of the  
Spin-Off. Among other conditions, the Board of Directors of Torchmark           
Corporation must also have determined that the terms of the Offering are        
acceptable to Torchmark. Subject to the satisfaction of certain conditions,     
Torchmark has agreed to effect the Spin-Off as promptly as practicable after    
October 1, 1998. The Company and Torchmark have agreed that the Board of        
Directors of Torchmark Corporation will have the sole discretion to determine   
whether to waive any stated condition. The Spin-Off is conditioned upon, among  
other things, the receipt of a private letter ruling from the Internal Revenue  
Service that the Spin-Off will qualify as a tax-free distribution for Federal   
income tax purposes under (S) 355 of the Code, which ruling must be in form     
and substance satisfactory to Torchmark in its sole discretion. The Spin-Off    
is also conditioned upon the absence of, since December 31, 1997, any material  
adverse change and Torchmark and the Company must have complied with all        
conditions set forth in the ruling with respect to the business or financial    
condition of Torchmark or any other event or development which the Board of     
Directors of Torchmark Corporation determines, in its sole discretion, makes    
the Spin-Off not in the best interest of Torchmark and its stockholders. The    
Company has agreed that if the Spin-Off does not occur on or before March 31,   
1999, Torchmark will have the right at any time after such date but prior to    
March 31, 2002 to cause the Company to use its best efforts to register the     
shares of Class A Common Stock and Class B Common Stock held by Torchmark for   
resale under the Securities Act, subject to certain conditions and              
limitations. The Company has also agreed that if it files a registration        
statement for the sale of securities (except with respect to registration       
statements on Form S-4 or Form S-8 or another form available for registration   
of securities other than for sale to the public for cash) before December 31,   
2002, Torchmark may, subject to certain conditions and limitations, include in  
such registration statement shares of Class A Common Stock and Class B Common   
Stock held by Torchmark.                                                        

Under the Separation Agreement, each of Torchmark Corporation and the       
Company will indemnify the other in the event of certain liabilities,           
including, liabilities arising under the Securities Act or the Exchange Act.    
Additionally, each of the Company and Torchmark Corporation have agreed to      
indemnify the other for certain liabilities relating to (i) their respective    
businesses, (ii) any individual employed by such company or its affiliates on   
the date the Offering is completed, except to the extent such person was        
acting solely as an officer, director, or employee of the other company or the  
other company's affiliates, or (iii) any authorized accountants, counsel,       

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or other designated representative of the company or any of the company's       
affiliates, in each case, whether relating to or arising out of occurrences     
prior to, on, or after the date the Offering is completed. The Separation       
Agreement also provides that the Company will indemnify Torchmark for tax       
liabilities with respect to the Spin-Off that result from certain errors or     
omissions in written statements that the Company has furnished or will furnish  
to Torchmark in connection with this Registration Statement or the private      
letter ruling request and related supplements to be filed with the Internal     
Revenue Service regarding the Spin-Off.                                         

Torchmark and the Company have agreed to continue joint coverage under      
certain insurance policies following the Offering until the earlier of the      
renewal date of the relevant policies or the date of the Spin-Off.              

The Company has agreed that between the date the Offering is completed and  
the date of the Spin-Off, the Company will not issue any shares of stock or     
enter into a binding obligation to do so if the effect would be that Torchmark  
would not control the Company within the meaning of (S) 355 and (S) 368(c) of   
the Code.                                                                       

Tax Disaffiliation Agreement. The Company and Torchmark have entered into a 
tax disaffiliation agreement (the "Tax Disaffiliation Agreement") providing     
for the allocation of responsibility between the Company and its subsidiaries   
(the "Company Group") and Torchmark and its affiliates other than the Company   
and its subsidiaries (the "Torchmark Group") for (i) the filing of tax          
returns, (ii) tax liabilities for taxable periods, before and after the         
Offering, (iii) the conduct of tax audits and the handling of tax               
controversies, and (iv) various related matters. Under the Tax Disaffiliation   
Agreement, the Company will be responsible for, and will hold each member of    
the Torchmark Group harmless on an after tax basis against, any liability for   
taxes attributable to any member of the Company Group with respect to periods   
before and after the Offering other than tax liabilities, if any, with respect  
to the Offering (including the recognition of certain deferred intercompany     
gains at the close of the Offering), the Spin-Off, the distributions of the     
stock of WRAMCO by certain members of the Company Group and the Torchmark       
Group on September 30, 1997 (the "WRAMCO Spin-Off") and certain other           
transactions (collectively, the "Restructuring Transactions"). However, the     
Company will be responsible for any tax liability of the Company Group or the   
Torchmark Group with respect to a Restructuring Transaction caused by or        
resulting from a breach by any member of the Company Group of certain           
agreements made in the Tax Disaffiliation Agreement or certain of the           
representations, warranties, or agreements set forth in the private letter      
ruling request and supplements filed with the Internal Revenue Service with     
respect to the Spin-Off, but only to the extent that the Torchmark Group in     
the aggregate is liable for more taxes than it would have been had such breach  
not occurred. In the event that such tax liabilities with respect to a          
Restructuring Transaction were to become payable by the Company, such payment   
could have a material adverse effect on the Company. The Company will be        
entitled to any tax refund that is attributable to both an entity and a         
taxable year or period for which the Company has tax liability under the Tax    
Disaffiliation Agreement. No member of the Company Group may carry back any     
net operating loss from a tax period after the Offering to a tax period before  
the Offering. Members of the Company Group may carry back any credit or other   
tax attribute attributable to a member of the Company Group from a tax period   
after the Offering to a tax period before the Offering and receive a payment    
related to the associated tax benefit, unless such carry back results in a      
material detriment to any member of the Torchmark Group. Torchmark has full     
responsibility and discretion to file tax returns for periods during which the  
Company Group and the Torchmark Group are included in the same consolidated     
group for federal income tax purposes or the same consolidated, combined, or    
unitary returns for state, local, or foreign tax purposes.                      

Services to WRAMCO. In September 1997, the Company distributed all of the   
capital stock of WRAMCO to Torchmark by means of a dividend. WRAMCO provides    
investment advisory services to pension funds and to Torchmark. The Company     
effected the WRAMCO dividend, in part, to separate its pension fund marketing   
activities from its investment management and mutual fund distribution          
activities. Prior to the date of the Offering, the Company, through a wholly    
owned subsidiary, has provided advisory services to WRAMCO, to support          
WRAMCO's investment advisory services to pension funds and to Torchmark.        
Pursuant to an Investment Services Agreement, a subsidiary of the Company will  
continue to provide investment advisory services to WRAMCO to support WRAMCO's  
advisory services provided to its pension fund clients and to Torchmark. Such   
advisory services relating to Torchmark will be primarily limited to advice     
relating to the management of                                                   

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high yield portfolio accounts, emerging market accounts, and certain other      
types of accounts, and the advisory fee will be based on a percentage of net    
assets, with such percentage believed to approximate market. The agreement may  
be terminated by either party upon 30 days notice.                              

Prior to the Offering, the Company provided certain services to WRAMCO.     
Pursuant to a Services Agreement, the Company will continue to provide certain  
services to WRAMCO such as legal services. The Company will also continue to    
provide certain other services to WRAMCO, including, among others, data         
processing services and mail services pursuant to an oral agreement. The        
Company will receive payment for such services based on the costs actually      
incurred on a time and materials basis. The Company estimates that the          
aggregate revenues it will receive from its relationship with WRAMCO will       
constitute approximately 2.5% of the Company's total revenues in 1998.          

Agent Agreements. The Company will continue to have the right to distribute 
variable annuities and life insurance products, Medicare supplement, and long   
term care insurance underwritten by Torchmark. The current General Agent        
Contract (relating to variable annuities and life insurance products) and the   
current Independent Agent Contract (relating to Medicare supplement and long    
term care insurance) between such parties entered into prior to the Offering    
will each be extended through December 31, 1998 on their current terms.         
Additionally, the Company will continue to serve as an Underwriter for          
Torchmark pursuant to a letter agreement which establishes a distribution       
arrangement and a Principal Underwriting Agreement, which terms will also be    
extended through December 31, 1998. Aggregate revenues under these agreements   
constitute approximately 12.7% of the Company's total revenue in 1997.          

Partnership. As of December 31, 1997, TMK Income Properties, L.P. , a       
partnership in which Torchmark holds a majority interest, owed the Company      
approximately $1,426,136 pursuant to a promissory note bearing interest at a    
rate of 8% per annum with a maturity date of December 31, 2002. The Company     
intends to reduce the amount of the note by approximately $900,000 in           
consideration of certain real property the Company will receive and use for     
parking and future expansion. In addition, the Company will provide certain     
maintenance services pursuant to a Maintenance Agreement with TMK Income        
Properties, L.P., which services generated approximately $66,000 in revenues    
in 1997.                                                                        

Any future material transactions between the Company and Torchmark and its  
affiliates will be on terms no less favorable to the Company than could be      
obtained from unaffiliated third parties on an arm's-length basis and would be  
approved by a majority of the Company's independent and disinterested           
directors. The Company's Board of Directors will be advised in advance of any   
such proposed transactions that are material to the Company and will utilize    
such procedures in evaluating their terms and provisions as are appropriate in  
light of the Board's fiduciary duties under state law. Depending on the nature  
and size of the particular transaction, in any such review the Board may rely   
on management's knowledge, utilize outside experts or consultants, secure       
appraisals, refer to industry statistics or prices or take such other actions   
as are appropriate under the circumstances. The Certificate of Incorporation    
contains provisions that address certain potential conflicts of interest        
between Torchmark and the Company. See "Description of Capital Stock--          
Certificate of Incorporation and Bylaw Provisions--Corporate Opportunity and    
Conflicts of Interest Policy."                                                  

UILIC                                                                           

The Company formerly held all of the issued and outstanding capital stock of
UILIC. The Company has declared and paid the UILIC Dividend. The Company        
effected the UILIC Dividend in order to divest itself of insurance operations   
to enable the Company to focus on its core business of investment management    
and distribution.                                                               

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PRINCIPAL STOCKHOLDER 

Before the Offering, all of the outstanding Common Stock will be owned by   
Torchmark. After the Recapitalization and consummation of the Offering,         
Torchmark will beneficially own approximately 27% of the Class A Common Stock   
(approximately 25% if the Underwriters' over-allotment option is exercised in   
full) and all of the Class B Common Stock then outstanding. Except as           
described above, the Company is not aware of any other person or group that     
will beneficially own more than 5% of the outstanding shares of Common Stock    
after the Offering.                                                             

The following table lists each person that, to the knowledge of the Company,
is the beneficial owner of more than five percent of the outstanding common     
stock of Torchmark Corporation as of December 31, 1997.                         

                                                                [Download Table]

                                           PERCENT OF
NAME AND ADDRESS       NUMBER OF SHARES(1)   CLASS   
----------------       ------------------- ----------
                                                     
AMVESCAP PLC                9,255,730         6.6%   
 11 Devonshire Square                                
 London EC2M 4YR                                     
 England                                             

--------                                                                        
(1) All stock reported is held by holding companies (AVZ, Inc., AIM Management  
Group, Inc., AMVESCAP Group Services, Inc., INVESCO, Inc., INVESCO North
America Holdings, Inc., and INVESCO Capital Management, Inc.) and       
investment advisors (INVESCO Capital Management, Inc. and INVESCO Funds 
Group, Inc.) that are subsidiaries of AMVESCAP PLC. These entities share
the voting and the dispositive power over the shares and have disclaimed
beneficial ownership of such stock.                                     

DESCRIPTION OF CAPITAL STOCK  

The authorized capital stock of the Company consists of 150,000,000 shares  
of Class A Common Stock, 100,000,000 shares of Class B Common Stock, and        
5,000,000 shares of Preferred Stock. No Preferred Stock is outstanding as of    
the date of this Prospectus. Of the Class A Common Stock authorized,            
29,675,000 shares will be outstanding upon consummation of the Offering;        
7,975,000 held by Torchmark and 21,700,000 shares are being offered in the      
Offering (23,870,000 shares if the Underwriters' over-allotment option is       
exercised in full). 16,300,000 shares have been reserved for issuance pursuant  
to certain employee benefits plans. See "Management--Compensation, Benefits,    
and Retirement Plans." Of the 100,000,000 shares of Class B Common Stock        
authorized, 34,325,000 will be outstanding and held by Torchmark upon           
consummation of the Offering. The following summary description of the capital  
stock of the Company is qualified by reference to the Certificate of            
Incorporation and Bylaws of the Company, copies of which are filed as exhibits  
to the Registration Statement.                                                  

COMMON STOCK                                                                    

Voting Rights. The holders of Class A Common Stock and Class B Common Stock 
have identical rights except that (i) holders of Class A Common Stock are       
entitled to one vote per share while holders of Class B Common Stock are        
entitled to five votes per share on all matters to be voted on by stockholders  
and (ii) holders of Class A Common Stock are not eligible to vote on any        
alteration or change in the powers, preferences, or special rights of the       
Class B Common Stock or vice versa. Holders of shares of Class A Common Stock   
and Class B Common Stock are not entitled to cumulate their votes in the        
election of directors. Generally, all matters to be voted on by stockholders    
must be approved by a majority (or, in the case of election of directors, by a  
plurality) of the votes entitled to be cast by all shares of Class A Common     
Stock and Class B Common Stock present in person or represented by proxy,       
voting together as a single class, subject to any voting rights granted to      
holders of any Preferred Stock. Except as otherwise provided by law, and        
subject to any voting rights granted to holders of any outstanding Preferred    
Stock, amendments to the Company's Certificate of Incorporation generally must  
be approved by a majority of the combined voting power of all Class A Common    
Stock and Class                                                                 

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B Common Stock voting together as a single class. Amendments to the Company's   
Certificate of Incorporation that would alter or change the powers,             
preferences, or special rights of the Class A Common Stock or the Class B       
Common Stock so as to affect them adversely also must be approved by a          
majority of the votes entitled to be cast by the holders of the shares          
affected by the amendment, voting as a separate class. Notwithstanding the      
foregoing, any amendment to the Company's Certificate of Incorporation to       
increase the authorized shares of any class or classes of stock will be deemed  
not to affect adversely the powers, preferences, or special rights of the       
Class A Common Stock or Class B Common Stock.                                   

Dividends. Holders of Class A Common Stock and Class B Common Stock will    
receive an equal amount per share in any dividend declared by the Board of      
Directors, subject to any preferential rights of any outstanding Preferred      
Stock. Dividends consisting of shares of Class A Common Stock and Class B       
Common Stock may be paid only as follows: (i) shares of Class A Common Stock    
may be paid only to holders of Class A Common Stock and shares of Class B       
Common Stock may be paid only to holders of Class B Common Stock and (ii)       
shares will be paid proportionally with respect to each outstanding share of    
Class A Common Stock and Class B Common Stock.                                  

Other Rights. On liquidation, dissolution, or winding up of the Company,    
after payment in full of the amounts required to be paid to holders of          
Preferred Stock, if any, all holders of Common Stock, regardless of class, are  
entitled to share ratably in any assets available for distribution to holders   
of shares of Common Stock. No shares of Common Stock are subject to redemption  
or have preemptive rights to purchase additional shares of Common Stock. Upon   
consummation of the Offering, all the outstanding shares of Class A Common      
Stock and Class B Common Stock will be validly issued, fully paid, and          
nonassessable.                                                                  

PREFERRED STOCK                                                                 

As of the date of this Prospectus, no shares of Preferred Stock are         
outstanding. The Board of Directors may authorize the issuance of Preferred     
Stock in one or more series and may determine, with respect to any such         
series, the designations, powers, preferences, and rights of such series, and   
its qualifications, limitations, and restrictions, including, without           
limitation, (i) the designation of the series; (ii) the number of shares of     
the series, which number the Board of Directors may thereafter (except where    
otherwise provided in the designations for such series) increase or decrease    
(but not below the number of shares of such series then outstanding); (iii)     
whether dividends, if any, will be cumulative or noncumulative and the          
dividend rate of the series; (iv) the conditions upon which and the dates at    
which dividends, if any, will be payable, and the relation that such            
dividends, if any, will bear to the dividends payable on any other class or     
classes of stock; (v) the redemption rights and price or prices, if any, for    
shares of the series; (vi) the terms and amounts of any sinking fund provided   
for the purchase or redemption of shares of the series; (vii) the amounts       
payable on and the preferences, if any, of shares of the series, in the event   
of any voluntary or involuntary liquidation, dissolution, or winding up of the  
affairs of the Company; (viii) whether the shares of the series will be         
convertible into shares of any other class or series, or any other security,    
of the Company or any other corporation, and, if so, the specification of such  
other class or series or such other security, the conversion price or prices    
or rate or rates, any adjustments thereof, the date or dates as of which such   
shares will be convertible and all other terms and conditions upon which such   
conversion may be made; and (ix) the voting rights, if any, of the holders of   
shares of such series.                                                          

The Company believes that the ability of the Board of Directors to issue one
or more series of Preferred Stock will provide the Company with flexibility in  
structuring possible future financings and acquisitions and in meeting other    
corporate needs that might arise. The authorized shares of Preferred Stock      
will be available for issuance without further action by the Company's          
stockholders, unless such action is required by applicable law or the rules of  
any stock exchange or automated quotation system on which the Company's         
securities may be listed or traded. The New York Stock Exchange, Inc. (the      
"NYSE") currently requires stockholder approval as a prerequisite to listing    
shares in several instances, including where the present or potential issuance  
of shares could result in an increase in the number of shares of common stock   
outstanding, or in the amount of voting securities outstanding, of at least     
20%.                                                                            

Although the Board of Directors has no current intention of doing so, it    
could issue a series of Preferred Stock that could, depending on the terms of   
such series, impede the completion of a merger, tender offer, or                

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other takeover attempt. The Board of Directors will make any determination to   
issue such shares based on its judgment as to the best interests of the         
Company and its stockholders. The Board of Directors, in so acting, could       
issue Preferred Stock having terms that could discourage a potential acquirer   
from making, without first negotiating with the Board of Directors, an          
acquisition attempt through which such acquirer may be able to change the       
composition of the Board of Directors, including a tender offer or other        
transaction that some, or a majority, of the Company's stockholders might       
believe to be in their best interests or in which stockholders might receive a  
premium for their stock over the then current market price of such stock.       

BUSINESS COMBINATION STATUTE                                                    

As a corporation organized under the laws of the State of Delaware, the     
Company will be subject to (S) 203 of the DGCL, which restricts certain         
business combinations between the Company and an "interested stockholder" (in   
general, a stockholder owning 15% or more of the Company's outstanding voting   
stock) or its affiliates or associates for a period of three years following    
the time that the stockholder becomes an "interested stockholder." The          
restrictions do not apply if (i) prior to an interested stockholder becoming    
such, the Board of Directors approved either the business combination or the    
transaction that resulted in the stockholder becoming an interested             
stockholder; (ii) upon consummation of the transaction that resulted in any     
person becoming an interested stockholder, such interested stockholder owns at  
least 85% of the voting stock of the Company outstanding at the time the        
transaction commenced (excluding shares owned by certain employee stock         
ownership plans and persons who are both directors and officers of the          
Company); or (iii) at or subsequent to the time an interested stockholder       
becomes such, the business combination is both approved by the Board of         
Directors and authorized at an annual or special meeting of the Company's       
stockholders, not by written consent, by the affirmative vote of at least 66    
2/3% of the outstanding voting stock not owned by the interested stockholder.   
Because Torchmark became an interested stockholder at a time when the           
restrictions did not apply, the restrictions will not apply to any business     
combination with Torchmark.                                                     

Under certain circumstances, (S) 203 of the DGCL makes it more difficult for
a person who would be an "interested stockholder" to effect various business    
combinations with a corporation for a three-year period, although the           
stockholders may elect to exclude a corporation from the restrictions imposed   
under (S) 203. The Certificate of Incorporation of the Company does not         
exclude the Company from the restrictions imposed under (S) 203 of the DGCL.    
It is anticipated that the provisions of (S) 203 of the DGCL may encourage      
companies interested in acquiring the Company to negotiate in advance with the  
Board of Directors, since the stockholder approval requirement would be         
avoided if a majority of the directors then in office approves, prior to the    
date on which a stockholder becomes an interested stockholder, either the       
business combination or the transaction that results in the stockholder         
becoming an interested stockholder.                                             

CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS                               

The summary set forth below describes certain provisions of the Certificate 
of Incorporation and Bylaws. The summary is qualified in its entirety by        
reference to the provisions of the Certificate of Incorporation and Bylaws,     
copies of which will be filed as exhibits to the Registration Statement of      
which this Prospectus forms a part.                                             

Certain of the provisions of the Certificate of Incorporation and Bylaws    
discussed below may have the effect, either alone or in combination with the    
provisions of (S) 203 discussed above, of making more difficult or              
discouraging a tender offer, proxy contest, or other takeover attempt that is   
opposed by the Board of Directors but that a stockholder might consider to be   
in such stockholder's best interest. Those provisions include (i) the           
classification of the Company's Board of Directors; (ii) restrictions on the    
rights of stockholders to remove or elect directors; and (iii) prohibitions     
against stockholders calling a special meeting of stockholders or acting by     
unanimous written consent in lieu of a meeting. In addition, the Certificate    
of Incorporation contains provisions relating to the allocation of certain      
corporate opportunities and resolution of certain potential conflicts of        
interest. See "--Corporate Opportunity and Conflict of Interest Policies."      

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Classified Board; Number of Directors; Removal; Filling Vacancies             

The Certificate of Incorporation and Bylaws of the Company provide that the 
Board of Directors--except for directors who may be elected by the holders of   
Preferred Stock--will be divided into three classes of directors, initially     
with four directors in two of the classes and two directors in the third        
class. See "Management--Directors and Executive Officers." One class is to be   
originally elected for a term expiring at the annual meeting of stockholders    
to be held in 1999, another class is to be originally elected for a term        
expiring at the annual meeting of stockholders to be held in 2000, and another  
class is to be originally elected for a term expiring at the annual meeting of  
stockholders to be held in 2001. Each director is to hold office until his or   
her successor is duly elected and qualified. Commencing with the 1999 annual    
meeting of stockholders, directors elected to succeed directors whose terms     
then expire will be elected for a term of office to expire at the third         
succeeding annual meeting of stockholders after their election, with each       
director to hold office until such person's successor is duly elected and       
qualified.                                                                      

The Certificate of Incorporation provides that, subject to any rights of    
holders of Preferred Stock to elect directors under specified circumstances,    
the number of directors will be fixed from time to time exclusively pursuant    
to a resolution adopted by directors constituting a majority of the total       
number of directors that the Company would have if there were no vacancies on   
the Board of Directors (the "Whole Board"), with the Whole Board consisting of  
not more than 15 nor less than seven directors. The Certificate of              
Incorporation also provides that, subject to any rights of holders of           
Preferred Stock or any other series or class of stock, and unless the Board of  
Directors otherwise determines, any vacancies will be filled only by the        
affirmative vote of a majority of the remaining directors, even if less than a  
quorum. Accordingly, absent an amendment to the Certificate of Incorporation,   
the Board of Directors could prevent any stockholder from enlarging the Board   
of Directors and filling the new directorships with such stockholder's own      
nominees.                                                                       

The Certificate of Incorporation and Bylaws of the Company provide that,    
subject to the rights of holders of Preferred Stock to elect directors under    
specified circumstances, effective as of the date on which Torchmark            
beneficially owns less than a majority of the Voting Stock (as defined below)   
(the "Trigger Date"), directors may be removed only for cause and only upon     
the affirmative vote of holders of at least 80% of the voting power of all the  
then outstanding shares of stock entitled to vote generally in the election of  
directors ("Voting Stock"), voting together as a single class. Before the       
Trigger Date, directors may be removed, without cause, with the affirmative     
vote of the holders of at least a majority of the voting power of the then      
outstanding Voting Stock, voting together as a single class.                    

The classification of directors will have the effect of making it more      
difficult for stockholders to change the composition of the Board of            
Directors. At least two annual meetings of stockholders, instead of one, will   
generally be required to effect a change in a majority of the Board of          
Directors. Such a delay may help ensure that the Company's directors, if        
confronted by a holder attempting to force a proxy contest, a tender or         
exchange offer, or an extraordinary corporate transaction, would have           
sufficient time to review the proposal as well as any available alternatives    
to the proposal and to act in what they believe to be the best interest of the  
stockholders. The classification provisions will apply to every election of     
directors, however, regardless of whether a change in the composition of the    
Board of Directors would be beneficial to the Company and its stockholders and  
whether or not a majority of the Company's stockholders believe that such a     
change would be desirable. The classification provisions could also have the    
effect of discouraging a third party from initiating a proxy contest, making a  
tender offer or otherwise attempting to obtain control of the Company, even     
though such an attempt might be beneficial to the Company and its               
stockholders. The classification of the Board of Directors could thus increase  
the likelihood that incumbent directors will retain their positions. In         
addition, because the classification provisions may discourage accumulations    
of large blocks of the Company's stock by purchasers whose objective is to      
take control of the Company and remove a majority of the Board of Directors,    
the classification of the Board of Directors could tend to reduce the           
likelihood of fluctuations in the market price of the Common Stock that might   
result from accumulations of large blocks. Accordingly, stockholders could be   
deprived of certain opportunities to sell their shares of Common Stock at a     
higher market price than might otherwise be the case.                           

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No Stockholder Action By Written Consent; Special Meetings                    

The Certificate of Incorporation and Bylaws provide that, effective as of   
the Trigger Date, and subject to the rights of any holders of Preferred Stock   
to elect additional directors under specified circumstances, stockholder        
action can be taken only at an annual or special meeting of stockholders and    
stockholder action may not be taken by written consent in lieu of a meeting.    
The Bylaws provide that, subject to the rights of holders of any series of      
Preferred Stock to elect additional directors under specified circumstances,    
special meetings of stockholders can be called only by the Board of Directors   
pursuant to a resolution adopted by a majority of the Whole Board or the        
Chairman of the Board, except that prior to the Trigger Date, special meetings  
can also be called at the request of the holders of a majority of the voting    
power of the then outstanding Voting Stock. Effective as of the Trigger Date,   
stockholders will not be permitted to call a special meeting or to require      
that the Board of Directors call a special meeting of stockholders. Moreover,   
the business permitted to be conducted at any special meeting of stockholders   
is limited to the business brought before the meeting pursuant to the notice    
of meeting given by the Company.                                                

The provisions of the Certificate of Incorporation and Bylaws of the Company
prohibiting stockholder action by written consent and permitting special        
meetings to be called only by the Chairman or at the request of a majority of   
the Whole Board may have the effect, after the Trigger Date, of delaying        
consideration of a stockholder proposal until the next annual meeting. The      
provisions would also prevent the holders of a majority of the voting power of  
the Voting Stock from unilaterally using the written consent procedure to take  
stockholder action. Moreover, a stockholder could not force stockholder         
consideration of a proposal over the opposition of the Chairman or a majority   
of the Whole Board by calling a special meeting of stockholders prior to the    
time such parties believe such consideration to be appropriate.                 

Liability of Directors; Indemnification                                       

The Certificate of Incorporation provides that a director will not be       
personally liable for monetary damages to the Company or its stockholders for   
breach of fiduciary duty as a director, except for liability (i) for any        
breach of the director's duty of loyalty to the Company or its stockholders;    
(ii) for acts or omissions not in good faith or that involve intentional        
misconduct or a knowing violation of law; (iii) for paying a dividend or        
approving a stock repurchase in violation of (S) 174 of the DGCL; or (iv) for   
any transaction from which the director derived an improper personal benefit.   
Any amendment or repeal of such provision will not adversely affect any right   
or protection of a director existing under such provision for any act or        
omission occurring prior to such amendment or repeal.                           

The Certificate of Incorporation provides that the Company will indemnify   
any person who was or is a party to any threatened, pending, or completed       
action, suit, or proceeding because he or she is or was a director or officer   
of the Company, or is or was serving at the request of the Company as a         
director or officer of another corporation, partnership, or other enterprise.   
The Certificate of Incorporation provides that this indemnification will be     
from and against expenses, judgments, fines, and amounts paid in settlement by  
the indemnitee. However, this indemnification will only be provided if the      
indemnitee acted in good faith and in a manner he or she reasonably believed    
to be in, or not opposed to, the best interests of the Company.                 

Corporate Opportunity and Conflict of Interest Policies                       

In order to address certain potential conflicts of interest between the     
Company and Torchmark, the Certificate of Incorporation contains provisions     
concerning the conduct of certain affairs of the Company as they may involve    
Torchmark and its subsidiaries (other than the Company and its subsidiaries)    
and their respective officers and directors, and the powers, rights, duties,    
and liabilities of the Company and its subsidiaries and their respective        
officers, directors, and stockholders in connection therewith. In general,      
these provisions recognize that the Company and Torchmark may engage in the     
same or similar business activities and lines of business and have an interest  
in the same areas of corporate opportunities and that the Company and           
Torchmark will continue to have contractual and business relations with each    
other (including service of officers and directors of Torchmark as directors    
of the Company). See "Management--Directors and Executive Officers."            

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For purposes of these provisions, the terms "Company" and "Torchmark"       
include their subsidiaries and other entities in which they respectively        
beneficially own, directly or indirectly, 50% or more of the outstanding        
voting securities or interests (except that "Torchmark" does not include the    
Company and its subsidiaries and such other entities), and, in the case of      
Torchmark, all successors to Torchmark by way of merger, consolidation, or      
sale of all or substantially all its assets.                                    

The Certificate of Incorporation provides that any person purchasing or     
otherwise acquiring any interest in any shares of capital stock of the Company  
will be deemed to have notice of and to have consented to these provisions.     

Before the Trigger Date, the affirmative vote of the holders of more than   
80% of the outstanding Voting Stock, voting together as a single class, will    
be required to alter, amend, or repeal any of these conflict of interest or     
corporate opportunity provisions in a manner adverse to the interests of        
Torchmark. After the Trigger Date, the conflict of interest and corporate       
opportunity provisions will terminate.                                          

Corporate Opportunity Policy. The Certificate of Incorporation provides     
that, except as Torchmark may otherwise agree in writing, Torchmark will have   
the right (i) to engage in the same or similar business activities or lines of  
business as the Company; (ii) to do business with any potential or actual       
client, customer, or supplier of the Company; and (iii) to employ or engage     
any officer or employee of the Company. Neither Torchmark nor any officer or    
director of Torchmark will be liable to the Company or its stockholders for     
breach of any fiduciary duty by reason of these activities.                     

If Torchmark acquires knowledge of a potential transaction or matter that   
may be a corporate opportunity for both Torchmark and the Company, Torchmark    
will have no duty to communicate that opportunity to the Company. Furthermore,  
Torchmark will not be liable to the Company or its stockholders because         
Torchmark pursues or acquires such corporate opportunity for itself, directs    
that corporate opportunity to another person or entity, or does not present     
that corporate opportunity to the Company.                                      

If a director or officer of the Company who is also a director or officer of
Torchmark acquires knowledge of a potential transaction or matter that may be   
a corporate opportunity for both the Company and Torchmark, the Certificate of  
Incorporation requires that the director or officer of the Company act in good  
faith in accordance with the following three-part policy, and a director or     
officer so acting will be deemed to have acted reasonably and in good faith     
and fully to have satisfied his or her duties of loyalty and fiduciary duties   
to the Company and its stockholders with respect to such opportunity.           

First, a corporate opportunity offered to any person who is a director but  
not an officer of the Company and who is also an officer (whether or not a      
director) of Torchmark will belong to Torchmark, unless the opportunity is      
expressly offered to that person primarily in his or her capacity as a          
director of the Company, in which case the opportunity will belong to the       
Company.                                                                        

Second, a corporate opportunity offered to any person who is an officer     
(whether or not a director) of the Company and who is also a director but not   
an officer of Torchmark will belong to the Company, unless the opportunity is   
expressly offered to that person primarily in his or her capacity as a          
director of Torchmark, in which case the opportunity will belong to Torchmark.  

Third, a corporate opportunity offered to any other person who is either an 
officer of both the Company and Torchmark or a director of both the Company     
and Torchmark will belong to Torchmark or to the Company, as the case may be,   
if the opportunity is expressly offered to the person primarily in his or her   
capacity as an officer or director of Torchmark or of the Company,              
respectively. Otherwise, the opportunity will belong to Torchmark.              

Under the Certificate of Incorporation, any corporate opportunity that      
belongs to Torchmark or to the Company pursuant to the foregoing policy will    
not be pursued by the other (or directed by the other to another person or      
entity) unless and until Torchmark or the Company, as the case may be,          
determines not to pursue the                                                    

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opportunity. If the party to whom the corporate opportunity belongs does not,   
however, within a reasonable period of time, begin to pursue, or thereafter     
continue to pursue, such opportunity diligently and in good faith, the other    
party may pursue such opportunity (or direct it to another person or entity).   

A director or officer of the Company who acts in accordance with the        
foregoing three-part policy (i) will be deemed fully to have satisfied his or   
her fiduciary duties to the Company and its stockholders with respect to such   
corporate opportunity; (ii) will not be liable to the Company or its            
stockholders for any breach of fiduciary duty by reason of the fact that        
Torchmark pursues or acquires such opportunity for itself or directs such       
corporate opportunity to another person or entity or does not communicate       
information regarding such opportunity to the Company; (iii) will be deemed to  
have acted in good faith and in a manner he or she reasonably believes to be    
in the best interests of the Company; and (iv) will be deemed not to have       
breached his or her duty of loyalty to the Company or its stockholders and not  
to have derived an improper benefit therefrom.                                  

Under the Certificate of Incorporation, "corporate opportunities"           
potentially allocable to the Company consist of business opportunities that     
(i) the Company is financially able to undertake; (ii) are, from their nature,  
in the Company's line or lines of business and are of practical advantage to    
the Company; and (iii) are ones in which the Company has an interest or         
reasonable expectancy. In addition, "corporate opportunities" do not include    
transactions in which the Company or Torchmark is permitted to participate      
pursuant to any agreement between the Company and Torchmark that is in effect   
as of the time any equity security of the Company is held of record by any      
person other than Torchmark or subsequently entered into with the approval of   
the disinterested directors.                                                    

For purposes of these corporate-opportunity provisions, a director of the   
Company who is chairman of the Board of Directors (or a committee thereof) or   
chief executive officer will not be deemed to be an officer of the Company by   
reason of holding such position, unless such person is a full-time employee of  
the Company.                                                                    

Conflict of Interests Policy. The Certificate of Incorporation provides that
no contract, agreement, arrangement, or transaction between the Company and     
Torchmark or any customer or supplier or any entity in which a director of the  
Company has a financial interest (a "Related Entity"), or between the Company   
and one or more of the directors or officers of the Company, Torchmark, or any  
Related Entity; any amendment, modification, or termination thereof; or any     
waiver of any right thereunder, will be voidable solely because Torchmark or    
such customer or supplier, any Related Entity, or any one or more of the        
officers or directors of the Company, Torchmark, or any Related Entity are      
parties thereto, or solely because any such directors or officers are present   
at or participate in the meeting of the Board of Directors or committee         
thereof that authorizes the contract, agreement, arrangement, transaction,      
amendment, modification, termination, or waiver (each, a "Transaction") or      
solely because their votes are counted for such purpose, if the standard        
specified is satisfied. That standard will be satisfied, and Torchmark, the     
Related Entity, and the directors and officers of the Company, Torchmark, or    
the Related Entity (as applicable) will be deemed to have acted reasonably and  
in good faith (to the extent such standard is applicable to such person's       
conduct) and fully to have satisfied any duties of loyalty and fiduciary        
duties they may have to the Company and its stockholders with respect to such   
Transaction if any of the following four requirements are met:                  

(i) the material facts as to the relationship or interest and as to the 
Transaction are disclosed or known to the Board of Directors or the         
committee thereof that authorizes the Transaction, and the Board of         
Directors or such committee in good faith approves the Transaction by the   
affirmative vote of a majority of the disinterested directors on the Board  
of Directors or such committee, even if the disinterested directors are     
less than a quorum;                                                         

(ii) the material facts as to the relationship or interest and as to the
Transaction are disclosed or known to the holders of Voting Stock entitled  
to vote thereon, and the Transaction is specifically approved by vote of    
the holders of a majority of the voting power of the then outstanding       
Voting Stock not owned by Torchmark or such Related Entity, voting together 
as a single class;                                                          

 (iii) the Transaction is effected pursuant to guidelines that are in good
faith approved by a majority of the disinterested directors on the Board of 
Directors or the applicable committee thereof or by vote of the holders of  
a majority of the then outstanding Voting Stock not owned by Torchmark or   
such Related Entity, voting together as a single class; or                  

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 (iv) the Transaction is fair to the Company as of the time it is approved
by the Board of Directors, a committee thereof or the stockholders of the   
Company.                                                                    

The Certificate of Incorporation also provides that any such Transaction    
authorized, approved, or effected, and each of such guidelines so authorized    
or approved, as described in (i), (ii), or (iii) above, will be deemed to be    
entirely fair to the Company and its stockholders, except that, if such         
authorization or approval is not obtained, or such Transaction is not so        
effected, no presumption will arise that such Transaction or guideline is not   
fair to the Company and its stockholders. In addition, the Certificate of       
Incorporation provides that Torchmark will not be liable to the Company or its  
stockholders for breach of any fiduciary duty that Torchmark may have as a      
stockholder of the Company by reason of the fact that Torchmark takes any       
action in connection with any transaction between Torchmark and the Company.    

LISTING                                                                         

The Class A Common Stock has been approved for listing, subject to official 
notice of issuance, on the NYSE under the trading symbol "WDR."                 

TRANSFER AGENT AND REGISTRAR                                                    

The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York.                                                            

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SHARES ELIGIBLE FOR FUTURE SALE 

Before the Offering, there has been no market for the Common Stock of the   
Company. Future sales or distributions of substantial amounts of Common Stock   
in the public market could adversely affect prevailing market prices.           
Torchmark has advised the Company that it intends to effect the Spin-Off,       
subject to conditions. See "Certain Relationships and Related Transactions--    
Relationship with Torchmark--Spin-Off."                                         

Upon completion of the Offering, the Company will have 29,675,000 shares of 
Class A Common Stock issued and outstanding (31,845,000 Shares of Class A       
Common Stock if the Underwriters' over-allotment option is exercised in full)   
and 34,325,000 shares of Class B Common Stock issued and outstanding. All of    
the shares of Class A Common Stock to be sold in the Offering will be freely    
tradable without restrictions, or further registration under the Securities     
Act, except that shares purchased by an "affiliate" of the Company (as that     
term is defined in Rule 144 (an "Affiliate")) will be subject to the resale     
limitations of Rule 144. None of the outstanding shares of Common Stock owned   
by Torchmark has been registered under the Securities Act, and may be sold      
only pursuant to an effective registration statement under the Securities Act   
or in accordance with Rule 144 or another exemption from registration           
("Restricted Shares").                                                          

The Restricted Shares will constitute "restricted securities" within the    
meaning of Rule 144 promulgated under the Securities Act and will be eligible   
for sale in the open market after the Offering subject to the Lock-Up           
Agreement and applicable requirements of Rule 144 described below. For as long  
as Torchmark is able to cause a majority of the Company's Board of Directors    
to be elected, it will be able to require the Company at any time to register   
under the Securities Act all or a portion of the Common Stock owned by it, in   
which event such shares could be sold publicly upon the effectiveness of any    
such registration without restriction. In addition, under the Affiliate         
Agreements, Torchmark will have the right to require the Company to use its     
best efforts to register for sale its shares of Common Stock and to include     
such shares of Common Stock in certain registration statements. See "Certain    
Relationships and Related Transactions--Relationship with Torchmark."           

In general, under Rule 144 as currently in effect, if a period of at least  
one year has elapsed between the later of the date on which "restricted         
shares" (as that phrase is defined in Rule 144) were acquired from the Company  
and the date on which they were acquired from an Affiliate, then the holder of  
such restricted shares (including an Affiliate) is entitled to sell a number    
of shares within any three-month period that does not exceed the greater of     
(i) one percent of the then outstanding shares of the Common Stock or (ii) the  
average weekly reported volume of trading of the Common Stock during the four   
calendar weeks preceding such sale. Sales under Rule 144 are also subject to    
certain requirements pertaining to the manner of such sales, notices of such    
sales, and the availability of current public information concerning the        
Company. Because Torchmark will be deemed to have held its shares of Common     
Stock for more than one year, Torchmark will be able to sell its shares of      
Common Stock in the public markets without registration immediately upon        
expiration of the Lock-Up Agreement, subject to the foregoing volume limits.    
Affiliates may sell shares not constituting restricted shares in accordance     
with the foregoing volume limitations and other requirements but without        
regard to the one-year period. Under Rule 144(k), if a period of at least two   
years has elapsed between the later of the date on which restricted shares      
were acquired from the Company and the date on which they were acquired from    
an Affiliate, a holder of such restricted shares who is not an Affiliate at     
the time of the sale and has not been an Affiliate for at least three months    
prior to the sale would be entitled to sell the shares immediately without      
regard to the volume limitations and other conditions described above. The      
foregoing description of Rule 144 is not intended to be complete, and Rule 144  
in its entirety should be referred to.                                          

Sales of significant amounts of the Class A Common Stock or Class B Common  
Stock, or the perception that such sales could occur, could have an adverse     
effect on the market price of the Class A Common Stock. Torchmark has advised   
the Company that, subject to certain conditions, it currently intends to        
divest its ownership of Common Stock by means of the Spin-Off. Torchmark will   
own more than 66% of the outstanding Common Stock after the Offering. The       
Spin-Off as currently proposed could be effected without registration under     
the Securities Act and without regard to the limitations of Rule 144. Each of   
the Company and Torchmark have agreed that during the period beginning on the   
date of this Prospectus and continuing to and including the                     

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date 180 days after the date of this Prospectus, it will not offer, sell,       
contract to sell, or otherwise dispose of any shares of Class A Common Stock    
or Class B Common Stock (other than pursuant to employee benefit plans          
existing, or on conversion or exchange of convertible or exchangeable           
securities outstanding, on the date of this Prospectus or as payment for        
acquisitions by the Company) without the prior written consent of Morgan        
Stanley & Co. Incorporated, except for the shares of Class A Common Stock       
offered in connection with the Offering. See "Underwriters."                    

CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS  
FOR NON-UNITED STATES HOLDERS 

The following is a general discussion of certain United States Federal      
income and estate tax considerations with respect to the ownership and          
disposition of Class A Common Stock applicable to Non-U.S. Holders. In          
general, a "Non-U.S. Holder" is any holder other than (i) a citizen or          
resident of the United States; (ii) a corporation or partnership created or     
organized in the United States or under the laws of the United States or of     
any state; (iii) an estate, the income of which is includable in gross income   
for United States federal income tax purposes regardless of its source; or      
(iv) a trust if (a) a court within the United States is able to exercise        
primary supervision over the administration of the trust and (b) one or more    
United States persons have the authority to control all substantial decisions   
of the trust. This discussion is based on current law, which is subject to      
change (possibly with retroactive effect), and is for general information       
only. This discussion does not address all aspects of income and estate         
taxation or any aspects of state, local or non-United States taxes, nor does    
it consider any specific facts or circumstances that may apply to a particular  
Non-U.S. Holder (including certain U.S. expatriates). ACCORDINGLY, PROSPECTIVE  
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES   
FEDERAL, STATE, LOCAL, AND NON-UNITED STATES INCOME AND OTHER TAX               
CONSIDERATIONS OF HOLDING AND DISPOSING OF SHARES OF CLASS A COMMON STOCK.      

DIVIDENDS                                                                       

In general, dividends paid to a Non-U.S. Holder will be subject to United   
States withholding tax at a 30% rate of the gross amount (or a lower rate       
prescribed by an applicable income tax treaty) unless the dividends are either  
(i) effectively connected with a trade or business carried on by the Non-U.S.   
Holder within the United States or (ii) if certain income tax treaties apply,   
attributable to a permanent establishment in the United States maintained by    
the Non-U.S. Holder. Dividends effectively connected with such a United States  
trade or business or attributable to such a United States permanent             
establishment generally will not be subject to United States withholding tax    
if the Non-U.S. Holder files certain forms, including Internal Revenue Service  
Form 4224, with the payor of the dividend, and generally will be subject to     
United States federal income tax on a net income basis, in the same manner as   
if the Non-U.S. Holder were a resident of the United States. A Non-U.S. Holder  
that is a corporation may be subject to an additional branch profits tax at a   
rate of 30% (or such lower rate as may be specified by an applicable income     
tax treaty) on the repatriation from the United States of its "effectively      
connected earnings and profits," subject to certain adjustments. To determine   
the applicability of a tax treaty providing for a lower rate of withholding     
under the currently effective Treasury Regulations (the "Current                
Regulations"), dividends paid to an address in a foreign country are presumed   
to be paid to a resident of that country absent knowledge to the contrary.      
Under Treasury Regulations issued on October 6, 1997 (the "Final                
Regulations"), generally effective for payments made after December 31, 1998,   
a Non-U.S. Holder (including, in certain cases of Non-U.S. Holders that are     
entities, the owner or owners of such entities) will be required to satisfy     
certain certification requirements in order to claim a reduced rate of          
withholding pursuant to an applicable income tax treaty.                        

GAIN OR SALE OR OTHER DISPOSITION OF CLASS A COMMON STOCK                       

In general, a Non-U.S. Holder will not be subject to United States federal  
income tax on any gain realized upon the sale or other disposition of such      
holder's shares of Class A Common Stock unless (i) the gain either is           
effectively connected with a trade or business carried on by the Non-U.S.       
Holder within the United States or, if certain income tax treaties apply, is    
attributable to a permanent establishment in the United States maintained by    

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the Non-U.S. Holder (and, in either case, the branch profits tax discussed      
above may also apply if the Non-U.S. Holder is a corporation); (ii) the Non-    
U.S. Holder is an individual who holds shares of Class A Common Stock as a      
capital asset and is present in the United States for 183 days or more in the   
taxable year of disposition and certain other tests are met; or (iii) the       
Company is or has been a United States real property holding corporation (a     
"USRPHC") for United States Federal income tax purposes (which the Company      
does not believe that it has been, currently is, or will become) at any time    
within the shorter of the five-year period preceding such disposition or such   
Non-U.S. Holder's holding period. If the Company were or were to become a       
USRPHC at any time during this period, gains realized upon a disposition of     
Class A Common Stock by a Non-U.S. Holder that did not directly or indirectly   
own more than 5% of the Class A Common Stock during this period generally       
would not be subject to United States Federal income tax, provided that the     
Class A Common Stock is regularly traded on an established securities market.   

ESTATE TAX                                                                      

Class A Common Stock owned or treated as owned by an individual who is not a
citizen or resident (as defined for United States Federal estate tax purposes)  
of the United States at the time of death will be includable in the             
individual's gross estate for United States Federal estate tax purposes unless  
an applicable estate tax treaty provides otherwise, and therefore may be        
subject to United States Federal estate tax.                                    

BACKUP WITHHOLDING, INFORMATION REPORTING, AND OTHER REPORTING REQUIREMENTS     

The Company must report annually to the Internal Revenue Service and to each
Non-U.S. Holder the amount of dividends paid to, and the tax withheld with      
respect to, each Non-U.S. Holder. These reporting requirements apply            
regardless of whether withholding was reduced or eliminated by an applicable    
tax treaty. Copies of this information also may be made available under the     
provisions of a specific treaty or agreement with the tax authorities in the    
country in which the Non-U.S. Holder resides or is established.                 

Under the Current Regulations, United States backup withholding tax (which  
generally is imposed at the rate of 31% on certain payments to persons that     
fail to furnish the information required under the United States information    
reporting requirements) and information reporting requirements (other than      
those discussed above under "Dividends") generally will not apply to dividends  
paid on Class A Common Stock to a Non-U.S. holder at an address outside the     
United States. Backup withholding and information reporting generally will      
apply, however, to dividends paid on shares of Class A Common Stock to a Non-   
U.S. Holder at an address in the United States, if such holder fails to         
establish an exemption or to provide certain other information to the payor.    

Under the Current Regulations, the payment of proceeds from the disposition 
of Class A Common Stock to or through a United States office of a broker will   
be subject to information reporting and backup withholding unless the           
beneficial owner, under penalties of perjury, certifies, among other things,    
its status as a Non-U.S. Holder or otherwise establishes an exemption. The      
payment of proceeds from the disposition of Class A Common Stock to or through  
a non-U.S. office of a broker generally will not be subject to backup           
withholding and information reporting except as noted below.  In the case of    
proceeds from a disposition of Class A Common Stock paid to or through a non-   
U.S. office of a broker that is (i) a United States person; (ii) a "controlled  
foreign corporation" for United States Federal income tax purposes; or (iii) a  
foreign person 50% or more of whose gross income from certain periods is        
effectively connected with a United States trade or business, information       
reporting (but not backup withholding) will apply unless the broker has         
documentary evidence in its files that the owner is a Non-U.S. Holder (and the  
broker has no actual knowledge to the contrary).                                

Under the Final Regulations, the payment of dividends or the payment of     
proceeds from the disposition of Class A Common Stock to a Non-U.S. Holder may  
be subject to information reporting and backup withholding unless such          
recipient satisfies applicable certification requirements or otherwise          
establishes an exemption.                                                       

Backup withholding is not an additional tax. Any amounts withheld under the 
backup withholding rules from a payment to a Non-U.S. Holder will be refunded   
or credited against the Non-U.S. Holder's United States Federal income tax      
liability, if any, provided that the required information is furnished to the   
Internal Revenue Service in a timely manner.                                    

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UNDERWRITERS  

Under the terms and subject to the conditions contained in an Underwriting  
Agreement dated the date of this Prospectus (the "Underwriting Agreement"),     
the U.S. Underwriters named below for whom Morgan Stanley & Co. Incorporated,   
Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated     
are acting as U.S. Representatives, and the International Underwriters named    
below for whom Morgan Stanley & Co. International Limited, Goldman Sachs        
International, and Merrill Lynch International are acting as International      
Representatives, have severally agreed to purchase, and the Company has agreed  
to sell to them, severally, the respective number of shares of Class A Common   
Stock set forth opposite the names of such Underwriters below:                  

                                                                [Download Table]

                                                                      NUMBER OF 
        NAME                                                            SHARES  
        ----                                                          ----------
                                                                                
U.S. Underwriters:                                                              
  Morgan Stanley & Co. Incorporated..................................  4,320,000
  Goldman, Sachs & Co. ..............................................  4,320,000
  Merrill Lynch, Pierce, Fenner & Smith                                         
           Incorporated..............................................  4,320,000
  George K. Baum & Company...........................................    200,000
  Sanford C. Bernstein & Co., Inc....................................    800,000
  CIBC Oppenheimer Corp..............................................    800,000
  Donaldson, Lufkin & Jenrette Securities Corporation................    800,000
  Fox-Pitt, Kelton Inc...............................................    800,000
  Janney Montgomery Scott Inc........................................    200,000
  Morgan Keegan & Company, Inc.......................................    200,000
  Piper Jaffray Inc..................................................    200,000
  The Robinson-Humphrey Company, LLC.................................    200,000
  Stephens Inc.......................................................    200,000
                                                                      ----------
    Subtotal......................................................... 17,360,000
                                                                      ----------
International Underwriters:                                                     
  Morgan Stanley & Co. International Limited.........................  1,200,000
  Goldman Sachs International........................................  1,200,000
  Merrill Lynch International........................................  1,200,000
  Sanford C. Bernstein & Co., Inc....................................    370,000
  Donaldson, Lufkin & Jenrette International.........................    370,000
                                                                      ----------
    Subtotal.........................................................  4,340,000
                                                                      ----------
      Total.......................................................... 21,700,000
                                                                      ==========

The U.S. Underwriters and the International Underwriters, and the U.S.      
Representatives and the International Representatives are collectively          
referred to as the "Underwriters" and the "Representatives," respectively. The  
Underwriting Agreement provides that the obligations of the several             
Underwriters to pay for and accept delivery of the shares of Class A Common     
Stock offered hereby are subject to the approval of certain legal matters by    
their counsel and to certain other conditions. The Underwriters are obligated   
to take and pay for all of the shares of Class A Common Stock offered hereby    
(other than those covered by the U.S. Underwriters' over-allotment option       
described below) if any such shares are taken.                                  

Pursuant to the Agreement between U.S. and International Underwriters, each 
U.S. Underwriter has represented and agreed that, with certain exceptions (i)   
it is not purchasing any Shares (as defined below,) for the account of anyone   
other than a United States or Canadian Person (as defined below) and (ii) it    
has not offered or sold, and will not offer or sell, directly or indirectly,    
any Shares or distribute any prospectus relating to Shares outside the United   
States or Canada or to anyone other than a United States or Canadian Person.    
Pursuant to the Agreement between U.S. and International Underwriters, each     
International Underwriter has represented and                                   

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agreed that, with certain exceptions (i) it is not purchasing any Shares for    
the account of any United States or Canadian person and (ii) it has not         
offered or sold, and will not offer or sell, directly or indirectly, any        
Shares or distribute any prospectus relating to the Shares in the United        
States or Canada or to any United States or Canadian Person. With respect to    
any Underwriter that is a U.S. Underwriter and an International Underwriter,    
the foregoing representations and agreements (i) made by it in its capacity as  
a U.S. Underwriter apply only to it in its capacity as a U.S. Underwriter and   
(ii) made by it in its capacity as an International Underwriter apply only to   
it in its capacity as an International Underwriter. The foregoing limitations   
do not apply to stabilization transactions or to certain other transactions     
specified in the Agreement between the U.S. and International Underwriters. As  
used herein, "United States or Canadian Person" means any national or resident  
of the United States or Canada, or any corporation, pension, profit-sharing,    
or other trust or other entity organized under the laws of the United States    
or Canada or of any political subdivision thereof (other than a branch located  
outside the United States and Canada of any United States or Canadian Person)   
and includes any United States or Canadian branch of a person who is otherwise  
not a United States or Canadian person. All shares of Class A Common Stock to   
be purchased by the Underwriters are referred to herein as the "Shares."        

Pursuant to the Agreement between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of     
any number of Shares as may be mutually agreed. The per share price of any      
Shares so sold will be the public offering price set forth on the cover page    
hereof, in United States dollars, less an amount not greater than the per       
share amount of the concession to dealers set forth below.                      

Pursuant to the Agreement between U.S. and International Underwriters, each 
U.S. Underwriter has represented that it has not offered or sold, and has       
agreed not to offer or sell, any Shares, directly or indirectly, in any         
province or territory of Canada or to, or for the benefit of, any resident of   
any province or territory of Canada in contravention of the securities laws     
thereof and has represented that any offer or sale of Shares in Canada will be  
made only pursuant to an exemption from the requirement to file a prospectus    
in the province or territory of Canada in which such offer or sale is made.     
Each U.S. Underwriter has further agreed to send to any dealer who purchases    
from it any of the Shares a notice stating in substance that, by purchasing     
such Shares, such dealer represents and agrees that it has not offered or       
sold, and will not offer or sell, directly or indirectly, any of such Shares    
in any province or territory of Canada or to, or for the benefit of, any        
resident of any province or territory of Canada in contravention of the         
securities laws thereof and that any offer or sale of Shares in Canada will be  
made only pursuant to an exemption from the requirement to file a prospectus    
in the province or territory of Canada in which such offer or sale is made,     
and that such dealer will deliver to any other dealer to whom it sells any of   
such Shares a notice containing substantially the same statement as is          
contained in this sentence.                                                     

Pursuant to the Agreement between U.S. and International Underwriters, each 
International Underwriter has represented and agreed that (i) it has not        
offered or sold and, prior to the date six months after the closing date for    
the sale of the Shares to the International Underwriters, will not offer or     
sell, any Shares to persons in the United Kingdom except to persons whose       
ordinary activities involve them in acquiring, holding, managing, or disposing  
of investments (as principal or agent) for the purposes of their businesses or  
otherwise in circumstances that have not resulted and will not result in an     
offer to the public in the United Kingdom within the meaning of the Public      
Offers of Securities Regulations 1995; (ii) it has complied and will comply     
with all applicable provisions of the Financial Services Act 1986 with respect  
to anything done by it in relation to the Shares in, from or otherwise          
involving the United Kingdom; and (iii) it has only issued or passed on and     
will only issue or pass on in the United Kingdom any document received by it    
in connection with the offering of the Shares to a person who is of a kind      
described in Article 11(3) of the Financial Services Act 1986 (Investment       
Advertisements) (Exemptions) Order 1996 or is a person to whom such document    
may otherwise be lawfully issued or passed on.                                  

Pursuant to the Agreement between U.S. and International Underwriters, each 
International Underwriter has further represented that it has not offered or    
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or  
to or for the account of any resident thereof, any of the Shares acquired in    
connection with the distribution contemplated hereby, except for offers or      
sales to Japanese International Underwriters or dealers and                     

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except pursuant to any exemption from the registration requirements of the      
Securities and Exchange Law and otherwise in compliance with applicable         
provisions of Japanese law. Each International Underwriter has further agreed   
to send to any dealer who purchases from it any of the Shares a notice stating  
in substance that, by purchasing such Shares, such dealer represents and        
agrees that it has not offered or sold, and will not offer or sell, any of      
such Shares, directly or indirectly, in Japan or to or for the account of any   
resident thereof except for offers or sales to Japanese International           
Underwriters or dealers and except pursuant to any exemption from the           
registration requirements of the Securities and Exchange Law and otherwise in   
compliance with applicable provisions of Japanese law, and that such dealer     
will send to any other dealer to whom it sells any of such Shares a notice      
containing substantially the same statement as is contained in this sentence.   

The Underwriters initially propose to offer part of the Shares directly to  
the public at the public offering price set forth on the cover page hereof and  
part to certain dealers at a price that represents a concession not in excess   
of $.81 per share under the public offering price. Any Underwriter may allow,   
and such dealers may reallow, a concession not in excess of $.10 per share to   
other Underwriters or to certain dealers. After the initial offering of the     
Shares, the offering price and other selling terms may from time to time be     
varied by the Representatives.                                                  

The Company has granted to the U.S. Underwriters an option, exercisable for 
30 days from the date of this Prospectus, to purchase up to an aggregate of     
2,170,000 additional shares of Class A Common Stock at the price to public set  
forth on the cover page hereof, less underwriting discounts and commissions.    
The U.S. Underwriters may exercise such option solely for the purpose of        
covering over-allotments, if any, made in connection with the offering of the   
shares of Class A Common Stock offered hereby. To the extent such option is     
exercised, each U.S. Underwriter will become obligated, subject to certain      
conditions, to purchase approximately the same percentage of such additional    
shares of Class A Common Stock as the number set forth next to such U.S.        
Underwriter's name in the preceding table bears to the total number of shares   
of Class A Common Stock set forth next to the names of all U.S. Underwriters    
in the preceding table.                                                         

The Underwriters have informed the Company that they do not intend for sales
to discretionary accounts to exceed five percent of the aggregate number of     
shares of Class A Common Stock offered by them.                                 

The Class A Common Stock has been approved for listing, subject to official 
notice of issuance, on the NYSE under the trading symbol "WDR."                 

Each of the Company and Torchmark and each of the directors and executive   
officers of the Company has agreed that, without the prior written consent of   
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,   
during the period ending 180 days after the date of this Prospectus (the        
"Lock-up Period"), (i) offer, pledge, sell, contract to sell, sell any option   
or contract to purchase, purchase any option or contract to sell, grant any     
option, right or warrant to purchase or otherwise transfer, lend or dispose     
of, directly or indirectly, any shares of Class A Common Stock or any           
securities convertible into or exercisable or exchangeable for Class A Common   
Stock or (ii) enter into any swap or other arrangement that transfers to        
another, in whole or in part, any of the economic consequences of ownership of  
the Class A Common Stock whether any such transaction described in clause (i)   
or (ii) above is settled by delivery of Class A Common Stock, or such other     
securities, in cash or otherwise. The restrictions described in this paragraph  
do not apply to (x) the sale of Shares to the Underwriters, (y) the issuance    
by the Company of shares of Class A Common Stock upon the exercise of an        
option or warrant or the conversion of a security outstanding on the date of    
this Prospectus of which the Underwriters have been advised in writing, or (z)  
transactions by any person other than the Company or Torchmark relating to      
shares of Class A Common Stock or other securities acquired in open market      
transactions after the completion of the Offering. The restrictions on the      
Company and Torchmark are subject to exceptions for the issuance of Class A     
Common Stock (A) pursuant to employee benefit plans and (B) as payment for      
acquisitions by the Company, if all persons or entities receiving Shares        
pursuant to this clause (B) agree to be subject to the restrictions in clauses  
(i) and (ii) above for the remainder of the Lock-up Period.                     

In order to facilitate the Offering, the Underwriters may engage in         
transactions that stabilize, maintain, or otherwise affect the price of the     
Class A Common Stock. Specifically, the Underwriters may over-allot in          

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connection with the Offering, creating a short position in the Class A Common   
Stock for their own account. In addition, to cover over-allotments or to        
stabilize the price of the Class A Common Stock, the Underwriters may bid for,  
and purchase, shares of Class A Common Stock in the open market. Finally, the   
underwriting syndicate may reclaim selling concessions allowed to an            
Underwriter or a dealer for distributing the Class A Common Stock in the        
Offering, if the syndicate repurchases previously distributed Class A Common    
Stock in transactions to cover syndicate short positions, in stabilization      
transactions, or otherwise. Any of these activities may stabilize or maintain   
the market price of the Class A Common Stock above independent market levels.   
The Underwriters are not required to engage in these activities, and may end    
any of these activities at any time.                                            

From time to time, Morgan Stanley & Co. Incorporated has provided, and      
continues to provide, investment banking services to Torchmark Corporation and  
the Company.                                                                    

Torchmark, the Company, and the Underwriters have agreed to indemnify each  
other against certain liabilities, including liabilities under the Securities   
Act.                                                                            

DIRECTED SHARE PROGRAM                                                          

At the request of the Company, the Underwriters have reserved for sale, at  
the initial public offering price, up to 1.25 million shares of the Class A     
Common Stock (that will be offered by this Prospectus) for directors,           
officers, employees, business associates, and related persons of the Company.   
The number of shares of Class A Common Stock available for sale to the general  
public will be reduced to the extent such persons purchase such reserved        
shares. Any reserved shares that are not so purchased will be offered by the    
Underwriters to the general public on the same basis as the other shares        
offered hereby.                                                                 

PRICING OF THE OFFERING                                                         

Prior to the Offering, there has been no public market for the Class A      
Common Stock. The initial public offering price was determined by negotiations  
between Torchmark and the Company on the one hand and the U.S. Representative   
on the other hand. Among the factors considered in determining the initial      
public offering price were the future prospects of the Company and its          
industry in general, sales, earnings, and certain other financial operating     
information of the Company in recent periods, and the price-earnings ratios,    
price-sales ratios, market prices of securities and certain financial and       
operating information of companies engaged in activities similar to those of    
the Company.                                                                    

LEGAL MATTERS 

The validity of the shares of Class A Common Stock offered hereby will be   
passed upon for the Company by Hughes & Luce, L.L.P., Dallas, Texas. Certain    
legal matters in connection with the sale of shares of Class A Common Stock in  
the Offering will be passed upon for the Underwriters by Skadden, Arps, Slate,  
Meagher & Flom LLP, New York, New York.                                         

EXPERTS 

The Consolidated Financial Statements of the Company as of December 31, 1996
and 1997, and for each of the years in the three-year period ended December     
31, 1997 included in this Prospectus have been so included in reliance on the   
report of KPMG Peat Marwick LLP, independent certified public accountants,      
appearing elsewhere herein, and upon the authority of said firm as experts in   
accounting and auditing.                                                        

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ADDITIONAL INFORMATION  

The Company has filed with the Commission a Registration Statement on Form  
S-1 (as amended from time to time and together with all exhibits and schedules  
thereto, the "Registration Statement") under the Securities Act with respect    
to the Class A Common Stock to be sold in the Offering. This Prospectus         
constitutes a part of the Registration Statement and does not contain all the   
information set forth in the Registration Statement, certain portions of which  
have been omitted as permitted by the rules and regulations of the Commission.  
Statements contained in this Prospectus as to the content of any contract or    
other document are not necessarily complete, and in each instance, reference    
is made to the copy of such contract or other document filed as an exhibit to   
the Registration Statement, each such statement being qualified in all respect  
by such reference. For further information regarding the Company and the Class  
A Common Stock, reference is hereby made to the Registration Statement, a copy  
of which may be obtained from the Commission at its principal office in         
Washington, D.C. upon payment of the fees prescribed by the Commission.         

The Registration Statement, and the reports and other information to be     
filed by the Company with the Commission following the Offering in accordance   
with the Exchange Act, can be inspected and copied at the principal office of   
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,           
Washington, D.C. 20549, and at the following regional offices of the            
Commission: 7 World Trade Center, New York, New York 10048 and Northwestern     
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.    
Copies of such material may be obtained from the Commission's website,          
http//www.sec.gov, and from the Public Reference Section of the Commission at   
its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon    
payment of the fees prescribed by the Commission.                               

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                [Download Table]

                                                                           PAGE
                                                                           ----
                                                                               
CONSOLIDATED FINANCIAL STATEMENTS OF WADDELL & REED FINANCIAL, INC. AND        
 SUBSIDIARY                                                                    
Independent Auditors' Report.............................................   F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997.............   F-3
Consolidated Statements of Operations for the years ended December 31,         
 1995, 1996 and 1997.....................................................   F-4
Statement of Changes in Stockholder's Equity for the years ended December      
 31, 1995, 1996 and 1997.................................................   F-5
Consolidated Statements of Cash Flows for the years ended December 31,         
 1995, 1996 and 1997.....................................................   F-6
Notes to Consolidated Financial Statements...............................   F-7
Pro Forma Financial Statements...........................................  F-18

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INDEPENDENT AUDITORS' REPORT  

The Board of Directors                                                          
Waddell & Reed Financial, Inc.:                                               

We have audited the accompanying consolidated balance sheets of Waddell &   
Reed Financial, Inc. and subsidiaries, a subsidiary of Torchmark Corporation,   
as of December 31, 1996 and 1997 and the related consolidated statements of     
operations, stockholders' equity and cash flows for each of the years in the    
three-year period ended December 31, 1997. These consolidated financial         
statements are the responsibility of the Company's management. Our              
responsibility is to express an opinion on these consolidated financial         
statements based on our audits.                                                 

We conducted our audits in accordance with generally accepted auditing      
standards. Those standards require that we plan and perform the audit to        
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

In our opinion, the consolidated financial statements referred to above     
present fairly, in all material respects, the financial position of Waddell &   
Reed Financial, Inc. and subsidiaries as of December 31, 1996 and 1997 and the  
results of their operations and their cash flows for each of the years in the   
three year period ended December 31, 1997, in conformity with generally         
accepted accounting principles.                                                 

KPMG Peat Marwick LLP                                                           
Kansas City, Missouri                                                           
January 30, 1998                                                                

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WADDELL & REED FINANCIAL, INC.

CONSOLIDATED BALANCE SHEETS 

DECEMBER 31, 1996 AND 1997

                                                                [Download Table]

                                                               1996     1997   
                                                             -------- -------- 
                                                              (IN THOUSANDS)   
                                                                               
                           ASSETS                                              
Assets:                                                                        
  Cash and cash equivalents (note 2)........................ $ 59,003   73,820 
  Investment securities, available-for-sale (note 3)........   19,980   18,977 
  Receivables:                                                                 
    United Funds and W&R Funds..............................    3,579    4,031 
    Customers and other.....................................   11,986   11,840 
  Due from affiliates (note 6)..............................   13,320   17,232 
  Deferred income taxes (note 8)............................      120    1,241 
  Prepaid expenses and other current assets.................    2,151    2,991 
                                                             -------- -------- 
    Total current assets....................................  110,139  130,132 
  Due from affiliates (note 6)..............................  171,153  175,450 
  Property and equipment, net (note 4)......................   10,392   12,058 
  Investment in real estate, net (note 5)...................   17,092      --  
  Investment in real estate partnership (note 5)............      --    17,544 
  Deferred sales commissions, net...........................   10,439   12,316 
  Goodwill (net of accumulated amortization of $14,575 and                     
   $17,479).................................................  101,734   98,831 
  Other assets..............................................    8,329      633 
                                                             -------- -------- 
    Total assets............................................ $429,278  446,964 
                                                             ======== ======== 
            LIABILITIES AND STOCKHOLDERS' EQUITY                               
Liabilities:                                                                   
 Current liabilities:                                                          
  Accounts payable.......................................... $ 24,832   22,929 
  Due to affiliates (note 6)................................    2,428  102,459 
  Accrued salesforce compensation...........................    9,007    8,666 
  Income taxes payable......................................   18,249    3,314 
  Other current liabilities.................................    8,146   18,525 
                                                             -------- -------- 
    Total current liabilities...............................   62,662  155,893 
                                                             -------- -------- 
  Due to affiliates (note 6)................................  124,133  509,186 
  Deferred income taxes (note 8)............................      947    2,246 
  Accrued pensions and post-retirement costs (notes 9 and                      
   10)......................................................    7,938    9,530 
  Other liabilities.........................................    1,043      --  
                                                             -------- -------- 
    Total liabilities.......................................  196,723  676,855 
                                                             -------- -------- 
Stockholders' equity (note 7):                                                 
  Common stock ($.01 par value; 42,300,000 shares                              
   authorized,                                                                 
   issued and outstanding)..................................      423      423 
  Additional paid-in capital................................  231,968      --  
  Retained earnings.........................................      --       --  
  Dividends in excess of retained earnings and additional                      
   paid-in capital                                                --  (230,658)
  Unrealized gain on available-for-sale securities..........      164      344 
                                                             -------- -------- 
    Total stockholders' equity..............................  232,555 (229,891)
                                                             -------- -------- 
Commitments, contingencies and subsequent events (notes 14                     
 and 15)                                                                       
Total liabilities and stockholders' equity.................. $429,278  446,964 
                                                             ======== ======== 

See accompanying notes to consolidated financial statements.

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WADDELL & REED FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS 

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

                                                                [Download Table]

                                                        1995    1996     1997   
                                                       ------- -------  ------- 
                                                        (IN THOUSANDS, EXCEPT   
                                                        FOR PER SHARE AMOUNT)   
                                                                                
Revenue (note 6):                                                               
  Investment management fees.......................... $85,289 101,466  117,784 
  Underwriting and distribution fees:                                           
   United Funds and W&R Funds.........................  44,126  55,059   58,815 
   Affiliates.........................................  26,267  30,778   30,612 
  Shareholder service fees............................  23,527  28,378   30,763 
  Investment and other revenue........................   4,295   5,295    3,798 
                                                       ------- -------  ------- 
    Total revenue..................................... 183,504 220,976  241,772 
                                                       ------- -------  ------- 
Expenses:                                                                       
  Underwriting and distribution.......................  64,082  78,915   79,995 
  Compensation and related costs......................  21,304  21,913   26,618 
  General and administrative (note 6).................   8,594  10,180   15,826 
  Depreciation........................................   1,914   1,758    1,307 
  Amortization of goodwill............................   2,903   2,903    2,903 
                                                       ------- -------  ------- 
    Total expenses....................................  98,797 115,669  126,649 
                                                       ------- -------  ------- 
    Income before interest and income taxes...........  84,707 105,307  115,123 
Interest (note 6)                                                               
  Income..............................................   3,886   4,072   11,323 
  Expense.............................................     --     (186) (11,299)
                                                       ------- -------  ------- 
    Income before income taxes........................  88,593 109,193  115,147 
Income taxes (note 8).................................  35,092  42,493   44,855 
                                                       ------- -------  ------- 
    Net income........................................ $53,501  66,700   70,292 
                                                       ======= =======  ======= 
Pro forma net income per share:                                                 
  Basic and diluted...................................                  $  1.10 
                                                                        ======= 

See accompanying notes to consolidated financial statements.

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WADDELL & REED FINANCIAL, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

                                                        [Enlarge/Download Table]

                         COMMON STOCK                                                                        
                         -------------                                                                       
                                                              DIVIDENDS IN                                   
                                       ADDITIONAL               EXCESS OF                                    
                                        PAID-IN   RETAINED  RETAINED EARNINGS   UNREALIZED        TOTAL      
                                        CAPITAL   EARNINGS   AND ADDITIONAL   GAIN (LOSS) ON  STOCKHOLDER'S  
                         SHARES AMOUNT  (NOTE 7)  (NOTE 7)   PAID-IN CAPITAL    INVESTMENT   EQUITY (DEFICIT)
                         ------ ------ ---------- --------  ----------------- -------------- ----------------
                                                           (IN THOUSANDS)                                    
                                                                                                             
Balance at December 31,                                                                                      
 1994................... 42,300  $423    193,377   29,158            --            (666)          222,292    
Net income..............    --    --         --    53,501            --             --             53,501    
Contributions from                                                                                           
 parent.................    --    --      10,581      --             --             --             10,581    
Other distributions                                                                                          
 (note 6)...............    --    --         --   (69,098)           --             --            (69,098)   
Unrealized gain on                                                                                           
 investment securities..    --    --         --       --             --             930               930    
                         ------  ----   --------  -------       --------           ----          --------    
Balance at December 31,                                                                                      
 1995................... 42,300   423    203,958   13,561            --             264           218,206    
Net income..............    --    --         --    66,700            --             --             66,700    
Contributions from                                                                                           
 parent.................    --    --     121,358      --             --             --            121,358    
Other distributions                                                                                          
 (note 6)...............    --    --     (93,348) (70,261)           --             --           (163,609)   
Cash dividends to                                                                                            
 parent.................    --    --         --   (10,000)           --             --            (10,000)   
Unrealized loss on                                                                                           
 investment securities..    --    --         --       --             --            (100)             (100)   
                         ------  ----   --------  -------       --------           ----          --------    
Balance at December 31,                                                                                      
 1996................... 42,300   423    231,968      --             --             164           232,555    
Net income..............    --    --         --    70,292            --             --             70,292    
Contributions from                                                                                           
 parent.................    --    --      47,980      --             --             --             47,980    
Other distributions                                                                                          
 (note 6)...............    --    --    (279,948) (18,627)      (230,658)           --           (529,233)   
Cash dividends to                                                                                            
 parent.................          --         --   (51,665)           --             --            (51,665)   
Unrealized gain on                                                                                           
 investment securities..    --    --         --       --             --             180               180    
                         ------  ----   --------  -------       --------           ----          --------    
Balance at December 31,                                                                                      
 1997................... 42,300  $423        --       --        (230,658)           344          (229,891)   
                         ======  ====   ========  =======       ========           ====          ========    

See accompanying notes to consolidated financial statements.

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WADDELL & REED FINANCIAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS 

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

                                                                [Download Table]

                                                1995      1996     1997   
                                               -------  --------  ------- 
                                                    (IN THOUSANDS)        
                                                                          
Cash flows from operating activities:                                     
  Net income.................................. $53,501    66,700   70,292 
  Adjustments to reconcile net income to net                              
   cash                                                                   
   provided by operating activities:                                      
    Depreciation and amortization.............   4,817     4,661    4,210 
    Gain on sale of investments...............     (30)      --       --  
    Loss on sale and retirement of fixed                                  
     assets...................................      59       311       65 
    Capital gains and dividends reinvested....     (60)      (60)     (78)
    Deferred income taxes.....................    (186)      827       27 
    Changes in assets and liabilities:                                    
      Receivables from funds..................  (1,606)    1,172     (452)
      Other receivables.......................  (1,836)    2,725   (1,195)
      Due to/from affiliates--operating.......    (660)    1,703   (4,217)
      Other assets............................  (3,317)   (9,913)  (5,383)
      Accounts payable........................   7,488      (252)  (1,883)
      Other liabilities.......................   4,082    18,369      898 
                                               -------  --------  ------- 
Net cash provided by operating activities.....  62,252    86,243   62,284 
                                               -------  --------  ------- 
Cash flows from investing activities:                                     
  Additions to investments....................    (917)     (116)     (40)
  Proceeds from sales of investments..........   1,201       --         1 
  Proceeds from maturity of investments.......   1,440     1,355    1,260 
  Purchase of property and equipment..........  (1,428)   (1,689)  (3,218)
  Investment in real estate...................    (312)     (298)     --  
  Other.......................................      25        18       50 
                                               -------  --------  ------- 
Net cash provided by (used in) investing                                  
 activities...................................       9      (730)  (1,947)
                                               -------  --------  ------- 
Cash flows from financing activities:                                     
  Cash dividends to parent....................     --    (10,000) (51,665)
  Change in due to/from affiliates--                                      
   nonoperating............................... (60,040) (170,016) (37,888)
  Cash contributions from parent..............  13,236   111,718   44,033 
                                               -------  --------  ------- 
Net cash used in financing activities......... (46,804)  (68,298) (45,520)
                                               -------  --------  ------- 
Net increase in cash and cash equivalents.....  15,457    17,215   14,817 
Cash and cash equivalents at beginning of                                 
 period.......................................  26,331    41,788   59,003 
                                               -------  --------  ------- 
Cash and cash equivalents at end of period.... $41,788    59,003   73,820 
                                               =======  ========  ======= 
Cash paid for income taxes.................... $33,084    43,667   65,754 
                                               =======  ========  ======= 

See notes 5, 6 and 7 for noncash investing and financing activities.            

See accompanying notes to consolidated financial statements.

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

DECEMBER 31, 1995, 1996 AND 1997  

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

Basis of Presentation                                                         

Waddell & Reed Financial, Inc. is owned by Torchmark Corporation and        
Torchmark's subsidiary, Liberty National Life Insurance Company (Liberty).      
Torchmark and its subsidiaries, other than Waddell & Reed Financial, Inc., are  
referred to herein as "Torchmark." In December 1997, Waddell & Reed Financial,  
Inc.'s name was changed from United Investors Management Company to Waddell &   
Reed Financial, Inc. In the first quarter of 1998, the insurance operations of  
Waddell & Reed Financial, Inc., United Investors Life Insurance Company, were   
distributed to Torchmark. Waddell & Reed Financial, Inc.'s remaining            
subsidiary is Waddell & Reed Financial Services, Inc. and its subsidiaries      
(WRFS).                                                                         

The accompanying financial statements include the accounts of Waddell & Reed
Financial, Inc. and WRFS (the Company) for all periods presented (note 7).      
Amounts for UILIC have been excluded for all periods presented. All             
significant intercompany accounts and transactions are eliminated in            
consolidation.                                                                  

Business                                                                      

Through WRFS, the Company derives its revenue primarily from investment     
management, administration, distribution and related services provided to the   
United mutual funds and Waddell & Reed mutual funds (the Funds) and             
institutional accounts in the United States. The Funds and institutional        
accounts operate under various rules and regulations set forth by the           
Securities and Exchange Commission (SEC). Services to the Funds are provided    
under contracts that set forth the fees to be charged for these services. The   
majority of these contracts are subject to annual review and approval by each   
fund's Board of Directors/Trustees and stockholders. In 1997, the United        
Income Fund represented approximately 16% of total revenues. No other fund      
represented 10% or more of revenues. Company revenues are largely dependent on  
the total value and composition of assets under management, which include       
domestic and international equity and debt securities; accordingly,             
fluctuations in financial markets and composition of assets under management    
impact revenues and results of operations.                                      

Cash and Cash Equivalents                                                     

Cash and cash equivalents include cash on hand and short-term investments.  
The Company considers all highly liquid debt instruments with original          
maturities of ninety days or less to be cash equivalents.                       

Revenue Recognition                                                           

Investment advisory and administrative service fees are recognized when     
earned. Commission revenue and expenses (and related receivables and payables)  
resulting from securities transactions are recorded on the date on which the    
order to buy or sell securities is executed.                                    

Advertising                                                                   

Costs of advertising are expensed as incurred. Amounts charged to expense   
were not significant for the years ended December 31, 1995, 1996 and 1997.      

Investments Securities and Investment in Affiliated Mutual Funds              

All investments in debt securities and affiliated stock and fixed income    
mutual funds are classified as available-for-sale. As a result, these           
investments are recorded at fair value. Unrealized holding gains and losses,    
net of related tax effects, are excluded from earnings until realized and are   
reported as a separate component of stockholders' equity. Realized gains and    
losses are computed using the specific identification method for investment     
securities other than mutual funds. For mutual funds, realized gains and        
losses are computed using the average cost method.                              

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

Concentration of Credit Risk                                                  

Financial instruments which potentially expose the Company to concentrations
of credit risk, as defined by Statement of Financial Accounting Standards       
(SFAS) No. 105, consist primarily of investments in U. S. government and        
agency securities, municipal securities and affiliated money market and fixed   
income mutual funds and accounts receivable. Credit risk is believed to be      
minimal in that the U. S government and agency securities are backed by the     
full faith and credit of the U. S. government, municipal securities are backed  
by the full taxing power of the issuing municipality or revenues from a         
specific project, and the affiliated mutual funds have substantial net assets.  

Property and Equipment                                                        

Property and equipment are carried at cost. Depreciation on property and    
equipment is calculated using the straight-line method over the estimated       
useful lives of the assets.                                                     

Goodwill                                                                      

Goodwill, which represents the excess of purchase price over fair value of  
net assets acquired, arose in connection with the acquisition of the Company    
by Torchmark. Amortization is on a straight-line basis over forty years. The    
Company assesses the recoverability of goodwill by determining whether the      
unamortized balance can be recovered through undiscounted future operating      
cash flows over its remaining life. Impairment, if any, is measured by the      
excess of the unamortized balance over discounted future operating cash flows.  

Deferred Sales Commissions                                                    

The Company defers certain costs, principally selling commissions, that are 
paid to financial advisors in connection with the sale of certain shares of     
Waddell & Reed mutual funds (W&R Funds). These costs are amortized on a         
straight line basis over a period not exceeding ten years which approximates    
the historical life of shareholder investments. The Company recovers such       
costs through 12b-1 distribution fees, which are paid by the W&R Funds and a    
contingent deferred sales charge paid by stockholders who redeem their shares   
prior to completion of the required holding periods.                            

Income Taxes                                                                  

The accounts of the Company are included in the consolidated federal income 
tax return of Torchmark. The Company's provision for income taxes has been      
made on the same basis as if the Company filed separate returns.                

Disclosures About Fair Value of Financial Instruments                         

Given the nature of the Company's assets and liabilities, the Company       
believes the amounts in the financial statements approximate fair value.        

Pro Forma Net Income Per Share                                                

In February 1997, the Financial Accounting Standards Board (FASB) issued    
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per        
Share, which revised the calculation and presentation provisions of Accounting  
Principles Board Opinion 15 and related interpretations. SFAS No. 128 became    
effective for the Company's fiscal year ending December 31, 1997. Pro forma     
basic and diluted net income per share amounts have been presented under SFAS   
No. 128.                                                                        

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

Pro forma basic and diluted net income per share has been computed by       
dividing net income, as adjusted to eliminate the after tax interest cost on    
the Torchmark Notes, by 64,000,000 shares (the average number of shares         
outstanding plus the number of shares, whose proceeds would be used to pay the  
Torchmark and Liberty notes (note 6).) Diluted net income per share is the      
same as basic net income per share as there are no dilutive securities.         

Use of Estimates                                                              

Management of the Company has made a number of estimates and assumptions    
relating to the reporting of assets and liabilities and the disclosure of       
contingent assets and liabilities to prepare these financial statements in      
conformity with generally accepted accounting principles. Actual results could  
differ from those estimates.                                                    

Recent Accounting Developments                                                

In 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income, and  
SFAS No. 131, Disclosures About Segments of an Enterprise and Related           
Information. These statements, which are effective for periods beginning after  
December 15, 1997, expand or modify disclosures. The Company does not expect    
implementation to have any significant effect on the Company's reported         
financial position, results of operations or segment reporting.                 

(2) CASH AND CASH EQUIVALENTS                                                   

Cash and cash equivalents at December 31, 1996 and 1997 includes reserves of
$15,028,000 and $14,943,000, respectively, for the benefit of customers in      
compliance with securities industry regulations and an investment of            
$4,344,000 and $325,000, respectively, in a money market fund for which the     
Company is principal underwriter and investment advisor. Substantially all      
such reserves are in excess of federal deposit insurance limits. The money      
market fund is uninsured.                                                       

(3) INVESTMENTS SECURITIES, AVAILABLE-FOR-SALE                                  

Investments at December 31, 1996 and 1997 are as follows:                   

                                                                [Download Table]

                                    AMORTIZED UNREALIZED UNREALIZED  FAIR 
               1996                   COST      GAINS      LOSSES   VALUE 
               ----                 --------- ---------- ---------- ------
                                                                          
United States government-backed                                           
 mortgage securities............... $  5,925      32        (17)     5,940
Municipal bonds maturing:                                                 
  After five years but within ten                                         
   years...........................   11,760     276        (42)    11,994
  After ten years..................    1,196      12        --       1,208
Affiliated mutual funds............      833       9         (4)       838
                                    --------     ---        ---     ------
                                    $ 19,714     329        (63)    19,980
                                    ========     ===        ===     ======

                                    AMORTIZED UNREALIZED UNREALIZED  FAIR 
               1997                   COST      GAINS      LOSSES   VALUE 
               ----                 --------- ---------- ---------- ------
                                                                          
United States government-backed                                           
 mortgage securities............... $  4,749      86        --       4,835
Municipal bonds maturing:                                                 
  Within five years................    3,017     115        --       3,132
  After five years but within ten                                         
   years...........................    8,520     304        --       8,824
  After ten years..................    1,186       3         (2)     1,187
Affiliated mutual funds............      949      50        --         999
                                    --------     ---        ---     ------
                                    $ 18,421     558         (2)    18,977
                                    ========     ===        ===     ======

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(4) PROPERTY AND EQUIPMENT                                                      

A summary of property and equipment at December 31, 1996 and 1997 is as     
follows:                                                                        

                                                                [Download Table]

                                                                     ESTIMATED  
                                               1996        1997     USEFUL LIVES
                                            ---------- ------------ ------------
                                                (IN THOUSANDS)                  
                                                                                
   Land....................................  $ 1,717        1,717           --  
   Building................................    6,242        6,257      40 years 
   Furniture and fixtures..................    5,719        5,862    3-10 years 
   Equipment and machinery.................    6,186        7,859    3-10 years 
                                             -------     --------               
   Property and equipment, at cost.........   19,864       21,695               
   Less accumulated depreciation...........    9,472        9,637               
                                             -------     --------               
   Property and equipment, net.............  $10,392       12,058               
                                             =======     ========               

(5) INVESTMENT IN REAL ESTATE                                                   

  A summary of investment in rental real estate at December 31, 1996 is as      
follows:                                                                        


                                                        ESTIMATED               
                                               1996    USEFUL LIVES             
                                            ---------- ------------             
                                               (IN                              
                                            THOUSANDS)                          
                                                                                
   Land....................................  $ 7,784          --                
   Buildings...............................   10,771     40 years               
                                             -------                            
   Rental real estate, at cost.............   18,555                            
   Less accumulated depreciation...........    1,463                            
                                             -------                            
   Rental real estate, net.................  $17,092                            
                                             =======                            

Rental income of $1,409,000, $1,682,000 and $0 for the years ended December 
31, 1995, 1996 and 1997, respectively, is included in investment and other      
revenue. Depreciation expense for the years ended December 31, 1995, 1996 and   
1997 was $367,000, $383,000 and $18,000, respectively.                          

Effective January 1, 1997, the Company contributed its investment in real   
estate, which is located adjacent to its offices in Overland Park, Kansas, to   
TMK Income Properties, L.P. (TMK) in exchange for a 14% limited partnership     
interest in TMK. TMK is a limited partnership with other Torchmark affiliates   
that was formed for the purpose of acquiring, developing and managing real      
property. The property was transferred to TMK at the Company's net book value   
as of December 31, 1996 in the amount of $11,961,000. Effective July 1, 1997,   
the Company contributed additional land and land improvements for an            
additional 5% interest in TMK. The land and improvements were transferred at    
the Company's net book value in the amount of $5,113,000.                       

(6) TRANSACTIONS WITH RELATED PARTIES                                           

The Company serves as investment advisor to various affiliates of Torchmark 
and receives advisory fees for this service. Advisory fees, which are based on  
assets under management, amounted to $800,000, $1,037,000 and $1,241,000 for    
the years ended December 31, 1995, 1996 and 1997, respectively.                 

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

The Company earns commissions from Torchmark for marketing life and health  
insurance products and variable annuities. For the years ended December 31,     
1995, 1996 and 1997, the commissions amounted to $26,267,000, $30,778,000 and   
$30,612,000 respectively. These commissions were earned under contracts which   
have been renewed for 1998 with substantially the same terms.                   

Torchmark performs certain administrative services for the Company. Charges 
for such services which are allocated based on a defined formula that           
allocates Torchmark's total costs for services provided based on each           
affiliate's assets and compensation expense as a percentage of the total        
affiliate assets and compensation expense. The Company believes the allocation  
results in a reasonable allocation to the Company of costs. These charges were  
$2,731,000, $2,189,000 and $2,008,000 for the years ended December 31, 1995,    
1996 and 1997, respectively.                                                    

The current amounts due from affiliates at December 31, 1996 and 1997       
include interest bearing notes from Torchmark, noninterest bearing advances     
for current operating expenses and commissions due from the sale of             
affiliates' products. At December 31, 1996 and 1997, the 5.5% demand notes      
amounted to $11,672,000 plus accrued interest. At December 31, 1996 and 1997,   
the noncurrent amounts due from affiliates include a $123,947,000 note          
receivable from Torchmark, plus $186,000 and $1,239,000, respectively, of       
accrued interest. The 6% note requires semiannual interest payments and         
matures May 1, 2000. Also included in the noncurrent portion is a $40,000,000   
note receivable from Torchmark, due November, 1999 with interest at 8.1%.       
During 1995, 1996 and 1997, amounts due from Torchmark aggregating              
$69,098,000, $163,609,000 and $38,124,000, respectively, were forgiven and      
charged against stockholders' equity.                                           

The current amounts due to affiliates at December 31, 1996 and 1997 include 
amounts due for administrative services. Included in the 1996 and 1997          
noncurrent due to affiliates balance is a $123,947,000 note payable to          
Torchmark, plus $186,000 and $1,239,000, respectively, of accrued interest.     
The 6% note requires semiannual interest payments and matures May 1, 2000.      

Effective September 1997, Waddell & Reed Asset Management Company (WRAMCO), 
a subsidiary of WRFS, was distributed to Torchmark at its net book value of     
$2,977,000. WRAMCO provides investment management services to institutional     
investors. Subsequent to the distribution date, WRFS provides advisory          
investment management services to WRAMCO and receives a fee based upon assets   
under management. The Company was paid $1,296,000 for investment advisory       
services provided subsequent to the distribution date. The accompanying         
financial statements include the amounts for WRAMCO. Subsequent to              
distribution, the Company operates under a subadvisory agreement with WRAMCO    
to provide approximately the same level of services as prior to the             
distribution.                                                                   

On November 25, 1997, the Company declared a $480,000,000 dividend evidenced
by two 8% promissory notes to Torchmark and Liberty. These notes are payable    
on or before November 25, 2002 and require semiannual interest payments. Notes  
aggregating $96,000,000 are due in 1998 and, accordingly, are classified in     
the current portion of due to affiliates. The remaining $384,000,000 of these   
notes is included in the long-term portion of due to affiliates. The notes are  
mandatorily prepayable from the capital raised by the Company from a public or  
private sale or offering of debt or equity securities.                          

The Company, at the direction of its parent, has engaged in inter-corporate 
financings with affiliates. Such activities are not considered representative   
of the Company's activities on an ongoing basis as the Company does not intend  
to engage in inter-corporate financings other than on its own behalf in the     
ordinary course of business. Accordingly, for purposes of the statement of      
cash flows, inter-corporate financings have been reported in financing          
activities as "change in due to/from affiliates - non-operating".               

(7) STOCKHOLDERS' EQUITY                                                        

As discussed in note 1, the consolidated financial statements include only  
amounts for the Company. Transactions involving former subsidiaries of Waddell  
& Reed Financial, Inc., and Torchmark are reflected as due to/due from          
affiliates. To the extent such transactions resulted in a gain or loss, such    
amounts are reflected in additional paid-in capital or retained earnings.       

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

Retained earnings have been charged for dividends and other distributions to
the Company's parent to the extent such retained earnings were sufficient. The  
excess has been charged to additional paid-in capital with the remainder        
classified as dividends in excess of retained earnings and additional paid-in   
capital.                                                                        

(8) INCOME TAXES                                                                

The components of total income tax expense are as follows:                  

                                                                [Download Table]

                                                        1995     1996   1997 
                                                      --------  ------ ------
                                                          (IN THOUSANDS)     
                                                                             
Currently payable:                                                           
  Federal............................................ $ 31,449  36,197 38,939
  State..............................................    3,829   5,469  5,889
                                                      --------  ------ ------
                                                        35,278  41,666 44,828
Deferred taxes.......................................     (186)    827     27
                                                      --------  ------ ------
                                                      $ 35,092  42,493 44,855
                                                      ========  ====== ======

The tax effect of temporary differences that give rise to significant       
portions of deferred tax liabilities and deferred tax assets at December 31,    
1996 and 1997 are as follows:                                                   

                                                                [Download Table]

                                                              1996     1997  
                                                             -------  ------ 
                                                             (IN THOUSANDS)  
                                                                             
Deferred tax liabilities:                                                    
  Deferred sales commissions................................ $(3,967) (4,680)
  Fixed assets..............................................    (418)   (824)
  Other.....................................................    (458)   (500)
                                                             -------  ------ 
Total gross deferred liabilities............................  (4,843) (6,004)
                                                             -------  ------ 
Deferred tax assets:                                                         
  Benefit plans.............................................   3,050   3,557 
  Accrued expenses..........................................     966   1,442 
                                                             -------  ------ 
Total gross deferred assets.................................   4,016   4,999 
                                                             -------  ------ 
Net deferred tax liability.................................. $  (827) (1,005)
                                                             =======  ====== 

A valuation allowance for deferred tax assets was not necessary at December 
31, 1996 and 1997.                                                              

The following table reconciles the statutory federal income tax rate to the 
Company's effective income tax rate:                                            

                                                                [Download Table]

                                                            1995  1996  1997 
                                                            ----  ----  ---- 
                                                                             
Statutory federal income tax rate.......................... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefits............  2.9   3.1   3.3 
Other items................................................  1.7    .8    .7 
                                                            ----  ----  ---- 
Effective income tax rate.................................. 39.6% 38.9% 39.0%
                                                            ====  ====  ==== 

(9) RETIREMENT PLAN                                                             

The Company sponsors a noncontributory retirement plan which covers         
substantially all employees and, prior to 1996, the employees of former         
affiliates. As of December 31, 1995, former affiliates ceased participation in  
the plan. Benefits payable under the plan are based on employees' years of      
service and compensation during the final ten years of employment.              

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

At December 31, 1996 and 1997, the assumed discount rate, the rate at which 
the plan benefit obligations could be settled, was 7.5%. The estimated rate of  
increase in future compensation levels used in determining the actuarial        
present value of the projected benefit obligation was 4.5% for December 31,     
1996 and 1997. The expected long-term rate of return on plan assets was 9.25%   
at December 31, 1996 and 1997.                                                  

The Company's funding policy is to contribute annually the maximum amount   
that can be deducted for federal income tax purposes. Contributions are         
intended to provide not only for benefits attributed to service to date but     
also for those expected to be earned in the future.                             

All plan assets are commingled and available for distribution to all        
participating employees, and thus, net pension cost for 1995 includes the cost  
for the Company as well as affiliates.                                          

Net pension cost for all companies for the years ended December 31, 1995,   
1996 and 1997 included the following components:                                

                                                                [Download Table]

                                                      1995    1996    1997  
                                                     ------  ------  ------ 
                                                        (IN THOUSANDS)      
                                                                            
Service cost--benefits earned during the period....  $2,365   1,304   1,511 
Interest cost on projected benefit obligation......   2,103   1,953   2,148 
Actual return on plan assets.......................  (3,626) (3,489) (4,102)
Net amortization and deferral......................   2,078   1,679   1,987 
                                                     ------  ------  ------ 
Net periodic pension cost of all participating com-                         
 panies............................................  $2,920   1,447   1,544 
                                                     ------  ------  ------ 
Company portion....................................  $1,648   1,447   1,544 
                                                     ======  ======  ====== 

The following table sets forth the plan's funded status as of December 31,  
1996 and 1997:                                                                  

                                                                [Download Table]

                                                              1996     1997  
                                                             -------  ------ 
                                                             (IN THOUSANDS)  
                                                                             
Actuarial present value of benefit obligations:                              
  Vested benefits..........................................  $17,715  20,693 
  Nonvested benefits.......................................      558     751 
                                                             -------  ------ 
Accumulated benefit obligation.............................   18,273  21,444 
Increase in benefits due to future compensation increases..    6,513   7,535 
                                                             -------  ------ 
Projected benefit obligation...............................   24,786  28,979 
Estimated fair market value of plan assets.................   23,483  25,689 
                                                             -------  ------ 
Projected benefit obligation in excess of plan assets......    1,303   3,290 
Unrecognized net gain from past experience different from                    
 that assumed and effects of changes in assumptions........    3,482   2,989 
Unrecognized net transition obligation being recognized                      
 over 21.6 years...........................................     (114)   (108)
Unrecognized prior service cost attributable to plan amend-                  
 ments.....................................................     (761)   (717)
                                                             -------  ------ 
Pension liability of all participating companies...........  $ 3,910   5,454 
                                                             =======  ====== 
Company portion............................................  $ 6,711   8,299 
                                                             =======  ====== 

As of December 31, 1995, former affiliates ceased participation in the plan,
which resulted in a decrease in projected benefits of the Plan.                 

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(10) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS                                

The Company sponsors an unfunded defined benefit postretirement medical plan
that covers substantially all its employees. The plan is contributory with      
retiree contributions adjusted annually.                                        

Net periodic postretirement benefit cost for the year ended December 31,    
1995, 1996 and 1997 included the following components:                          

                                                                [Download Table]

                                                           1995  1996  1997
                                                           ----  ----  ----
                                                           (IN THOUSANDS)  
                                                                           
Service cost-benefits attributed to service during the                     
 year..................................................... $ 48   48    48 
Interest cost on accumulated postretirement benefit obli-                  
 gation...................................................   71   70    68 
Amortization of unrecognized prior service cost...........  (18) (18)  (19)
                                                           ----  ---   --- 
Net periodic postretirement benefit cost.................. $101  100    97 
                                                           ====  ===   === 

The following table sets forth the plan's funded status as of December 31,  
1996 and 1997:                                                                  

                                                                [Download Table]

                                                               1996  1997  
                                                              ------ ----- 
                                                                  (IN      
                                                               THOUSANDS)  
                                                                           
Accumulated postretirement benefit obligation (APBO):                      
  Retirees................................................... $  356   405 
  Fully eligible active plan participants....................    134   190 
  Other active plan participants.............................    382   547 
                                                              ------ ----- 
Total APBO...................................................    872 1,142 
                                                              ------ ----- 
  Unrecognized prior service cost............................    223   191 
  Actuarial experience.......................................    132  (102)
                                                              ------ ----- 
Accumulated postretirement benefit obligation in excess of                 
 plan assets................................................. $1,227 1,231 
                                                              ====== ===== 

The significant assumptions used in computing the APBO as of December 31,   
1996 and 1997 are as follows:                                                   

                                                                [Download Table]

                                             1996              1997       
                                       ----------------- -----------------
                                                                          
Assumed health care cost trend rate                                       
 used to measure the expected cost of                                     
 benefits covered by the plan:                                            
  Current year........................        10%                9%       
  Thereafter.......................... Decrease annually Decrease annually
                                        to 5.5% by 2018   to 5.5% by 2019 
Discount rate.........................       7.5%              7.5%       

The health care cost trend rate assumption can effect the expenses and      
obligations. The effect of a 1% increase each year in the assumed health care   
cost trend rate on the aggregate of the service and interest cost components    
of net periodic postretirement benefit cost would be an increase of             
approximately $34,000 for the year ended December 31, 1997. The effect on the   
APBO as of December 31, 1997 would be an increase of approximately $217,000.    

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

(11) SAVINGS AND INVESTMENT PLAN                                                

The Company has a savings and investment plan covering substantially all    
employees. The plan provides for a matching corporate contribution of 50% of    
the employee's investment in mutual fund shares and/or Torchmark stock, not to  
exceed 3% of the employee's salary.                                             

The charge to expense for this plan for the years ended December 31, 1995,  
1996 and 1997 was $626,000, $641,000 and $716,000, respectively.                

(12) EMPLOYEE STOCK OPTIONS                                                     

Under the provisions of the Torchmark Corporation 1987 Stock Incentive Plan 
(1987 Option Plan), certain employees and directors of the Company have been    
granted options to buy shares of Torchmark stock generally at the market value  
of the stock on the date of grant. The options are exercisable during a period  
of up to ten years and two days after grant. Employee stock options granted     
under the 1987 Option Plan generally vest one-half in two years and one-half    
in three years. Director grants generally vest in six months.                   

In October 1995, the FASB issued Statement No. 123, Accounting for Stock-   
Based Compensation (SFAS No. 123), which was effective for the Company          
beginning January 1, 1996. SFAS No. 123 defines the "fair value method" of      
accounting for employee stock options. It also allows accounting for such       
options under the "intrinsic value method" in accordance with Accounting        
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB  
No. 25) and related interpretations. If a company elects to use the intrinsic   
value method, pro forma disclosures of earnings and earnings per share are      
required as if the fair value method of accounting was applied. The effects of  
applying SFAS No. 123 in the pro forma disclosures are not necessarily          
indicative of future amounts because the pro forma disclosures do not take      
into account the amortization of the fair value of awards granted prior to      
1995.                                                                           

The Company has elected to account for stock options under the intrinsic    
value method. The fair value method requires use of the Black-Scholes option    
valuation model to value employee stock options. The Black-Scholes option       
valuation model was not developed for use in valuing employee stock options.    
Instead, this model was developed for use in estimating the fair value of       
traded options which have no vesting restrictions and are fully transferable.   
In addition, option valuation models require the input of highly subjective     
assumptions including the expected stock price volatility. Because Torchmark's  
employee stock options have characteristics significantly different from those  
of traded options, and because changes in the subjective input assumptions can  
materially affect the fair value estimate, it is management's opinion that the  
existing models do not provide a reliable measure of the fair value of its      
employee stock options. Under the intrinsic value method, compensation expense  
is only recognized if the exercise price of the employee stock option is less   
than the market price of the underlying stock on the date of grant.             
Accordingly, the Company has recognized no compensation expense for options     
granted in 1995, 1996 or 1997.                                                  

In accordance with SFAS No. 123, the fair value for Torchmark's employee    
stock options was estimated at the date of grant using a Black-Scholes option   
pricing model with the following weighted average assumptions for 1996 and      
1997:                                                                           

                                                                [Download Table]

                                                                  1996  1997 
                                                                  ----  ---- 
                                                                             
Risk-free interest rate..........................................  6.4%  6.4%
Dividend yield...................................................  3.7   1.7 
Volatility factor................................................ 22.8  21.1 
Weighted average expected life (in years)........................ 4.17  3.93 

The weighted average fair values of an option granted during the years ended
December 31, 1996 and 1997 were $4.93 and $8.36, respectively.                  

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

For the purpose of pro forma disclosures, the estimated fair value of the   
options is amortized to expense over the options' vesting period. The           
Company's pro forma information follows:                                        

                                                                [Download Table]

                                                        1996        1997   
                                                     ----------- ----------
                                                     (IN THOUSANDS, EXCEPT 
                                                       PER SHARE AMOUNTS)  
                                                                           
Actual net income................................... $    66,700     70,292
Pro forma net income................................ $    65,958     68,022
                                                     ----------- ----------
Proforma net income per share, as adjusted for SFAS                        
 No. 123:                                                                  
  Basic and diluted.................................             $     1.06
                                                                 ==========

A summary of stock option activity and related information for the years    
ended December 31, 1995, 1996 and 1997 follows:                                 

                                                        [Enlarge/Download Table]

                                 1995                1996                1997        
                          ------------------- ------------------- -------------------
                                     WEIGHTED            WEIGHTED            WEIGHTED
                                     AVERAGE             AVERAGE             AVERAGE 
                                     EXERCISE            EXERCISE            EXERCISE
                           OPTIONS    PRICE    OPTIONS    PRICE    OPTIONS    PRICE  
                          ---------  -------- ---------  -------- ---------  --------
                                                                                     
Outstanding at beginning                                                             
 of year................  1,335,984   $16.21  1,596,642   $18.11  1,738,442   $19.54 
Granted.................    373,600    21.69    277,600    24.88    688,292    35.98 
Exercised...............   (105,126)    6.72   (130,800)   13.49   (927,024)   17.68 
Expired.................     (7,816)   17.00     (5,000)   17.00     (3,020)   22.27 
                          ---------   ------  ---------   ------  ---------   ------ 
Outstanding at end of                                                                
 year...................  1,596,642   $18.11  1,738,442   $19.54  1,496,690   $28.25 
                          ---------   ------  ---------   ------  ---------   ------ 
Exercisable at end of                                                                
 year...................    660,934   $17.36    999,742   $17.48    868,798   $31.18 
                          =========   ======  =========   ======  =========   ====== 

(13) UNIFORM CAPITAL RULE REQUIREMENTS                                          

Waddell & Reed, Inc. (W&R), a subsidiary of the Company, is a registered    
broker-dealer and a member of the National Association of Securities Dealer,    
Inc. and therefore is subject to a requirement of the SEC's Uniform Net         
Capital Rule, requiring the maintenance of certain minimal capital levels. At   
December 31, 1997, W&R had net capital, as defined by the Uniform Capital       
Rule, of $7,745,000 which is $4,628,000 in excess of the required net capital.  

(14) COMMITMENTS AND CONTINGENCIES                                              

Rental Expense and Lease Commitments                                          

The Company rents certain sales and other office space under long-term      
operating leases. Rent expense for the years ended December 31, 1995, 1996 and  
1997, was $3,459,000, $3,824,000 and $4,397,000 respectively. Future minimum    
rental commitments under noncancelable operating leases are as follows:         

                                                                [Download Table]

                                                            (IN THOUSANDS)
                                                            --------------
                                                                          
Minimum remaining rental commitments years ended December                 
 31:                                                                      
  1998.....................................................    $ 2,589    
  1999.....................................................      1,612    
  2000.....................................................        961    
  2001.....................................................        330    
  2002.....................................................         85    
                                                               -------    
                                                               $ 5,577    
                                                               =======    

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WADDELL & REED FINANCIAL, INC.  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 

New leases are expected to be executed as existing leases expire. Thus,     
future minimum lease commitments are not expected to be less than those in      
1998.                                                                           

Contingencies                                                                 

From time to time, the Company is a party to various claims arising in the  
ordinary course of business. In the opinion of management, after consultation   
with legal counsel, it is unlikely that any adverse determination in one or     
more pending claims would have a material adverse effect on the Company's       
financial position or results of operations.                                    

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PRO FORMA FINANCIAL STATEMENTS  

The following pro forma balance sheet reflects (1) payment of notes due to  
the Company from Torchmark with Torchmark Preferred Stock; (2) repayment of     
outstanding Notes and accrued interest due to Torchmark with Torchmark          
Preferred Stock so that the remaining outstanding indebtedness to Torchmark     
equals $468.8 million; (3) repayment of the remaining outstanding indebtedness  
to Torchmark of $468.8 million with the net proceeds of the Offering; and (4)   
transfer of Torchmark Preferred Stock held by the Company to Torchmark.         

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WADDELL & REED FINANCIAL, INC. AND SUBSIDIARIES 

PRO FORMA CONSOLIDATED BALANCE SHEETS 

DECEMBER 31, 1997 

                                                                [Download Table]

                                                                           PRO  
                                               HISTORICAL ADJUSTMENTS     FORMA 
                                               ---------- -----------    -------
                                                       (IN THOUSANDS)           
                                                                                
                    ASSETS                                                      
Assets:                                                                         
  Cash and cash equivalents...................  $ 73,820                  73,820
  Investment securities, available-for-sale       18,977                  18,977
  Receivables:                                                                  
    United funds and W&R funds................     4,031                   4,031
    Customers and other.......................    11,840                  11,840
  Due from affiliates.........................    17,232    (13,598)(1)    3,634
  Deferred income taxes.......................     1,241                   1,241
  Prepaid expenses and other current assets...     2,991                   2,991
                                                --------                 -------
    Total current assets......................   130,132                 116,534
  Due from affiliates.........................   175,450   (175,450)(1)      -- 
  Torchmark Preferred Stock...................       --     189,048 (1)    7,000
                                                           (125,186)(2)         
                                                            (15,012)(2)         
                                                            (41,850)(4)         
  Property and equipment, net.................    12,058                  12,058
  Investment in real estate, net..............       --                      -- 
  Investment in real estate partnership.......    17,544                  17,544
  Deferred sales commissions, net.............    12,316                  12,316
  Goodwill (net of accumulated amortization of                                  
   $14,575                                                                      
   and $17,479)...............................    98,831                  98,831
  Other assets................................       633                     633
                                                --------                 -------
    Total assets..............................  $446,964                 264,916
                                                ========                 =======
     LIABILITIES AND STOCKHOLDERS' EQUITY                                       
Liabilities:                                                                    
 Current liabilities:                                                           
  Accounts payable............................  $ 22,929                  22,929
  Due to affiliates...........................   102,459    (96,000)(3)    2,597
                                                             (3,862)(2)         
  Accrued sales force compensation............     8,666                   8,666
  Income taxes payable........................     3,314                   3,314
  Other current liabilities...................    18,525                  18,525
                                                --------                 -------
    Total current liabilities.................   155,893                  56,031
  Due to affiliates...........................   509,186   (372,850)(3)         
                                                           (125,186)(2)         
                                                            (11,150)(2)      -- 
  Deferred income taxes.......................     2,246                   2,246
  Accrued pensions and post-retirement costs..     9,530                   9,530
  Other liabilities...........................       --                      -- 
                                                --------                 -------
    Total liabilities.........................   676,855                  67,807
                                                --------                 -------
Stockholders' equity (deficit):                                                 
  Common stock ...............................       423        217 (3)      640
  Additional paid-in capital..................       --     237,975 (3)  196,125
                                                            (41,850)(4)         
  Retained earnings...........................       --                      -- 
  Dividends in excess of retained earnings and                                  
   additional                                                                   
   paid-in capital............................  (230,658)   230,658 (3)      -- 
  Unrealized gain on available-for-sale                                         
   securities.................................       344                     344
                                                --------                 -------
    Total Stockholders' equity (deficit)......  (229,891)                197,109
                                                --------                 -------
Total liabilities and Stockholders' equity....  $446,964                 264,916
                                                ========                 =======

--------                                                                        
(1) To reflect payment of notes due from Torchmark with Torchmark Preferred     
Stock.                                                                  
(2) To reflect payment of the Notes and accrued interest, with Torchmark        
Preferred Stock.                                                        
(3) To reflect proceeds from the Offering and the use of proceeds to pay the    
remainder of the Notes.                                                 
(4) To reflect transfer of Torchmark Preferred Stock to Torchmark.              

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WADDELL & REED FINANCIAL, INC. AND SUBSIDIARIES 

PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS 

YEAR ENDED DECEMBER 31, 1997

                                                                [Download Table]

                             HISTORICAL ADJUSTMENTS   PRO FORMA
                             ---------- -----------   ---------
                                  (IN THOUSANDS, EXCEPT        
                                  FOR PER SHARE AMOUNT)        
                                                               
Revenue:                                                       
  Investment management                                        
   fees.....................  $117,784                 117,784 
  Underwriting and                                             
   distribution fees:                                          
    United Funds and W&R                                       
     Funds..................    58,815                  58,815 
    Affiliates..............    30,612                  30,612 
  Shareholder service fees..    30,763                  30,763 
  Investment and other                                         
   revenue..................     3,798                   3,798 
                              --------                 ------- 
    Total revenue...........   241,772                 241,772 
                              --------                 ------- 
Expenses:                                                      
  Underwriting and                                             
   distribution.............    79,995                  79,995 
  Compensation and related                                     
   costs....................    26,618                  26,618 
  General and                                                  
   administrative...........    15,826                  15,826 
  Depreciation..............     1,307                   1,307 
  Amortization of goodwill..     2,903                   2,903 
                              --------                 ------- 
    Total expenses..........   126,649                 126,649 
                              --------                 ------- 
    Income before interest                                     
     and income taxes.......   115,123                 115,123 
Interest                                                       
  Income....................    11,323    (11,323)(1)      --  
  Expense...................   (11,299)    11,299 (2)      --  
                              --------                 ------- 
    Income before income                                       
     taxes..................   115,147                 115,123 
Income taxes................    44,855         (9)(3)   44,846 
                              --------    -------      ------- 
    Net income..............  $ 70,292        (15)      70,277 
                              ========    =======      ======= 
Pro forma net income per                                       
 share:                                                        
  Basic and diluted.........                           $  1.10 
                                                       ======= 

--------                                                                        
(1) To eliminate interest income on amounts due from Torchmark.                 
(2) To eliminate interest expense on the Notes.                                 
(3) Tax effects of the above.                                                   

F-20

424B4
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21,700,000 Shares 
Waddell & Reed Financial, Inc.  
CLASS A COMMON STOCK  

----------------  
OF THE 21,700,000  SHARES OF CLASS  A COMMON STOCK  BEING OFFERED, 4,340,000  
SHARES ARE  BEING OFFERED INITIALLY  OUTSIDE THE UNITED STATES  AND CANADA  
BY THE  INTERNATIONAL  UNDERWRITERS  AND 17,360,000  SHARES  ARE  BEING 
OFFERED  INITIALLY IN  THE  UNITED  STATES AND  CANADA  BY THE  U.S.  
UNDERWRITERS.  ALL SHARES OF CLASS  A COMMON STOCK  OFFERED HEREBY  
ARE BEING  SOLD  BY  THE  COMPANY.  SEE  "UNDERWRITERS"  FOR  A 
DISCUSSION  OF THE  FACTORS  CONSIDERED  IN DETERMINING  THE  
INITIAL PUBLIC OFFERING PRICE.    

THE COMPANY HAS  TWO CLASSES OF AUTHORIZED COMMON STOCK  CONSISTING OF CLASS A  
COMMON STOCK  OFFERED HEREBY  AND  CLASS B  COMMON STOCK  (COLLECTIVELY,  THE 
"COMMON  STOCK"). SEE  "DESCRIPTION OF  CAPITAL STOCK."  HOLDERS OF  CLASS A  
COMMON STOCK ARE  ENTITLED TO ONE  VOTE PER  SHARE AND HOLDERS  OF CLASS  B 
COMMON  STOCK  ARE  ENTITLED  TO  FIVE  VOTES PER  SHARE  ON  EACH  MATTER  
SUBMITTED TO A VOTE OF STOCKHOLDERS. ALL  OF THE CLASS B COMMON STOCK  IS 
BENEFICIALLY OWNED  BY TORCHMARK  CORPORATION. SUBSTANTIALLY ALL  OF THE  
NET PROCEEDS  OF  THE  OFFERING  WILL BE  USED  TO  PREPAY  OUTSTANDING 
INDEBTEDNESS  TO TORCHMARK  CORPORATION AND  ONE OF  ITS SUBSIDIARIES.  
SEE "USE OF PROCEEDS."  ALL HOLDERS OF COMMON  STOCK ARE ENTITLED  TO 
RECEIVE  SUCH  DIVIDENDS  AND   DISTRIBUTIONS,  IF ANY,  AS  MAY  BE  
DECLARED FROM TIME TO TIME BY THE BOARD OF DIRECTORS.   

----------------  
THE CLASS A COMMON STOCK HAS BEEN APPROVED FOR LISTING, SUBJECT TO OFFICIAL 
NOTICE OF ISSUANCE, ON THE NEW YORK STOCK EXCHANGE UNDER THE TRADING SYMBOL 
"WDR."  

----------------  
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN INFORMATION THAT SHOULD BE  
CONSIDERED BY PROSPECTIVE INVESTORS.  

----------------  
THESE  SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES  AND  
EXCHANGE  COMMISSION  OR  ANY   STATE  SECURITIES  COMMISSION  NOR  HAS  THE  
SECURITIES  AND EXCHANGE  COMMISSION  OR ANY  STATE SECURITIES  COMMISSION  
PASSED   UPON  THE  ACCURACY  OR   ADEQUACY  OF  THIS  PROSPECTUS.   ANY  
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.   

----------------  
PRICE $23 A SHARE 

----------------  

                                                                [Download Table]

                                  PRICE TO   UNDERWRITING DISCOUNTS PROCEEDS TO 
                                   PUBLIC      AND COMMISSIONS(1)    COMPANY(2) 
                                ------------ ---------------------- ------------
                                                                                
Per Share......................   $23.000            $1.265           $21.735   
Total(3)....................... $499,100,000      $27,450,000       $471,649,500

--------                                                                        
(1) The Company and Torchmark Corporation have agreed to indemnify the      
 Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriters."         
(2) Before deducting expenses payable by the Company, estimated at          
$2,800,000.                                                         
(3) The Company has granted the U.S. Underwriters an option exercisable     
within 30 days of the date hereof to purchase up to an aggregate of 
   2,170,000 additional shares of Class A Common Stock at the price to the
  public shown above less underwriting discounts and commissions for the
 purpose of covering over-allotments, if any. If the U.S. Underwriters
exercise such option in full, the total price to the public,        
    underwriting discounts and commissions, and proceeds to the Company will
be $549,010,000, $30,195,550, and $518,814,450, respectively. See   
"Underwriters."                                                     

----------------  
The Class A Common Stock is offered subject to prior sale, when, as, and if 
accepted by the Underwriters and subject to approval of certain legal matters   
by Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Underwriters, and   
to certain other conditions. It is expected that delivery of the Class A        
Common Stock will be made on or about March 10, 1998 at the offices of Morgan   
Stanley & Co. Incorporated, New York, New York, against payment therefor in     
immediately available funds.                                                    

----------------  
MORGAN STANLEY DEAN WITTER                                                      
GOLDMAN SACHS INTERNATIONAL 
                                                   MERRILL LYNCH INTERNATIONAL

March 4, 1998                                                                   

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B4’ Filing		Date		First		Last			Other Filings
		1/31/08		45
		9/27/07		45
		12/31/02		57		59			10-K,  11-K,  13F-HR
		11/25/02		16		86
		3/31/02		57					10-Q,  13F-HR
		5/1/00		16		86
		3/31/99		57					10-Q,  13F-HR
		12/31/98		13		69			10-K,  11-K
		10/1/98		33		57			8-A12B
		3/29/98		3
		3/10/98		1		96
Filed on:		3/5/98
		3/4/98		1		96			S-1/A
		1/30/98		77					S-1/A
		1/1/98		44
		12/31/97		4		95
		12/24/97		54
		12/15/97		23		84
		11/25/97		86
		11/22/97		16
		10/6/97		69
		9/30/97		10		58
		9/25/97		45
		7/1/97		85
		1/1/97		85
		12/31/96		5		91
		12/23/96		56
		4/1/96		22		23
		1/1/96		54		90
		12/31/95		10		91
		12/31/94		10		80
		12/31/93		10		33
		12/31/92		5		26
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