WADDELL & REED FINANCIAL INC (Form: S-8, Received: 10/16/1998 16:28:42)

As filed with the Securities and Exchange Commission on October 16, 1998.
Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM S-8

REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933

WADDELL & REED FINANCIAL, INC.
(Exact Name of Registrant as Specified in Its Charter)

            DELAWARE                                  51-0261715
---------------------------------                ---------------------
 (State or Other Jurisdiction of                   (I.R.S. Employer
 Incorporation or Organization)                   Identification No.)

6300 LAMAR AVENUE
OVERLAND PARK, KANSAS
66202
(913) 236-2000

(Address of Principal Executive Offices, including Zip Code)

1998 EXECUTIVE DEFERRED COMPENSATION STOCK OPTION PLAN,
1998 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN AND
1998 STOCK INCENTIVE PLAN

(Full Title of the Plans)

           SHARON K. PAPPAS                          COPY TO:
    GENERAL COUNSEL AND SECRETARY                ALAN J. BOGDANOW
    WADDELL & REED FINANCIAL, INC.             HUGHES & LUCE, L.L.P.
           6300 LAMAR AVENUE               1717 MAIN STREET, SUITE 2800
     OVERLAND PARK, KANSAS  66202              DALLAS, TEXAS  75201
            (913) 236-2000                        (214) 939-5500

(Name, Address, and Telephone Number,
including Area Code, of Agent for Service)

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

CALCULATION OF REGISTRATION FEE

-------------------------------------------------------------------------------------------------
 TITLE OF EACH CLASS       AMOUNT       PROPOSED MAXIMUM     PROPOSED MAXIMUM       AMOUNT OF
    OF SECURITIES          TO BE         OFFERING PRICE         AGGREGATE          REGISTRATION
  TO BE REGISTERED      REGISTERED/1/      PER SHARE/2/      OFFERING PRICE/2/         FEE
-------------------------------------------------------------------------------------------------
Class A Common
Stock, $.01 par         16,300,000           $17.16            $279,708,000           $82,514
    value
-------------------------------------------------------------------------------------------------

(1) This registration statement also covers an indeterminate additional amount of shares of the Registrant's Class A Common Stock to be offered or sold pursuant to the antidilution provisions of the 1998 Executive Deferred Compensation Stock Option Plan, 1998 Non-Employee Director Stock Option Plan and 1998 Stock Incentive Plan.
(2) Estimated solely for the purpose of calculating the registration fee on the basis of the average of the high and low price paid per share of the Class A Common Stock, as reported on the New York Stock Exchange on October 9, 1998, in accordance with Rules 457(c) and (h)(1) promulgated under the Securities Act of 1933, as amended.

WADDELL & REED FINANCIAL, INC.

297,174 SHARES
CLASS A COMMON STOCK

Our stockholders identified below under the caption "Selling Stockholders" may offer to sell up to 297,174 shares of our Class A common stock.

We have already issued to the selling stockholders the shares being offered by the selling stockholders, or we will issue the shares being offered by the selling stockholders prior to the sale of the shares. This offering is not part of the original issuance of the shares of Class A common stock. We will not receive any of the proceeds from the selling stockholder's sale of their shares. The selling stockholders may offer the shares in transactions on the New York Stock Exchange, in negotiated transactions, or through a combination of these methods. The selling stockholders may offer the shares at prices relating to the prevailing market prices or at negotiated prices.

The Class A common stock is quoted on the NYSE under the symbol "WDR." On October 14, 1998 the last sale price of the Class A common stock, as reported on the NYSE, was
$18.38 per share.

Investing in the Class A common stock involves a high degree of risk. You should purchase only if you can afford a complete loss. See "Risk Factors" beginning on page 4.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if the prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

You should rely only on the information contained in this document or that we have referred you to. We have not authorized anyone to provide you with information that is different from that contained in this Prospectus. The selling stockholders may offer to sell, and seek offers to buy, shares of Class A common stock only in jurisdictions where offers and sales are permitted. The information contained in this Prospectus is accurate only as of the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of the Class A common stock.

This Prospectus is dated October 16, 1998.

AVAILABLE INFORMATION

The Company is subject to the informational reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements, information statements, and other information may be inspected without charge at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549-1004 and at the following regional offices of the Commission: New York Regional Office, Seven World Trade Center, Suite 1300, New York, New York 10048; and Chicago Regional Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60606. Copies of such material may be obtained from the Public Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Information on the operation of the Public Reference Section is available by calling the Commission at 1-800-SEC-0330. Reports, proxy statements, information statements and other information can also be inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005. The Commission maintains a Web site that contains information filed with the Commission. The Commission's Web site address is http://www.sec.gov.

The Company intends to furnish its stockholders with annual reports containing audited financial statements and such other periodic reports as it may determine to furnish or as may be required by law.

The Company has filed with the Commission a Registration Statement on Form S-8, (together with all exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares of Class A common stock offered hereby. This Prospectus does not contain all information set forth in the Registration Statement. Certain parts of the Registration Statement have been omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement which can be inspected at the public reference rooms at the offices of the Commission.

DOCUMENTS INCORPORATED BY REFERENCE

The Company will provide without charge to each person to whom a copy of this Prospectus is delivered, including any beneficial owner, upon the written or oral request of such person, a copy of any or all of the documents incorporated by reference herein (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). Requests should be directed to:

Waddell & Reed Financial, Inc. 6300 Lamar Avenue Overland Park, Kansas 66202 Attn: Secretary (913) 236-2000

The following documents previously filed with the Commission pursuant to the Securities Act and the Exchange Act are incorporated herein by reference and shall be deemed a part hereof:

(a) The Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998;

(b) The Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998;

(c) The description of the Registrant's Class A common stock contained in the Registrant's Registration Statement on Form 8-A, (the "Form 8-A") filed with the Commission on February 27, 1998, including any amendment or report filed for the purpose of updating such description; and

(d) All reports filed by the Registrant pursuant to Sections 13(a) or 15(d) of the Exchange Act, since the filing of the Form 8-A.

All documents filed with the Commission by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering relating to this Prospectus will be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement incorporated or deemed to be incorporated by reference herein will be deemed to be modified, replaced or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document that also is or is deemed to be incorporated by reference herein modifies, replaces or supersedes such statement. Any such statement so modified, replaced or superseded will be deemed, except as so modified, replaced or superseded, to constitute a part of this Prospectus.

THE COMPANY

We were founded in 1937 and are the third oldest mutual fund complex in the United States, having introduced the United family of funds in 1940. We focus on selling investment products to middle income Americans through our sales force. We are the exclusive underwriter and distributor of 36 mutual fund portfolios. 17 of these funds make up the United Group of Mutual Funds, 8 make up the Waddell & Reed Funds, Inc., and 11 make up the Target/United Funds, Inc. We also distribute underwritten variable annuities and life insurance products of Torchmark Corporation to our customers. We sell front-end loaded and contingent deferred sales charge mutual fund products.

We are a Delaware corporation with our principal offices located at 6300 Lamar Avenue, Overland Park, Kansas 66202 (telephone number 913-236-2000).

RISK FACTORS

You should carefully consider the following risk factors and warnings before making an investment decision. The risks described below are not the only ones that we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. In such case, the trading price of our Class A common stock could decline, and you may lose all or part of your investment. You should also refer to the other information set forth in this Prospectus.

This Prospectus contains forward-looking statements. These statements refer to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "anticipates," "plans," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms and other comparable terminology. These statements are only predictions. Actual events or results may differ materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined below. These factors may cause our actual results to differ materially from any forward-looking statement.

POTENTIAL ADVERSE EFFECTS ON OUR BUSINESS FROM A DECLINE IN SECURITIES MARKETS

Our results of operations are affected by certain economic factors, including the level of the securities markets. The United States securities markets performed well for the last five years and the first half of 1998. This performance attracted a substantial increase in the investments in these markets, which benefited us and the funds. The United States securities markets have, however, been highly volatile. Most equity market indices have declined significantly since July 1998. In recent months the United States mutual fund industry experienced net redemptions for the first time in several years. If there is (1) a further decline in the securities markets (2) a failure of the securities markets to return to prior levels or to sustain the levels of growth achieved prior to July 1998 or (3) continued or additional short-term volatility in the securities markets,

there could be an adverse effect on our business. This could adversely and materially affect the market price of the Class A common stock.

Because our revenues are largely based on the value of the assets that we manage, a decline in the value of these assets would adversely affect our revenues. Our growth is dependent to a significant degree upon the ability of the funds to attract and retain mutual fund assets. This may be difficult if there is an adverse economic environment. Our growth rate has varied from year to year, and we cannot assure you that our recent growth rates will continue.

POTENTIAL ADVERSE EFFECTS ON OUR BUSINESS IF THE FUNDS' PERFORMANCE DECLINES

In order for us to succeed, the funds must have good investment performance. Good performance generally leads to (1) selling more shares in our funds, which results in higher revenues; (2) fewer owners of shares in the funds redeeming those shares and (3) us obtaining additional private institutional accounts, for which we may act as a subadvisor. If the funds have poor investment performance, this generally leads to (1) selling less shares in our funds; (2) more owners of shares in the funds redeeming those shares and (3) private institutional accounts being withdrawn from us, with corresponding decreases in our revenues. If the funds do not perform well, this could adversely and materially affect the market price of the Class A common stock.

OUR CONTRACTS CONTAIN TERMINATION PROVISIONS AND RENEWALS RISKS

A substantial majority of our revenues are derived from investment management agreements with the funds that are terminable on 60 days' notice. In addition, the disinterested members of each fund's board or its shareholders must annually approve and renew each investment management agreement. If the board or shareholders of a significant number of the funds vote to terminate or not renew the agreements, this could have a material adverse effect on our business, financial condition and results of operations.

DIFFICULTIES IF WE CANNOT RECRUIT AND RETAIN KEY PERSONNEL AND SALES FORCE

Our future success depends to a substantial degree on our ability to attract and retain qualified personnel to conduct our business. There is a great deal of competition for qualified fund managers, investment analysts and financial advisers, and this competition has increased in recent periods due to the growth of the mutual fund management industry. We anticipate that it will be necessary for us to add fund managers and investment analysts, and we have adopted a strategy intended to attract and retain fund managers and investment analysts. We cannot assure you, however, that we will be successful in our efforts to recruit and retain the required personnel.

We are currently dependent on our sales force to sell our mutual fund and other investment products. Our future growth will be directly affected by the quality and quantity of financial advisers we are able to successfully recruit and retain.

WE HAVE COMPETITORS WITH GREATER RESOURCES

The mutual fund distribution and service and investment management industries are very competitive and are undergoing substantial consolidations. Many organizations in these industries are attempting to market to and service the same clients as we are. These organizations offer mutual fund investments and services and a wide range of other financial products and services. Many of our 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.

WE MAY HAVE DIFFICULTIES IN EXECUTING OUR ACQUISITION STRATEGY

We have no history of finding, acquiring or integrating other companies. We cannot assure you that we will (1) find suitable acquisition candidates at acceptable prices, (2) have sufficient capital resources to realize our acquisition strategy, (3) be successful in entering into definitive agreements for desired acquisitions or (4) successfully integrate acquired companies. We also cannot assure you that any such acquisitions, if consummated, will be advantageous to us.

WE MAY NOT SUCCESSFULLY IMPLEMENT OUR NEW INFORMATION SYSTEMS

Some of our key information technology systems were developed solely to handle our particular information technology infrastructure. We are in the process of implementing new information technology and systems. We are implementing these new systems both internally and through outsourcing the data processing portion of our shareholder service functions. We believe that these new systems could facilitate the acquisition and integration of other mutual fund companies. We cannot, however, assure you that we will be successful in implementing the new information technology and systems or that the implementation of these systems will be completed in a timely manner or within our budget.

RISKS RELATING TO YEAR 2000 PROBLEMS MAY ADVERSELY AFFECT OUR BUSINESS

Some computers, software, and other equipment include computer code in which calendar year data is abbreviated to only two digits. As a result, some of these systems will not operate correctly after 1999 because they may interpret "00" to mean 1900, rather than 2000 - widely known as the "Year 2000 Problem." These problems are likely to increase in frequency and severity as the year 2000 approaches. The Year 2000 Problem affects some of our computers, software and other equipment. If we fail to properly recognize and address the Year 2000 Problem in our systems, our business, financial condition and results of operations could be materially and adversely affected.

We believe that we have identified most of the major computers, software and other equipment used in connection with our internal operations that must be modified, upgraded or replaced to minimize the possibility of a material disruption to our business. We have commenced

the process of modifying, upgrading and replacing major systems that have been assessed as adversely affected, and we expect to complete this process before the occurrence of any material disruption of our business. We have commenced the process of identifying other computers, software and other equipment that may be affected by the Year 2000 Problem, and determining whether remedial action is needed. We expect to complete this process by the second quarter of 1999, and we estimate that the total costs of this effort will be $4.2 million for the four year period ending December 31, 1999.

The Year 2000 Problem also affects some of our customers and major suppliers of computers, software, and other equipment. We have discussed the Year 2000 Problem with some of these customers and suppliers, but we cannot guarantee that they will resolve any or all Year 2000 Problems. If our customers and suppliers fail to resolve Year 2000 Problems, our business could be materially disrupted.

OUR FINANCIAL ADVISERS COULD MISUSE MONEY AND INFORMATION

Our financial advisers handle a significant amount of money and financial and personal information for people that invest in the funds and for people that purchase other investment and insurance products from us. Although we have implemented a system of controls to minimize the risk of misuse of such money and information, we cannot assure you that these controls will be adequate. We also cannot assure you that we can prevent taking or misuse of money or information. In the event of any taking or misuse, we could have liability and could also be subject to regulatory sanctions. Although we believe that we are adequately insured against such risks, we cannot assure you that such insurance will be maintained or that it will be adequate to meet any future liability.

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 our Class A common stock and the Class B common stock have identical rights except that:

. holders of Class A common stock have one vote per share while holders of Class B common stock have five votes per share;
. holders of Class A common stock cannot 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
. holders of Class B common stock cannot vote on any alteration of the powers, preferences or special rights of the Class A common stock that would not adversely affect the Class B common stock.

For example, holders of one class of common stock could not vote on proposals to:

. decrease the voting power of the other class of common stock;
. decrease the right of the other class of common stock to receive dividends; or

. diminish the rights of the other class of common stock in liquidation.

Investors or any potential future purchaser of our shares could view the superior voting rights of the Class B common stock to have value, which could adversely affect the value of the Class A common stock. 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.

WE MAY NOT PAY DIVIDENDS; OUR HOLDING COMPANY STRUCTURE MAY LIMIT OUR AVAILABLE CASH FOR DISTRIBUTION

Our Board of Directors currently intends to declare quarterly dividends on both the Class A common stock and the Class B common stock. Our Board of Directors has discretion over declaring and paying dividends. Whether or not the Board of Directors decides to pay dividends, and the amount of such dividends, will depend on many factors, including:

. general economic and business conditions;
. our strategic plans;
. our financial results and condition;
. contractual, legal, and regulatory restrictions on the payment of dividends by us or our subsidiaries; and
. such other factors as the Board of Directors may consider to be relevant.

We are a holding company, and, as such, our ability to pay dividends is subject to the ability of the our subsidiaries to provide us with cash. We cannot assure you that our initial quarterly dividend level will be maintained or that we will pay any dividends in any future period.

We Could Be Adversely Affected By Changes in Regulation

Our investment management business is subject to extensive regulation in the United States, primarily at the Federal level, including regulation by the Commission. Changes in laws or regulations, or in governmental policies, could materially and adversely affect our business and operations.

PROVISIONS IN OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW COULD DETER TAKEOVER ATTEMPTS

Our Board of Directors may issue shares of preferred stock and may determine the price, rights, preferences, privileges and restrictions, including voting and conversion rights, of these shares of preferred stock. These determinations may be made without any further vote our action by our stockholders. The rights of the holders of Class A common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock may make it more difficult for a third party to acquire a majority of our outstanding voting stock.

Some provisions in our Certificate of Incorporation and Bylaws and of Delaware law could also delay, prevent, or make more difficult a merger, tender offer, or proxy contest involving our Company, including:

. With certain exceptions, Section 203 of the Delaware General Corporation Law restricts certain mergers and other business combinations between us and any holder of 15% or more of our voting stock;
. the prohibition of actions by stockholders without a meeting, unless our Board of Directors otherwise approves;
. our Board of Directors is divided into three classes, each of which serves for a staggered three-year term; and
. after Torchmark Corporation ceases to beneficially own at least a majority of the voting power, incumbent directors may not be removed without cause.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Prospectus contains or incorporates by reference certain forward- looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements 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.

In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "anticipates," "plans," "believes," "estimates," "predicts," "potential" or "continue" or the negative of such terms or other comparable terminology.

Although we believe that the expectations reflected in the forward- looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any such forward-looking statements. We are under no duty to update any of the forward-looking statements after the date of this Prospectus to conform such statements to actual results.

SELLING STOCKHOLDERS

The table below sets forth information with respect to the beneficial ownership of the Class A common stock of Waddell & Reed Financial, Inc. (the "Company") by the selling stockholders immediately prior to this offering and as adjusted to reflect the sale of shares of Class A common stock pursuant to the offering. None of the selling stockholders own in excess of one percent (1%) of the outstanding Class A common stock of the Company. All information with respect to the beneficial ownership has been furnished by the selling stockholders:

                                           Class A common stock
                      Relationship with         Owned as of        Shares to
            Name          Company           September 30,  1998    Be Sold(1)
            ----      -----------------     -------------------    ----------

 Keith A. Tucker      Chairman of the             248,697            97,174
                      Board, Chief
                      Executive Officer &
                      Director

 Henry J. Herrmann    President, Chief            185,000           110,000
                      Investment Officer,
                      Treasurer & Director

 Robert L. Hechler    Executive Vice              130,000            90,000
                      President, Chief
                      Operating Officer &
                      Director                                     ----------
                                                                     297,174


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

(1) Shares to be sold pursuant to this Prospectus consist of restricted stock which, in the case of Mr. Tucker, vests in four increments of 25% each commencing on May 1, 1998, and on each of the three anniversaries thereafter, and, in the case of Messrs. Herrmann and Hechler, vests in three equal installments commencing on March 4, 2000 and on each of the two anniversaries thereafter.

PLAN OF DISTRIBUTION

The Class A common stock being offered by the selling stockholders pursuant to this Prospectus may be sold from time to time by the selling stockholders, or by pledgees, donees, transferees or other successors in interest, regardless of whether such successors in interest are successors in interest with respect to the shares. Such sales may be made on one or more exchanges or in the over-the-counter market, or otherwise at prices and on terms then prevailing or at prices related to the then-current market price of the Class A common stock, or in negotiated transactions. In addition, any securities covered by this Prospectus which qualify for sale pursuant to Rule 144 under the Act may be sold under either of such rules rather than pursuant to this Prospectus.

In effecting sales, brokers or dealers engaged by the selling stockholders may arrange for other brokers or dealers to participate. Brokers or dealers will receive commissions or discounts from selling stockholders in amounts to be negotiated immediately prior to the sale. The selling stockholders and agents who execute orders on their behalf may be deemed to be underwriters as that term is defined in Section 2(11) of the Act and a portion of any proceeds or sales discounts, commissions or other compensation may be deemed to be underwriting compensation for purposes of the Act.

USE OF PROCEEDS

The Company will not receive any proceeds from this offering.

LEGAL MATTERS

The validity of the shares of Class A common stock offered hereby will be passed upon for us by Hughes & Luce, L.L.P., Dallas, Texas.

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 incorporated by reference into 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.

INDEMNIFICATION

The Company's Certificate of Incorporation provides that each person who was or is threatened to be made a party to or is involved in any action, suit or proceeding by reason of the fact that he or she, or a person of whom he or she is the legal representative, 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 company, partnership, joint venture, trust or other enterprise, will be indemnified and held harmless by the Company to the fullest extent authorized by the Delaware General Corporation Law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators.

The Delaware General Corporation Law permits Delaware corporations to include in their certificates of incorporation a provision eliminating or limiting director liability for monetary damages arising from breaches of their fiduciary duty. The only limitations imposed under the statute are that the provision may not eliminate or limit a director's liability (i) for breaches of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or involving intentional misconduct or known violations of law, (iii) for the payment of unlawful dividends or unlawful stock purchases or redemptions, or (iv) for transactions in which the director received an

improper personal benefit. In addition, directors and officers are insured, at the Registrant's expense, against certain liabilities which might arise out of their employment.

Under Section 145 of the Delaware General Corporation Law, a corporation may indemnify a director, officer, employee or agent of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her if he or she 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 corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. In the case of an action brought by or in the right of a corporation, the corporation may indemnify a director, officer, employee or agent of the corporation against expenses (including attorneys' fees) actually and reasonably incurred by him or her if he or she acted in good faith and in a manner he or she reasonably believed to be in the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless a court finds that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper.

297,174 SHARES

WADDELL & REED FINANCIAL, INC.

CLASS A COMMON STOCK

PROSPECTUS

TABLE OF CONTENTS

                                        Page
                                        ----
Available Information                      2
Documents Incorporated by Reference        3
The Company                                4
Risk Factors                               4
Cautionary Statement Concerning           10
 Forward-Looking Statements
Selling Stockholders                      11
Plan of Distribution                      11
Use of Proceeds                           12
Legal Matters                             12
Experts                                   12
Indemnification                           12

                                                    October 16, 1998

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.

The following documents heretofore filed with the Securities and Exchange Commission (the "Commission") by Waddell & Reed Financial, Inc. (the "Registrant" or the "Company") are incorporated by reference in this Registration Statement:

(a) The Registrant's Rule 424(b) Prospectus, as filed under the Securities Exchange Act of 1933, as amended (the "Securities Act"), Registration Statement No. 333-43687;

(b) The Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, as filed under Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act");

(c) The Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998, as filed under Section 13(a) of the Exchange Act;

(d) The description of the Registrant's Class A common stock, par value $.01 per share (the "Common Stock"), contained in the Registrant's Registration Statement on Form 8-A, (the "Form 8-A") filed with the Commission on February 27, 1998, including any amendment or report filed for the purpose of updating such description; and

(e) All reports filed by the Registrant pursuant to Sections 13(a) or 15(d) of the Exchange Act, since the filing of the Form 8-A.

All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, after the date of the filing of the initial Registration Statement and any amendments thereto and prior to the filing of a post-effective amendment to this Registration Statement which indicates that all of the shares of Common Stock offered have been sold or which deregisters all of such shares then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be a part hereof from the date of filing of such documents (such documents, and the documents enumerated above, being hereinafter referred to as "Incorporated Documents").

Any statement contained in an Incorporated Document shall be deemed to be modified, replaced or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed Incorporated Document modifies, replaces or supersedes such statement. Any statement so modified, replaced or superseded shall not be deemed, except as so modified, replaced or superseded, to constitute a part of this Registration Statement.

II-1

ITEM 4. DESCRIPTION OF SECURITIES.

Not applicable.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.

Not applicable.

ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Certificate of Incorporation provides that each person who was or is threatened to be made a party to or is involved in any action, suit or proceeding by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Registrant or is or was serving at the request of the Registrant as a director or officer of another company, partnership, joint venture, trust or other enterprise, will be indemnified and held harmless by the Registrant to the fullest extent authorized by the Delaware General Corporation Law as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Registrant to provide broader indemnification rights than said law permitted the Registrant to provide prior to such amendment), against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators.

II-2

shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless a court finds that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper.

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.

Not applicable.

ITEM 8. EXHIBITS.

         4.1  Specimen of Stock Certificate (filed as Exhibit 4.1 to the
              Company's Registration Statement on Form S-1 (Commission File
              No. 333-43687) and incorporated herein by reference).
         4.2  1998 Executive Deferred Compensation Stock Option Plan (filed
              as Exhibit 10.10 to the Company's Quarterly Report on Form
              10-Q for the quarter ended March 31, 1998 and incorporated
              herein by reference).
         4.3  1998 Non-Employee Director Stock Option Plan (filed as
              Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q
              for the quarter ended March 31, 1998 and incorporated herein
              by reference).
         4.4  1998 Stock Incentive Plan (filed as Exhibit 10.8 to the
              Company's Quarterly Report on Form 10-Q for the quarter ended
              March 31, 1998 and incorporated herein by reference).
        4.5*  Form of Option Exchange Mailing Documents
        5.1*  Opinion of Hughes & Luce, L.L.P.
       23.1*  Consent of Hughes & Luce, L.L.P. (contained in Exhibit 5.1
              hereto)
       23.2*  Consent of KPMG Peat Marwick LLP
       24.1*  Powers of Attorney

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

* Filed herewith

ITEM 9. UNDERTAKINGS.

(a) The Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;

II-3

(ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement;

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement;

provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to or Section 15(d) of the Exchange Act that are incorporated by reference in the Registration Statement.

(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(b) The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 6, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(d) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus, to each person to whom the prospectus is sent or given, the latest annual report to security holders that is incorporated by reference in the prospectus and furnished

II-4

pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act; and, where interim financial information required to be presented by Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or cause to be delivered to each person to whom the prospectus is sent or given, the latest quarterly report that is specifically incorporated by reference in the prospectus to provide such interim financial information.

II-5

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Overland Park, State of Kansas, on October 16, 1998.

WADDELL & REED FINANCIAL, INC.

By: /s/ KEITH A. TUCKER
    -----------------------------
    Keith A. Tucker,
    Chairman of the Board and Chief
    Executive Officer

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

/s/ KEITH A. TUCKER Chairman of the Board, Chief October 16, 1998
----------------------------------- Executive Officer and Director
Keith A. Tucker (Principal Financial Officer)

/s/ HENRY J. HERRMANN President, Chief Investment October 16, 1998
----------------------------------- Officer, Treasurer and Director
Henry J. Herrmann

/s/ ROBERT L. HECHLER Chief Operating Officer, Executive October 16, 1998
----------------------------------- Vice President and Director
Robert L. Hechler

/s/ MICHAEL D. STROHM Principal Accounting Officer October 16, 1998
-----------------------------------
Michael D. Strohm

* Director October 16, 1998
-----------------------------------
Harold T. McCormick

* Director October 16, 1998
-----------------------------------
Louis T. Hagopian

* Director October 16, 1998
-----------------------------------
R. K. Richey

* Director October 16, 1998
-----------------------------------
Joseph L. Lanier, Jr.

* Director October 16, 1998
-----------------------------------
William L. Rogers

II-6

                 *                                  Director                   October 16, 1998
-----------------------------------
          James M. Raines

                 *                                  Director                   October 16, 1998
-----------------------------------
      George J. Records

                 *                                  Director                   October 16, 1998
-----------------------------------
      David L. Boren

                 *                                  Director                   October 16, 1998
-----------------------------------
      Joseph M. Farley

*By:   /s/ DANIEL C. SCHULTE                                                   October 16, 1998
    -------------------------------
           Daniel C. Schulte
           Attorney-in-fact

II-7

INDEX TO EXHIBITS

  4.1     Specimen of Stock Certificate (filed as Exhibit 4.1 to the
          Company's Registration Statement on Form S-1 (Commission File No.
          333-43687) and incorporated herein by reference).
  4.2     1998 Executive Deferred Compensation Stock Option Plan (filed as
          Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q for
          the quarter ended March 31, 1998 and incorporated herein by
          reference).
  4.3     1998 Non-Employee Director Stock Option Plan (filed as Exhibit 10.9
          to the Company's Quarterly Report on Form 10-Q for the quarter
          ended March 31, 1998 and incorporated herein by reference).
  4.4     1998 Stock Incentive Plan (filed as Exhibit 10.8 to the Company's
          Quarterly Report on Form 10-Q for the quarter ended March 31, 1998
          and incorporated herein by reference).
 4.5*     Form of Option Exchange Mailing Documents
 5.1*     Opinion of Hughes & Luce, L.L.P.
23.1*     Consent of Hughes & Luce, L.L.P. (contained in Exhibit 5.1 hereto)
23.2*     Consent of KPMG Peat Marwick LLP
24.1*     Powers of Attorney


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

*Filed herewith

EXHIBIT 4.5

FORM OF
WADDELL & REED OPTIONHOLDERS
ELECTION FORM

Optionee Name:

GRANT DATE NO. OF SHARES EXERCISE PRICE

[Employee's Actual Torchmark Options to be Inserted]

With respect to the amendment and adjustment of my outstanding Torchmark Corporation stock options listed above for the spin-off of Waddell & Reed Financial, Inc., I hereby elect:

[_] To receive WDR Conversion Options only, calculated pursuant to the adjustment procedures adopted by the Compensation Committee of the Board of Directors of Waddell & Reed Financial, Inc. on September 29, 1998.

[_] To receive WDR Conversion Options and Adjusted TMK Options, calculated pursuant to the adjustment procedures adopted by the Compensation Committee of the Board of Directors of Waddell & Reed Financial, Inc. on September 29, 1998.

[_] To retain my existing Torchmark Options with the understanding that they will be adjusted for exercise price and number of shares but that they will expire, in accordance with their terms, three months from the date of the completion of the spin-off.

Date:
     ---------------------------------   ---------------------------------------
                                         Optionee

FORM OF
TORCHMARK OPTIONHOLDERS
ELECTION FORM

Optionee Name:

Outstanding Stock Options Subject to Election

GRANT DATE NO. OF SHARES EXERCISE PRICE

[Employee's Actual Torchmark Options to be Inserted]

With respect to the amendment and adjustment of my outstanding Torchmark Corporation stock options listed above for the spin-off of Waddell & Reed Financial, Inc., I hereby elect to receive:

[_] Adjusted TMK Options only, calculated pursuant to the adjustment procedures adopted by the Compensation Committee of the Board of Directors of Torchmark Corportion on ____________, 1998.

[_] Adjusted TMK Options and WDR Conversion Options, calculated pursuant to the adjustment procedures adopted by the Compensation Committee of the Board of Directors of Torchmark Corporation on _____________, 1998.

Date:

FORM OF
TORCHMARK AND
WADDELL & REED DIRECTORS
ELECTION FORM

Optionee Name:

Outstanding Stock Options Subject to Election

GRANT DATE NO. OF SHARES EXERCISE PRICE

[Employee's Actual Torchmark Options to be Inserted]

With respect to the amendment and adjustment of my outstanding Torchmark Corporation stock options listed above for the spin-off of Waddell & Reed Financial, Inc., I hereby elect to receive:

[_] Adjusted TMK Options only, calculated pursuant to the adjustment procedures adopted by the Compensation Committee of the Board of Directors of Torchmark Corporation on ___________, 1998.

[_] WDR Conversion Options only, calculated pursuant to the adjustment procedures adopted by the Compensation Committee of the Board of Directors of Torchmark Corporation on ____________, 1998.

[_] Adjusted TMK and WDR Conversion Options, calculated pursuant to the adjustment procedures adopted by the Compensation Committee of the Board of Directors of Torchmark Corporation on ___________, 1998.

Date:

FORM OF MAILING TO WADDELL & REED FINANCIAL, INC. EMPLOYEES

Date: October ____, 1998

To: Waddell & Reed Employees who are Holders of Torchmark Stock Options

From: Keith A. Tucker

Re: Conversion of Torchmark Stock Options

As you know, upon receipt of a tax ruling from the Internal Revenue Service, Torchmark Corporation ("Torchmark") will shortly be distributing the remaining shares of Waddell & Reed Financial, Inc. ("WDR") it holds to its common shareholders in a tax-free spin-off. Pursuant to the terms of the plans under which Torchmark stock options have been granted to you, the Torchmark Compensation Committee and WDR Compensation Committee have approved procedures to adjust outstanding stock options for the spin-off. This adjustment process is designed to maintain the equity you have in and maintain the market value of, your Torchmark stock options while allowing you to convert some or all of these Torchmark options into options of WDR.

Attached is an illustration of how the adjustment process works in the case of your unexercised options. This is only an example and is based on assumed prices for Torchmark and WDR stock. Actual adjusted numbers of shares and adjusted option prices cannot be determined until the measurement period prior to the spin-off distribution date.

You should complete the attached election form indicating whether you wish to receive only WDR Conversion options, a combination of WDR Conversion options and Adjusted TMK options, or retain your existing TMK options and return it on or before October ___, 1998 to Daniel C. Schulte at Waddell & Reed Financial, Inc., 6300 Lamar, Overland Park, Kansas 66202 (facsimile number -- 913-236-1930).

If you have any questions regarding the adjustment process, feel free to contact Daniel C. Schulte at 913-236-2012 or Spencer Stone at 205-325-4249.

FORM OF MAILING TO TORCHMARK CORPORATION EMPLOYEES

DATE:

MEMORANDUM TO: HOLDERS OF TORCHMARK STOCK OPTIONS

As you know, upon receipt of a tax ruling from the IRS, Torchmark will shortly be distributing the remaining shares of Waddell & Reed Financial ("WDR") it holds to its common shareholders in a tax-free spin-off. Pursuant to the terms of the plans under which Torchmark stock options have been granted to you, the Torchmark Compensation Committee has approved procedures to adjust outstanding stock options for the spin-off. This adjustment process is designed to: (1) maintain the equity you have in Torchmark stock options, and (2) maintain the market value of your Torchmark stock options.

Attached is an ILLUSTRATION of how the adjustment process works in the case of your unexercised options. THIS IS ONLY AN EXAMPLE AND IS BASED ON ASSUMED PRICES FOR TORCHMARK AND WDR STOCK. ACTUAL ADJUSTED NUMBERS OF SHARES AND ADJUSTED OPTION PRICES CANNOT BE DETERMINED UNTIL THE MEASUREMENT PERIOD PRIOR TO THE SPIN-OFF DISTRIBUTION DATE.

You should complete the attached election indicating whether you wish to receive only Adjusted TMK options or a combination of Adjusted TMK options and WDR Conversion options and return it to Carol McCoy at Torchmark on or before October __, 1998. We will make every effort to obtain your election but if we do not receive it by the deadline, your options will automatically be converted into Adjusted TMK Options only.

If you have any questions regarding the adjustment process, feel free to contact Spencer Stone at 205-325-4249, Danny Almond at 972-569-3713, or Carol McCoy at 205-325-4243.

FORM OF MAILING TO OUTSIDE DIRECTORS OF TORCHMARK CORPORATION AND WADDELL & REED FINANCIAL, INC.

DATE:

MEMORANDUM TO: HOLDERS OF TORCHMARK STOCK OPTIONS

You should complete the attached election indicating whether you wish to receive only WDR Conversion options, a combination of Adjusted TMK options and WDR Conversion options, or retain your existing TMK options and return it to Carol McCoy at Torchmark on or before October __, 1998.

If you have any questions regarding the adjustment process, feel free to contact Spencer Stone at 205-325-4249, Danny Almond at 972-569-3713, or Carol McCoy at 205-325-4243.

FORM OF EXAMPLE

Optionee:      Waddell & Reed Employee (Waddell & Reed example)

Assumptions:   Pre-spin TMK price:   $37.5000
               Post-spin TMK price:  $32.0000
               Post-spin WDR price:  $18.2500
               Spin ratio:             30.16%

          Existing options:                  Converted Waddell & Reed
---------------------------------------   ------------------------------
         Number                           Number     New
Grant      of     Exercise  Intrinsic       of     exercise   Intrinsic
Date     Options   Price      Value       options   price       value
-------------------------- ------------   -----------------  -----------

12/20/95   6,000  $21.6875  $ 94,875.00    12,329  $10.5548  $ 94,874.12
12/16/96   6,000   24.8750    75,750.00    12,329   12.1060    75,749.38
09/25/97  32,000   39.1250   (52,000.00)   65,754   19.0409   (52,004.84)

          ------            -----------    ------            -----------
          44,000            $118,625.00    90,412            $118,618.66
          ======            ===========    ======            ===========

                                     Combination
          Adjusted Torchmark:                   Converted Waddell & Reed         Combined
-----------------------------------------   ---------------------------------   -----------
           New
         number      New                    Number
Grant      of      exercise   Intrinsic       of       Exercise    Intrinsic     Intrinsic
Date     options    price       value       options     price        value         value
---------------------------- ------------   --------------------  -----------   -----------
12/20/95   6,000   $18.50895  $ 80,946.30     1,810    $10.5546   $ 13,928.67   $ 94,874.97
12/16/96   6,000    21.22847    64,629.18     1,810     12.1059     11,120.82     75,750.00
09/25/97  32,000    33.38667   (44,373.44)    9,651     19.0409     (7,632.98)   (52,006.42)

          ------              -----------    ------                ----------   -----------
          44,000              $101,202.04    13,271                $17,416.51   $118,618.55
          ======              ===========    ======                ==========   ===========

Adjusted Existing Torchmark

         Number                              This is an example based upon
Grant      of      Exercise   Intrinsic      certain assumptions.  Actual
Date     Options    Price       Value        adjustments to your options may
---------------------------- ------------    differ from the example because of
                                             differences between the assumptions
12/20/95   7,032   $18.50811  $ 94,874.97    and measurement period prices.
12/16/96   7,032    21.22782    75,749.97
09/25/97  37,500    33.38667   (52,000.13)

          ------              -----------
          51,564              $118,624.81
          ======              ===========

EXHIBIT 5.1

OPINION OF HUGHES & LUCE, L.L.P.

October 16, 1998

Waddell & Reed Financial, Inc.
6300 Lamar Avenue
Overland Park, Kansas 66202

Re: Registration Statement on Form S-8 for the 1998 Executive Deferred Compensation Stock Option Plan, 1998 Non-Employee Director Stock Option Plan and 1998 Stock Incentive Plan

Ladies and Gentlemen:

We have acted as counsel to Waddell & Reed Financial, Inc., a Delaware corporation (the "Company"), in connection with the registration under the Securities Act of 1933, as amended, of 16,300,000 shares (the "Shares") of the Company's Class A common stock, $.01 par value per share (the "Common Stock"), issuable under the 1998 Executive Deferred Compensation Stock Option Plan, 1998 Non-Employee Director Stock Option Plan and 1998 Stock Incentive Plan (collectively, the "Plans"). The Shares are being registered pursuant to a registration statement on Form S-8 to be filed with the Securities and Exchange Commission on or about October 16, 1998 (the "Registration Statement").

In rendering this opinion, we have examined and relied upon executed originals, counterparts or copies of such documents, records and certificates (including certificates of public officials and officers of the Company) as we considered necessary or appropriate for enabling us to express the opinions set forth herein. In all such examinations, we have assumed the authenticity and completeness of all documents submitted to us as originals and the conformity to originals and completeness of all documents submitted to us as photostatic, conformed, notarized or certified copies.

Based on the foregoing, we are of the opinion that the Shares will be, if and when issued in accordance with the terms of the Plans, validly issued, fully paid and nonassessable, assuming the Company maintains an adequate number of authorized but unissued shares of Common Stock available for such issuance, and further assuming that the consideration actually received by the Company for the Shares exceeds the par value thereof.

This opinion may be filed as an exhibit to the Registration Statement. We also consent to the reference to this firm as having passed on the validity of the Common Stock under the caption "Legal Matters" in the Prospectus. In giving this consent, we do not admit that we are included in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission promulgated thereunder.

Very truly yours,

/s/ HUGHES & LUCE, L.L.P.

EXHIBIT 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Waddell & Reed Financial, Inc.

We consent to the use of our reports incorporated herein by reference and to the reference to our firm under the heading "Experts" in the Registration Statement on Form S-8.

                                 /s/ KMPG PEAT MARWICK LLP

Kansas City, Missouri
October 14, 1998

EXHIBIT 24.1

POWER OF ATTORNEY