WADDELL & REED
FUNDS, INC.
Total Return Fund
Growth Fund
Limited-Term Bond Fund
Municipal Bond Fund
Global Income Fund
SEMIANNUAL
REPORT
-------------------------------------------
For the six months ended September 30, 1994
<PAGE>
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.
<PAGE>
PRESIDENT'S LETTER
SEPTEMBER 30, 1994
Dear Shareholder:
This report covers the investment performance of your Fund for the six
months ended September 30, 1994.
During the past six months, bond and equity markets have been affected by
increases in interest rates and the fear of higher inflation. We expect these
markets will continue to react to action, if any, taken by the Federal Reserve
to prevent increases in the inflation rate. Although markets have declined
since the beginning of 1994, historically such intermediate and short-term
fluctuations have had limited impact on achieving investors' long-term financial
goals.
Over time, interest rates follow inflation. Once it has been determined
that the rate of economic growth is manageable, the Federal Reserve Board's
actions will be seen as beneficial to combating inflation, which eventually
should lead to interest rates that are more favorable to the markets.
Based on our 57 years in the financial services industry, we believe that
our commitment to professional portfolio management is the key value-added
service we provide: we select and continuously supervise the Fund's investments
using the most up-to-date information and research available to ensure the
investments meet the Fund's stated objectives.
And, we believe our "hands-on" approach to investment management can help
reward the patient investor over the long term. We never forget that we manage
your money.
The following is an in-depth review of your Fund's recent performance. We
believe the information included in this review continues to reflect our aim of
achieving the goals and purposes of the Fund. Thank you for your continued
confidence in our products and services.
Respectfully,
Keith A. Tucker
President
<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)
PERFORMANCE SUMMARY
PER SHARE DATA
For the six months ended September 30, 1994
- -------------------------------------------
NET ASSET VALUE ON
9/30/94 $12.12
3/31/94 11.99
------
CHANGE PER SHARE $ 0.13
======
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 9-30-94 1.75% 4.75%
Period from 9-21-92*
through 9-30-94 9.17% 10.06%
*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 September 30, 1994, Total Return Fund had net assets totaling $87,986,587
invested in a diversified portfolio of:
91.87% Common Stocks
8.13% Cash and Cash Equivalents
As a shareholder of Total Return Fund, for every $100 you had invested on
September 30, 1994, your Fund owned:
Basic Industries Stocks $40.98
Technological Stocks 25.15
Consumer Stocks 20.40
Cash and Cash Equivalents 8.13
Financial Stocks 5.34
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
SEPTEMBER 30, 1994
Shares Value
COMMON STOCKS
Aerospace - 0.95%
Boeing Company (The) ................... 9,300 $ 401,063
Sundstrand Corporation ................. 8,600 436,450
Total ................................. 837,513
Airlines - 1.75%
AMR Corporation* ....................... 10,700 551,050
Southwest Airlines Co. ................. 43,950 988,875
Total ................................. 1,539,925
Automotive - 7.71%
Chrysler Corporation ................... 29,400 1,319,325
Daimler-Benz AG, ADS .................. 3,520 168,080
Dana Corporation ....................... 20,300 568,400
Eaton Corporation ...................... 13,300 631,750
Ford Motor Company ..................... 50,700 1,406,925
General Motors Corporation ............. 26,700 1,251,563
Magna International Group,
Inc., Class A ......................... 9,300 342,938
Standard Products Company (The) ........ 20,900 522,500
Superior Industries International, Inc. 14,300 412,913
Varity Corporation* .................... 4,200 156,975
Total ................................. 6,781,369
Banks and Savings and Loans - 3.18%
BankAmerica Corporation ................ 13,400 591,275
Citicorp ............................... 18,900 803,250
First Bank Systems, Inc. ............... 12,600 459,900
First Interstate Bancorp ............... 8,000 649,000
Midlantic Corporation .................. 10,700 296,251
Total ................................. 2,799,676
Beverages - 0.95%
PepsiCo, Inc. .......................... 25,100 831,438
Biotechnology and Medical Services - 1.08%
Medtronic, Inc. ........................ 10,600 560,475
Ventritex, Inc.* ....................... 19,800 391,050
Total ................................. 951,525
Building - 5.95%
Armstrong World Industries, Inc. ....... 18,600 806,775
Centex Corporation ..................... 33,200 767,750
Georgia-Pacific Corporation ............ 11,400 872,100
Louisiana-Pacific Corporation .......... 18,000 596,250
Pulte Corporation ...................... 36,100 785,175
Temple-Inland Inc. ..................... 9,300 513,825
Weyerhaeuser Company ................... 20,000 892,500
Total ................................. 5,234,375
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
SEPTEMBER 30, 1994
Shares Value
COMMON STOCKS(Continued)
Chemicals Major - 5.83%
Air Products & Chemicals, Inc. ......... 30,700 $ 1,435,225
du Pont (E.I.) de Nemours and Company .. 16,000 928,000
PPG Industries, Inc. ................... 33,400 1,323,475
Praxair, Inc. .......................... 26,700 650,813
Union Carbide Corporation .............. 23,400 795,600
Total ................................. 5,133,113
Chemicals Specialty and Miscellaneous Technology - 5.34%
Betz Laboratories, Inc. ................ 13,300 630,088
Geon Company (The) ..................... 40,700 1,221,000
Minnesota Mining and Manufacturing
Company ............................... 13,300 734,825
Polaroid Corporation ................... 37,400 1,313,675
Xerox Corporation ...................... 7,500 800,625
Total ................................. 4,700,213
Computers and Office Equipment - 3.28%
General Motors Corporation, Class E .... 26,700 1,014,600
International Business Machines
Corporation ........................... 13,800 959,100
Microsoft Corporation* ................. 8,000 449,496
Oracle Systems Corporation* ............ 10,700 461,438
Total ................................. 2,884,634
Consumer Electronics and Appliances - 1.02%
Harmon International Industries,
Incorporated .......................... 7,600 265,050
Whirlpool Corporation .................. 12,300 631,913
Total ................................. 896,963
Electrical Equipment - 2.48%
Emerson Electric Co. ................... 10,700 637,988
General Electric Company ............... 32,000 1,540,000
Total ................................. 2,177,988
Electronics - 7.86%
AMP Incorporated ....................... 14,700 1,137,413
Analog Devices, Inc.* .................. 40,600 1,339,800
Applied Materials, Inc.* ............... 23,100 1,074,150
cisco Systems, Inc.* ................... 26,700 732,568
Intel Corporation ...................... 20,400 1,257,150
LSI Logic Corporation* ................. 27,200 1,016,600
Novell, Inc.* .......................... 24,000 355,488
Total ................................. 6,913,169
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
SEPTEMBER 30, 1994
Shares Value
COMMON STOCKS(Continued)
Engineering and Construction - 1.02%
Fluor Corporation ...................... 10,700 $ 532,325
Foster Wheeler Corporation ............. 10,700 367,813
Total ................................. 900,138
Financial - 2.16%
Federal Home Loan Mortgage Corporation . 13,300 709,888
Federal National Mortgage Association .. 7,900 622,125
Household International, Inc. .......... 16,000 572,000
Total ................................. 1,904,013
Food and Related - 1.22%
CPC International Inc. ................. 13,300 673,313
Pet Incorporated ....................... 20,400 402,900
Total ................................. 1,076,213
Hospital Management - 1.05%
United HealthCare Corporation .......... 17,400 922,200
Household Products - 3.21%
Colgate-Palmolive Company .............. 16,000 928,000
Gillette Company (The) ................. 13,300 940,975
Procter & Gamble Company (The) ......... 16,000 954,000
Total.................................. 2,822,975
Leisure Time - 1.94%
Walt Disney Company (The) .............. 18,700 726,963
McDonald's Corporation ................. 37,400 981,750
Total ................................. 1,708,713
Machinery - 6.66%
Caterpillar Inc. ....................... 42,800 2,316,550
Clark Equipment Company* ............... 13,300 921,025
Deere & Company ........................ 18,300 1,255,838
Ingersoll-Rand Company ................. 10,700 378,513
Parker Hannifin Corporation ............ 10,700 426,663
Trinova Corporation .................... 16,000 558,000
Total ................................. 5,856,589
Metals and Mining - 0.53%
Phelps Dodge Corporation ............... 7,500 465,938
Multi-Industry - 1.79%
ITT Corporation ........................ 18,900 1,575,788
Paper - 2.17%
International Paper Company ............ 16,000 1,256,000
Union Camp Corporation ................. 13,300 653,363
Total ................................. 1,909,363
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
SEPTEMBER 30, 1994
Shares Value
COMMON STOCKS(Continued)
Railroads - 3.26%
CSX Corporation ........................ 9,300 $ 637,050
Conrail Inc. ........................... 16,000 792,000
Norfolk Southern Corporation ........... 8,000 498,000
Southern Pacific Rail Corporation* ..... 12,300 230,625
Union Pacific Corporation .............. 13,300 713,213
Total ................................. 2,870,888
Retailing - 10.17%
Circuit City Stores, Inc. .............. 42,700 1,104,863
Dayton Hudson Corporation .............. 12,400 948,600
Dillard Department Stores, Inc.,
Class A ............................... 25,400 679,450
Ethan Allen Interiors Inc.* ............ 8,000 181,000
Gap, Inc. (The) ........................ 18,700 614,763
Home Depot, Inc. (The) ................. 20,333 853,986
Limited, Inc. (The) .................... 20,700 406,238
May Department Stores Company (The) .... 26,700 1,051,313
Penney (J.C.) Company, Inc. ............ 18,000 929,250
Sears, Roebuck & Co. .................. 5,300 254,400
Spiegel, Inc., Class A ................. 11,000 198,000
Tommy Hilfiger Corporation* ............ 21,100 820,263
Toys "R" Us, Inc.* .................... 8,000 285,000
Wal-Mart Stores, Inc. .................. 26,700 624,113
Total ................................. 8,951,239
Services, Consumer and Business - 0.84%
Block (H&R), Inc. ...................... 16,000 734,000
Telecommunications - 6.64%
AT&T Corporation ....................... 13,300 718,200
General Instrument Corporation* ........ 26,600 758,100
MCI Communications Corporation ......... 26,700 677,513
Motorola, Inc. ......................... 45,400 2,394,850
Telefonaktiebolaget LM Ericsson, ADR,
Class B ............................... 13,300 713,213
Vanguard Cellular Systems, Inc.* ....... 22,200 582,750
Total ................................. 5,844,626
Tire and Rubber - 1.05%
Goodyear Tire & Rubber Company (The) ... 27,600 921,150
Trucking - 0.78%
Ryder System, Inc. ..................... 26,700 684,188
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
SEPTEMBER 30, 1994
Value
TOTAL COMMON STOCKS - 91.87% $80,829,922
(Cost: $76,726,448)
TOTAL SHORT-TERM SECURITIES - 7.20% $ 6,339,000
(Cost: $6,339,000)
TOTAL INVESTMENT SECURITIES - 99.07% $87,168,922
(Cost: $83,065,448)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.93% 817,665
NET ASSETS - 100.00% $87,986,587
See Notes to Schedules of Investments on page 36.
<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)
PERFORMANCE SUMMARY
PER SHARE DATA
For the Six Months Ended September 30, 1994
- -------------------------------------------
NET ASSET VALUE ON
9/30/94 $14.97
3/31/94 14.08
------
CHANGE PER SHARE $ 0.89
======
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 9-30-94 5.01% 8.01%
Period from 9-21-92*
through 9-30-94 23.03% 23.82%
*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 September 30, 1994, Growth Fund had net assets totaling $65,759,979 invested
in a diversified portfolio of:
53.28% Common Stocks
46.72% Cash and Cash Equivalents
As a shareholder in Growth Fund, for every $100 you had invested on September
30, 1994, your Fund owned:
$46.72 Cash and Cash Equivalents
32.88 Technological Stocks
14.46 Consumer Stocks
5.22 Basic Industries Stocks
0.72 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
SEPTEMBER 30, 1994
Shares Value
COMMON STOCKS
Automotive - 2.64%
Automotive Industries Holdings, Inc.* .. 22,500 $ 542,813
Gentex Corporation* .................... 20,000 472,500
Superior Industries International, Inc. 25,000 721,875
Total ................................. 1,737,188
Biotechnology and Medical Services - 4.36%
American Healthcorp, Inc.* ............. 30,000 225,000
Pyxis Corporation* .................... 40,000 985,000
St. Jude Medical, Inc. ................. 10,000 358,750
Tecnol Medical Products, Inc.* ......... 15,600 230,100
Ventritex, Inc.* ....................... 45,000 888,750
Zoll Medical Corporation* .............. 20,000 180,000
Total ................................. 2,867,600
Building - 0.88%
NCI Building Systems, Inc.* ............ 30,000 577,500
Computers and Office Equipment - 23.76%
America Online, Inc.* .................. 25,000 1,712,500
Broderbund Software, Inc.* ............. 23,000 1,224,750
Cerner Corporation* .................... 22,000 896,500
DSP Group, Inc.* ...................... 30,000 656,250
FORE Systems, Inc.* .................... 15,000 671,250
Health Management Systems, Inc.* ...... 20,000 517,500
Integrated Silicon Systems, Inc.* ..... 15,500 449,500
Intuit* ............................... 20,000 880,000
Learning Company (The)* ................ 37,600 752,000
Macromedia, Inc.* ..................... 30,000 461,250
MapInfo Corporation* ................... 50,000 1,000,000
MEDSTAT Group (The)* ................... 25,000 375,000
Microsoft Corporation* ................. 10,000 561,870
Minnesota Educational Computing
Corporation* .......................... 40,000 560,000
Parametric Technology Corporation* ..... 35,000 1,155,000
ParcPlace Systems, Inc.* .............. 5,000 105,000
Pinnacle Micro, Inc.* .................. 20,000 267,500
QuickResponse Services, Inc.* .......... 15,000 228,750
Synopsys, Inc.* ........................ 20,000 910,000
SystemSoft Corporation* ................ 60,000 348,720
Wall Data Incorporated* ................ 30,000 993,750
Wonderware Corporation* ............... 43,000 897,625
Total ................................. 15,624,715
Drugs and Hospital Supply - 1.54%
Circa Pharmaceuticals, Inc.* ........... 40,000 610,000
OmniCare, Inc. ......................... 10,000 401,250
Total ................................. 1,011,250
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
SEPTEMBER 30, 1994
Shares Value
COMMON STOCKS (Continued)
Electronics - 2.18%
Atmel Corporation* .................... 10,000 $ 314,370
Cascade Communications Corp.* .......... 10,000 471,250
Digital Link Corporation* ............. 30,000 393,750
Level One Communications, Incorporated* 8,100 256,163
Total ................................. 1,435,533
Financial - 0.72%
Regional Acceptance Corporation* ....... 35,000 472,500
Hospital Management - 4.34%
Quorum Health Group, Inc.* ............. 20,500 386,938
Sierra Health Services, Inc.* ......... 40,000 1,030,000
United HealthCare Corporation .......... 10,000 530,000
Vencor, Incorporated* .................. 20,000 910,000
Total ................................. 2,856,938
Machinery - 0.56%
Cognex Corporation* .................... 20,000 367,500
Retailing - 6.11%
Books-A-Million, Inc.* ................. 50,000 681,250
Hollywood Entertainment Corporation* ... 47,000 1,304,250
Leslie's Poolmart* .................... 25,200 327,600
Tractor Supply Company* ............... 20,000 555,000
Williams-Sonoma, Inc.* ................ 33,750 1,151,719
Total ................................. 4,019,819
Services, Consumer and Business - 2.82%
Block (H&R), Inc. ...................... 13,000 596,375
Fusion Systems Corporation* ............ 20,000 642,500
Stewart Enterprises, Inc., Class A ..... 25,000 612,500
Total ................................. 1,851,375
Telecommunications - 1.04%
MFS Communications Company, Inc.* ...... 20,000 685,000
Textiles and Apparel - 1.19%
Department 56, Inc.* ................... 20,000 780,000
Trucking - 1.14%
Heartland Express, Inc.* ............... 25,000 750,000
TOTAL COMMON STOCKS - 53.28% $35,036,918
(Cost: $29,711,356)
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES
Banks and Savings and Loans - 1.88%
U.S. Bancorp,
Master Note ........................... $1,238 $ 1,238,000
Building - 3.03%
Weyerhaeuser Company,
4.78%, 10-21-94........................ 2,000 1,994,689
Consumer Electronics and Appliances - 3.03%
TDK (USA) Corp.,
4.8%, 10-20-94 ........................ 2,000 1,994,933
Drugs and Hospital Supply - 3.79%
Warner-Lambert Company,
4.75%, 11-1-94 ........................ 2,500 2,489,774
Electrical Equipment - 3.27%
General Electric Capital Corporation,
4.75%, 10-11-94 ....................... 2,150 2,147,163
Electronics - 3.71%
Motorola, Inc.,
4.78%, 10-24-94 ....................... 2,450 2,442,518
Financial - 10.59%
Associates Corporation of North America,
Master Note ........................... 859 859,000
Ford Motor Credit Company,
4.8%, 10-31-94 ........................ 2,000 1,992,000
International Business Machines Credit
Corporation,
4.76%, 10-5-94 ........................ 2,045 2,043,919
PHH Corp.,
4.9%, 10-26-94 ........................ 2,075 2,067,939
Total ................................. 6,962,858
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Food and Related - 3.27%
Sara Lee Corporation,
Master Note ........................... $2,148 $ 2,148,000
Machinery - 3.68%
Cooper Industries, Inc.,
4.75%, 10-12-94 ....................... 2,425 2,421,480
Public Utilities - Electric - 1.51%
Southern California Edison Company,
4.81%, 11-14-94 ....................... 1,000 994,121
Services, Consumer and Business - 6.27%
Hertz Corp.,
4.77%, 10-25-94 ....................... 4,135 4,121,851
Telecommunications - 3.03%
NYNEX Corp.,
4.85%, 11-7-94 ........................ 2,000 1,990,031
TOTAL SHORT-TERM SECURITIES - 47.06% $30,945,418
(Cost: $30,945,418)
TOTAL INVESTMENT SECURITIES - 100.34% $65,982,336
(Cost: $60,656,774)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.34%) (222,357)
NET ASSETS - 100.00% $65,759,979
See Notes to Schedules of Investments on page 36.
<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
PERFORMANCE SUMMARY
PER SHARE DATA
For the Six Months Ended September 30, 1994
- -------------------------------------------
DIVIDENDS PAID $0.19
=====
NET ASSET VALUE ON
9/30/94 $9.61
3/31/94 9.84
------
CHANGE PER SHARE ($0.23)
======
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 9-30-94 -5.20% -2.38%
Period from 9-21-92*
through 9-30-94 0.72% 1.65%
*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 September 30, 1994, Limited-Term Bond Fund had net assets totaling
$11,753,270 invested in a diversified portfolio of:
98.72% Bonds
1.28% Cash and Cash Equivalents
As a shareholder of Limited-Term Bond Fund, for every $100 you had invested on
September 30, 1994, your Fund owned:
Corporate Bonds $58.69
U.S. Government Securities 40.03
Cash and Cash Equivalents 1.28
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Airlines - 2.80%
Federal Express Corporation,
10.0%, 9-1-98 ......................... $310 $ 329,310
Banks and Savings and Loans - 4.86%
First Chicago Corporation,
9.875%, 7-1-99 ........................ 250 268,573
Wells Fargo & Company,
8.375%, 5-15-2002 ..................... 300 302,172
Total ................................. 570,745
Building - 3.40%
Masco Corporation,
6.25%, 6-15-95 ........................ 400 399,868
Chemicals Specialty and Miscellaneous
Technology - 3.41%
Eastman Kodak Company,
9.125%, 3-1-98 ........................ 200 202,248
Polaroid Corporation,
7.25%, 1-15-97......................... 200 198,148
Total ................................. 400,396
Domestic Oil - 3.13%
BP America Inc.,
9.5%, 1-1-98 .......................... 150 158,429
Phillips Petroleum Company,
9.5%, 11-15-97 ........................ 200 209,980
Total ................................. 368,409
Financial - 12.06%
Avco Financial Services,
7.375%, 8-15-2001 ..................... 300 291,153
Ford Motor Credit Company,
4.3%, 7-15-98 ......................... 233 226,947
General Motors Acceptance Corporation:
6.375%, 9-23-97 ....................... 50 48,443
7.75%, 1-15-99 ........................ 300 298,599
Household Finance Corporation,
9.0%, 9-28-2001 ....................... 285 295,776
United States Leasing International Inc.,
8.75%, 5-1-96 ......................... 250 257,048
Total ................................. 1,417,966
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Food and Related - 2.12%
ConAgra, Inc.,
9.75%, 11-1-97 ........................ $236 $ 249,622
Insurance - 3.02%
CIGNA Corporation,
8.0%, 9-1-96 .......................... 350 354,648
International Oil - 1.72%
Chevron Corp.,
8.11%, 12-1-2004 ...................... 200 201,718
Multi-Industry - 3.60%
ITT Corporation,
8.375%, 3-15-96 ....................... 415 423,528
Public Utilities - Electric - 0.85%
Connecticut Light & Power Company (The),
6.5%, 1-1-98 .......................... 100 99,697
Public Utilities - Pipelines - 2.72%
Tennessee Gas Pipeline Company,
9.25%, 5-15-96 ........................ 310 320,103
Railroads - 2.61%
CSX Corporation,
8.4%, 8-1-96 .......................... 300 306,600
Retailing - 5.78%
Dillard Department Stores, Inc.,
8.75%, 6-15-98 ........................ 100 103,782
Penney (J.C.) Company, Inc.,
10.0%, 10-15-97 ....................... 250 267,650
Sears, Roebuck and Co.,
8.55%, 8-1-96 ......................... 300 307,380
Total ................................. 678,812
Telecommunications - 3.95%
GTE Corporation,
8.85%, 3-1-98 ......................... 350 361,799
Southwestern Bell Telephone Company,
8.3%, 6-1-96 .......................... 100 102,324
Total ................................. 464,123
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Textiles and Apparel - 2.66%
Fruit of the Loom, Inc.,
7.875%, 10-15-99 ...................... $318 $ 312,651
TOTAL CORPORATE DEBT SECURITIES - 58.69% $ 6,898,196
(Cost: $7,106,632)
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
6.75%, 7-15-2003 ...................... 100 99,843
5.75%, 7-15-2006 ...................... 250 232,420
5.5%, 4-15-2013 ....................... 100 95,906
5.5%, 9-15-2013 ....................... 100 96,875
6.4%, 2-15-2018 ....................... 250 230,078
Federal National Mortgage Association:
8.0%, 2-1-2008 ........................ 356 355,200
6.0%, 1-1-2009 ........................ 376 342,206
6.0%, 2-1-2009 ........................ 379 344,079
6.0%, 6-25-2014 ....................... 200 198,186
7.0%, 9-25-2020 ....................... 71 70,483
Government National Mortgage Association,
6.5%, 10-15-2008 ...................... 295 274,109
United States Treasury:
6.875%, 4-30-97 ....................... 400 400,688
5.625%, 8-31-97 ....................... 400 386,812
5.375%, 5-31-98 ....................... 300 283,452
5.125%, 11-30-98 ...................... 300 278,016
5.5%, 4-15-2000........................ 300 275,673
6.375%, 8-15-2002 ..................... 400 372,748
6.25%, 2-15-2003 ...................... 400 367,564
TOTAL UNITED STATES GOVERNMENT SECURITIES - 40.03% $ 4,704,338
(Cost: $4,992,892)
TOTAL SHORT-TERM SECURITIES - 3.92% $ 461,000
(Cost: $461,000)
TOTAL INVESTMENT SECURITIES - 102.64% $12,063,534
(Cost: $12,560,524)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (2.64%) (310,264)
NET ASSETS - 100.00% $11,753,270
See Notes to Schedules of Investments on page 36.
<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
PERFORMANCE SUMMARY
PER SHARE DATA
For the Six Months Ended September 30, 1994
- -------------------------------------------
DIVIDENDS PAID $0.21
=====
NET ASSET VALUE ON
9/30/94 $ 9.99
3/31/94 10.12
------
CHANGE PER SHARE ($0.13)
======
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 9-30-94 -7.81% -5.10%
Period from 9-21-92*
through 9-30-94 3.43% 4.38%
*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 September 30, 1994, Municipal Bond Fund had net assets totaling $25,753,019
invested in a diversified portfolio.
As a shareholder of Municipal Bond Fund, for every $100 you had invested on
September 30, 1994, your Fund owned:
Other Municipal Bonds $22.10
Hospital Revenue Bonds 18.41
Lease/Certificates of
Participation Bonds 11.25
Pollution Control Revenue
Bonds 7.42
Industrial Revenue Bonds 7.34
Cash and Cash Equivalents 7.04
Public Power Revenue Bonds 6.00
Special Tax Bonds 4.87
Student Loan Bonds 4.78
Airport Revenue Bonds 4.22
Recreation Revenue Bonds 3.32
Education Revenue Bonds 3.25
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS
ARIZONA - 0.98%
City of Bullhead City, Arizona, Bullhead
Parkway Improvement District,
Improvement Bonds,
6.1%, 1-1-2013 ........................ $ 270 $ 253,463
ARKANSAS - 1.40%
Baxter County, Arkansas, Industrial Development
Revenue Refunding Bonds (Aeroquip Corporation
Project), Series 1993,
5.8%, 10-1-2013 ....................... 400 359,500
CALIFORNIA - 3.26%
Carson Redevelopment Agency (California),
Redevelopment Project Area No. 2, Refunding
Tax Allocation Bonds, Series 1993,
6.0%, 10-1-2013 ....................... 500 451,250
Certificates of Participation, City of Upland,
California to San Antonio Community Hospital,
1993 Series,
5.0%, 1-1-2018 ........................ 500 388,125
Total ................................. 839,375
COLORADO - 4.05%
City and County of Denver, Colorado,
Airport System Revenue Bonds:
Series 1994A,
7.4%, 11-15-2004 ...................... 1,000 992,500
Series 1991A,
0.0%, 11-15-2003 ...................... 100 50,250
Total ................................. 1,042,750
DISTRICT OF COLUMBIA - 3.92%
Certificates of Participation,
Series 1993, Issued by Security Trust
Company, N.A., As Trustee, District of
Columbia,
7.3%, 1-1-2013 ........................ 1,000 1,010,000
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
FLORIDA - 4.84%
Lake County, Florida, Resource Recovery
Industrial Development Refunding Revenue
Bonds (NRG/Recovery Group Project),
Series 1993A,
5.95%, 10-1-2013 ...................... $ 965 $ 855,231
Mid-Bay Bridge Authority (Florida),
Revenue Refunding Bonds, Series 1993A,
6.0%, 10-1-2013 ....................... 300 264,375
Hillsborough County, Florida, Capital
Improvement Non-Ad Valorem Revenue Bonds
(County Center Project), Second
Series 1992,
6.75%, 7-1-2022 ....................... 125 127,500
Total ................................. 1,247,106
GEORGIA - 1.90%
Hospital Authority of Savannah, Revenue Bonds,
Candler Hospital, Series 1992,
7.0%, 1-1-2023 ........................ 500 488,125
GUAM - 0.91%
Guam Power Authority, Revenue Bonds,
1992 Series A,
6.3%, 10-1-2022 ....................... 250 234,063
ILLINOIS - 6.49%
Illinois Health Facilities Authority,
Revenue Bonds, Series 1993 (OSF
Healthcare System),
5.75%, 11-15-2007 ..................... 700 658,000
City of Quincy, Adams County, Illinois,
Revenue Bonds, Series 1993
(Blessing Hospital),
6.0%, 11-15-2018 ...................... 500 438,750
Illinois Development Finance Authority,
Local Government Program Revenue Bonds,
Series 1993 (Village of Maywood Project),
6.0%, 1-1-2008 ........................ 400 378,000
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
ILLINOIS (Continued)
The Illinois State Toll Highway Authority,
Toll Highway Priority Revenue Bonds,
1992 Series A,
6.375%, 1-1-2015 ...................... $ 200 $ 196,500
Total ................................. 1,671,250
INDIANA - 5.33%
Indiana State Office Building Commission,
Capitol Complex Revenue Bonds (State
Office Building I Facility),
Series 1990B,
7.4%, 7-1-2015 ........................ 500 554,375
City of Sullivan, Indiana, Pollution
Control Revenue Refunding Bonds
(Indiana-Michigan Power Company Project),
Series C,
5.95%, 5-1-2009 ....................... 500 461,250
East Chicago Elementary School Building
Corporation (Lake County, Indiana),
First Mortgage Bonds, Series 1993A,
5.5%, 1-15-2016 ....................... 400 356,000
Total ................................. 1,371,625
IOWA - 1.25%
Scott County, Iowa, Refunding Certificates
of Participation (County Golf Course
Project, Series 1993),
6.2%, 5-1-2013 ........................ 340 321,725
KANSAS - 5.04%
City of Lawrence, Kansas, Hospital Revenue
Bonds, Series 1994 (The Lawrence Memorial
Hospital),
6.2%, 7-1-2019 ........................ 1,125 1,072,969
City of Lawrence, Kansas, Multifamily
Housing Development Revenue Refunding
Bonds (Brandon Woods, Inc. Project),
Series 1993,
6.625%, 4-1-2012 ...................... 225 225,281
Total ................................. 1,298,250
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
LOUISIANA - 2.74%
Parish of St. Charles, State of Louisiana:
Pollution Control Revenue Bonds (Union
Carbide Project), Series 1992,
7.35%, 11-1-2022 ...................... $ 200 $ 203,000
Solid Waste Disposal Revenue Bonds
(Louisiana Power & Light Company Project),
Series 1992-A,
7.0%, 12-1-2022 ....................... 200 200,750
Louisiana Public Facilities Authority,
Student Loan Revenue Bonds,
Series 1992A-2,
6.75%, 9-1-2006 ....................... 300 303,000
Total ................................. 706,750
MARYLAND - 7.37%
Prince George's County, Maryland,
Project and Refunding Revenue Bonds
(Dimensions Health Corporation Issue),
Series 1994,
5.375%, 7-1-2014 ...................... 1,000 843,750
Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds (Montgomery
County Resource Recovery Project),
Series 1993A,
6.2%, 7-1-2010 ........................ 665 634,244
Maryland Health and Educational Facilities
Authority, Project and Refunding Revenue
Bonds, Doctors Community Hospital Issue,
Series 1993,
5.75%, 7-1-2013 ....................... 500 419,375
Total ................................. 1,897,369
MICHIGAN - 3.18%
Michigan State Hospital Finance
Authority, Hospital Revenue Refunding
Bonds (Crittenton Hospital),
Series 1994A,
5.25%, 3-1-2014 ....................... 1,000 820,000
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MISSOURI - 4.61%
The Junior College District of Metropolitan
Kansas City, Missouri, Lease Certificates
of Participation (Longview Recreation
Complex Project), Series 1994,
6.125%, 7-1-2014 ...................... $1,000 $ 945,000
City of Ste. Genevieve, Missouri, Waterworks
Revenue Bonds, Series 1993,
6.6%, 2-1-2013 ........................ 250 241,563
Total ................................. 1,186,563
MONTANA - 0.37%
Anaconda-Deer Lodge County, Montana,
Solid Waste Facility Revenue Bonds
(ARCO-Anaconda Smelter Site Project),
Series 1992,
6.375%, 10-1-2016 ..................... 100 96,125
NEBRASKA - 1.86%
Nebraska Higher Education Loan Program, Inc.,
Senior Subordinate Bonds, Series A-SA,
6.2%, 6-1-2013 ........................ 500 480,000
NEW JERSEY - 2.45%
New Jersey Economic Development Authority,
Economic Growth Bonds, Richard L.
Tauber Composite Issue-1993
Series A,
5.4%, 10-1-2013 ....................... 700 631,750
NEW MEXICO - 4.87%
City of Albuquerque, New Mexico, Gross
Receipts/Lodgers' Tax Refunding and
Improvement Revenue Bonds, Series 1991B,
0.0%, 7-1-2013 ........................ 4,500 1,254,375
NEW YORK - 5.59%
The City of New York, General Obligation
Bonds, Fiscal 1994 Series D:
5.75%, 8-15-2012 ...................... 500 443,750
5.75%, 8-15-2007 ...................... 400 370,000
New York State Thruway Authority,
Local Highway and Bridge Service
Contract Bonds, Series 1993,
5.25%, 4-1-2013 ....................... 500 430,000
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
NEW YORK (Continued)
Onondaga County Resource Recovery Agency,
Project Revenue Bonds (Resource Recovery
Facility - 1992 Series),
7.0%, 5-1-2015 ........................ $ 200 $ 195,250
Total ................................. 1,439,000
OHIO - 2.91%
City of Moraine, Ohio, Solid Waste
Disposal Revenue Bonds (General Motors
Corporation Project), Series 1994,
6.75%, 7-1-2014 ....................... 750 748,125
OKLAHOMA - 2.62%
Tulsa Public Facilities Authority
(Oklahoma), Assembly Center Lease Payment
Revenue Bonds, Refunding Series 1985:
6.2%, 11-1-2012 ....................... 500 474,375
6.6%, 7-1-2014 ........................ 200 201,250
Total ................................. 675,625
TEXAS - 7.10%
Port of Corpus Christi, Authority of
Nueces County, Texas, Pollution Control
Revenue Bonds (Hoechst Celanese Corporation
Project), Series 1992,
6.875%, 4-1-2017 ...................... 1,000 1,031,250
Sabine River Authority of Texas,
Collateralized Pollution Control
Revenue Refunding Bonds (Texas
Utilities Electric Company Project),
Series 1993B,
5.85%, 5-1-2022 ....................... 800 701,000
Alliance Airport Authority, Inc.,
Special Facilities Revenue Bonds,
Series 1991 (American Airlines, Inc.
Project),
7.0%, 12-1-2011 ....................... 100 95,500
Total ................................. 1,827,750
VIRGINIA - 3.61%
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 ....................... 1,000 928,750
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
WASHINGTON - 4.31%
Washington Public Power Supply System,
Nuclear Project No. 1, Refunding
Revenue Bonds:
Series 1994B,
7.375%, 7-1-2004 ...................... $ 500 $ 545,625
Series 1989A,
6.0%, 7-1-2017 ........................ 450 412,875
Public Utility District No. 2 of Grant
County, Washington, Wanapum
Hydroelectric Development, Second Series
Revenue Bonds, 1992B,
6.75%, 1-1-2023 ....................... 150 151,125
Total ................................. 1,109,625
TOTAL MUNICIPAL BONDS - 92.96% $23,939,039
(Cost: $25,379,543)
TOTAL SHORT-TERM SECURITIES - 4.68% $ 1,206,000
(Cost: $1,206,000)
TOTAL INVESTMENT SECURITIES - 97.64% $25,145,039
(Cost: $26,585,543)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.36% 607,980
NET ASSETS - 100.00% $25,753,019
See Notes to Schedules of Investments on page 36.
<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
PERFORMANCE SUMMARY
PER SHARE DATA
For the Six Months Ended September 30, 1994
- -------------------------------------------
DIVIDENDS PAID $0.18
=====
NET ASSET VALUE ON
9/30/94 $9.33
3/31/94 9.37
-----
CHANGE PER SHARE ($0.04)
=====
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 9-30-94 -2.29% 0.62%
Period from 9-21-92*
through 9-30-94 -0.65% 0.28%
*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 September 30, 1994, Global Income Fund had net assets totaling $10,862,588
invested in a diversified portfolio of:
83.07% Bonds
16.93% Other, including Cash and Cash Equivalents
As a shareholder of Global Income Fund, for every $100 you had invested on
September 30, 1994, your Fund owned:
Other Government Securities $59.72
Other, including Cash and
Cash Equivalents 16.93
U.S. Government Securities 13.73
Corporate Debt Securities 9.62
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Automotive - 2.05%
Toyota Motor Credit Corporation,
3.02%, 8-5-96 ......................... $ 250 $ 222,533
Banks and Savings and Loans - 3.58%
Bayerische Landesbank Girozentrale,
3.06%, 3-28-97 ........................ $ 250 225,938
Deutsche Bank Aktiengesellschaft,
12.0%, 10-2-96 (A) .................... L250,000 162,500
Total ................................. 388,438
Public Utilities - Electric - 3.99%
Electricite de France,
8.25%, 12-4-97 (A) .................... F2,250 433,733
TOTAL CORPORATE DEBT SECURITIES - 9.62% $ 1,044,704
(Cost: $1,075,449)
OTHER GOVERNMENT SECURITIES
Australia - 7.53%
New South Wales Treasury,
8.5%, 3-1-96 (A) ...................... $A500 371,325
Queensland Treasury Corporation:
8.0%, 5-14-97 (A) ..................... $A400 288,608
12.0%, 5-15-97 (A) .................... $A200 158,144
Total ................................. 818,077
Canada - 14.10%
Province of Alberta,
8.625%, 11-27-96 ...................... $ 200 205,950
Government of Canada:
7.5%, 7-1-97 (A) ...................... $C1,000 738,670
6.25%, 2-1-98 (A) ..................... $C 350 246,733
10.75%, 3-15-98 (A) ................... $C 425 340,527
Total ................................. 1,531,880
Denmark - 2.67%
Kingdom of Denmark,
9.0%, 11-15-98 (A) .................... DKr1,750 290,238
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
OTHER GOVERNMENT SECURITIES (Continued)
France - 17.07%
Bon Du Tresor:
9.0%, 11-12-95 (A) .................... F1,000 $ 193,880
8.0%, 5-12-98 (A) ..................... F4,500 863,100
0.0%, 10-25-98 (A) .................... F4,000 561,320
Credit Local de France,
4.25%, 2-23-96 ........................ $ 250 236,250
Total ................................. 1,854,550
Germany - 8.02%
Bundesobligation:
7.25%, 12-20-94 (A) ................... DM550 355,960
6.625%, 1-20-98 (A) ................... DM250 159,593
Bundesschatzanweisungen,
8.75%, 12-20-95 (A) ................... DM250 166,265
Kreditanstalt fur Weideraufbau,
10.6%, 5-18-98 (A) .................... L300,000 189,000
Total ................................. 870,818
Netherlands - 1.51%
Netherlands Government,
6.5%, 10-1-94 (A) ..................... Dfl285 163,975
Supranational - 4.60%
European Investment Bank,
6.75%, 5-14-98 (A) .................... F2,000 369,720
Inter-American Development Bank,
7.5%, 12-15-94 (A) .................... DM200 129,472
Total ................................. 499,192
Sweden - 4.22%
Kingdom of Sweden,
10.75%, 1-23-97 (A) ................... SEK3,400 458,830
TOTAL OTHER GOVERNMENT SECURITIES - 59.72% $ 6,487,560
(Cost: $6,574,388)
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
7.25%, 8-31-96 ........................ $1,300 1,315,639
6.875%, 4-30-97 ....................... $ 175 175,301
TOTAL UNITED STATES GOVERNMENT SECURITIES - 13.73% $ 1,490,940
(Cost: $1,531,613)
See Notes to Schedules of Investments on page 36.
<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
SEPTEMBER 30, 1994
Face
Amount in
Thousands Value
UNREALIZED LOSS ON OPEN FORWARD
CURRENCY CONTRACTS
Danish Krone, 3-25-96 (A) .............. DKr1,700 $ (21,306)
French Franc, 3-5-95 (A) ............... F3,000 (58,562)
French Franc, 3-9-95 (A) ............... F2,500 (49,317)
TOTAL UNREALIZED LOSS ON OPEN FORWARD
CURRENCY CONTRACTS - (1.19%) $ (129,185)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Financial - 4.63%
Associates Corporation of North America,
Master Note............................ $ 503 503,000
Food and Related - 4.08%
Sara Lee Corporation,
Master Note ........................... $ 443 443,000
Total Commercial Paper - 8.71% 946,000
Time Deposits
ABN Amro Bank - Grand Cayman,
4.875%, 12-15-94 (A) .................. DM522 336,881
Canadian Imperial Bank of
Commerce - Grand Cayman,
4.1875%, 10-21-94 (A) ................. SFr512 397,764
Total Time Deposits - 6.76% 734,645
TOTAL SHORT-TERM SECURITIES - 15.47% $ 1,680,645
(Cost: $1,644,540)
TOTAL INVESTMENT SECURITIES - 97.35% $10,574,664
(Cost: $10,825,990)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.65% 287,924
NET ASSETS - 100.00% $10,862,588
See Notes to Schedules of Investments on page 36.
<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, F - French Franc, $A - Australian Dollar, $C
- Canadian Dollar, DKr - Danish Krone, DM - German Mark, Dfl - Dutch
Guilder, SEK - Swedish Krona, 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
SEPTEMBER 30, 1994 Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
<TABLE>
Assets -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Investment securities--
at value (Notes
1 and 4) $87,168,922 $65,982,336 $12,063,534 $25,145,039 $10,574,664
Cash ............... 4,998 8,221 7,365 8,139 6,139
Receivables:
Fund shares sold .. 850,381 526,561 11,862 223,523 32,547
Dividends and
interest ........ 117,511 20,908 193,914 464,154
278,241
Investment securities
sold ............ --- --- --- 714,449 ---
Other ............. --- --- 5,603 6,506 ---
Unamortized organization
expenses (Note 2) . 19,555 19,555 19,555 19,555 19,555
Prepaid insurance premium 2,229 1,871 939 1,445 939
-----------------------------------------------------------
Total assets .... 88,163,596 66,559,452 12,302,772 26,582,810 10,912,085
Liabilities -----------------------------------------------------------
Payable for investment
securities purchased --- 590,330 500,544 704,339 ---
Payable for Fund shares
redeemed .......... 92,146 138,874 16,693 77,328 21,282
Accrued service fee . 46,442 32,252 6,163 14,035 3,098
Organization expenses
payable ........... 19,555 19,555 19,555 19,555 19,555
Accrued transfer agency
and dividend disbursing 13,141 12,458 2,211 3,184 1,629
Dividends payable .. --- --- 3,503 9,683 2,249
Accrued accounting
services fee ...... 2,500 2,500 833 1,667 833
Other .............. 3,225 3,504 --- --- 851
---------------------------------------------------------
Total liabilities 177,009 799,473 549,502 829,791 49,497
---------------------------------------------------------
Total net assets$87,986,587$65,759,979 $11,753,270 $25,753,019 $10,862,588
Net Assets =========================================================
$0.01 par value capital stock
Capital stock .....$ 72,568$ 43,928 $ 12,233 $ 25,788 $ 11,641
Additional paid-in
capital ......... 84,519,126 58,993,441 12,237,969 27,416,144 11,256,985
Accumulated undistributed gain (loss):
Accumulated undistributed
net investment loss (26,334) (110,761) --- --- ---
Accumulated undistributed
net realized gain (loss)
on investments
and foreign currency
transactions ..... (682,247) 1,507,809 58 (248,409) (164,175)
Net unrealized appreciation
(depreciation) of
investments and
translation of assets
and liabilities in
foreign currencies at
end of period . 4,103,474 5,325,562 (496,990) (1,440,504) (241,863)
---------------------------------------------------------
Net assets applicable to
outstanding units
of capital .....$87,986,587$65,759,979 $11,753,270 $25,753,019 $10,862,588
=========================================================
Net asset value, redemption
and offering price
per share ........... $12.12 $14.97 $9.61 $9.99 $9.33
====== ====== ===== ===== =====
Capital shares
outstanding ........ 7,256,811 4,392,845 1,223,269 2,578,793 1,164,107
Capital shares
authorized .........500,000,000500,000,000 500,000,000 500,000,000 500,000,000
</TABLE>
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended SEPTEMBER 30, 1994
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
Investment Income -------------------- ------------------- --------
Income:
Interest .......... $ 110,098$ 508,395 $353,190 $776,835 $317,920
Dividends ......... 666,037 5,800 --- --- ---
-------------------- -------- --------- --------
Total income .... 776,135 514,195 353,190 776,835 317,920
Expenses (Notes 2 and 3):-------------------- -------- --------- --------
Distribution fees . 285,782 200,625 44,204 95,502 39,125
Investment management fee267,912 214,624 32,812 71,052 34,337
Transfer agency and
dividend disbursing 74,005 70,189 14,116 20,169
10,472
Service fee ....... 84,034 56,478 12,784 27,062 5,866
Registration fees.. 41,671 38,392 6,314 11,568 1,574
Accounting services fee 15,000 13,333 5,000 8,333 5,000
Audit fees ........ 4,674 4,122 3,229 3,261 4,525
Custodian fees .... 3,990 4,883 1,680 1,767 5,760
Amortization of organization
expenses ........ 3,259 3,259 3,259 3,259 3,259
Legal fees ........ 1,587 1,543 257 556 686
Other ............. 20,555 17,508 5,939 5,957 6,890
-------------------- -------- --------- --------
Total expenses .. 802,469 624,956 129,594 248,486 117,494
-------------------- -------- --------- --------
Net investment income
(loss) ........ (26,334) (110,761) 223,596 528,349 200,426
-------------------- -------- --------- --------
Realized and Unrealized Gain
(Loss) on Investments
Realized net gain (loss)
on securities...... (190,891) 738,757 (9,831) (249,867) (101,876)
Realized net gain (loss)
from foreign currency
transactions ...... (5) --- --- --- 7,988
-------------------- -------- --------- --------
(190,896) 738,757 (9,831) (249,867) (93,888)
-------------------- -------- --------- --------
Unrealized appreciation
(depreciation) in value
of securities during
the period ........ 1,001,864 3,503,016 (270,058) (100,539) 52,154
Unrealized appreciation from
translation of assets and
liabilites in foreign
currencies......... --- --- --- --- 6,670
-------------------- ------------------ --------
1,001,864 3,503,016 (270,058) (100,539) 58,824
-------------------- ------------------ --------
Net gain (loss) on
investments ..... 810,968 4,241,773 (279,889) (350,406) (35,064)
-------------------- ------------------ --------
Net increase (decrease)
in net assets resulting
from operations $ 784,634 $4,131,012$(56,293) $177,943 $165,362
==================== ================== ========
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Six Months Ended SEPTEMBER 30, 1994
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
Increase in Net Assets -------------------------------------------------------
Operations:
Net investment income
(loss) .......... $ (26,334)$ (110,761)$ 223,596$ 528,349$ 200,426
Realized net gain (loss)
on investments ... (190,896) 738,757 (9,831) (249,867) (93,888)
Unrealized appreciation
(depreciation) .. 1,001,864 3,503,016 (270,058) (100,539) 58,824
-------------------------------------------------------
Net increase (decrease)
in net assets resulting
from operations. 784,634 4,131,012 (56,293) 177,943 165,362
-------------------------------------------------------
Dividends to shareholders from
net investment income* --- --- (223,596) (528,349) (200,426)
-------------------------------------------------------
Capital share
transactions** .... 25,466,666 18,104,690 362,024 1,142,940 615,343
-------------------------------------------------------
Total increase . 26,251,300 22,235,702 82,135 792,534 580,279
Net Assets
Beginning of period 61,735,287 43,524,277 11,671,135 24,960,485 10,282,309
-------------------------------------------------------
End of period ...... $87,986,587$65,759,979$11,753,270$25,753,019$10,862,588
=======================================================
Undistributed net
investment income
(loss) .......... $(26,334) $(110,761) $--- $--- $---
======== ========= ==== ==== ====
*See "Financial Highlights" on pages 41-45.
**Shares issued from sale
of shares .......... 2,372,731 1,471,618 238,937 313,812 129,057
Shares issued from reinvest-
ment of dividends .. --- --- 22,222 48,333 21,667
Shares redeemed ...... (266,559) (170,747) (224,206) (249,911) (84,432)
--------- --------- ------- ------- -------
Increase in outstanding
capital shares ...... 2,106,172 1,300,871 36,953 112,234 66,292
========= ========= ======= ======= =======
Value issued from sale
of shares .......... $28,685,696$20,491,767 $2,321,467 $3,181,023 $1,197,624
Value issued from reinvest-
ment of dividends .. --- --- 215,409 489,677 201,406
Value redeemed ....... (3,219,030)(2,387,077)(2,174,852)(2,527,760) (783,687)
-------------------------------------------------------
Increase in outstanding
capital ............ $25,466,666$18,104,690 $ 362,024 $1,142,940$ 615,343
=======================================================
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
Increase in Net Assets -------------------------------------------------------
Operations:
Net investment income
(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 41-45.
**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.
<PAGE>
FINANCIAL HIGHLIGHTS OF
TOTAL RETURN FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
For the six For the For the
months ended year endedperiod ended
September 30, March 31, March 31,
1994 1994 1993*
-------------- ----------------------
Net asset value,
beginning of
period ........... $11.99 $11.07 $10.00
------ ------ ------
Income from investment
operations:
Net investment
income (loss).... .00 (0.01) .02
Net realized and
unrealized gain
on investments .. .13 .93 1.07
------ ------ ------
Total from investment
operations ....... .13 .92 1.09
------ ------ ------
Less dividends from net
investment income (0.00) (0.00) (0.02)
------ ------ ------
Net asset value,
end of period .... $12.12 $11.99 $11.07
====== ====== ======
Total return ....... 1.08% 8.31% 10.91%
Net assets, end of
period (000
omitted) .......... $87,987 $61,735 $12,460
Ratio of expenses
to average net
assets ........... 2.10%** 2.16% 2.21%**
Ratio of net investment
income to average
net assets ....... -0.07%** -0.12% 0.32%**
Portfolio turnover
rate ............. 20.83%** 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 six For the For the
months ended year endedperiod ended
September 30, March 31, March 31,
1994 1994 1993*
-------------- ----------------------
Net asset value,
beginning of
period ........... $14.08 $11.68 $10.00
------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... .00 (0.04) (0.02)
Net realized and
unrealized gain
on investments .. .89 2.75 1.79
------ ------ ------
Total from investment
operations ....... .89 2.71 1.77
------ ------ ------
Less distributions:
Dividends from net
investment
income .......... (0.00) (0.00) (0.01)
Distribution from
capital gains ... (0.00) (0.31) (0.08)
------ ------ ------
Total distributions (0.00) (0.31) (0.09)
------ ------ ------
Net asset value,
end of period .... $14.97 $14.08 $11.68
====== ====== ======
Total return ....... 6.32% 23.16% 17.71%
Net assets, end of
period (000
omitted) ......... $65,760 $43,524 $7,976
Ratio of expenses
to average net
assets ........... 2.33%** 2.34% 2.50%**
Ratio of net investment
income to average
net assets ....... -0.41%** -0.97% -0.68%**
Portfolio turnover
rate ............. 81.18%** 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 FUND
For a Share of Capital Stock Outstanding Throughout Each Period:
For the six For the For the
months ended year endedperiod ended
September 30, March 31, March 31,
1994 1994 1993*
-------------- ----------------------
Net asset value,
beginning of
period ........... $9.84 $10.06 $10.00
----- ------ ------
Income from investment
operations:
Net investment
income .......... .18 .35 .18
Net realized and
unrealized gain
(loss) on
investments ..... (0.23) (0.20) .06
----- ------ ------
Total from investment
operations ....... (0.05) .15 .24
----- ------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.18) (0.35) (0.18)
Distribution from
capital gains ... (0.00) (0.02) (0.00)
----- ------ ------
Total distributions (0.18) (0.37) (0.18)
----- ------ ------
Net asset value,
end of period .... $9.61 $ 9.84 $10.06
===== ====== ======
Total return ....... -0.45% 1.41% 2.40%
Net assets, end of
period (000
omitted) ......... $11,753 $11,671 $6,259
Ratio of expenses
to average net
assets ........... 2.20%** 2.14% 2.15%**
Ratio of net investment
income to average
net assets ....... 3.79%** 3.41% 3.48%**
Portfolio turnover
rate ............. 19.48%** 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 six For the For the
months ended year endedperiod ended
September 30, March 31, March 31,
1994 1994 1993*
-------------- ----------------------
Net asset value,
beginning of
period ........... $10.12 $10.53 $10.00
------ ------ ------
Income from investment
operations:
Net investment
income .......... .21 .39 .21
Net realized and
unrealized gain
(loss) on
investments ..... (0.13) (0.28) .53
------ ------ ------
Total from investment
operations ....... .08 .11 .74
------ ------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.21) (0.39) (0.21)
Distribution from
capital gains ... (0.00) (0.13) (0.00)
------ ------ ------
Total distributions (0.21) (0.52) (0.21)
------ ------ ------
Net asset value,
end of period .... $ 9.99 $10.12 $10.53
====== ====== ======
Total return ....... 0.82% 0.76% 7.37%
Net assets, end of
period (000
omitted) ......... $25,753 $24,960 $8,557
Ratio of expenses
to average net
assets ........... 1.95%** 1.98% 1.94%**
Ratio of net investment
income to average
net assets ....... 4.15%** 3.62% 3.99%**
Portfolio turnover
rate ............. 78.23%** 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 six For the For the
months ended year endedperiod ended
September 30, March 31, March 31,
1994 1994 1993*
-------------- ----------------------
Net asset value,
beginning of
period ........... $9.37 $9.68 $10.00
----- ----- ------
Income from investment
operations:
Net investment
income .......... .18 .34 .20
Net realized and
unrealized loss
on investments .. (0.04) (0.31) (0.32)
----- ----- ------
Total from investment
operations ....... .14 .03 (0.12)
----- ----- ------
Less distributions:
Dividends declared
from net investment
income .......... (0.18) (0.26) (0.20)
Tax-basis return of
capital.......... (0.00) (0.08) (0.00)
----- ----- ------
Total distributions. (0.18) (0.34) (0.20)
----- ----- ------
Net asset value,
end of period .... $9.33 $9.37 $ 9.68
===== ===== ======
Total return ....... 1.53% 0.33% -1.28%
Net assets, end of
period (000
omitted) ......... $10,863 $10,282 $7,181
Ratio of expenses
to average net
assets ........... 2.25%** 2.24% 2.06%**
Ratio of net investment
income to average
net assets ....... 3.84%** 3.56% 3.88%**
Portfolio turnover
rate ............. 17.85%** 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
SEPTEMBER 30, 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. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards.
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 September 30, 1994, the Distributor received $851,462 in
12b-1 payments. During this same period W&R paid sales commissions of
$1,040,981.
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 September 30,
1994, the Distributor received $171,987 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 September 30, 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 $30,375,479$ 15,296,439$1,318,332$10,687,181$ 887,088
Purchases of U.S. Government
securities --- --- 573,095 --- ---
Purchases of short-term
securities 33,429,822129,352,6942,695,000 7,727,000 1,338,000
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 7,415,31512,340,129 415,702 9,515,498 168,303
Proceeds from maturities
and sales of U.S.
Government securities --- --- 687,031 --- 639,476
Proceeds from maturities
and sales of short-term
securities 29,998,075114,439,0852,349,159 7,930,831 853,227
For Federal income tax purposes, cost of investments owned at September 30,
1994 and the related unrealized appreciation (depreciation) were as follows:
Aggregate
Appreciation
Cost AppreciationDepreciation(Depreciation)
----------- -------------------------------------
Total Return Fund $83,069,926 $6,504,936 $2,405,940 $4,098,996
Growth Fund 60,656,774 6,869,435 1,543,873 5,325,562
Limited-Term Bond Fund12,560,524 4,176 501,166 (496,990)
Municipal Bond Fund 26,585,543 16,828 1,457,332 (1,440,504)
Global Income Fund 10,825,990 173,412 295,553 (122,141)
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 September
30, 1994, the results of its operations for the six months 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
September 30, 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 LLP
Kansas City, Missouri
October 31, 1994
<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
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
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
WRR3000SA(9-94)
printed on recycled paper
