WADDELL & REED
FUNDS, INC.
Total Return Fund
Growth Fund
Limited-Term Bond Fund
Municipal Bond Fund
Global Income Fund
ANNUAL
REPORT
----------------------------------------
For the fiscal year ended March 31, 1994
<PAGE>
TOTAL RETURN FUND
MANAGER'S LETTER
MARCH 31, 1994
- ---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the Total Return Fund for the
fiscal year ended March 31, 1994. The following discussion, graphs and tables
provide you with information regarding the Fund's performance during that
period.
During the Fund's past fiscal year, corporate profits improved
significantly as a result of increased corporate control over costs, along with
slow, but persistently growing sales. Companies in cyclical industries
performed particularly well in 1993. Companies with overseas distribution
capabilities grew faster, in many cases, than domestic companies that do not
have international outlets for their goods and services.
To take advantage of increases in corporate earnings, we emphasized stocks
of companies in cyclical industries like the automobile industry, as well as
stocks of companies that are suppliers to those firms. Similarly, we increased
the Fund's exposure to stocks of companies in the communications industry and
stocks of firms that are suppliers to this industry.
The strategies and techniques we applied resulted in the direction of the
Fund's performance during its past fiscal year remaining fairly consistent with
that of the indexes charted on the following page. Those indexes reflect the
performance of securities that generally represent the stock market (the S&P 500
Index) and the universe of funds with similar investment objectives (the Lipper
Growth & Income Fund Universe Average). The Fund's performance was positively
impacted by its emphasis on cyclical industry stocks.
We anticipate that the economy will continue to grow at a moderate pace,
which will lead to above-average corporate profits and higher stock prices. We
expect that the securities which grow the most in the upcoming years will be
stocks of companies that have worldwide distribution systems. Therefore, we
expect to continue to pursue the same strategies we have recently employed by
increasing the Fund's investment in stocks of companies that are poised to take
advantage of business opportunities around the world.
We appreciate your continued confidence.
Respectfully,
Russell E. Thompson
Manager, Total Return Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
TOTAL RETURN FUND,
The line graph which appears here is the paper version which was filed on Form
SE on May 24, 1994.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
TOTAL RETURN FUND
PORTFOLIO STRATEGY:
Common stocks and OBJECTIVE: To provide current income
securities convertible into while seeking capital
common stocks. growth.
Cash Reserves STRATEGY: Invest principally in common stocks, or
securities convertible into common
stocks, of companies that have a record
of paying regular dividends on common
stock and also have the potential for
capital appreciation. May purchase
securities subject to repurchase
agreements. May invest in certain
options, futures and other hedging
techniques.
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the Total Return Fund
from time to time.
Moving into cash reserve positions at
times thought to be near a major stock
market peak may allow the Fund the
opportunity to capture profits and
attempt to cushion the impact of market
declines. The added flexibility
provided by our CASH RESERVES STRATEGY,
when deemed appropriate, may be used in
the management of the portfolio.
FOUNDED: 1992
DIVIDENDS: PAID ANNUALLY (December)
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the fiscal year ended March 31, 1994
- ----------------------------------------
NET ASSET VALUE ON
3/31/94 $11.99
3/31/93 11.07
------
CHANGE PER SHARE $0.92
======
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual
Total Return
----------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 3-31-94 5.31% 8.31%
Period from 9-21-92*
through 3-31-94 11.56% 12.79%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and
reflects payment of the applicable contingent deferred sales charge upon
redemption at the end of the period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of the period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On March 31, 1994, Total Return Fund had net assets totaling $61,735,287
invested in a diversified portfolio of:
92.42% Common Stocks
7.58% Cash and Cash Equivalents
As a shareholder of Total Return Fund, for every $100 you had invested on March
31, 1994, your Fund owned:
Basic Industries Stocks $42.94
Consumer Stocks 22.59
Technological Stocks 17.70
Financial Stocks 9.19
Cash and Cash Equivalents 7.58
Not all holdings will be represented in the portfolio at all times.
<PAGE>
- ---------------------------------------------------------------------------
These STOCK CATEGORIES are provided as a reference only. Not all categories or
subcategories will be represented in a portfolio at all times. Refer to the
following pages for a more detailed portfolio listing.
BASIC INDUSTRIES
Airlines
Automotive
Building
Chemicals Major
Electrical Equipment
Engineering and Construction
Machinery
Manufacturers
Metals and Mining
Multi-Industry
Paper
Precious Metals
Railroad Equipment
Railroads
Shipping
Steel
Tire and Rubber
Trucking
CONSUMER
Beverages
Consumer Electronics and Appliances
Food and Related
Hospital Management
Household Products
Leisure Time
Packaging and Containers
Publishing and Advertising
Retailing
Services, Consumer and Business
Textiles and Apparel
Tobacco
ENERGY AND ENERGY-RELATED
Canadian Oil
Coal
Domestic Oil
International Oil
Oil Services
Propane
FINANCIAL
Banks and Savings and Loans
Financial
Insurance
PUBLIC UTILITIES
Electric
Gas
Pipelines
TECHNOLOGICAL
Aerospace
Biotechnology and Medical Services
Chemicals Specialty and Miscellaneous Technology
Computers and Office Equipment
Drugs and Hospital Supply
Electronics
Telecommunications
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1994
Shares Value
COMMON STOCKS
Airlines - 2.53%
AMR Corporation* ....................... 8,100 $ 461,700
Southwest Airlines Co. ................. 33,550 1,098,763
Total ................................. 1,560,463
Automotive - 8.88%
Chrysler Corporation ................... 22,300 1,151,238
Daimler-Benz AG, ADS .................. 2,800 142,450
Dana Corporation ....................... 7,700 440,825
Eaton Corporation ...................... 10,100 584,538
Ford Motor Company ..................... 19,300 1,133,875
General Motors Corporation ............. 14,400 777,600
Magna Group, Inc., Class A ............. 7,100 333,700
Superior Industries International, Inc. 5,300 184,838
Varity Corporation* .................... 4,200 175,875
Volvo AB, ADR, Class B ................ 7,200 559,346
Total ................................. 5,484,285
Banks and Savings and Loans - 7.02%
Banc One Corporation ................... 9,952 328,416
BankAmerica Corporation ................ 10,200 401,625
Chase Manhattan Corporation ............ 17,200 556,850
Chemical Banking Corporation ........... 12,700 461,963
Citicorp* .............................. 20,300 761,250
First Bank Systems, Inc. ............... 12,400 396,800
First Fidelity Bancorporation .......... 6,100 446,825
Midlantic Corporation* ................. 12,200 348,456
NationsBank Corporation ................ 7,900 361,425
PNC Financial Corp. .................... 10,100 268,913
Total ................................. 4,332,523
Beverages - 2.35%
Cott Corporation ...................... 10,000 248,750
PepsiCo, Inc. .......................... 26,400 966,900
Whitman Corporation .................... 15,500 234,438
Total ................................. 1,450,088
Biotechnology and Medical Services - 0.95%
Medtronic, Inc. ........................ 4,100 328,000
Ventritex, Inc.* ....................... 12,300 258,300
Total ................................. 586,300
Building - 3.71%
Armstrong World Industries, Inc. ....... 14,100 761,400
Centex Corporation ..................... 5,600 172,900
Georgia-Pacific Corporation ............ 4,100 262,400
Louisiana-Pacific Corporation .......... 4,100 148,113
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1994
Shares Value
COMMON STOCKS(Continued)
Building (Continued)
Pulte Corporation ...................... 6,000 $ 174,000
Stanley Works (The) .................... 3,000 118,125
Temple-Inland Inc. ..................... 7,100 324,825
Weyerhaeuser Company ................... 7,600 328,700
Total ................................. 2,290,463
Chemicals Major - 4.96%
Air Products & Chemicals, Inc. ......... 16,200 722,925
du Pont (E. I.) de Nemours and Company . 12,200 646,600
PPG Industries, Inc. ................... 12,700 944,563
Praxair, Inc. .......................... 20,300 352,713
Union Carbide Corporation .............. 17,700 398,250
Total ................................. 3,065,051
Chemicals Specialty and Miscellaneous Technology - 5.11%
Betz Laboratories, Inc. ................ 5,700 286,425
Ferro Corporation ...................... 8,000 248,000
Geon Company (The) ..................... 25,000 659,375
Minnesota Mining and Manufacturing
Company ............................... 5,100 505,538
Polaroid Corporation ................... 28,400 905,250
Xerox Corporation ...................... 5,700 544,350
Total ................................. 3,148,938
Computers and Office Equipment - 1.13%
General Motors Corporation, Class E .... 20,300 695,275
Consumer Electronics and Appliances - 2.12%
Harmon International Industries,
Incorporated* ......................... 7,600 210,900
Maytag Corporation ..................... 24,300 455,625
Rival Company (The) .................... 3,800 78,375
Whirlpool Corporation .................. 9,300 564,975
Total ................................. 1,309,875
Electrical Equipment - 2.75%
Emerson Electric Co. ................... 8,100 480,938
General Electric Company ............... 12,200 1,215,425
Total ................................. 1,696,363
Electronics - 7.37%
AMP Incorporated* ...................... 11,200 674,800
Analog Devices, Inc.* .................. 10,600 275,600
Applied Materials, Inc.* ............... 18,300 816,638
Intel Corporation ...................... 15,500 1,044,313
Motorola, Inc. ......................... 17,200 1,741,500
Total ................................. 4,552,851
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1994
Shares Value
COMMON STOCKS(Continued)
Engineering and Construction - 1.18%
Fluor Corporation ...................... 8,100 $ 405,000
Foster Wheeler Corporation ............. 8,100 324,000
Total ................................. 729,000
Financial - 2.17%
Federal Home Loan Mortgage Corporation . 10,100 512,575
Federal National Mortgage Association .. 6,000 466,500
Household International, Inc. .......... 12,200 361,425
Total ................................. 1,340,500
Food and Related - 1.23%
CPC International Inc. ................. 10,100 478,488
Pet Incorporated ....................... 15,500 279,000
Total ................................. 757,488
Household Products - 3.76%
Avon Products, Inc. .................... 5,700 322,050
Colgate-Palmolive Company .............. 12,200 706,075
Gillette Company (The) ................. 10,100 638,825
Procter & Gamble Company (The) ......... 12,200 654,225
Total.................................. 2,321,175
Leisure Time - 2.27%
Walt Disney Company (The) .............. 14,200 594,625
McDonald's Corporation ................. 14,200 807,625
Total ................................. 1,402,250
Machinery - 7.45%
Caterpillar Inc. ....................... 16,200 1,820,475
Clark Equipment Company* ............... 10,100 598,425
Deere & Company ........................ 13,900 1,167,600
Ingersoll-Rand Company ................. 8,100 301,725
Parker Hannifin Corporation ............ 8,100 286,538
Trinova Corporation .................... 12,200 422,425
Total ................................. 4,597,188
Metals and Mining - 0.48%
Phelps Dodge Corporation ............... 5,700 297,825
Multi-Industry - 1.83%
ITT Corporation ........................ 13,200 1,131,900
Paper - 2.09%
International Paper Company ............ 8,100 551,813
James River Corporation of Virginia .... 16,200 293,625
Union Camp Corporation ................. 10,100 446,925
Total ................................. 1,292,363
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1994
Shares Value
COMMON STOCKS(Continued)
Railroads - 3.97%
CSX Corporation ........................ 7,100 $ 582,200
Conrail Inc. ........................... 12,200 704,550
Norfolk Southern Corporation ........... 6,100 394,213
Southern Pacific Rail Corporation* ..... 9,500 199,500
Union Pacific Corporation .............. 10,100 573,175
Total ................................. 2,453,638
Retailing - 10.01%
Circuit City Stores, Inc. .............. 32,500 645,938
Dayton Hudson Corporation .............. 9,400 686,200
Dillard Department Stores, Inc.,
Class A ............................... 19,300 646,550
Ethan Allen Interiors Inc.* ............ 8,000 208,000
Gap, Inc. (The) ........................ 14,200 630,125
Home Depot, Inc. (The) ................. 15,533 632,970
May Department Stores Company (The) .... 20,300 844,988
Penney (J. C.) Company, Inc. ........... 13,700 724,388
Sears, Roebuck & Co. .................. 4,100 176,300
Spiegel, Inc., Class A ................. 11,000 248,875
Toys "R" Us, Inc.* .................... 6,100 211,975
Wal-Mart Stores, Inc. .................. 20,300 525,263
Total ................................. 6,181,572
Services, Consumer and Business - 0.85%
Block (H&R), Inc. ...................... 12,200 524,600
Steel - 1.20%
Bethlehem Steel Corporation* ........... 7,300 146,000
Inland Steel Industries, Inc.* ......... 7,300 219,913
USX Corporation - U.S. Steel Group ..... 10,100 374,963
Total ................................. 740,876
Telecommunications - 3.14%
American Telephone and Telegraph
Company ............................... 10,100 517,625
General Instrument Corporation* ........ 5,100 242,250
MCI Communications Corporation ......... 20,300 475,771
Telefonaktiebolaget LM Ericsson, ADR,
Class B ............................... 10,100 424,826
Vanguard Cellular Systems, Inc.* ....... 9,500 276,688
Total ................................. 1,937,160
Tire and Rubber - 1.10%
Goodyear Tire & Rubber Company (The) ... 16,700 676,350
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1994
Shares Value
COMMON STOCKS(Continued)
Trucking - 0.81%
Ryder System, Inc. ..................... 20,300 $ 502,425
TOTAL COMMON STOCKS - 92.42% $57,058,785
(Cost: $53,957,175)
TOTAL SHORT-TERM SECURITIES - 4.54% $ 2,800,011
(Cost: $2,800,011)
TOTAL INVESTMENT SECURITIES - 96.96% $59,858,796
(Cost: $56,757,186)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 3.04% 1,876,491
NET ASSETS - 100.00% $61,735,287
See Notes to Schedules of Investments on page 45.
<PAGE>
GROWTH FUND
MANAGER'S LETTER
MARCH 31, 1994
- ---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the Growth Fund for the fiscal year
ended March 31, 1994. The following discussion, graphs and tables provide you
with information regarding the Fund's performance during that period.
Market conditions during the Fund's past fiscal year were characterized by
sharp securities price changes at various times within particular industries,
such as the health care, gaming, telecommunications, technology and retail trade
sectors. A steady, substantial flow of initial public offerings came to market
throughout the year.
To take advantage of the dynamic market conditions, we pursued two main
market strategies. Initially, we utilized the Fund's positive cash flows to
increase the Fund's existing positions in certain securities. Second, we
selectively added to the Fund's portfolio an assortment of securities in markets
that we perceived had the potential for strong future appreciation.
The strategies and techniques we applied resulted in the Fund's performance
during its past fiscal year remaining superior to that of the indexes charted on
the following page. Those indexes reflect the performance of securities that
generally represent the stock market (the S&P 500 Index) and the universe of
funds with similar investment objectives (the Lipper Growth Fund Universe
Average). The Fund's participation in cyclical industrial stocks and securities
purchased in new public offerings enhanced the Fund's performance the past year.
Consequently, the Fund achieved significant positive returns for its
shareholders.
We anticipate that economic growth will slow during the Fund's upcoming
fiscal year due to rising interest rates. While this may temporarily depress
stock valuations, it should once again favor rapid growth companies over
economically sensitive ones. We expect to continue to employ the strategies we
have employed in the recent past to seek growth investment opportunities
whenever they appear.
We appreciate your continued confidence.
Respectfully,
Mark G. Seferovich
Manager, Growth Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GROWTH FUND,
The line graph which appears here is the paper version which was filed on Form
SE on May 24, 1994.
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------------------
GROWTH FUND
PORTFOLIO STRATEGY:
Common stocks and OBJECTIVE: To achieve capital appreciation.
securities convertible
into common stocks.
Cash Reserves STRATEGY: Invests primarily in common stocks, or
securities convertible into common
stocks, of companies that offer above-
average growth potential, including
relatively new or unseasoned companies.
May purchase securities subject to
repurchase agreements. May invest in
certain options, futures and other
hedging techniques.
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the Growth Fund from
time to time.
Moving into cash reserve positions at
times thought to be near a major stock
market peak may allow the Fund the
opportunity to capture profits and
attempt to cushion the impact of market
declines. The added flexibility
provided by our CASH RESERVES STRATEGY,
when deemed appropriate, may be used in
the management of the portfolio.
FOUNDED: 1992
DIVIDENDS: PAID ANNUALLY (December)
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Fiscal Year Ended March 31, 1994
- ----------------------------------------
CAPITAL GAINS DISTRIBUTION $0.31
=====
NET ASSET VALUE ON
3/31/94 $14.08 adjusted to:$14.39 (A)
3/31/93 11.68
------
CHANGE PER SHARE $ 2.71
======
(A) This number includes the capital gains distribution of $0.31 paid in
December 1993 added to the actual net asset value on March 31, 1994.
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
----------------------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 3-31-94 20.16% 23.16%
Period from 9-21-92*
through 3-31-94 26.45% 27.61%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and
reflects payment of the applicable contingent deferred sales charge upon
redemption at the end of the period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of the period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On March 31, 1994, Growth Fund had net assets totaling $43,524,277 invested in a
diversified portfolio of:
63.96% Common Stocks
36.04% Cash and Cash Equivalents
As a shareholder in Growth Fund, for every $100 you had invested on March 31,
1994, your Fund owned:
$39.65 Technological Stocks
36.04 Cash and Cash Equivalents
15.30 Consumer Stocks
8.02 Basic Industries Stocks
0.99 Financial Stock
<PAGE>
- -----------------------------------------------------------------
These STOCK CATEGORIES are provided as a reference only. Not all categories or
subcategories will be represented in a portfolio at all times. Refer to the
following pages for a more detailed portfolio listing.
BASIC INDUSTRIES
Airlines
Automotive
Building
Chemicals Major
Electrical Equipment
Engineering and Construction
Machinery
Manufacturers
Metals and Mining
Multi-Industry
Paper
Precious Metals
Railroad Equipment
Railroads
Shipping
Steel
Tire and Rubber
Trucking
CONSUMER
Beverages
Consumer Electronics and Appliances
Food and Related
Hospital Management
Household Products
Leisure Time
Packaging and Containers
Publishing and Advertising
Retailing
Services, Consumer and Business
Textiles and Apparel
Tobacco
ENERGY AND ENERGY-RELATED
Canadian Oil
Coal
Domestic Oil
International Oil
Oil Services
Propane
FINANCIAL
Banks and Savings and Loans
Financial
Insurance
PUBLIC UTILITIES
Electric
Gas
Pipelines
TECHNOLOGICAL
Aerospace
Biotechnology and Medical Services
Chemicals Specialty and Miscellaneous Technology
Computers and Office Equipment
Drugs and Hospital Supply
Electronics
Telecommunications
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
MARCH 31, 1994
Shares Value
COMMON STOCKS
Automotive - 3.10%
Automotive Industries Holdings, Inc.* .. 12,500 $ 375,000
Gentex Corporation* .................... 20,000 452,500
Superior Industries International, Inc. 15,000 523,125
Total ................................. 1,350,625
Biotechnology and Medical Services - 4.92%
American Healthcorp, Inc.* ............. 30,000 420,000
Pyxis Corporation* .................... 25,000 656,250
Tecnol Medical Products, Inc.* ......... 10,600 139,125
Ventritex, Inc.* ....................... 30,000 630,000
Zoll Medical Corporation* .............. 10,000 293,750
Total ................................. 2,139,125
Building - 0.75%
NCI Building Systems, Inc.* ............ 20,000 327,500
Computers and Office Equipment - 20.67%
America Online, Inc.* .................. 12,000 859,500
BMC Software* .......................... 10,000 616,250
Broderbund Software, Inc.* ............. 13,000 531,375
Cerner Corporation* .................... 12,000 498,000
DSP Group, Inc.* ...................... 30,000 483,750
Health Management Systems, Inc.* ...... 20,000 455,000
Integrated Silicon Systems, Inc.* ..... 15,500 364,250
Intuit* ............................... 15,000 549,375
Macromedia, Inc.* ..................... 3,500 51,625
MapInfo Corporation* ................... 2,500 59,063
MEDSTAT Group (The)* ................... 25,000 384,375
Microsoft Corporation* ................. 10,000 850,000
Parametric Technology Corporation* ..... 25,000 684,375
ParcPlace Systems, Inc.* .............. 5,000 101,250
PeopleSoft, Inc.* ...................... 3,000 103,125
Pinnacle Micro, Inc.* .................. 20,000 315,000
QuickResponse Services, Inc.* .......... 15,000 320,625
Sterling, Software* ................... 20,000 577,500
Wall Data Incorporated* ................ 15,000 667,500
Wonderware Corporation* ............... 30,000 525,000
Total ................................. 8,996,938
Drugs and Hospital Supply - 1.90%
Circa Pharmaceuticals, Inc.* ........... 40,000 470,000
Copley Pharmaceutical, Inc.* ........... 15,000 358,125
Total ................................. 828,125
Electronics - 9.83%
ALANTEC Corporation* .................. 8,600 141,358
Applied Materials, Inc.* ............... 10,000 446,250
Atmel Corporation* .................... 10,000 424,370
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
MARCH 31, 1994
Shares Value
COMMON STOCKS (Continued)
Electronics (Continued)
Digital Link Corporation* ............. 30,000 $ 465,000
Gasonics International Corporation.* .. 25,000 334,375
LSI Logic Corporation* ................. 20,000 400,000
Lam Research* .......................... 15,000 468,750
Level One Communications, Incorporated* 8,100 157,950
Megatest Corporation* .................. 15,000 271,875
Micron Technology, Inc.* .............. 13,000 1,085,500
TriQuint Semiconductor, Inc.* ......... 5,000 81,250
Total ................................. 4,276,678
Financial - 0.99%
Regional Acceptance Corporation* ....... 35,000 428,750
Hospital Management - 5.52%
Intergroup Healthcare Corporation* ..... 12,000 543,000
Sierra Health Services, Inc.* ......... 30,000 761,250
United HealthCare Corporation .......... 10,000 427,500
Vencor, Incorporated* .................. 20,000 670,000
Total ................................. 2,401,750
Household Products - 0.65%
Valence Technology, Inc.* ............. 20,000 285,000
Leisure Time - 0.27%
Cobra Golf Incorporated* ............... 4,100 117,363
Machinery - 0.95%
Cognex Corporation* .................... 20,000 412,500
Railroad Equipment - 0.42%
Atchison Casting Corporation* .......... 12,500 184,375
Retailing - 6.75%
Bombay Company, Inc.* .................. 17,150 426,606
Books-A-Million, Inc.* ................. 25,000 512,500
Leslie's Poolmart* .................... 14,000 157,500
Sunglass Hut International, Inc.* ...... 20,000 665,000
Tractor Supply Company* ............... 20,000 460,000
Williams-Sonoma, Inc.* ................ 22,500 714,375
Total ................................. 2,935,981
Services, Consumer and Business - 2.11%
Stewart Enterprises, Inc., Class A ..... 25,000 596,875
Thomas Group, Inc.* ................... 20,000 320,000
Total ................................. 916,875
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
MARCH 31, 1994
Shares Value
COMMON STOCKS (Continued)
Steel - 0.86%
Huntco Inc., Class A .................. 15,000 $ 375,000
Telecommunications - 2.33%
Glenayre Technologies, Inc.* ........... 20,000 727,500
MFS Communications Company, Inc.* ...... 10,000 288,750
Total ................................. 1,016,250
Trucking - 1.94%
Heartland Express, Inc.* ............... 20,000 682,500
TRISM, Inc.* .......................... 10,000 163,750
Total ................................. 846,250
TOTAL COMMON STOCKS - 63.96% $27,839,085
(Cost: $26,016,539)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 3.80%
U.S. Bancorp,
Master Note ........................... $1,653 1,653,000
Beverages - 2.18%
PepsiCo, Inc.,
3.55%, 4-4-94.......................... 950 949,719
Building - 2.30%
Weyerhaeuser Company,
3.56%, 4-4-94.......................... 1,000 999,703
Computers and Office Equipment - 1.72%
Electronic Data Systems Corp.,
3.75%, 5-13-94......................... 750 746,719
Drugs and Hospital Supply - 3.65%
American Cyanamid Co.,
3.8%, 6-6-94........................... 1,600 1,588,853
Financial - 12.26%
Associates Corporation of North America,
Master Note ........................... 1,992 1,992,000
B.A.T. Capital Corp.,
3.35%, 4-4-94.......................... 1,300 1,299,637
BHP Finance (U.S.A.) Inc.,
3.57%, 4-18-94 ........................ 1,050 1,048,230
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Financial (Continued)
Textron Financial Corp.,
3.8%, 5-3-94........................... $1,000 $ 996,622
Total ................................. 5,336,489
Food and Related - 4.08%
Sara Lee Corporation,
Master Note ........................... 1,778 1,778,000
Household Products - 1.38%
Procter & Gamble Co.,
3.5%, 4-8-94........................... 600 599,592
Publishing and Advertising - 1.03%
American Greetings Corp.,
3.6%, 4-26-94.......................... 450 448,875
Telecommunications - 3.28%
Siemens Corp.,
3.47%, 4-7-94.......................... 1,430 1,429,173
TOTAL SHORT-TERM SECURITIES - 35.68% $15,530,123
(Cost: $15,530,123)
TOTAL INVESTMENT SECURITIES - 99.64% $43,369,208
(Cost: $41,546,662)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.36% 155,069
NET ASSETS - 100.00% $43,524,277
See Notes to Schedules of Investments on page 45.
<PAGE>
LIMITED-TERM BOND FUND
MANAGER'S LETTER
MARCH 31, 1994
- ---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the Limited-Term Bond Fund for the
fiscal year ended March 31, 1994. The following discussion, graphs and tables
provide you with information regarding the Fund's performance during that
period.
During the first half of the Fund's past fiscal year, interest rates
declined, with the five-year treasury note hitting its low yield in October,
1993. From that point, interest rates increased as the economy accelerated and
inflation fears grew. A significant event in the fixed income markets was the
recent tightening of credit by the Federal Reserve. Both the stock and bond
markets reacted negatively to the rate increase, which was the first tightening
by the Federal Reserve in over five years. By the end of the Fund's past fiscal
year, the five-year treasury note had increased in yield by nearly a full
percentage point while prices of fixed income securities had fallen.
We employed three major strategies during the Fund's past fiscal year. In
response to the upward trend in interest rates during the second half of the
year, we purchased mortgage-backed securities because of their high current
yield and potential defensive characteristics. We also shortened the average
maturity of the Fund's portfolio as a defensive measure. To take advantage of
the improving economy and increases in corporate earnings and credit quality, we
attempted to enhance yield by purchasing relatively lower-rated securities still
in the investment-grade category.
The strategies and techniques we applied resulted in the direction of the
Fund's performance during its past fiscal year remaining fairly consistent with
that of the indexes charted on the following page. Those indexes reflect the
performance of securities that generally represent the short-maturity sector of
the bond market (the Lehman Brothers Mutual Fund Short Investment Grade Debt
Index) and the universe of funds with similar investment objectives (the Lipper
Short Investment Grade Debt Fund Universe Average).
We anticipate that the economic statistics over the next several months
will be an important indicator of whether the Federal Reserve's recent
tightening of credit was sufficient to slow the economy's growth to a more
sustainable level. Because of the uncertainty caused by the Federal Reserve's
actions, we plan to adopt a more defensive strategy for the Fund by investing in
higher quality securities and securities with shorter average maturities.
We appreciate your continued confidence.
Respectfully,
W. Patrick Sterner
Manager, Limited-Term Bond Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
LIMITED-TERM BOND FUND,
The line graph which appears here is the paper version which was filed on Form
SE on May 24, 1994.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
LIMITED-TERM BOND FUND
PORTFOLIO STRATEGY:
OBJECTIVE: To seek current income
Dollar-weighted average consistent with
maturity of portfolio is preservation of capital.
between two and five years.
At least 65% investment-grade
bonds.
STRATEGY: Invests primarily in debt securities of
investment grade, including debt
securities issued or guaranteed by the
U.S. Government or its agencies or
instrumentalities, with the portfolio
having a dollar-weighted average
maturity of not less than two years, but
not more than five years. May purchase
securities subject to repurchase
agreements. May invest in certain
options, futures and other hedging
techniques.
FOUNDED: 1992
DIVIDENDS: DECLARED DAILY, PAID MONTHLY
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Fiscal Year Ended March 31, 1994
- ----------------------------------------
DIVIDENDS PAID $0.35
=====
CAPITAL GAINS DISTRIBUTION $0.02
=====
NET ASSET VALUE ON
3/31/94 $9.84 adjusted to: 9.86 (A)
3/31/93 10.06
------
CHANGE PER SHARE $(0.20)
======
(A) This number includes the capital gains distribution of $0.02 paid in
December 1993 added to the actual net asset value on March 31, 1994.
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual
Total Return
----------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 3-31-94 -1.53% 1.41%
Period from 9-21-92*
through 3-31-94 1.23% 2.51%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and
reflects payment of the applicable contingent deferred sales charge upon
redemption at the end of the period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of the period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On March 31, 1994, Limited-Term Bond Fund had net assets totaling $11,671,135
invested in a diversified portfolio of:
95.60% Bonds
4.40% Cash and Cash Equivalents
As a shareholder of Limited-Term Bond Fund, for every $100 you had invested on
March 31, 1994, your Fund owned:
Corporate Bonds $52.99
U.S. Government Securities 42.61
Cash and Cash Equivalents 4.40
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Airlines - 2.81%
Federal Express Corporation,
10.0%, 9-1-98 ......................... $296 $ 327,639
Automotive - 0.39%
Ford Motor Company,
6.27%, 1-2-2000 ....................... 45 45,106
Banks and Savings and Loans - 3.70%
First Chicago Corporation,
9.875%, 7-1-99 ........................ 150 168,479
Wells Fargo & Company,
8.375%, 5-15-2002 ..................... 250 263,668
Total ................................. 432,147
Building - 3.46%
Masco Corporation,
6.25%, 6-15-95 ........................ 400 404,620
Chemicals Specialty and Miscellaneous
Technology - 1.74%
Polaroid Corporation,
7.25%, 1-15-97......................... 200 202,980
Domestic Oil - 3.27%
BP America Inc.,
9.5%, 1-1-98 .......................... 150 164,237
Phillips Petroleum Company,
9.5%, 11-15-97 ........................ 200 217,774
Total ................................. 382,011
Drugs and Hospital Supply - 1.28%
Baxter International Inc.,
5.0%, 10-1-95 ......................... 150 148,821
Financial - 7.89%
Ford Motor Credit Company,
4.3%, 7-15-98 ......................... 304 300,216
General Motors Acceptance Corporation:
6.375%, 9-23-97 ....................... 50 49,465
7.75%, 1-15-99 ........................ 300 307,401
United States Leasing International Inc.,
8.75%, 5-1-96 ......................... 250 263,968
Total ................................. 921,050
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food and Related - 2.22%
ConAgra, Inc.,
9.75%, 11-1-97 ........................ $236 $ 259,397
Insurance - 3.58%
CIGNA Corporation,
8.0%, 9-1-96 .......................... 350 364,329
SAFECO Corporation,
10.75%, 9-15-95 ....................... 50 53,748
Total ................................. 418,077
Multi-Industry - 3.72%
ITT Corporation,
8.375%, 3-15-96 ....................... 415 434,053
Public Utilities - Electric - 0.86%
Connecticut Light & Power Company (The),
6.5%, 1-1-98 .......................... 100 100,430
Public Utilities - Pipelines - 2.82%
Tennessee Gas Pipeline Company,
9.25%, 5-15-96 ........................ 310 329,344
Railroads - 2.69%
CSX Corporation,
8.4%, 8-1-96 .......................... 300 314,223
Retailing - 5.71%
Dillard Department Stores, Inc.,
8.75%, 6-15-98 ........................ 100 107,592
Penney (J.C.) Company, Inc.,
10.0%, 10-15-97 ....................... 250 278,115
Sears, Roebuck and Co.,
8.55%, 8-1-96 ......................... 266 280,337
Total ................................. 666,044
Telecommunications - 4.06%
GTE Corporation,
8.85%, 3-1-98 ......................... 250 267,185
Southwestern Bell Telephone Company,
8.3%, 6-1-96 .......................... 100 105,297
US WEST Financial Services, Inc.,
6.75%, 11-24-97 ....................... 100 101,116
Total ................................. 473,598
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Textiles and Apparel - 2.79%
Fruit of the Loom, Inc.,
7.875%, 10-15-99 ...................... $318 $ 325,123
TOTAL CORPORATE DEBT SECURITIES - 52.99% $ 6,184,663
(Cost: $6,260,016)
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
6.75%, 7-15-2003 ...................... 100 101,187
5.75%, 7-15-2006 ...................... 250 232,890
6.0%, 1-1-2009 ........................ 389 366,664
6.0%, 2-1-2009 ........................ 391 368,199
5.5%, 4-15-2013 ....................... 100 97,500
5.5%, 9-15-2013 ....................... 100 99,406
6.4%, 2-15-2018 ....................... 250 241,483
Federal National Mortgage Association:
8.0%, 2-1-2008 ........................ 390 400,980
6.0%, 6-25-2014 ....................... 200 200,750
7.0%, 9-25-2020 ....................... 94 95,552
Government National Mortgage Association,
6.5%, 10-15-2008 ...................... 302 292,383
United States Treasury:
8.5%, 5-15-95 ......................... 300 312,141
4.0%, 1-31-96 ......................... 300 294,141
6.875%, 4-30-97 ....................... 400 412,812
5.625%, 8-31-97 ....................... 400 397,188
5.375%, 5-31-98 ....................... 300 292,218
5.125%, 11-30-98 ...................... 300 287,061
5.5%, 4-15-2000........................ 200 191,250
6.25%, 2-15-2003 ...................... 300 289,452
TOTAL UNITED STATES GOVERNMENT SECURITIES - 42.61% $ 4,973,257
(Cost: $5,124,836)
TOTAL SHORT-TERM SECURITIES - 0.93% $ 108,000
(Cost: $108,000)
TOTAL INVESTMENT SECURITIES - 96.53% $11,265,920
(Cost: $11,492,852)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 3.47% 405,215
NET ASSETS - 100.00% $11,671,135
See Notes to Schedules of Investments on page 45.
<PAGE>
MUNICIPAL BOND FUND
MANAGER'S LETTER
MARCH 31, 1994
- ---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the Municipal Bond Fund for the
fiscal year ended March 31, 1994. The following discussion, graphs and tables
provide you with information regarding the Fund's performance during that
period.
Interest rates generally declined during the first part of the Fund's past
fiscal year but began to rise in October and have increased sharply since the
Federal Reserve started tightening the nation's monetary policy in February.
The cyclical economic recovery gained strength throughout 1993, with gross
domestic production rising considerably in the final quarter. Accelerating
employment and rising personal income have encouraged a revival in credit demand
as the economy appears to be moving into a sustained growth phase. Over the
past decade, inflation has steadily declined and is currently at an annual rate
of less than 3%. Although inflation has remained low, inflation fears remain
prevalent among many market participants.
In view of market conditions, the Fund has invested in municipal bonds with
relatively long maturities and medium credit quality characteristics.
Specifically, the majority of purchases for the Fund's portfolio have been bonds
with 20 to 30 year maturities and credit qualities of A and Baa by Moody's or A
and BBB by Standard & Poor's. Because the Fund is relatively new and most
purchases are recent, trading activity has been limited.
The strategies and techniques we applied resulted in the direction of the
Fund's performance during its past fiscal year remaining fairly consistent with
that of the indexes charted on the following page. Those indexes reflect the
performance of securities that generally represent the municipal bond market
(the Lehman Brothers Municipal Bond Index) and the universe of funds with
similar investment objectives (the Lipper General Municipal Debt Fund Universe
Average).
We anticipate that inflation may rise slightly as the economy strengthens.
We expect interest rates will trade in a relatively narrow band as we expect the
Federal Reserve to be successful in its indicated intent to control inflation.
Bond investors should continue to receive satisfactory real returns over time.
We expect to continue to pursue the same strategies we have recently employed by
investing in long-term, medium-quality municipal bonds.
We appreciate your continued confidence.
Respectfully,
John M. Holliday
Manager, Municipal Bond Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
MUNICIPAL BOND FUND,
The line graph which appears here is the paper version which was filed on Form
SE on May 24, 1994.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
MUNICIPAL BOND FUND
PORTFOLIO STRATEGY:
Minimum 80% OBJECTIVE: To provide income not subject
Municipal Bonds. to Federal income taxes.
(Income may be subject to state
Maximum 5% non-investment and local taxes, and a portion
grade debt securities. may be subject to Federal taxes,
including alternative minimum
Less than 25% of its assets tax.)
in securities of issuers
located in any single state.
STRATEGY: Invests in a diversified portfolio of
tax-exempt bonds. May invest in certain
options, futures and other hedging
techniques.
FOUNDED: 1992
DIVIDENDS: DECLARED DAILY, PAID MONTHLY
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Fiscal Year Ended March 31, 1994
- ----------------------------------------
DIVIDENDS PAID $0.39
=====
CAPITAL GAINS DISTRIBUTION $0.13
=====
NET ASSET VALUE ON
3/31/94 $10.12 adjusted to:$10.25 (A)
3/31/93 10.53
------
CHANGE PER SHARE $(0.28)
======
(A) This number includes the capital gains distribution of $0.13 paid in
December 1993 added to the actual net asset value on March 31, 1994.
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual
Total Return
----------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 3-31-94 -2.12% 0.76%
Period from 9-21-92*
through 3-31-94 4.02% 5.30%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and
reflects payment of the applicable contingent deferred sales charge upon
redemption at the end of the period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of the period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On March 31, 1994, Municipal Bond Fund had net assets totaling $24,960,485
invested in a diversified portfolio.
As a shareholder of Municipal Bond Fund, for every $100 you had invested on
March 31, 1994, your Fund owned:
Other Municipal Bonds $24.27
Hospital Revenue Bonds 21.72
Cash and Cash Equivalents and
Adjustable Rate Bonds 12.64
Public Power Revenue Bonds 8.42
Education Revenue Bonds 8.30
Industrial Revenue Bonds 7.01
Pollution Control Revenue
Bonds 6.53
Water and Sewer Revenue Bonds 4.42
Resource Recovery Revenue
Bonds 3.37
City General Obligation Bonds 3.32
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS
ARIZONA - 2.06%
City of Phoenix, Civic Improvement Corporation,
Wastewater System Lease Revenue Bonds,
Series 1993,
6.125%, 7-1-2023 ...................... $ 250 $ 265,000
City of Bullhead City, Arizona, Bullhead
Parkway Improvement District,
Improvement Bonds,
6.1%, 1-1-2013 ........................ 270 250,088
Total ................................. 515,088
ARKANSAS - 4.16%
Solid Waste Disposal Revenue Bonds
(International Paper Company Projects),
City of Pine Bluff, Arkansas,
5.55%, 10-1-2017 ...................... 500 443,750
Baxter County, Arkansas, Industrial Development
Revenue Refunding Bonds (Aeroquip Corporation
Project), Series 1993,
5.8%, 10-1-2013 ....................... 400 356,500
Pulaski County, Arkansas, Hospital Revenue
Bonds (Arkansas Children's Hospital Project),
Series 1993,
6.2%, 3-1-2022 ........................ 250 237,813
Total ................................. 1,038,063
CALIFORNIA - 3.40%
Carson Redevelopment Agency (California),
Redevelopment Project Area No. 2, Refunding
Tax Allocation Bonds, Series 1993,
6.0%, 10-1-2013 ....................... 500 456,875
Certificates of Participation, City of Upland,
California to San Antonio Community Hospital,
1993 Series,
5.0%, 1-1-2018 ........................ 500 391,875
Total ................................. 848,750
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
COLORADO - 1.17%
City and County of Denver, Colorado,
Airport System Revenue Bonds:
Series 1992C,
6.75%, 11-15-2013 ..................... $ 250 $ 239,375
Series 1991A,
0.0%, 11-15-2003 ...................... 100 52,375
Total ................................. 291,750
FLORIDA - 1.62%
Mid-Bay Bridge Authority (Florida),
Revenue Refunding Bonds, Series 1993A,
6.0%, 10-1-2013 ....................... 300 274,125
Hillsborough County, Florida, Capital
Improvement Non-Ad Valorem Revenue Bonds
(County Center Project),
Second Series 1992,
6.75%, 7-1-2022 ....................... 125 128,906
Total ................................. 403,031
GEORGIA - 3.82%
Hospital Authority of Savannah, Revenue Bonds:
Candler Hospital, Series 1992,
7.0%, 1-1-2023 ........................ 500 481,250
Saint Joseph's Hospital Project,
Series 1993,
6.2%, 7-1-2023 ........................ 500 472,500
Total ................................. 953,750
GUAM - 0.96%
Guam Power Authority, Revenue Bonds,
1992 Series A,
6.3%, 10-1-2022 ....................... 250 239,063
ILLINOIS - 7.60%
Illinois Health Facilities Authority,
Revenue Bonds, Series 1993 (OSF
Healthcare System),
5.75%, 11-15-2007 ..................... 700 666,750
City of Quincy, Adams County, Illinois,
Revenue Bonds, Series 1993
(Blessing Hospital),
6.0%, 11-15-2018 ...................... 500 450,625
Illinois Development Finance Authority,
Local Government Program Revenue Bonds,
Series 1993 (Village of Maywood Project),
6.0%, 1-1-2008 ........................ 400 383,500
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
ILLINOIS (Continued)
Metropolitan Pier and Exposition Authority
(Illinois), McCormick Place Expansion
Project Bonds, Series 1992A,
6.5%, 6-15-2027 ....................... $ 200 $ 198,750
The Illinois State Toll Highway Authority,
Toll Highway Priority Revenue Bonds,
1992 Series A,
6.375%, 1-1-2015 ...................... 200 198,250
Total ................................. 1,897,875
INDIANA - 5.54%
Indiana State Office Building Commission,
Capitol Complex Revenue Bonds (State
Office Building I Facility),
Series 1990B,
7.4%, 7-1-2015 ........................ 500 561,250
City of Sullivan, Indiana, Pollution
Control Revenue Refunding Bonds
(Indiana-Michigan Power Company Project),
Series C,
5.95%, 5-1-2009 ....................... 500 463,750
East Chicago Elementary School Building
Corporation (Lake County, Indiana),
First Mortgage Bonds, Series 1993A,
5.5%, 1-15-2016 ....................... 400 358,000
Total ................................. 1,383,000
IOWA - 1.29%
Scott County, Iowa, Refunding Certificates
of Participation (County Golf Course
Project, Series 1993),
6.2%, 5-1-2013 ........................ 340 322,575
KANSAS - 0.91%
City of Lawrence, Kansas, Multifamily
Housing Development Revenue Refunding
Bonds (Brandon Woods, Inc. Project),
Series 1993,
6.625%, 4-1-2012 ...................... 225 227,813
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
LOUISIANA - 2.86%
Parish of St. Charles, State of Louisiana:
Pollution Control Revenue Bonds (Union
Carbide Project), Series 1992,
7.35%, 11-1-2022 ...................... $ 200 $ 208,500
Solid Waste Disposal Revenue Bonds
(Louisiana Power & Light Company Project),
Series 1992-A,
7.0%, 12-1-2022 ....................... 200 203,000
Louisiana Public Facilities Authority,
Student Loan Revenue Bonds,
Series 1992A-2,
6.75%, 9-1-2006 ....................... 300 302,625
Total ................................. 714,125
MARYLAND - 7.81%
Prince George's County, Maryland,
Project and Refunding Revenue Bonds
(Dimensions Health Corporation Issue),
Series 1994,
5.375%, 7-1-2014 ...................... 1,000 866,250
Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds (Montgomery
County Resource Recovery Project),
Series 1993A,
6.2%, 7-1-2010 ........................ 665 638,400
Maryland Health and Educational Facilities
Authority, Project and Refunding Revenue
Bonds, Doctors Community Hospital Issue,
Series 1993,
5.75%, 7-1-2013 ....................... 500 444,375
Total ................................. 1,949,025
MASSACHUSETTS - 4.30%
Massachusetts Water Resources Authority,
General Revenue Bonds:
1993 Series C,
5.25%, 12-1-2008 ...................... 750 692,813
1991 Series A,
6.5%, 12-1-2019 ....................... 150 164,625
Massachusetts Municipal Wholesale
Electric Company, Power Supply System
Revenue Bonds, 1992 Series B,
6.75%, 7-1-2017 ....................... 200 215,250
Total ................................. 1,072,688
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MICHIGAN - 3.40%
Michigan State Hospital Finance
Authority, Hospital Revenue Refunding
Bonds (Crittenton Hospital),
Series 1994A,
5.25%, 3-1-2014 ....................... $1,000 $ 847,500
MINNESOTA - 1.90%
City of Plymouth, Minnesota, Multifamily
Housing Revenue Bonds (Harbor Lane
Apartments Project), Series 1993,
5.95%, 9-1-2018 ....................... 500 473,125
MISSOURI - 1.28%
City of Ste. Genevieve, Missouri, Waterworks
Revenue Bonds, Series 1993,
6.6%, 2-1-2013 ........................ 250 247,188
The Industrial Development Authority of the
County of Jackson, State of Missouri,
Health Care System Revenue Bonds,
Saint Joseph Health Center Issue,
Series 1992,
6.5%, 7-1-2012 ........................ 75 72,188
Total ................................. 319,376
MONTANA - 2.24%
City of Forsyth, Rosebud County, Montana,
Pollution Control Revenue Refunding
Bonds (The Montana Power Company Colstrip
Project), Series 1993A,
6.125%, 5-1-2023 ...................... 500 460,625
Anaconda-Deer Lodge County, Montana,
Solid Waste Facility Revenue Bonds
(ARCO-Anaconda Smelter Site Project),
Series 1992,
6.375%, 10-1-2016 ..................... 100 98,500
Total ................................. 559,125
NEBRASKA - 1.94%
Nebraska Higher Education Loan Program, Inc.,
Senior Subordinate Bonds, Series A-SA,
6.2%, 6-1-2013 ........................ 500 484,375
NEVADA - 0.58%
Humboldt County, Nevada, Pollution Control
Revenue Bonds (Idaho Power Company
Project), Series 1984,
8.3%, 12-1-2014 ....................... 125 145,000
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
NEW JERSEY - 4.06%
New Jersey Economic Development Authority:
Economic Growth Bonds,
Richard L. Tauber Composite Issue-1993
Series A,
5.4%, 10-1-2013 ....................... $ 700 $ 624,750
Economic Development Refunding Bonds
(Yellow Freight System, Inc.- 1993 Project),
6.125%, 4-1-2008 ...................... 400 388,000
Total ................................. 1,012,750
NEW YORK - 5.87%
The City of New York, General Obligation
Bonds, Fiscal 1994 Series D:
5.75%, 8-15-2012 ...................... 500 455,000
5.75%, 8-15-2007 ...................... 400 375,000
New York State Thruway Authority,
Local Highway and Bridge Service
Contract Bonds, Series 1993,
5.25%, 4-1-2013 ....................... 500 433,750
Onondaga County Resource Recovery Agency,
Project Revenue Bonds (Resource Recovery
Facility - 1992 Series),
7.0%, 5-1-2015 ........................ 200 202,250
Total ................................. 1,466,000
OHIO - 0.21%
Ohio Air Quality Development Authority,
State of Ohio, Collateralized Pollution
Control Revenue Refunding Bonds,
1989 Series B (The Toledo Edison Company
Project),
7.55%, 6-1-2023 ....................... 50 53,188
OKLAHOMA - 2.72%
Tulsa Public Facilities Authority
(Oklahoma), Assembly Center Lease Payment
Revenue Bonds, Refunding Series 1985:
6.2%, 11-1-2012 ....................... 500 475,625
6.6%, 7-1-2014 ........................ 200 202,000
Total ................................. 677,625
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
SOUTH CAROLINA - 1.20%
Charleston County, South Carolina, Industrial
Refunding Revenue Bonds, 1982 Series
(Massey Coal Terminal, South Carolina
Corporate Project), Adjustable Convertible
Extendible Securities,
2.9%, 1-1-2007 ........................ $ 300 $ 300,000
TEXAS - 7.23%
Brazos River Authority (Texas),
Variable Rate Demand, Pollution Control
Revenue Refunding Bonds (Monsanto Company
Project), Series 1994,
2.2%, 2-1-2004 ........................ 1,000 1,000,000
Sabine River Authority of Texas,
Collateralized Pollution Control
Revenue Refunding Bonds (Texas
Utilities Electric Company Project),
Series 1993B,
5.85%, 5-1-2002 ....................... 800 705,000
Alliance Airport Authority, Inc.,
Special Facilities Revenue Bonds,
Series 1991 (American Airlines, Inc.
Project),
7.0%, 12-1-2011 ....................... 100 99,250
Total ................................. 1,804,250
VIRGINIA - 3.71%
Virginia Education Loan Authority (A
Political Subdivision of the Commonwealth
of Virginia), Student Loan Program
Revenue Bonds, Series C Bonds,
5.75%, 9-1-2010 ....................... 1,000 926,250
WASHINGTON - 8.73%
Washington Public Power Supply System:
Nuclear Project No. 1, Refunding
Revenue Bonds:
Series 1989A,
6.0%, 7-1-2017 ........................ 450 420,750
Series 1994B,
7.375%, 7-1-2004 ...................... 500 545,000
Nuclear Project No. 2, Refunding
Revenue Bonds, Series 1991A,
6.0%, 7-1-2012 ........................ 190 180,025
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
WASHINGTON (Continued)
Washington Health Care Facilities
Authority, Revenue Bonds, Series 1993
(Highline Community Hospital, Seattle),
5.5%, 8-15-2014 ....................... $1,000 $ 881,250
Public Utility District No. 2 of Grant
County, Washington, Wanapum
Hydroelectric Development, Second Series
Revenue Bonds, 1992B,
6.75%, 1-1-2023 ....................... 150 153,000
Total ................................. 2,180,025
TOTAL MUNICIPAL BONDS - 92.57% $23,105,185
(Cost: $24,445,150)
SHORT-TERM SECURITIES
Banks and Savings and Loans - 0.68%
U.S. Bancorp,
Master Note............................ 170 170,000
Financial - 2.24%
Associates Corporation of North America,
Master Note............................ 560 560,000
Food and Related - 2.61%
Sara Lee Corporation,
Master Note............................ 650 650,000
TOTAL SHORT-TERM SECURITIES - 5.53% $ 1,380,000
(Cost: $1,380,000)
TOTAL INVESTMENT SECURITIES - 98.10% $24,485,185
(Cost: $25,825,150)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.90% 475,300
NET ASSETS - 100.00% $24,960,485
See Notes to Schedules of Investments on page 45.
<PAGE>
GLOBAL INCOME FUND
MANAGER'S LETTER
MARCH 31, 1994
- ---------------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of the Global Income Fund for the
fiscal year ended March 31, 1994. The following discussion, graphs and tables
provide you with information regarding the Fund's performance during that
period.
During the Fund's past fiscal year, European countries exhibited slow
growth and declining interest rates, while dollar-bloc countries (the U.S.,
Canada, and Australia) displayed a somewhat faster economic growth rate. The
European central banks, in general, reduced their short-term interest rates,
while most recently the U.S. Federal Reserve Board hiked U.S. short-term
interest rates, causing U.S. bonds to decline in value. These factors resulted
in an increase in the value of the U.S., Canadian, and Australian currencies
relative to European currencies. Contrary to the trends elsewhere, interest
rates in Japan declined even as the Japanese yen gained ground against the U.S.
dollar.
In response to these market conditions, we adopted the following
strategies. First, we kept the portfolio's average maturity near the Fund's
allowable maximum in an attempt to capture the greatest amount of current income
possible. Second, we increased the Fund's emphasis on debt denominated in U.S.
and Canadian dollars as we sought to earn relatively high real rates of return
with limited or no currency risk. By emphasizing debt denominated in U.S.
dollars, we also avoided the costs associated with hedging foreign currencies.
Conversely, we reduced the Fund's exposure to debt denominated in Japanese yen,
particularly because Japanese bond rates were among the lowest in the world.
Finally, we hedged foreign currency risk on our other foreign securities to a
significant extent.
The strategies and techniques we applied did not allow the Fund's
performance during its past fiscal year to keep pace with that of the indexes
charted on the following page. Those indexes reflect the performance of
securities that generally represent the short-maturity sector of the
international bond market (the Lehman Brothers Mutual Fund Short World Multi-
Market Index) and the universe of funds with similar investment objectives (the
Lipper Short World Multi-Market Income Fund Universe Average).
We anticipate that European interest rates will continue their decline from
artificially high levels as they approach low levels of inflation in Europe's
slowly growing economy. We also anticipate that currency fluctuations will
subside. Therefore, we expect to continue to employ the strategies we have
employed in the recent past by maintaining the portfolio's maturity at or near
the maximum permissible level. In addition, we expect to move more of the
Fund's investments out of the U.S. market and into foreign markets where high
current rates of return are available and greater potential for capital gains
exist.
We appreciate your continued confidence.
Respectfully,
James C. Cusser and
John E. Sundeen, Jr.
Co-Managers, Global Income Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
GLOBAL INCOME FUND,
The line graph which appears here is the paper version which filed on Form SE on
May 24, 1994.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
GLOBAL INCOME FUND
PORTFOLIO STRATEGY:
Maximum 50% securities OBJECTIVE: To provide a high level of
denominated in U.S. dollars. current income consistent
with safety of principal.
Maximum 25% securities
issued by any single foreign
government.
STRATEGY: Invests primarily in relatively higher-
rated debt securities that are
denominated in various currencies and
multinational currency units and that
have remaining maturities of not more
than five years, with the average
maturity of the portfolio not to exceed
three years. May purchase securities
subject to repurchase agreements. May
invest in certain options, futures and
other hedging techniques
FOUNDED: 1992
DIVIDENDS: DECLARED DAILY, PAID MONTHLY
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Fiscal Year Ended March 31, 1994
- ----------------------------------------
DIVIDENDS PAID $ 0.34
======
NET ASSET VALUE ON
3/31/94 $ 9.37
3/31/93 9.68
------
CHANGE PER SHARE $(0.31)
======
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 3-31-94 -2.58% 0.33%
Period from 9-21-92*
through 3-31-94 -1.87% -0.63%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and
reflects payment of the applicable contingent deferred sales charge upon
redemption at the end of the period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of the period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On March 31, 1994, Global Income Fund had net assets totaling $10,282,309
invested in a diversified portfolio of:
90.51% Bonds
9.49% Other, including Cash and Cash Equivalents
As a shareholder of Global Income Fund, for every $100 you had invested on March
31, 1994, your Fund owned:
Other Government Securities $62.94
U.S. Government Securities 21.24
Other, including Cash and
Cash Equivalents 9.49
Corporate Debt Securities 6.33
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Automotive - 2.37%
Toyota Motor Credit Corporation,
6.695%, 8-5-96 ........................ $ 250 $ 243,125
Banks and Savings and Loans - 3.96%
Bayerische Landesbank Girozentrale,
5.34%, 3-28-97 ........................ $ 250 242,500
Deutsche Bank Aktiengesellschaft,
12.0%, 10-2-96 (A) .................... L250,000 165,000
Total ................................. 407,500
TOTAL CORPORATE DEBT SECURITIES - 6.33% $ 650,625
(Cost: $670,427)
OTHER GOVERNMENT SECURITIES
Australia - 7.85%
New South Wales Treasury,
8.5%, 3-1-96 (A) ...................... $A500 362,415
Queensland Treasury Corporation:
8.0%, 5-14-97 (A) ..................... $A400 286,180
12.0%, 5-15-97 (A) .................... $A200 158,878
Total ................................. 807,473
Canada - 14.83%
Province of Alberta,
8.625%, 11-27-96 ...................... $ 200 212,650
Government of Canada:
7.5%, 7-1-97 (A) ...................... $C1,000 727,880
6.25%, 2-1-98 (A) ..................... $C 350 243,229
10.75%, 3-15-98 (A) ................... $C 425 341,029
Total ................................. 1,524,788
Denmark - 2.84%
Kingdom of Denmark,
9.0%, 11-15-98 (A) .................... DKr1,750 292,355
France - 21.53%
Bon Du Tresor:
8.0%, 4-12-94 (A) ..................... F2,250 393,705
9.0%, 11-12-95 (A) .................... F1,000 183,340
8.0%, 5-12-98 (A) ..................... F4,500 844,875
0.0%, 10-25-98 (A) .................... F4,000 537,920
Credit Local de France,
5.9%, 2-23-96 ......................... $ 250 254,375
Total ................................. 2,214,215
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
MARCH 31, 1994
Principal
Amount in
Thousands Value
OTHER GOVERNMENT SECURITIES (Continued)
Germany - 8.19%
Bundesobligation:
7.25%, 12-20-94 (A) ................... DM550 $ 332,712
6.625%, 1-20-98 (A) ................... DM250 154,058
Bundesschatzanweisungen,
8.75%, 12-20-95 (A) ................... DM250 157,285
Kreditanstalt fur Weideraufbau,
10.6%, 5-18-98 (A) .................... L300,000 198,000
Total ................................. 842,055
Netherlands - 3.04%
Netherlands Government:
6.0%, 7-1-94 (A) ...................... Dfl300 159,705
6.5%, 10-1-94 (A) ..................... Dfl285 152,432
Total ................................. 312,137
Supranational - 4.66%
European Investment Bank,
6.75%, 5-14-98 (A) .................... F2,000 358,040
Inter-American Development Bank,
7.5%, 12-15-94 (A) .................... DM200 121,016
Total ................................. 479,056
TOTAL OTHER GOVERNMENT SECURITIES - 62.94% $ 6,472,079
(Cost: $6,695,084)
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
7.25%, 8-31-96 ........................ $1,300 1,351,181
6.875%, 4-30-97 ....................... $ 300 309,609
5.25%, 7-31-98 ........................ $ 150 145,008
4.75%, 10-31-98 ....................... $ 400 377,624
TOTAL UNITED STATES GOVERNMENT SECURITIES - 21.24% $ 2,183,422
(Cost: $2,219,764)
Face
Amount in
Thousands
UNREALIZED GAIN (LOSS) ON OPEN FORWARD
CURRENCY CONTRACTS
Canadian Dollar, 4-12-94 (A) ........... $C 500 11,423
Canadian Dollar, 11-2-94 (A) ........... $C 350 12,432
Canadian Dollar, 11-29-94 (A) .......... $C 425 15,635
Danish Krone, 3-25-96 (A) .............. DKr1,700 (4,047)
See Notes to Schedules of Investments on page 45.
<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
MARCH 31, 1994
Face
Amount in
Thousands Value
UNREALIZED GAIN (LOSS) ON OPEN FORWARD
CURRENCY CONTRACTS (Continued)
French Franc, 5-24-94 (A) .............. F1,000 $ 3,699
French Franc, 8-4-94 (A) ............... F2,000 (15,040)
French Franc, 3-5-95 (A) ............... F3,000 (11,405)
French Franc, 3-7-95 (A) ............... F1,000 (3,296)
French Franc, 3-7-95 (A) ............... F2,500 (10,012)
TOTAL UNREALIZED LOSS ON OPEN FORWARD
CURRENCY CONTRACTS - (0.01%) $ (611)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper - 0.68%
Financial
Associates Corporation of North America,
Master Note............................ $ 70 70,000
Time Deposits
Canadian Imperial Bank of
Commerce - Grand Cayman,
4.0%, 4-11-94 (A) ..................... SFr503 356,028
Dresdner Bank AG - Grand Cayman,
5.6875%, 6-15-94 (A) .................. DM515 307,876
Total Time Deposits - 6.46% 663,904
TOTAL SHORT-TERM SECURITIES - 7.14% $ 733,904
(Cost: $757,624)
TOTAL INVESTMENT SECURITIES - 97.64% $10,039,419
(Cost: $10,342,899)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.36% 242,890
NET ASSETS - 100.00% $10,282,309
See Notes to Schedules of Investments on page 45.
<PAGE>
WADDELL & REED FUNDS, INC.
Notes to Schedules of Investments
* No income dividends were paid during the preceding 12 months.
(A) Principal amounts are denominated in the indicated foreign currency, where
applicable (L - Italian Lira, $A - Australian Dollar, $C - Canadian Dollar,
DKr - Danish Krone, F - French Franc, DM - German Mark, Dfl - Dutch
Guilder, SFr - Swiss Franc,).
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 4 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
<TABLE>
Assets -------------------------------------------------------
Investment securities--at value
<S> <C> <C> <C> <C> <C>
(Notes 1 and 4) ... $59,858,796 $43,369,208$11,265,920$24,485,185$10,039,419
Cash ............... 3,922 7,190 484 3,943 2,765
Receivables:
Fund shares sold .. 1,917,953 1,102,327 255,517 150,996 35,960
Dividends and interest 90,382 14,500 189,942 440,277
255,906
Other ............. --- --- --- --- 2,768
Unamortized organization
expenses (Note 2) . 22,814 22,814 22,814 22,814 22,814
Prepaid insurance premium 226 226 192 226 192
-------------------------------------------------------
Total assets .... 61,894,093 44,516,265 11,734,869 25,103,441 10,359,824
Liabilities -------------------------------------------------------
Payable for investment
securities purchased --- 773,750 --- --- ---
Payable for Fund shares
redeemed .......... 85,717 158,757 26,884 82,512 44,481
Organization expenses
payable ........... 22,814 22,814 22,814 22,814 22,814
Accrued service fee . 31,546 22,003 4,480 13,456 2,847
Accrued transfer agency
and dividend disbursing 10,120 9,483 2,129 3,159 1,612
Dividends payable .. --- --- 4,789 16,768 4,928
Accrued accounting
services fee ...... 2,500 1,667 833 1,667 833
Other .............. 6,109 3,514 1,805 2,580 ---
-------------------------------------------------------
Total liabilities 158,806 991,988 63,734 142,956 77,515
-------------------------------------------------------
Total net assets $61,735,287$43,524,277$11,671,135$24,960,485$10,282,309
Net Assets =======================================================
$0.01 par value capital stock
Capital stock ..... $ 51,506$ 30,920$ 11,863$ 24,666$ 10,978
Additional paid-in
capital ......... 59,073,522 40,901,759 11,876,315 26,274,326 10,642,305
Accumulated undistributed
gain (loss):
Accumulated undistributed
net realized gain
(loss) on investment
transactions ..... (491,351) 769,052 9,889 1,458 (70,287)
Net unrealized appreciation
(depreciation) of investments
at end of period . 3,101,610 1,822,546 (226,932)(1,339,965) (302,869)
Net unrealized depreciation on
forward currency contracts --- --- --- --- (611)
Net unrealized appreciation from
foreign currency translation--- --- --- --- 2,793
-------------------------------------------------------
Net assets applicable to
outstanding units
of capital ..... $61,735,287$43,524,277$11,671,135$24,960,485$10,282,309
=======================================================
Net asset value, redemption
and offering price
per share ........... $11.99 $14.08 $ 9.84 $10.12 $9.37
====== ====== ====== ====== =====
Capital shares outstanding5,150,639 3,091,974 1,186,316 2,466,559 1,097,815
Capital shares
authorized .......... 500,000,000500,000,000500,000,000500,000,000500,000,000
See notes to financial statements.
</TABLE>
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year ended March 31, 1994
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
Investment Income -------------------- ------------------- --------
Income:
Interest .......... $ 87,147$ 317,264 $ 526,188$ 969,271 $547,683
Dividends ......... 661,516 3,991 --- --- ---
-------------------- -------- --------- --------
Total income .... 748,663 321,255 526,188 969,271 547,683
Expenses (Notes 2 and 3):-------------------- -------- --------- --------
Distribution fees . 274,052 174,653 70,849 129,488 70,692
Investment management fee255,556 185,715 52,456 95,328 62,024
Transfer agency and
dividend disbursing 80,832 69,730 20,235 26,507
17,286
Service fee ....... 85,722 51,486 20,588 38,870 11,997
Registration fees.. 23,941 20,387 14,987 18,704 15,235
Accounting services fee 20,000 13,333 4,167 10,833 5,833
Custodian fees .... 20,730 7,631 2,796 3,859 9,805
Amortization of organization
expenses ........ 6,518 6,518 6,518 6,518 6,518
Audit fees ........ 5,785 5,111 4,112 4,448 5,738
Legal fees ........ 3,318 1,962 1,299 1,783 1,564
Other ............. 14,962 10,755 5,076 6,439 5,090
-------------------- -------- --------- --------
Total expenses .. 791,416 547,281 203,083 342,777 211,782
-------------------- -------- --------- --------
Net investment income
(loss) ........ (42,753) (226,026) 323,105 626,494 335,901
-------------------- -------- --------- --------
Realized and Unrealized Gain
(Loss) on Investments
Realized net gain (loss)
on securities...... (472,421)1,570,093 33,900 163,024 (54,459)
Realized net loss from foreign
currency translation --- --- --- ---
(30,802)
Realized net gain on forward
currency contracts --- --- --- ---
7,231
-------------------- -------- --------- --------
(472,421)1,570,093 33,900 163,024 (78,030)
-------------------- -------- --------- --------
Unrealized appreciation
(depreciation) in value
of securities during
the period ........ 2,475,374 1,574,011 (311,607)(1,533,977)(248,620)
Unrealized depreciation on
forward currency contracts --- --- --- --- (2,222)
Unrealized appreciation from
foreign currency translation --- --- --- --- 3,070
-------------------- ------------------ --------
2,475,374 1,574,011 (311,607)(1,533,977)(247,772)
-------------------- ------------------ --------
Net gain (loss) on
investments ....... 2,002,953 3,144,104 (277,707)(1,370,953)(325,802)
-------------------- ------------------ --------
Net increase (decrease)
in net assets resulting
from operations $1,960,200$2,918,078 $ 45,398$ (744,459)$ 10,099
==================== ================== ========
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year ended March 31, 1994
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
<TABLE>
Increase in Net Assets ---------------------------------------------------------
Operations:
Net investment income
<S> <C> <C> <C> <C> <C>
(loss) .......... $ (42,753)$ (226,026)$ 323,105$ 626,494$ 335,901
Realized net gain (loss)
on investments ... (472,421) 1,570,093 33,900 163,024 (78,030)
Unrealized appreciation
(depreciation) .. 2,475,374 1,574,011 (311,607)(1,533,977) (247,772)
----------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations. 1,960,200 2,918,078 45,398 (744,459) 10,099
----------------------------------------------------------
Dividends to shareholders from:*
Net investment income --- --- (323,105) (626,494) (247,980)
Realized net gain
from investment
transactions ..... --- (656,864) (18,818) (253,457) ---
Tax-basis return of
capital .......... --- --- --- --- (87,921)
---------------------------------------------------------
--- (656,864) (341,923) (879,951) (335,901)
---------------------------------------------------------
Capital share
transactions** .... 47,315,309 33,287,538 5,708,291 18,028,155 3,427,061
---------------------------------------------------------
Total increase . 49,275,509 35,548,752 5,411,766 16,403,745 3,101,259
Net Assets
Beginning of period 12,459,778 7,975,525 6,259,369 8,556,740 7,181,050
---------------------------------------------------------
End of period ...... $61,735,287 $43,524,277 $11,671,135$24,960,485$10,282,309
=========================================================
Undistributed net
investment income $--- $--- $--- $--- $---
==== ==== ==== ==== ====
*See "Financial Highlights" on pages 50-54.
**Shares issued from sale
of shares .......... 4,355,295 2,456,137 708,062 1,770,824 506,618
Shares issued from reinvest-
ment of dividends and/or
capital gains distributions --- 46,641 32,737 74,079 34,499
Shares redeemed ...... (329,843) (93,395) (176,690) (191,170) (185,224)
--------- --------- ------- --------- -------
Increase in outstanding
capital shares ...... 4,025,452 2,409,383 564,109 1,653,733 355,893
========= ========= ======= ========= =======
Value issued from sale
of shares .......... $51,194,063 $33,940,272 $7,164,902$19,289,336 $4,868,350
Value issued from reinvest-
ment of dividends and/or
capital gains distributions --- 656,245 330,864 805,677 330,513
Value redeemed ....... (3,878,754) (1,308,979) (1,787,475)(2,066,858)(1,771,802)
---------------------------------------------------------
Increase in outstanding
capital ............ $47,315,309 $33,287,538 $5,708,291$18,028,155 $3,427,061
=========================================================
See notes to financial statements.
</TABLE>
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period From September 21, 1992 Through March 31, 1993
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
Increase in Net Assets ----------------------------------------- ---------
Operations:
Net investment income
(loss) ........... $ 10,205$ (15,082)$ 66,093$ 93,466$ 117,869
Realized net gain (loss)
on investments ... (18,930) 127,667 (5,193) 91,891 (92,391)
Unrealized appreciation
(depreciation) .. 626,236 248,535 84,675 194,012 (52,915)
---------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations. 617,511 361,120 145,575 379,369 (27,437)
---------------------------------------------------
Dividends to shareholders from:*
Net investment income (10,156) (3,420) (66,093) (93,466) (117,869)
Realized net gain
from investment
transactions ..... --- (27,316) --- --- ---
----------------------------------------------------
(10,156) (30,736) (66,093) (93,466) (117,869)
---------------------------------------------------
Capital share transactions**11,832,4237,625,1416,159,8878,250,8377,306,356
---------------------------------------------------
Total increase . 12,439,778 7,955,525 6,239,369 8,536,740 7,161,050
Net Assets
Beginning of period 20,000 20,000 20,000 20,000 20,000
---------------------------------------------------
End of period ...... $12,459,778$7,975,525$6,259,369$8,556,740$7,181,050
===================================================
Undistributed net
investment income $49 ($18,502) $--- $--- $---
====== ======= ==== ==== ====
*See "Financial Highlights" on pages 40-44.
**Shares issued from sale
of shares .......... 1,131,789 684,223 632,763 807,410 747,250
Shares issued from reinvest-
ment of dividends and/or
capital gains distributions 954 2,658 5,783 7,312 10,403
Shares redeemed ...... (9,556) (6,290) (18,339) (3,896) (17,731)
--------- ------- ------- ------- -------
Increase in outstanding
capital shares ...... 1,123,187 680,591 620,207 810,826 739,922
========= ======= ======= ======= ======
Value issued from sale
of shares .......... $11,926,378$7,667,750$6,284,160$8,215,099$7,376,488
Value issued from reinvest-
ment of dividends and/or
capital gains distributions 10,139 30,733 57,386 75,761 99,966
Value redeemed ....... (104,094) (73,342) (181,659) (40,023) (170,098)
---------------------------------------------------
Increase in outstanding
capital ............ $11,832,423$7,625,141$6,159,887$8,250,837$7,306,356
==================================================
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
TOTAL RETURN FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
year ended period ended
March 31, March 31,
1994 1993*
---------- ------------
Net asset value,
beginning of
period ........... $11.07 $10.00
------ ------
Income from investment
operations:
Net investment
income (loss) ... (0.01) 0.02
Net realized and
unrealized gain
on investments .. 0.93 1.07
------ ------
Total from investment
operations ....... 0.92 1.09
------ ------
Less dividends from net
investment income (0.00) (0.02)
------ ------
Net asset value,
end of period .... $11.99 $11.07
====== ======
Total return ....... 8.31% 10.91%
Net assets, end of
period (000
omitted) .......... $61,735 $12,460
Ratio of expenses
to average net
assets ........... 2.16% 2.21%**
Ratio of net investment
income to average
net assets ....... -0.12% 0.32%**
Portfolio turnover
rate ............. 17.31% 23.97%**
*The Corporation's inception date is January 29, 1992; however, since the Fund
did not have any investment activity or incur expenses prior to the date of
initial public offering, the per share information is for a capital share
outstanding for the period from September 21, 1992 (initial public offering)
through March 31, 1993.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
GROWTH FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
year ended period ended
March 31, March 31,
1994 1993*
---------- ------------
Net asset value,
beginning of
period ........... $11.68 $10.00
------ ------
Income from investment
operations:
Net investment
loss ............ (0.04) (0.02)
Net realized and
unrealized gain
on investments .. 2.75 1.79
------ ------
Total from investment
operations ....... 2.71 1.77
------ ------
Less distributions:
Dividends from net
investment
income .......... (0.00) (0.01)
Distribution from
capital gains ... (0.31) (0.08)
------ ------
Total distributions (0.31) (0.09)
------ ------
Net asset value,
end of period .... $14.08 $11.68
====== ======
Total return ....... 23.16% 17.71%
Net assets, end of
period (000
omitted) ......... $43,524 $7,976
Ratio of expenses
to average net
assets ........... 2.34% 2.50%**
Ratio of net investment
income to average
net assets ....... -0.97% -0.68%**
Portfolio turnover
rate ............. 69.12% 124.44%**
*The Corporation's inception date is January 29, 1992; however, since the Fund
did not have any investment activity or incur expenses prior to the date of
initial public offering, the per share information is for a capital share
outstanding for the period from September 21, 1992 (initial public offering)
through March 31, 1993.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
LIMITED-TERM BOND
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
year ended period ended
March 31, March 31,
1994 1993*
---------- ------------
Net asset value,
beginning of
period ........... $10.06 $10.00
------ ------
Income from investment
operations:
Net investment
income .......... 0.35 0.18
Net realized and
unrealized gain
(loss) on
investments ..... (0.20) 0.06
------ ------
Total from investment
operations ....... 0.15 0.24
------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.35) (0.18)
Distribution from
capital gains ... (0.02) (0.00)
------ ------
Total distributions (0.37) (0.18)
------ ------
Net asset value,
end of period .... $ 9.84 $10.06
====== ======
Total return ....... 1.41% 2.40%
Net assets, end of
period (000
omitted) ......... $11,671 $6,259
Ratio of expenses
to average net
assets ........... 2.14% 2.15%**
Ratio of net investment
income to average
net assets ....... 3.41% 3.48%**
Portfolio turnover
rate ............. 25.90% 39.64%**
*The Corporation's inception date is January 29, 1992; however, since the Fund
did not have any investment activity or incur expenses prior to the date of
initial public offering, the per share information is for a capital share
outstanding for the period from September 21, 1992 (initial public offering)
through March 31, 1993.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
MUNICIPAL BOND FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
year ended period ended
March 31, March 31,
1994 1993*
---------- ------------
Net asset value,
beginning of
period ........... $10.53 $10.00
------ ------
Income from investment
operations:
Net investment
income .......... 0.39 0.21
Net realized and
unrealized gain
(loss) on
investments ..... (0.28) 0.53
------ ------
Total from investment
operations ....... 0.11 0.74
------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.39) (0.21)
Distribution from
capital gains ... (0.13) (0.00)
------ ------
Total distributions (0.52) (0.21)
------ ------
Net asset value,
end of period .... $10.12 $10.53
====== ======
Total return ....... 0.76% 7.37%
Net assets, end of
period (000
omitted) ......... $24,960 $8,557
Ratio of expenses
to average net
assets ........... 1.98% 1.94%**
Ratio of net investment
income to average
net assets ....... 3.62% 3.99%**
Portfolio turnover
rate ............. 18.93% 140.02%**
*The Corporation's inception date is January 29, 1992; however, since the Fund
did not have any investment activity or incur expenses prior to the date of
initial public offering, the per share information is for a capital share
outstanding for the period from September 21, 1992 (initial public offering)
through March 31, 1993.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
GLOBAL INCOME FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
year ended period ended
March 31, March 31,
1994 1993*
---------- -----------
Net asset value,
beginning of
period ........... $9.68 $10.00
----- ------
Income from investment
operations:
Net investment
income .......... 0.34 0.20
Net realized and
unrealized loss
on investments .. (0.31) (0.32)
----- ------
Total from investment
operations ....... 0.03 (0.12)
----- ------
Less distributions:
Dividends declared
from net investment
income .......... (0.26) (0.20)
Tax-basis return of
capital.......... (0.08) (0.00)
----- ------
Total distributions. (0.34) (0.20)
----- ------
Net asset value,
end of period .... $9.37 $ 9.68
===== ======
Total return ....... 0.33% -1.28%
Net assets, end of
period (000
omitted) ......... $10,282 $7,181
Ratio of expenses
to average net
assets ........... 2.24% 2.06%**
Ratio of net investment
income to average
net assets ....... 3.56% 3.88%**
Portfolio turnover
rate ............. 34.90% 8.35%**
*The Corporation's inception date is January 29, 1992; however, since the Fund
did not have any investment activity or incur expenses prior to the date of
initial public offering, the per share information is for a capital share
outstanding for the period from September 21, 1992 (initial public offering)
through March 31, 1993.
**Annualized.
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
NOTE 1 -- Significant Accounting Policies
Waddell & Reed Funds, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940 as an open-end management investment company.
The Corporation issues five classes of capital shares; each class represents
ownership of a separate mutual fund. Each Fund except Global Income Fund is a
diversified fund. The assets belonging to each Fund are held separately by the
Custodian. The capital shares of each Fund represent a pro rata beneficial
interest in the principal, net income and realized and unrealized capital gains
or losses of its respective investments and other assets. The following is a
summary of significant accounting policies consistently followed by the
Corporation in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using
pricing systems provided by a major dealer in bonds or by an information
service. Convertible bonds are valued using this pricing system only on
days when there is no sale reported. Stocks which are traded over-the-
counter are priced using NASDAQ (National Association of Securities Dealers
Automated Quotations) which provides information on bid and asked or
closing prices quoted by major dealers in such stocks. Securities for
which quotations are not readily available are valued as determined in good
faith in accordance with procedures established by and under the general
supervision of the Corporation's Board of Directors. Short-term debt
securities are valued at amortized cost, which approximates market. Short-
term debt securities denominated in foreign currencies are valued at
amortized cost in that currency.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined in the Internal
Revenue Code), premiums on the purchase of bonds and post-1984 market
discount are amortized for both financial and tax reporting purposes over
the remaining lives of the bonds. Dividend income is recorded on the ex-
dividend date. Interest income is recorded on the accrual basis. See Note
4 -- Investment Securities Transactions.
C. Foreign currency translations -- All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars daily. Purchases and
sales of investment securities and accruals of income and expenses are
translated at the rate of exchange prevailing on the date of the
transaction. For assets and liabilities other than investments in
securities, net realized and unrealized gains and losses from foreign
currency translation arise from changes in currency exchange rates. The
Corporation combines fluctuations from currency exchange rates and
fluctuations in market value when computing net realized and unrealized
gain or loss from investments.
D. Federal income taxes -- It is the Corporation's policy to distribute all of
its taxable income and capital gains to its shareholders and otherwise
qualify as a regulated investment company under the Internal Revenue Code.
In addition, the Corporation intends to pay distributions as required to
avoid imposition of excise tax. Accordingly, provision has not been made
for Federal income taxes. See Note 5 -- Federal Income Tax Matters.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by each Fund on the record date. During the period ended
March 31, 1994, the Corporation adopted Statement of Position 93-2
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
Accordingly, permanent book and tax basis differences relating to
shareholder distributions have been reclassified to additional paid-in
capital. In addition, reclassifications have been made between accumulated
undistributed net investment income and accumulated undistributed net
realized gain on investment transactions to more appropriately conform book
and tax treatment of dividend distributions paid to shareholders. As of
April 1, 1993 and March 31, 1994, these reclassifications were as follows:
Undistributed Undistributed Additional
Net Investment Net Realized Paid-In
Income Gain Capital
-------------- ------------- ----------
April 1, 1993
Global Income Fund $ --- $ 12,214 $(12,214)
Growth Fund 18,502 (18,502) ---
March 31, 1994
Total Return Fund 42,704 --- (42,704)
Global Income Fund --- 87,921 (87,921)
Growth Fund 226,026 (226,026) ---
Net investment income, net realized gains and net assets were not affected
by this change.
NOTE 2 -- Organization
The Corporation was incorporated in Maryland on January 29, 1992 and was
inactive (except for matters relating to its organization and registration as an
investment company under the Investment Company Act of 1940 and registration of
shares under the Securities Act of 1933) until September 21, 1992 (the date of
the initial public offering).
On April 24, 1992, Waddell & Reed, Inc. ("W&R"), the Corporation's
principal distributor and underwriter, purchased for investment 2,000 shares of
each class of the Corporation at their net asset value of $10.00 per share.
The Corporation's organizational expenses in the amount of $162,960 were
advanced to the Corporation by W&R and are an obligation to be paid by it.
These expenses are being amortized and are payable evenly over 60 months
following the date of the initial public offering.
NOTE 3 -- Investment Management And Payments To Affiliated Persons
Waddell & Reed Investment Management Company ("WRIMCO"), a wholly-owned
subsidiary of W&R, serves as the Corporation's investment manager. WRIMCO
provides advice and supervises investments for which services it is paid a fee
computed on each Fund's net assets as of the close of business each day at the
following annual rates: Total Return Fund - 0.71% of net assets, Growth Fund -
0.81% of net assets, Limited-Term Bond Fund - 0.56% of net assets, Municipal
Bond Fund - 0.56% of net assets and Global Income Fund - 0.66% of net assets.
The fee is accrued and paid daily.
The Corporation has an Accounting Services Agreement with Waddell & Reed
Services Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the
agreement, WARSCO acts as the agent in providing accounting services and
assistance to the Corporation and pricing daily the value of shares of the
Corporation. For these services, each of the five Funds pays WARSCO a monthly
fee of one-twelfth of the annual fee shown in the following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Fund
------------------------ -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
The Corporation also pays WARSCO a per account charge for transfer agency
and dividend disbursement services of $1.0208 for each shareholder account which
was in existence at any time during the prior month plus $0.30 for each account
on which a dividend or distribution of cash or shares had a record date in that
month. The Corporation also reimburses W&R, WRIMCO, and WARSCO for certain out-
of-pocket costs.
The Corporation has adopted a 12b-1 plan under which W&R, principal
underwriter and sole distributor of the Corporation's shares, is compensated in
an amount calculated and payable daily up to 1% annually of each of the Fund's
average daily net assets. This fee consists of two elements: (i) up to 0.75%
may be paid to the Distributor (W&R) for distribution services and distribution
expenses including commissions paid by the Distributor to its sales
representatives and managers and (ii) up to 0.25% may be paid to reimburse the
Distributor for continuing payments made to the Distributor's representatives
and managers, its administrative costs in overseeing these payments, and the
expenses of WARSCO in providing certain personal services to shareholders.
During the period ended March 31, 1994, the Distributor received $928,397 in
12b-1 payments. During this same period W&R paid sales commissions of
$2,189,596.
A contingent deferred sales charge may be assessed against a shareholder's
redemption amount and paid to the Distributor, W&R. The purpose of the deferred
sales charge is to compensate the Distributor for the costs incurred by the
Distributor in connection with the sale of a Fund's shares. The amount of the
deferred sales charge will be the following percent of the total amount invested
during a calendar year to acquire the shares or the value of the shares
redeemed, whichever is less. Redemption at any time during the calendar year of
investment and the first full calendar year after the calendar year of
investment, 3%; the second full calendar year, 2%; the third full calendar year,
1%; and thereafter, 0%. All investments made during a calendar year shall be
deemed as a single investment during the calendar year for purposes of
calculating the deferred sales charge. The deferred sales charge will not be
imposed on shares representing payment of dividends or distributions or on
amounts which represent an increase in the value of the shareholder's account
resulting from capital appreciation above the amount paid for shares purchased
during the deferred sales charge period. During the period ended March 31,
1994, the Distributor received $106,233 in deferred sales charges.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 4 -- Investment Securities Transactions
Investment securities transactions for the period ended March 31, 1994 are
summarized as follows:
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
-----------------------------------------------------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities $50,751,859$30,002,615$3,551,127$19,497,805$4,961,893
Purchases of U.S. Government
securities --- --- 4,450,189 --- 1,293,120
Purchases of short-term
securities 44,726,21394,950,896 7,344,69619,088,000 7,229,605
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 5,949,298 9,297,157 597,163 3,044,422 1,152,125
Proceeds from maturities
and sales of U.S.
Government securities --- --- 1,693,785 --- 1,441,071
Proceeds from maturities
and sales of short-term
securities 44,558,09884,009,762 7,509,51618,468,088 7,566,412
Realized gain (loss) on U.S.
Government securities --- --- 18,549 --- (24,865)
Realized loss on short-term
securities --- --- --- --- (30,936)
For Federal income tax purposes, cost of investments owned at March 31,
1994 and the related unrealized appreciation (depreciation) were as follows:
Aggregate
Appreciation
Cost AppreciationDepreciation(Depreciation)
----------- -------------------------------------
Total Return Fund $56,761,664 $4,430,055 $1,332,923 $ 3,097,132
Growth Fund 41,546,662 3,168,843 1,346,297 1,822,546
Limited-Term Bond Fund11,492,852 21,490 248,422 (226,932)
Municipal Bond Fund 25,825,150 91,686 1,431,651 (1,339,965)
Global Income Fund 10,342,899 33,626 336,495 (302,869)
NOTE 5 -- Federal Income Tax Matters
The Corporation's income and expenses attributed to each Fund and the gains
and losses on security transactions of each Fund have been attributed to that
Fund for Federal income tax purposes as well as for accounting purposes. For
Federal income tax purposes, Growth Fund, Limited-Term Bond Fund and Municipal
Bond Fund realized capital gain net income of $1,570,093, $28,708 and $163,023,
respectively, during the period ended March 31, 1994 of which a portion was paid
to shareholders during the period ended March 31, 1994. Remaining net capital
gains will be distributed to each Fund's shareholders. Total Return Fund
realized net capital losses of $486,873 during the period ended March 31, 1994,
of which $267,022 was deferred to the year ending March 31, 1995 (see discussion
below). The remaining $219,851 is available to offset future net realized
capital gains through March 31, 2002. As a result of foreign currency exchange
losses in Global Income Fund, $87,921 of the investment income dividends paid by
that Fund represent a tax-basis return of capital. In addition, the Fund
realized net capital and foreign currency exchange losses of $65,969 during the
period ended March 31, 1994, of which $49,197 was deferred to the year ending
March 31, 1995 (see discussion below). The remaining $16,772 is available to
offset future net realized capital gains through March 31, 2002.
Internal Revenue Code regulations permit each Fund to defer into its next
fiscal year net capital losses incurred between each November 1 and the end of
its next fiscal year ("post-October losses"). From November 1, 1993, through
March 31, 1994, Total Return Fund and Global Income Fund incurred net capital
losses of $267,022 and $49,197, respectively, which have been deferred to the
fiscal year ending March 31, 1995.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Waddell & Reed Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of each of the five mutual funds
comprising Waddell & Reed Funds, Inc.(the "Corporation"), issuer of the
respective five classes of capital shares (Total Return Fund, Growth Fund,
Limited-Term Bond Fund, Municipal Bond Fund and Global Income Fund) at March 31,
1994, the results of its operations for the year then ended and the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Corporation's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 1994 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Kansas City, Missouri
April 29, 1994
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends and long-term capital gains below, multiplied by
the number of shares in Growth Fund owned by you on the record dates, will give
you the total amounts to be reported in your Federal income tax return for the
years in which they were received or reinvested.
PER-SHARE AMOUNTS REPORTABLE AS:
----------------------------------------------------------
For Individuals For Corporations
--------------------------- ------------------------------
Long-Term Non- Long-Term
Record Ordinary Non- Capital Qual- Qual- Non- Capital
Date Total Income Taxable Gain ifying ifying Taxable Gain
- --------------------------------------------------------------------------
Growth Fund
12-17-93$0.305 $0.305 $0.000 $0.000 $0.000 $0.305 $0.000 $0.000
------ ------ ------ ------ ------ ------ ----- ------
$0.305 $0.305 $0.000 $0.000 $0.000 $0.305 $0.000 $0.000
====== ====== ====== ====== ====== ====== ===== ======
Dividends are declared and recorded by each Fund on each day the New York Stock
Exchange is open for business. Dividends are paid monthly on the 27th of the
month or on the preceding business day if the 27th is a weekend or holiday.
Exempt Interest Dividends - The exempt interest portion of dividends paid
represents the distribution of state and municipal bond interest and is exempt
from Federal income taxation.
The table below shows the taxability of dividends and long-term capital gains
paid during the fiscal year ended March 31, 1994:
PER-SHARE AMOUNTS REPORTABLE AS:
----------------------------------------------------------
For Individuals For Corporations
--------------------------- ------------------------------
Long-Term Non- Long-Term
Record Ordinary Non- Capital Qual- Qual- Non- Capital
Date Income Taxable Gain ifying ifying Taxable Gain
- --------------------------------------------------------------------------
Limited-Term Bond Fund
April through
December
1993 100.000% 0.000% 0.000% 0.000% 100.000% 0.000% 0.000%
December 1993
Security
Profit Distri-
bution 85.168 0.000 14.832 0.000 85.168 0.000 14.832
January through
March
1994 100.000 0.000 0.000 0.000 100.000 0.000 0.000
Global Income Fund
April through
December
1993 100.000% 0.000% 0.000% 0.000% 100.000% 0.000% 0.000%
January through
March
1994 0.000 100.000 0.000 0.000 0.000 100.000 0.000
Long-Term
Record Exempt Non- Non- Capital
Date Total Interest Exempt Taxable Gain
- -------- --------- -------- ------- ------- --------
Municipal Bond Fund
April through
December
1993 100.0000% 96.5861% 3.4139% 0.0000% 0.0000%
December 1993
Security
Profit Distri-
bution 100.0000 0.0000 100.0000 0.0000 0.0000
January through
March
1994 100.0000 95.2823 4.7177 0.0000 0.0000
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction in the
year received as provided by Section 243 of the Internal Revenue Code.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Income from Municipal Bond Fund may be subject to the alternative minimum tax.
Shareholders are advised to consult with their tax advisor concerning the tax
treatment of dividends and distributions from all Funds.
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Los Angeles, California
Doyle Patterson, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel, III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
Leslie S. Wright, Birmingham, Alabama
OFFICERS
Keith A. Tucker, President
James C. Cusser, Vice President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
John M. Holliday, Vice President
Theodore W. Howard, Vice President and Treasurer
Rodney O. McWhinney, Vice President
Sharon K. Pappas, Vice President and Secretary
Mark G. Seferovich, Vice President
W. Patrick Sterner, Vice President
John E. Sundeen, Jr., Vice President
Russell E. Thompson, Vice President
This report is submitted for the general information of the shareholders of
Waddell & Reed Funds, Inc. It is not authorized for distribution to prospective
investors unless accompanied with or preceded by the Waddell & Reed Funds, Inc.
current prospectus.
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
<PAGE>
WADDELL & REED FUNDS, INC.
Total Return Fund
Growth Fund
Limited-Term Bond Fund
Municipal Bond Fund
Global Income Fund
- ------------------------------------
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(913) 236-1303
WRR3000A(3-94)
printed on recycled paper
