WADDELL & REED FUNDS INC, 497, 1995-07-05

WADDELL & REED FUNDS INC
497, 1995-07-05

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Please read this Prospectus before investing, and keep it on file for future
reference. It sets forth concisely the information about the Funds that you
ought to know before investing.

Additional information has been filed with the Securities and Exchange
Commission and is contained in a Statement of Additional Information ("SAI")
dated June 30, 1995. The SAI is available free upon request to the Corporation
or Waddell & Reed, Inc., its principal underwriter and distributor, at the
address or telephone number below. The SAI is incorporated by reference into
this Prospectus and you will not be aware of all facts unless you read both this
Prospectus and the SAI.

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

Waddell & Reed Funds, Inc.

Waddell & Reed Funds, Inc. (the "Corporation") is a management investment
company that has six separate funds (the "Funds"), each of which is designed for
investors with different goals. Total Return Fund seeks to provide current
income while seeking capital growth. Growth Fund seeks capital appreciation.
Limited-Term Bond Fund seeks to provide a high level of current income
consistent with preservation of capital. Municipal Bond Fund seeks to provide
income which is not subject to Federal income taxation. International Growth
Fund seeks long-term appreciation as its primary goal and realization of income
as its secondary goal. Asset Strategy Fund seeks high total return with reduced
risk over the long term.

Prospectus
June 30, 1995

WADDELL & REED FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
Supplement to the Prospectus

This supplement is required by the state of Missouri

The securities offered hereby may be considered to be speculative due to
the Funds' ability to engage in short-term trading which may result in a high
rate of portfolio turnover and correspondingly increased transaction and
commission costs.

To be attached to the cover page of the Prospectus of Waddell & Reed Funds, Inc.

This supplement is dated August 31, 1992

WRP3000MO

<PAGE>
Table of Contents

An Overview of the Funds.................................3
Expenses.................................................5
Financial Highlights of Waddell & Reed Funds, Inc........11
Performance..............................................16
Explanation of Terms................................16
About Waddell & Reed.....................................17
About the Investment Principles of the Funds.............18
Investment Goals and Principles.....................18
Securities and Investment Practices
and Associated Risks ..........................24
About Your Account.......................................41
Ways to Set Up Your Account.........................41
Buying Shares.......................................42
Minimum Investments.................................43
Adding to Your Account..............................43
Selling Shares......................................43
Shareholder Services................................48
Personal Service...............................48
Reports........................................48
Exchanges......................................48
Automatic Transactions.........................49
Dividends, Distributions and Taxes..................49
Distributions..................................49
Taxes..........................................49
About the Management and Expenses of the Funds...........52
WRIMCO and Its Affiliates...........................52
Breakdown of Expenses...............................54
Management Fee.................................55
Other Expenses.................................55
Distribution...................................56

<PAGE>
An Overview of the Funds

The Funds: This Prospectus describes six separate series (each a "Fund") of an
open-end, management investment company. Each Fund has different investment
goals and policies. Each of the Funds is a diversified fund.

Goals, Strategies and Risk Considerations:

Total Return Fund seeks to provide current income while seeking capital growth.
This Fund invests primarily 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. Although
common stocks have a history of long-term growth in value, their prices tend to
fluctuate in the short term, particularly those of smaller companies.

Growth Fund seeks capital appreciation. This Fund invests primarily in common
stocks, or securities convertible into common stocks, of companies that offer,
in the opinion of the Fund's investment manager, above-average growth potential,
including relatively new or unseasoned companies. Although common stocks have a
history of long-term growth in value, their prices tend to fluctuate in the
short term, particularly those of smaller companies.

Limited-Term Bond Fund seeks a high level of current income consistent with
preservation of capital. This Fund invests primarily in debt securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities. Debt
securities have varying levels of sensitivity to changes in interest rates. The
Fund will maintain a dollar weighted average maturity of its portfolio of two to
five years.

Municipal Bond Fund seeks income not subject to Federal income taxation. This
Fund invests primarily in municipal bonds. Municipal bonds vary widely as to
their interest rates, degree of security and maturity. The Fund may invest up
to 10% of assets in taxable obligations (as defined herein).

International Growth Fund seeks long-term appreciation as its primary goal and
realization of income as its secondary goal. The securities selected to attempt
to achieve the Fund's primary goal will be issued by companies which the Fund's
investment manager believes have the potential for long-term growth. This Fund
invests in securities issued by companies or governments of any nation. There
are certain risks associated with foreign securities not usually associated with
U.S. securities.

Asset Strategy Fund seeks high total return with reduced risk over the long
term. This Fund seeks to reduce risk over the long term by spreading its assets
among stocks, bonds, and short-term instruments, both in the United States and
abroad, attempting to moderate the risk potential of investing solely in one
class of instruments. The Fund designates a mix which represents the way the
Fund's investments will generally be allocated over the long term. This mix
will vary over short-term periods as the Fund's investment manager adjusts the
Fund's holdings - within defined ranges - based on the current outlook for the
different markets. Because the Fund owns different types of investments, its
performance will be affected by a variety of factors.

As with any mutual fund, there can be no assurance that a Fund will be
successful in meeting its investment goal. For a further description of the six
Funds, their investment techniques and risks which may be associated with
certain investments, see "About the Investment Principles of the Funds."

Management: Waddell & Reed Investment Management Company ("WRIMCO") provides
investment advice to each of the Funds and manages each Fund's investments.
WRIMCO is a wholly-owned subsidiary of Waddell & Reed, Inc. WRIMCO, Waddell &
Reed, Inc. and its predecessors have provided investment management services to
registered investment companies since 1940.

Distributor: Waddell & Reed, Inc. acts as principal underwriter and distributor
of the shares of the Funds. See "About the Management and Expenses of the
Funds" for further information about distribution fees.

Purchases: You may buy shares of each of the Funds through Waddell & Reed, Inc.
and its account representatives. The price to buy a share of a Fund is the net
asset value of a share of that Fund. A sales charge is not incurred upon
purchase of a Fund, but the shares are subject to a contingent deferred sales
charge if redeemed within a certain time period. See "About Your Account" for
information on how to purchase shares of each of the Funds.

Redemptions: You may redeem your shares at net asset value less a deferred
sales charge, if any. The deferred sales charge will vary with the length of
time you have held your shares. When you sell your shares, they may be worth
more or less than what you paid for them. See "About Your Account" for a
description of redemption and reinvestment procedures.

<PAGE>
Expenses

Total Return Fund

Shareholder transaction expenses are charges you pay when you buy or sell shares
of a fund.

Maximum sales load
on purchases None

Maximum sales load
on reinvested
dividends None

Maximum contingent deferred sales
charge1 3%

Redemption fees
(other than con-
tingent deferred
sales charge) None

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).

Management fees 0.71%
12b-1 fees2 0.98%
Other expenses 0.36%
Total Fund
operating expenses3 2.05%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return4 and (2) redemption at the end of each time period:

1 year $ 51
3 years $ 74
5 years $110
10 years $238

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return4 and (2) no redemption at the end of each time period:

1 year $ 21
3 years $ 64
5 years $110
10 years $238

The purpose of the table is to assist you in understanding the various costs and
expenses that an investor in the Fund will bear directly or indirectly. The
example should not be considered a representation of past or future expenses;
actual expenses may be greater or lesser than those shown. For a more complete
discussion of certain expenses and fees, see "Breakdown of Expenses."

1The contingent deferred sales charge, which is imposed on redemption proceeds,
declines 1% annually from 3% of the amount invested during the first calendar
year to 0% after 4 years. See "About Your Account" for further information
about the contingent deferred sales charge.

2It is possible that long-term shareholders of the Fund may bear 12b-1
distribution fees which are more than the maximum front-end sales charge
permitted under the rules of the National Association of Securities Dealers,
Inc. See "Breakdown of Expenses."

3Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.

4Use of an assumed annual return of 5% is for illustration purposes only and not
a representation of a Fund's future performance, which may be greater or
lesser.Supplement to the Prospectus

This supplement is required by the state of Texas

The Funds' total operating expenses are higher than those charged by most
mutual funds with similar objectives.

To be attached to page 4 of the Prospectus of Waddell & Reed Funds, Inc.

This supplement is dated August 31, 1992

WRP3000TX

<PAGE>
Growth Fund

Shareholder transaction expenses are charges you pay when you buy or sell shares
of a fund.

Maximum sales load
on purchases None

Maximum sales load
on reinvested
dividends None

Maximum contingent deferred sales
charge1 3%

Redemption fees
(other than con-
tingent deferred
sales charge) None

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).

Management fees2 0.81%
12b-1 fees3 0.98%
Other expenses 0.45%
Total Fund
operating expenses4 2.24%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return5 and (2) redemption at the end of each time period:

1 year $ 53
3 years $ 80
5 years $120
10 years $257

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return5 and (2) no redemption at the end of each time period:

1 year $ 23
3 years $ 70
5 years $120
10 years $257

2The management fee for Growth Fund is higher than that of most funds.

3It is possible that long-term shareholders of the Fund may bear 12b-1
distribution fees which are more than the maximum front-end sales charge
permitted under the rules of the National Association of Securities Dealers,
Inc. See "Breakdown of Expenses."

4Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.

5Use of an assumed annual return of 5% is for illustration purposes only and not
a representation of a Fund's future performance, which may be greater or lesser.

<PAGE>
Limited Term-Bond Fund

Shareholder transaction expenses are charges you pay when you buy or sell shares
of a fund.

Maximum sales load
on purchases None

Maximum sales load
on reinvested
dividends None

Maximum contingent deferred sales
charge1 3%

Redemption fees
(other than con-
tingent deferred
sales charge) None

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).

Management fees 0.56%
12b-1 fees2 0.96%
Other expenses 0.64%
Total Fund
operating expenses3 2.16%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return4 and (2) redemption at the end of each time period:

1 year $ 52
3 years $ 78
5 years $116
10 years $249

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return4 and (2) no redemption at the end of each time period:

1 year $ 22
3 years $ 68
5 years $116
10 years $249

3 Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.

4Use of an assumed annual return of 5% is for illustration purposes only and not
a representation of a Fund's future performance, which may be greater or lesser.

<PAGE>
Municipal Bond Fund

Shareholder transaction expenses are charges you pay when you buy or sell shares
of a fund.

Maximum sales load
on purchases None

Maximum sales load
on reinvested
dividends None

Maximum contingent deferred sales
charge1 3%

Redemption fees
(other than con-
tingent deferred
sales charge) None

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).

Management fees 0.56%
12b-1 fees2 0.97%
Other expenses 0.41%
Total Fund
operating expenses 1.94%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return3 and (2) redemption at the end of each time period:

1 year $ 50
3 years $ 71
5 years $105
10 years $226

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return3 and (2) no redemption at the end of each time period:

1 year $ 20
3 years $ 61
5 years $105
10 years $226

3Use of an assumed annual return of 5% is for illustration purposes only and not
a representation of a Fund's future performance, which may be greater or lesser.

<PAGE>
International Growth Fund1

Shareholder transaction expenses are charges you pay when you buy or sell shares
of a fund.

Maximum sales load
on purchases None

Maximum sales load
on reinvested
dividends None

Maximum contingent deferred sales
charge2 3%

Redemption fees
(other than con-
tingent deferred
sales charge) None

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).

Management fees3 0.81%
12b-1 fees4 0.87%
Other expenses 0.77%
Total Fund
operating expenses5 2.45%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return6 and (2) redemption at the end of each time period:

1 year $ 55
3 years $ 86
5 years $131
10 years $279

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return6 and (2) no redemption at the end of each time period:

1 year $ 25
3 years $ 76
5 years $131
10 years $279

1International Growth Fund (formerly Global Income Fund) changed its name and
investment objective effective April 20, 1995.

2The contingent deferred sales charge, which is imposed on redemption proceeds,
declines 1% annually from 3% of the amount invested during the first calendar
year to 0% after 4 years. See "About Your Account" for further information
about the contingent deferred sales charge.

3Expense information has been restated to reflect the current management fees
which became effective April 20, 1995. The management fee for International
Growth Fund is higher than that of most funds.

4It is possible that long-term shareholders of the Fund may bear 12b-1
distribution fees which are more than the maximum front-end sales charge
permitted under the rules of the National Association of Securities Dealers,
Inc. See "Breakdown of Expenses."

5Expense information has been restated to reflect the current management fees
which became effective April 20, 1995. Retirement plan accounts may be subject
to a $2 fee imposed by the plan custodian for use of the Flexible Withdrawal
Service.

6Use of an assumed annual return of 5% is for illustration purposes only and not
a representation of a Fund's future performance, which may be greater or lesser.

<PAGE>
Asset Strategy Fund

Shareholder transaction expenses are charges you pay when you buy or sell shares
of a fund.

Maximum sales load
on purchases None

Maximum sales load
on reinvested
dividends None

Maximum contingent deferred sales
charge1 3%

Redemption fees
(other than con-
tingent deferred
sales charge) None

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).

Management fees2 0.81%
12b-1 fees3 1.00%
Other expenses4 0.40%
Total Fund
operating expenses5 2.21%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return6 and (2) redemption at the end of each time period:

1 year $52
3 years $79

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return6 and (2) no redemption at the end of each time period:

1 year $22
3 years $69

Asset Strategy Fund commenced operations on April 20, 1995. The expenses are
pro forma and estimated for the first fiscal year of operations. The purpose of
the table is to assist you in understanding the various costs and expenses that
an investor in the Fund will bear directly or indirectly. The example should
not be considered a representation of past or future expenses; actual expenses
may be greater or lesser than those shown. For a more complete discussion of
certain expenses and fees, see "Breakdown of Expenses."

2The management fee for Asset Strategy Fund is higher than that of most funds.

3Expense information reflects the maximum 12b-1 fee. It is possible that long-
term shareholders of the Fund may bear 12b-1 distribution fees which are more
than the maximum front-end sales charge permitted under the rules of the
National Association of Securities Dealers, Inc. See "Breakdown of Expenses."

4Estimated expenses for the first fiscal year of operation. Actual expenses may
be greater or lesser than those shown.

5Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.

6Use of an assumed annual return of 5% is for illustration purposes only and not
a representation of a Fund's future performance, which may be greater or lesser.

<PAGE>
Financial Highlights

Total Return Fund
(Audited)

The following information has been audited by Price Waterhouse LLP, independent
accountants, and should be read in conjunction with the financial statements and
notes thereto, together with the report of Price Waterhouse LLP, included in the
SAI.

For a Share of Capital Stock Outstanding Throughout Each Period:

For the For the For the
year ended year endedperiod ended
March 31, March 31, March 31,
1995 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 .. .74 .93 1.07
------ ------ ------
Total from investment
operations ....... .74 .92 1.09
------ ------ ------
Less dividends from net
investment income (0.00) (0.00) (0.02)
------ ------ ------
Net asset value,
end of period .... $12.73 $11.99 $11.07
====== ====== ======
Total return ....... 6.17% 8.31% 10.91%
Net assets, end of
period (000
omitted) .......... $104,691 $61,735 $12,460
Ratio of expenses
to average net
assets ........... 2.05% 2.16% 2.21%**
Ratio of net investment
income to average
net assets ....... -0.04% -0.12% 0.32%**
Portfolio turnover
rate ............. 16.60% 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.

<PAGE>
Growth Fund
(Audited)

For a Share of Capital Stock Outstanding Throughout Each Period:

For the For the For the
year ended year endedperiod ended
March 31, March 31, March 31,
1995 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 .. 3.15 2.75 1.79
------ ------ ------
Total from investment
operations ....... 3.15 2.71 1.77
------ ------ ------
Less distributions:
Dividends from net
investment
income .......... (0.00) (0.00) (0.01)
Distribution from
capital gains ... (0.33) (0.31) (0.08)
------ ------ ------
Total distributions (0.33) (0.31) (0.09)
------ ------ ------
Net asset value,
end of period .... $16.90 $14.08 $11.68
====== ====== ======
Total return ....... 22.61% 23.16% 17.71%
Net assets, end of
period (000
omitted) ......... $100,683 $43,524 $7,976
Ratio of expenses
to average net
assets ........... 2.23% 2.34% 2.50%**
Ratio of net investment
income to average
net assets ....... 0.01% -0.97% -0.68%**
Portfolio turnover
rate ............. 56.30% 69.12% 124.44%**

<PAGE>
Limited-Term Bond Fund
(Audited)

For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the For the
year ended year endedperiod ended
March 31, March 31, March 31,
1995 1994 1993*
-------------- ----------------------
Net asset value,
beginning of
period ........... $9.84 $10.06 $10.00
----- ------ ------
Income from investment
operations:
Net investment
income .......... .39 .35 .18
Net realized and
unrealized gain
(loss) on
investments ..... (0.13) (0.20) .06
----- ------ ------
Total from investment
operations ....... .26 .15 .24
----- ------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.39) (0.35) (0.18)
Distribution from
capital gains ... (0.01) (0.02) (0.00)
----- ------ ------
Total distributions (0.40) (0.37) (0.18)
----- ------ ------
Net asset value,
end of period .... $9.70 $ 9.84 $10.06
===== ====== ======
Total return ....... 2.73% 1.41% 2.40%
Net assets, end of
period (000
omitted) ......... $12,419 $11,671 $6,259
Ratio of expenses
to average net
assets ........... 2.17% 2.14% 2.15%**
Ratio of net investment
income to average
net assets ....... 4.05% 3.41% 3.48%**
Portfolio turnover
rate ............. 29.20% 25.90% 39.64%**

<PAGE>
Municipal Bond Fund
(Audited)

For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the For the
year ended year endedperiod ended
March 31, March 31, March 31,
1995 1994 1993*
-------------- ----------------------
Net asset value,
beginning of
period ........... $10.12 $10.53 $10.00
------ ------ ------
Income from investment
operations:
Net investment
income .......... .44 .39 .21
Net realized and
unrealized gain
(loss) on
investments ..... .18 (0.28) .53
------ ------ ------
Total from investment
operations ....... .62 .11 .74
------ ------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.44) (0.39) (0.21)
Distribution from
capital gains ... (0.00) (0.13) (0.00)
------ ------ ------
Total distributions (0.44) (0.52) (0.21)
------ ------ ------
Net asset value,
end of period .... $10.30 $10.12 $10.53
====== ====== ======
Total return ....... 6.37% 0.76% 7.37%
Net assets, end of
period (000
omitted) ......... $27,434 $24,960 $8,557
Ratio of expenses
to average net
assets ........... 1.94% 1.98% 1.94%**
Ratio of net investment
income to average
net assets ....... 4.41% 3.62% 3.99%**
Portfolio turnover
rate ............. 56.92% 18.93% 140.02%**

<PAGE>
International Growth Fund*
(Audited)

For a Share of Capital Stock Outstanding Throughout Each Period:

For the For the For the
year ended year endedperiod ended
March 31, March 31, March 31,
1995 1994 1993**
-------------- ----------------------
Net asset value,
beginning of
period ........... $9.37 $9.68 $10.00
----- ----- ------
Income from investment
operations:
Net investment
income .......... .36 .34 .20
Net realized and
unrealized loss
on investments .. (0.01) (0.31) (0.32)
----- ----- ------
Total from investment
operations ....... .35 .03 (0.12)
----- ----- ------
Less distributions:
Dividends declared
from net investment
income .......... (0.36) (0.26) (0.20)
Tax-basis return of
capital.......... (0.00) (0.08) (0.00)
----- ----- ------
Total distributions. (0.36) (0.34) (0.20)
----- ----- ------
Net asset value,
end of period .... $9.36 $9.37 $ 9.68
===== ===== ======
Total return ....... 3.84% 0.33% -1.28%
Net assets, end of
period (000
omitted) ......... $11,188 $10,282 $7,181
Ratio of expenses
to average net
assets ........... 2.29% 2.24% 2.06%***
Ratio of net investment
income to average
net assets ....... 3.87% 3.56% 3.88%***
Portfolio turnover
rate ............. 13.33% 34.90% 8.35%***

*International Growth Fund (formerly Global Income Fund) changed its name and
investment objective effective April 20, 1995.
**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.

Asset Strategy Fund began operations in April 1995.

<PAGE>
Performance

Mutual fund performance is commonly measured as total return. The Funds may
also advertise their performance by showing yield and performance rankings.

Explanation of Terms

Total Return is the overall change in value of an investment in a fund over a
given period, assuming reinvestment of any dividends and distributions. A
cumulative total return reflects actual performance over a stated period of
time. An average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period. Average annual total
returns smooth out variations in performance; they are not the same as actual
year-by-year results.

Standardized total return figures reflect payment of the maximum applicable
contingent deferred sales charge. Non-standardized performance information does
not reflect deduction of the sales charge or is for periods other than those
required to be presented or differs otherwise from standardized performance
information.

Yield refers to the income generated by an investment in a fund over a given
period of time, expressed as an annual percentage rate. A fund's yield is based
on a 30-day period ending on a specific date and is computed by dividing the
fund's net investment income per share earned during the period by the fund's
maximum offering price per share on the last day of the period. Tax equivalent
yield is calculated by applying the stated income tax rate to only the net
investment income exempt from taxation, according to a standard formula.

Performance Rankings are comparisons of a fund's performance to the performance
of other selected mutual funds, selected recognized market indicators such as
the Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average, or
non-market indices or averages of mutual fund industry groups. The Funds may
quote their performance rankings and/or other information as published by
recognized independent mutual fund statistical services or by publications of
general interest. In connection with a ranking, the Funds may provide
additional information, such as the particular category to which it relates, the
number of funds in the category, the criteria upon which the ranking is based,
and the effect of sales charges, fee waivers and/or expense reimbursements.

All performance information that a Fund advertises or includes in information
provided to present or prospective shareholders is historical in nature and is
not intended to represent or guarantee future results. The value of any Fund's
shares when redeemed may be more or less than their original cost.

Each Fund's recent performance and holdings will be detailed twice a year in the
Fund's annual and semiannual reports, which are sent to all shareholders.

<PAGE>
About Waddell & Reed

Since 1937, Waddell & Reed has been helping people make the most of their
financial future by helping them take advantage of various financial services.
Today, Waddell & Reed has over 2500 account representatives located throughout
the United States. Your primary contact in your dealings with Waddell & Reed
will be your local account representative. However, the Waddell & Reed
shareholder services department, which is part of the Waddell & Reed
headquarters operations in Overland Park, Kansas is available to assist you and
your Waddell & Reed account representative. You may speak with a customer
service representative by calling 913-236-2000.

<PAGE>
About the Investment Principles of the Funds

Investment Goals and Principles

The goal of each Fund is a matter of fundamental policy and may not be changed
without the approval of the shareholders of that Fund. Unless otherwise
indicated below, the types of securities in which a Fund may invest and other
policies are operating policies which may be changed by the Board of Directors
without shareholder approval. There is no assurance that a Fund will achieve
its goals; some market risks are inherent in all securities to varying degrees.

Total Return Fund.
The goal of Total Return Fund is to provide current income while seeking capital
growth. The Fund seeks to achieve this goal by investing primarily 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.

When conditions are such that stocks with high yields are less attractive than
other common stocks, Total Return Fund may hold lower yielding or non-dividend-
paying common stocks because of their prospects for capital growth. At other
times, Total Return Fund may seek to achieve its goal by investing in debt
securities when the return on these securities is attractive relative to the
return on common stocks.

WRIMCO normally invests the Fund's assets according to its investment strategy;
however, when WRIMCO believes that a full or partial defensive position is
temporarily desirable due to present or anticipated market or economic
conditions that are affecting or could affect the value of securities in the
Fund's portfolio, WRIMCO may take certain steps with respect to up to all of
Total Return Fund's assets, including, without limitation, the following: (i)
hold cash or cash equivalents (short-term investments, such as commercial paper
and certificates of deposit); (ii) invest in debt securities (including
commercial paper and short-term securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities ("U.S. Government Securities"));
or (iii) invest in convertible preferred stock. A defensive posture may create
a reduction in the Fund's yield.

See "Securities and Investment Practices and Associated Risks" for more detailed
information about the types of instruments in which the Fund may invest,
strategies WRIMCO may employ in pursuit of the Fund's investment goals and a
summary of risks associated with these instrument types and investment
practices.

Growth Fund.
The goal of Growth Fund is capital appreciation. The Fund attempts to achieve
this goal through a diversified holding of securities consisting primarily of
common stocks, or securities convertible into common stocks, of companies that
offer, in the opinion of WRIMCO, above-average growth potential, including
relatively new or unseasoned companies. Growth Fund is not intended for
investors who desire assured income and conservation of capital.

Growth Fund ordinarily invests in securities whose market price can be subject
to rapid and wide fluctuation. In selecting companies, WRIMCO usually looks for
such characteristics as aggressive or creative management, technology or
specialized expertise, new or unique products or services, entry into new or
emerging industries and special situations arising out of governmental
priorities and programs.

WRIMCO normally invests the Fund's assets according to its investment strategy;
however, when WRIMCO believes that a full or partial defensive position is
temporarily desirable due to present or anticipated market or economic
conditions that are affecting or could affect the value of securities in the
Fund's portfolio, WRIMCO may take certain steps with respect to up to all of
Growth Fund's assets, including, without limitation, the following: (i) hold
cash or cash equivalents (short-term investments, such as commercial paper and
certificates of deposit); (ii) invest in debt securities (including commercial
paper or short-term U.S. Government Securities); or (iii) invest in convertible
preferred stock. A defensive posture may create a reduction in the Fund's
yield.

Limited-Term Bond Fund.
The goal of Limited-Term Bond Fund is to provide a high level of current income
consistent with preservation of capital. The Fund seeks to achieve this goal by
investing primarily in debt securities of investment grade, including U.S.
Government Securities.

"Limited-Term" means that the Fund will maintain a dollar weighted average
maturity of its portfolio of not less than two years and not more than five
years. The maturity of collateralized mortgage obligations and other asset-
backed securities will be deemed to be the estimated average life of such
securities, as determined in accordance with certain prescribed models or
formulas, such as those provided by the Public Securities Association. The
maturity of other debt securities will be deemed to be the earlier of the call
date or the maturity date, whichever is appropriate.

Among the U.S. Government Securities that Limited-Term Bond Fund may purchase
are mortgage-backed securities of the Government National Mortgage Association
("Ginnie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and the
Federal National Mortgage Association ("Fannie Mae"). These mortgage-backed
securities include pass-through securities, participation certificates and
collateralized mortgage obligations. The Fund will invest in U.S. Government
Securities not backed by the full faith and credit of the United States only
when WRIMCO is satisfied the credit risk is acceptable. The debt securities,
other than U.S. Government Securities, in which Limited-Term Bond Fund invests
include, without limitation, corporate bonds, medium-term notes, asset-backed
securities (such as mortgage-backed securities) and other financial obligations
that are commonly considered debt, all of which securities will be denominated
in U.S. dollars.

WRIMCO normally invests the Fund's assets according to its investment strategy;
however, when WRIMCO believes that a full or partial defensive position is
temporarily desirable due to present or anticipated market or economic
conditions that are affecting or could affect the value of securities in the
Fund's portfolio, WRIMCO may take certain steps with respect to up to all of
Limited-Term Bond Fund's assets, including, without limitation, the following:
(i) shorten the average maturity of the Fund's portfolio; (ii) hold cash or cash
equivalents (short-term investments, such as commercial paper and certificates
of deposit); (iii) emphasize debt securities of a higher quality than those the
Fund would ordinarily hold; or (iv) invest in convertible preferred stock. A
defensive posture may create a reduction in the Fund's yield.

Municipal Bond Fund.
The goal of Municipal Bond Fund is to provide income that is not subject to
Federal income taxation. The Fund attempts to achieve this goal by investing
primarily in municipal bonds.

As used in this Prospectus, "municipal bonds" means obligations the interest on
which is not includable in gross income for Federal income tax purposes. See
"Dividends, Distributions and Taxes" concerning the alternative minimum tax.
Municipal Bond Fund and WRIMCO rely on the opinion of bond counsel for the
issuer in determining whether obligations are municipal bonds.

The types of municipal bonds in which Municipal Bond Fund may invest include
"general obligation" bonds, "revenue" bonds and certain "industrial development"
bonds. Municipal obligations in which the Fund may invest also include
municipal lease obligations of municipal authorities or entities and
participations in these obligations. Municipal bonds vary as to their interest
rates, degree of security and maturity. The bonds purchased by Municipal Bond
Fund are selected primarily on the basis of quality, yield and diversification.

The only taxable obligations that Municipal Bond Fund may purchase are (i) U.S.
Government Securities; (ii) bank obligations of domestic banks or savings and
loan associations that are subject to regulation by the U.S. Government
(including, without limitation, certificates of deposit, letters of credit and
acceptances); and (iii) commercial paper rated at least A by a recognized
statistical rating organization.

The ability of the governments, agencies, companies or others to pay principal
and interest on debt securities held by Municipal Bond Fund may change. Such
changes, actual or expected, may also affect the value of these debt securities,
and in turn the value of Municipal Bond Fund's shares. Dividends paid by
Municipal Bond Fund that are derived from income from taxable obligations,
options and futures contracts are subject to Federal income tax. See
"Dividends, Distributions and Taxes."

WRIMCO normally invests the Fund's assets according to its investment strategy;
however, when WRIMCO believes that a full or partial defensive position is
temporarily desirable due to present or anticipated market or economic
conditions that are affecting or could affect the value of securities in the
Fund's portfolio, WRIMCO may take certain steps with respect to up to all of
Municipal Bond Fund's assets, including, without limitation, the following: (i)
shorten the average maturity of the Fund's portfolio; (ii) hold cash or cash
equivalents (short-term investments, such as commercial paper and certificates
of deposit); (iii) hold taxable obligations, subject to the limitations stated
above; or (iv) emphasize debt securities of a higher quality or higher coupon
than those the Fund would ordinarily hold. A defensive posture may create a
reduction in the Fund's yield.

International Growth Fund.
The primary goal of International Growth Fund is the long-term appreciation of
your investment. Realization of income is a secondary goal. The Fund tries to
achieve these goals by investing in securities issued by companies or
governments of any nation. The securities WRIMCO selects to attempt to achieve
the Fund's primary goal will be issued by companies that WRIMCO believes have
the potential for long-term growth.

There are three main kinds of securities that the Fund will own: common stocks,
preferred stocks and debt securities. During normal market conditions, the Fund
will have at least 65% of its assets invested in growth securities. The
securities that the Fund purchases because they may increase in value over the
long term will usually be common stocks or securities that may be converted into
common stocks or rights for the purchase of common stocks. All or a substantial
amount of International Growth Fund's assets may be invested in foreign
securities if, in WRIMCO's opinion, doing so might assist in achieving the
Fund's goals.

WRIMCO normally invests the Fund's assets according to its investment strategy;
however, when WRIMCO believes that a full or partial defensive position is
temporarily desirable due to present or anticipated market or economic
conditions that are affecting or could affect the value of the securities in the
Fund's portfolio, WRIMCO may take certain steps with respect to up to all of
International Growth Fund's assets, including, without limitation, the
following: (i) invest in either debt securities (including commercial paper or
short-term U.S. Government Securities) or preferred stocks or both; or (ii)
invest completely or substantially in U.S. securities.

Asset Strategy Fund.
The goal of Asset Strategy Fund is high total return with reduced risk over the
long term. The Fund seeks to achieve this goal by allocating its assets among
stocks, bonds, and short-term instruments.

Allocating assets among different types of investments allows Asset Strategy
Fund to take advantage of opportunities wherever they may occur, but also
subjects the Fund to the risks of a given investment type. Stock values
generally fluctuate in response to the activities of individual companies and
general market and economic conditions. The value of bonds and short-term
instruments generally fluctuates based on changes in interest rates and in the
credit quality of the issuer.

WRIMCO regularly reviews Asset Strategy Fund's allocation of assets and makes
changes to favor investments that it believes provide the most favorable outlook
for achieving the Fund's goal. Although WRIMCO uses its expertise and resources
in choosing investments and in allocating assets, WRIMCO's decisions may not
always be advantageous to the Fund. When you sell your shares, they may be
worth more or less than what you paid for them.

Asset Strategy Fund allocates its assets among the following classes, or types,
of investments. The stock class includes equity securities of all types. The
bond class includes all varieties of fixed-income instruments with maturities of
more than three years (including adjustable rate preferred stocks). The short-
term class includes all types of short-term instruments with remaining
maturities of three years or less. Within each of these classes, Asset Strategy
Fund may invest in both domestic and foreign securities.

WRIMCO has the ability to allocate Asset Strategy Fund's assets within specified
ranges. Asset Strategy Fund's mix indicates the benchmark for its combination
of investments in each class over time. WRIMCO may change the mix within the
specified ranges from time to time. The range and approximate percentage of the
mix for each asset class are shown below. Some types of investments, such as
indexed securities, can fall into more than one asset class.

Mix Range
- --------- ------
Stock
class
10-60% 40%
Bond
class
20-60% 40%
Short-term
class
0-70% 20%

Asset Strategy Fund's approach spreads the Fund's assets among all three
classes, attempting to moderate the risk potential of stocks, bonds, and short-
term instruments. In pursuit of Asset Strategy Fund's goal, WRIMCO will not try
to pinpoint the precise moment when a major reallocation should be made. Asset
shifts among classes may be made gradually over time. Under normal
circumstances, a single reallocation will not involve more than 10% of Asset
Strategy Fund's total assets.

Within each class, WRIMCO seeks to maximize total return. WRIMCO seeks to
maximize total return within the stock class by actively allocating assets to
industry sectors expected to benefit from major trends, and to individual stocks
that WRIMCO believes to have superior growth potential. WRIMCO seeks to
maximize total return within the bond class by adjusting Asset Strategy Fund's
investments in securities with different credit qualities, maturities, and
coupon or dividend rates, and by seeking to take advantage of yield
differentials between securities. WRIMCO seeks to maximize total return within
the short-term asset class by taking advantage of yield differentials between
different instruments, issuers, and currencies. WRIMCO intends to take
advantage of yield differentials by considering the purchase or sale of
instruments when differentials on spreads between various grades and maturities
of such instruments approach extreme levels relative to long-term norms.

WRIMCO normally invests the Fund's assets according to its investment strategy;
however, as a temporary defensive measure at times when WRIMCO believes that
stocks, bonds and certain short-term instruments do not offer a good investment
opportunity, it may temporarily invest up to all of Asset Strategy Fund's assets
in money market instruments rated A-1 by Standard & Poor's Ratings Group ("S&P")
or Prime 1 by Moody's Investors Service, Inc. ("MIS"), or unrated securities
judged by WRIMCO to be of equivalent quality.

Asset Strategy Fund diversifies across investment types more than most mutual
funds. No one mutual fund, however, can provide an appropriate balanced
investment plan for all investors.

Securities and Investment Practices and Associated Risks

The following pages contain more detailed information about types of instruments
in which the Funds may invest, and strategies WRIMCO may employ in pursuit of
the Funds' investment goals. A summary of risks associated with these
instrument types and investment practices is included as well.

WRIMCO might not buy all of these instruments or use all of these techniques to
the full extent permitted by a Fund's investment goals and restrictions unless
it believes that doing so will help a Fund achieve its goal. As a shareholder,
you will receive annual and semiannual reports detailing your Fund's holdings.

Certain of the investment policies and restrictions of each Fund are also stated
below. A fundamental policy of a Fund may not be changed without the approval
of the shareholders of that Fund. Operating policies may be changed by the
Board of Directors without the approval of shareholders. Unless otherwise
indicated, the types of securities and other assets in which a Fund may invest
and other policies are operating policies.

Policies and limitations are typically considered at the time of purchase; the
sale of instruments is usually not required in the event of a subsequent change
in circumstances.

The Funds may engage in short-term trading. This results in correspondingly
greater commission expenses and transaction costs and may result in tax
consequences.

Please see the SAI for further information concerning the following instruments
and associated risks and the Funds' investment policies and restrictions.

Equity Securities. Equity securities represent an ownership interest in an
issuer. This ownership interest often gives an investor the right to vote on
measures affecting the issuer's organization and operations. Although common
stocks and other equity securities have a history of long-term growth in value,
their prices tend to fluctuate in the short term, particularly those of smaller
companies. The equity securities in which a Fund (other than Municipal Bond
Fund) invests may include preferred stock that converts to common stock either
automatically or after a specified period of time or at the option of the
issuer.

Debt Securities. Bonds and other debt instruments are used by issuers to borrow
money from investors. The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity. Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values. The debt securities in which a Fund (other
than Municipal Bond Fund) invests may include debt securities whose performance
is linked to a specified equity security or securities index.

Debt securities have varying levels of sensitivity to changes in interest rates
and varying degrees of quality. As a general matter, however, when interest
rates rise, the values of fixed rate debt securities fall and conversely, when
interest rates fall, the values of fixed rate debt securities rise. The values
of floating and adjustable rate debt securities are not as sensitive to changes
in interest rates as the values of fixed rate debt securities. Longer-term
bonds are generally more sensitive to interest rate changes than shorter-term
bonds.

Debt securities rated AAA, AA, A and BBB by S&P or Aaa, Aa, A and Baa by MIS, or
unrated securities judged by WRIMCO to be of equivalent quality to rated
securities in these categories, are considered to be of investment grade
quality. Debt securities rated in the lowest investment grade category (BBB by
S&P or Baa by MIS), or comparable unrated securities, have speculative
characteristics. Debt securities rated in the lower rating categories of the
established rating services (BB or lower by S&P or Ba or lower by MIS), or
comparable unrated securities (commonly called "junk bonds"), have predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. Debt securities rated
D by S&P or C by MIS are in payment default or are regarded as having extremely
poor prospects of ever attaining any real investment standing.
Subject to its investment restrictions, a Fund may invest in debt securities
rated in any rating category by an established rating service. In addition,
Asset Strategy Fund will treat unrated securities judged by WRIMCO to be
equivalent to rated securities to be equivalent to securities having that
rating. S&P and MIS ratings are described in Appendix A to the SAI. Credit
ratings for individual securities may change from time to time, and a Fund may
retain a portfolio security whose rating has been changed.

Lower-quality debt securities are considered to be speculative and involve
greater risk of default or price changes due to changes in the issuer's
creditworthiness. The market prices of these securities may fluctuate more than
high-quality securities and may decline significantly in periods of general
economic difficulty. While the market for high-yield, high-risk corporate debt
securities has been in existence for many years and has weathered previous
economic downturns, the 1980s brought a dramatic increase in the use of such
securities to fund highly leveraged corporate acquisitions and restructurings.
Past experience may not provide an accurate indication of the future performance
of the high-yield, high-risk bond market, especially during periods of economic
recession. The market for lower-rated debt securities may be thinner and less
active than that for higher-rated debt securities, which can adversely affect
the prices at which the former are sold. Adverse publicity and changing
investor perceptions may decrease the values and liquidity of lower-rated debt
securities, especially in a thinly-traded market. Valuation becomes more
difficult and judgment plays a greater role in valuing lower-rated debt
securities than with respect to securities for which more external sources of
quotations and last sale information are available. Since the risk of default
is higher for lower-rated debt securities, WRIMCO's research and credit analysis
are an especially important part of managing securities of this type held by a
Fund. WRIMCO continuously monitors the issuers of lower-rated debt securities
in a Fund's portfolio in an attempt to determine if the issuers will have
sufficient cash flow and profits to meet required principal and interest
payments. A Fund may choose, at its expense or in conjunction with others, to
pursue litigation or otherwise to exercise its rights as a security holder to
seek to protect the interests of security holders if it determines this to be in
the best interest of the Fund's shareholders.

U.S. Government Securities are high-quality instruments issued or guaranteed as
to principal or interest by the U.S. Treasury or by an agency or instrumentality
of the U.S. Government. Not all U.S. Government Securities are backed by the
full faith and credit of the United States. Some are backed by the right of the
issuer to borrow from the U.S. Treasury; others are backed by discretionary
authority of the U.S. Government to purchase the agencies' obligations; while
others are supported only by the credit of the instrumentality. In the case of
securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment.

Zero coupon bonds do not make interest payments; instead, they are sold at a
deep discount from their face value and are redeemed at face value when they
mature. Because zero coupon bonds do not pay current income, their prices can
be very volatile when interest rates change. In calculating its dividends, a
Fund takes into account as income a portion of the difference between a zero
coupon bond's purchase price and its face value.

Policies and Restrictions: At least 65% of the respective total assets of
Limited-Term Bond Fund and Municipal Bond Fund will be invested during normal
market conditions in bonds.

Up to 10% of Municipal Bond Fund's assets may be invested in debt securities
other than municipal bonds ("taxable obligations").

Limited-Term Bond Fund does not intend to invest more than 50% of its assets in
securities rated in the lowest tier of investment grade debt securities (those
rated BBB by S&P or Baa by MIS).

Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond Fund and
International Growth Fund may not invest in non-investment grade debt securities
if as a result of such investment more than 5% of that Fund's assets would
consist of such investments.

Asset Strategy Fund may not invest more than 35% of its assets in lower-quality
debt securities (those rated below BBB by S&P or Baa by MIS and unrated
securities judged by WRIMCO to be of equivalent quality). However, the Fund
does not currently intend to invest more than 20% of its total assets in
securities rated below investment-grade or judged by WRIMCO to be of equivalent
quality.

Municipal bonds are issued by a wide range of governments, agencies and
authorities for various purposes. The two main kinds of municipal bonds are
"general obligation" bonds and "revenue" bonds. In "general obligation" bonds,
the issuer has pledged its full faith, credit and taxing power for the payment
of principal and interest. "Revenue" bonds are payable only from specific
sources; these may include revenues from a particular facility or class of
facilities or special tax or other revenue source.

Industrial development bonds are revenue bonds issued by or on behalf of public
authorities to obtain funds to finance privately operated facilities. Their
credit quality is generally dependent on the credit standing of the company
involved.

Other municipal obligations include municipal lease obligations of municipal
authorities or entities and participations in these obligations (collectively,
"lease obligations"). WRIMCO determines liquidity of lease obligations in
accordance with guidelines established by the Corporation's Board of Directors.
Unrated municipal lease obligations will be considered to be illiquid. In
determining the credit quality of unrated municipal lease obligations, one of
the factors, among others, to be considered will be the likelihood that the
lease will not be canceled. Certain "non-appropriation" lease obligations may
present special risks because the municipality's obligation to make future lease
or installment payments depends on money being appropriated each year for this
purpose.

Municipal bonds vary widely as to their interest rates, degree of security and
maturity. Factors that affect the yield on municipal bonds include general
money market conditions, municipal bond market conditions, the size of a
particular offering, the maturity of the obligation and the nature of the issue.
Lower rated bonds usually, but not always, have higher yields than similar but
higher rated bonds.

Policies and Restrictions: As a fundamental policy, at least 80% of Municipal
Bond Fund's net assets will be invested during normal market conditions in
municipal bonds.

At least 80% of Municipal Bond Fund's assets will consist of municipal bonds of
investment grade.

Municipal Bond Fund does not intend to invest 25% or more of its assets in
industrial development bonds.

Preferred Stock is also rated by S&P and MIS, as described in Appendix A to the
SAI. Preferred stock rated AAA, AA, A or BBB by S&P or aaa, aa, a or baa by MIS
is considered to be of investment grade. Preferred stock rated BB or lower by
S&P or ba or lower by MIS is considered to have speculative characteristics.
The Funds may invest in preferred stock rated in any rating category by an
established rating service and unrated preferred stock judged by WRIMCO to be of
equivalent quality.

Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally have higher yields than those of common
stocks of the same or similar issuers, but lower yields than comparable
nonconvertible securities, are less subject to fluctuation in value than the
underlying stock because they have fixed income characteristics, and provide the
potential for capital appreciation if the market price of the underlying common
stock increases.

The value of a convertible security is influenced by changes in interest rates,
with investment value declining as interest rates increase and increasing as
interest rates decline. The credit standing of the issuer and other factors
also may have an effect on the convertible security's investment value.

Money Market Instruments are high-quality, short-term debt instruments that
present minimal credit risk. They may include U.S. Government Securities,
commercial paper and other short-term corporate obligations, and certificates of
deposit, bankers' acceptances, bank deposits, and other financial institution
obligations. These instruments may carry fixed or variable interest rates.

Policies and Restrictions: Asset Strategy Fund does not currently intend to
invest in money-market instruments rated below A-1 by S&P or Prime 1 by MIS, or
judged by WRIMCO to be of equivalent quality.

Foreign Securities and foreign currencies can involve significant risks in
addition to the risks inherent in U.S. investments. The value of securities
denominated in or indexed to foreign currencies, and of dividends and interest
from such securities, can change significantly when foreign currencies
strengthen or weaken relative to the U.S. dollar. Foreign securities markets
generally have less trading volume and less liquidity than U.S. markets, and
prices on some foreign markets can be highly volatile. Many foreign countries
lack uniform accounting and disclosure standards comparable to those applicable
to U.S. companies, and it may be more difficult to obtain reliable information
regarding an issuer's financial condition and operations. In addition, the
costs of foreign investing, including withholding taxes, brokerage commissions,
and custodial costs, are generally higher than for U.S. investments.

Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal
rights in foreign countries.

Investing abroad also involves different political and economic risks. Foreign
investments may be affected by actions of foreign governments adverse to the
interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility
of default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic, or social instability, military action or unrest, or adverse
diplomatic developments. There is no assurance that WRIMCO will be able to
anticipate these potential events or counter their effects.

The considerations noted above generally are intensified for investments in
developing countries. A developing country is a nation that, in WRIMCO's
opinion, is likely to experience long-term gross domestic product growth above
that expected to occur in the United States, the United Kingdom, France,
Germany, Italy, Japan and Canada. Developing countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets that trade a small number of securities.

Certain foreign securities impose restrictions on transfer within the U.S. or to
U.S. persons. Although securities subject to transfer restrictions may be
marketable abroad, they may be less liquid than foreign securities of the same
class that are not subject to such restrictions.

Policies and Restrictions: It is anticipated that normally at least 80% of
International Growth Fund's assets will be invested in foreign securities.
International Growth Fund may purchase foreign securities only if they (i) are
listed or admitted to trading on a domestic or foreign securities exchange, with
the exception of warrants, rights or restricted securities, which need not be so
listed or admitted; or (ii) are represented by American Depositary Receipts
(receipts issued against securities of foreign issuers deposited or to be
deposited with an American depository) so listed or admitted on a domestic
securities exchange or traded in the United States over-the-counter ("OTC")
market; or (iii) are issued or guaranteed by any foreign government or any
subdivision, agency or instrumentality thereof.

Under normal market conditions, International Growth Fund will have at least 65%
of its assets invested in at least three different countries outside the U.S.
International Growth Fund may not purchase a foreign security if as a result
more than 75% of its assets would be invested in securities of any one foreign
country. International Growth Fund will not invest more than 25% of its assets
in the securities issued by the government of any one foreign country.

Under normal conditions, Asset Strategy Fund intends to limit its investments in
foreign securities to no more than 50% of total assets. Asset Strategy Fund
currently intends to limit its investments in obligations of any single foreign
government to less than 25% of its total assets.

Total Return Fund and Growth Fund may invest up to 10% of their respective
assets in foreign securities, subject to limitations explained in the SAI.

Limited-Term Bond Fund and Municipal Bond Fund may not invest in foreign
securities.

Options, Futures and Other Strategies. A Fund may use certain options, forward
currency contracts and indexed securities to attempt to enhance income or yield
or may attempt to reduce the overall risk of its investments by using certain
options, futures contracts, forward currency contracts, swaps and certain other
strategies described herein. The strategies described below may be used in an
attempt to manage a Fund's foreign currency exposure as well as other risks of a
Fund's investments that can affect fluctuation in its net asset value.

Asset Strategy Fund may also use various techniques to increase or decrease its
exposure to changing security prices, interest rates, currency exchange rates,
commodity prices, or other factors that affect security values. These
techniques may involve derivative transactions such as buying and selling
options and futures contracts, entering into forward currency contracts or swap
agreements, and purchasing indexed securities.

A Fund's ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations. A Fund might not use any of these
strategies, and there can be no assurance that any strategy that is used will
succeed. The risks associated with such strategies are described below. Also
see the SAI for more information on these strategies and risk considerations
relating thereto.

Options. The Funds may engage in certain strategies involving options to
attempt to enhance the Fund's income or yield or to attempt to reduce the
overall risk of its investments. A call option gives the purchaser the right to
buy, and obligates the writer to sell, the underlying investment at the agreed
upon exercise price during the option period. A put option gives the purchaser
the right to sell, and obligates the writer to buy, the underlying investment at
the agreed upon exercise price during the option period. Purchasers of options
pay an amount, known as a premium, to the option writer in exchange for the
right under the option contract.

Options offer large amounts of leverage, which will result in a Fund's net asset
value being more sensitive to changes in the value of the related investment.
There is no assurance that a liquid secondary market will exist for exchange-
listed options. The market for options that are not listed on an exchange may be
less active than the market for exchange-listed options. A Fund will be able to
close a position in an option it has written only if there is a market for the
put or call. If a Fund is not able to enter into a closing transaction on an
option it has written, it will be required to maintain the securities, or cash
in the case of an option on an index, subject to the call or the collateral
underlying the put until a closing purchase transaction can be entered into or
the option expires. Because index options are settled in cash, a Fund cannot
provide in advance for its potential settlement obligations on a call it has
written on an index by holding the underlying securities. The Fund bears the
risk that the value of the securities it holds will vary from the value of the
index. Option transactions may increase a Fund's portfolio turnover rate
creating greater commission expenses, transaction costs and tax consequences.

Total Return Fund and Growth Fund may write and purchase listed options on
domestic stock indices that are not limited to stocks of any industry or group
of industries ("broadly-based stock indices"). Total Return Fund and Growth
Fund may also write listed covered call options and purchase listed covered put
options on domestic stock as well as purchase listed call options and write
listed put options on domestic stocks that are not covered.

Limited-Term Bond Fund and Municipal Bond Fund may write and purchase listed
options on domestic debt securities, which securities include, without
limitation, U.S. Government Securities ("Domestic Debt Securities"). Limited-
Term Bond Fund may also write and purchase OTC options on Domestic Debt
Securities. Municipal Bond Fund may write and purchase listed options on
indices of municipal bonds ("Municipal Bond Indices").

International Growth Fund may only write covered call options on securities that
are listed on a domestic securities exchange on not more than 10% of its total
assets. With respect to International Growth Fund only, a call option is
"covered" when International Growth Fund owns the securities subject to call or
has the right to acquire them without additional payment. International Growth
Fund may only purchase call options on securities to effect closing transactions
with respect to call options it has written.

There is no limitation on the types of options that Asset Strategy Fund may
purchase and sell. See the SAI for the limitations on Asset Strategy Fund's use
of options.

Futures Contracts and Options on Futures Contracts. When a Fund purchases a
futures contract, it incurs an obligation to take delivery of a specified amount
of the obligation underlying the contract at a specified time in the future for
a specified price. When a Fund sells a futures contract it incurs an obligation
to deliver the specified amount of the underlying obligation at a specified time
in return for an agreed upon price.

When a Fund writes an option on a futures contract it becomes obligated, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the term of the option. If a Fund
has written a call, it assumes a short futures position. If it has written a
put, it assumes a long futures position. When the Fund purchases an option on a
futures contract, it acquires a right in return for the premium it pays to
assume a position in a futures contract (a long position if the option is a call
and a short position if the option is a put).

Total Return Fund and Growth Fund may buy and sell futures contracts on broadly-
based stock indices ("Stock Index Futures"). Limited-Term Bond Fund and
Municipal Bond Fund may buy and sell futures on Domestic Debt Securities
("Domestic Debt Futures"). Municipal Bond Fund may buy and sell futures on
Municipal Bond Indices ("Municipal Bond Index Futures").

Total Return Fund and Growth Fund may write and purchase options on Stock Index
Futures. Limited-Term Bond Fund and Municipal Bond Fund may write and purchase
options on Domestic Debt Futures.

International Growth Fund has no present intention to purchase or sell futures
contracts or options thereon. There is no limitation on the types of futures
contracts and options thereon that Asset Strategy Fund may purchase and sell.

Subject to the further limitations stated in the SAI, the Funds' limitations on
the above instruments are as follows: Total Return Fund and Growth Fund may not
purchase or sell options, futures contracts or options on futures contracts if
immediately thereafter the aggregate value of such contracts and options held by
the Fund would exceed 10% of its assets. Similarly, Municipal Bond Fund may not
purchase or sell options, futures contracts or options on futures contracts if
immediately thereafter the aggregate value of such contracts and options held by
the Fund would exceed 20% of its assets. Dividends paid by Municipal Bond Fund
that are derived from income from taxable obligations, options and futures
contracts are subject to Federal income tax. See "Dividends, Distributions and
Taxes." Limited-Term Bond Fund may not purchase or sell options, futures
contracts or options on futures contracts if immediately thereafter the
aggregate value of such options and contracts held by the Fund would exceed 25%
of its assets. See the SAI for the limitations on Asset Strategy Fund's use of
these instruments.

Forward Contracts and Currencies. Asset Strategy Fund, International Growth
Fund, Total Return Fund and Growth Fund may enter into forward currency
contracts for the purchase or sale of a specified currency at a specified future
date either with respect to specific transactions or with respect to portfolio
positions in order to minimize the risk to the Funds from adverse changes in the
relationship between the U.S. dollar and foreign currencies. For example, when
WRIMCO anticipates purchasing or selling a security, a Fund may enter into a
forward contract in order to set the exchange rate at which the transaction will
be made. A Fund also may enter into a forward contract to sell an amount of a
foreign currency approximating the value of some or all of the Fund's securities
positions denominated in such currency. Each of these four Funds may also use
forward contracts in one currency or a basket of currencies to attempt to hedge
against fluctuations in the value of securities denominated in a different
currency if WRIMCO anticipates that there will be a correlation between the two
currencies.

Each of Asset Strategy Fund, International Growth Fund, Total Return Fund and
Growth Fund may also use forward currency contracts to shift the Fund's exposure
to foreign currency exchange rate changes from one foreign currency to another.
For example, if a Fund owns securities denominated in a foreign currency and
WRIMCO believes that currency will decline relative to another currency, it
might enter into a forward contract to sell the appropriate amount of the first
foreign currency with payment to be made in the second foreign currency.
Transactions that use two foreign currencies are sometimes referred to as "cross
hedging." Use of a different foreign currency magnifies the Fund's exposure to
foreign currency exchange rate fluctuations. Each of these Funds may also
purchase forward currency contracts to enhance income when WRIMCO anticipates
that the foreign currency will appreciate in value, but securities denominated
in that currency do not present attractive investment opportunities.

Successful use of forward currency contracts will depend on WRIMCO's skill in
analyzing and predicting currency values. Forward contracts may substantially
change a Fund's investment exposure to changes in currency exchange rates, and
could result in losses to the Fund if currencies do not perform as WRIMCO
anticipates. There is no assurance that WRIMCO's use of forward currency
contracts will be advantageous to a Fund or that it will hedge at an appropriate
time.

International Growth Fund may hold foreign currency only in connection with
forward currency contracts, only up to four business days, as well as in
connection with the purchase or sale of foreign securities, but not otherwise.
Total Return Fund, Growth Fund and Asset Strategy Fund may purchase and sell
foreign currency and invest in foreign currency deposits. Currency conversion
involves dealer spreads and other costs, although commissions usually are not
charged.

Indexed Securities. Each Fund (other than Municipal Bond Fund) may purchase and
sell indexed securities, which are securities whose prices are indexed to the
prices of other securities, securities indices, currencies, precious metals or
other commodities, or other financial indicators, as long as WRIMCO determines
that it is consistent with the Fund's investment goal and policies. Indexed
securities typically, but not always, are debt securities or deposits whose
value at maturity or coupon rate is determined by reference to a specific
instrument or statistic. The performance of indexed securities depends to a
great extent on the performance of the security, currency, or other instrument
to which they are indexed, and may also be influenced by interest rate changes
in the U.S. and abroad. At the same time, indexed securities are subject to the
credit risks associated with the issuer of the security, and their values may
decline substantially if the issuer's creditworthiness deteriorates. Indexed
securities may be more volatile than the underlying instruments.

Swaps, Caps and Floors. Limited-Term Bond Fund and Municipal Bond Fund may
enter into interest rate swap transactions and purchase or sell interest rate
caps and floors as described below. These Funds may only enter into these
transactions in connection with hedging strategies. Limited-Term Bond Fund may
enter into swaps, caps and floors with respect to domestic interest rates.
Municipal Bond Fund may enter into such transactions with respect to municipal
interest rates. Each of these Funds expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio or to protect against any increase in the price of securities a
Fund anticipates purchasing at a later date.

Asset Strategy Fund is not limited in the type of swap, cap, collar or floor it
may enter into as long as WRIMCO determines it is consistent with the Fund's
investment goal and policies. Depending on how they are used, the swap, cap,
collar and floor agreements used by Asset Strategy Fund may increase or decrease
the overall volatility of its investments and its share price and yield. The
most significant factor in the performance of these agreements is the change in
the specific interest rate, currency, or other factors that determine the
amounts of payments due to and from the Fund.

Swaps involve the exchange by a Fund with another party of their respective
commitments to pay or receive cash flows, e.g., an exchange of floating rate
payments for fixed rate payments. The purchase of a cap entitles the purchaser,
to the extent that a specified index exceeds a predetermined value, to receive
payments on a notional principal amount from the party selling such cap. The
purchase of a floor entitles the purchaser, to the extent that a specified index
falls below a predetermined value, to receive payments on a notional principal
amount from the party selling such floor. An interest rate collar combines
elements of buying a cap and selling a floor.

A Fund usually will enter into swaps on a net basis, i.e., the two payment
streams are netted out, with the Fund receiving or paying, as the case may be,
only the net amount of the two payments. If, however, an agreement calls for
payments by a Fund, the Fund must be prepared to make such payments when due.
The creditworthiness of firms with which a Fund enters into swaps, caps or
floors will be monitored by WRIMCO in accordance with procedures adopted by the
Board of Directors. If a firm's creditworthiness declines, the value of an
agreement would be likely to decline, potentially resulting in losses. If a
default occurs by the other party to such transaction, the Fund will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation.

The Funds understand that the position of the staff of the Securities and
Exchange Commission is that assets involved in such transactions are illiquid
securities and are, therefore, subject to the limitations on investment in
illiquid securities as described in the SAI.

Risks of Derivative Techniques. The use of options, futures contracts, options
on futures contracts, forward contracts, swaps, caps, collars, floors and
indexed securities involve special risks, including (i) possible imperfect or no
correlation between price movements of the portfolio investments (held or
intended to be purchased) involved in the transaction and price movements of the
instruments involved in the transaction; (ii) possible lack of a liquid
secondary market for any particular instrument at a particular time; (iii) the
need for additional portfolio management skills and techniques; (iv) losses due
to unanticipated market price movements; (v) the fact that, while such
strategies can reduce the risk of loss, they can also reduce the opportunity for
gain, or even result in losses, by offsetting favorable price movements in
investments involved in the transaction; (vi) incorrect forecasts by WRIMCO
concerning interest or currency exchange rates or direction of price
fluctuations of the investment involved in the transaction, which may result in
the strategy being ineffective; (vii) loss of premiums paid by a Fund on options
it purchases; and (viii) the possible inability of a Fund to purchase or sell a
portfolio security at a time when it would otherwise be favorable for it to do
so, or the possible need for a Fund to sell a portfolio security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to
segregate securities in connection with such transactions and the possible
inability of a Fund to close out or liquidate its position.

For a hedging strategy to be completely effective, the price change of the
hedging instrument must equal the price change of the investment being hedged.
The risk of imperfect correlation of these price changes increases as the
composition of the Funds' respective portfolios diverges from instruments
underlying a hedging instrument. Such equal price changes are not always
possible because the investment underlying the hedging instruments may not be
the same investment that is being hedged. WRIMCO will attempt to create a
closely correlated hedge but hedging activity may not be completely successful
in eliminating market value fluctuation.

WRIMCO may use derivative instruments, including securities with embedded
derivatives, for hedging purposes to adjust the risk characteristics of a Fund's
portfolio of investments and may use some of these instruments to adjust the
return characteristics of a Fund's portfolio of investments. The use of
derivative techniques for speculative purposes can increase investment risk. If
WRIMCO judges market conditions incorrectly or employs a strategy that does not
correlate well with a Fund's investments, these techniques could result in a
loss, regardless of whether the intent was to reduce risk or increase return.
These techniques may increase the volatility of a Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed. In addition,
these techniques could result in a loss if the counterparty to the transaction
does not perform as promised or if there is not a liquid secondary market to
close out a position that a Fund has entered into.

The ordinary spreads between prices in the cash and futures markets, due to the
differences in the natures of those markets, are subject to distortion. Due to
the possibility of distortion, a correct forecast of general interest, foreign
currency or stock market trends by WRIMCO may still not result in a successful
transaction. WRIMCO may be incorrect in its expectations as to the extent of
various interest or foreign exchange rate movements or stock market movements or
the time span within which the movements take place.

Options and futures transactions may increase portfolio turnover rates, which
results in correspondingly greater commission expenses and transaction costs and
may result in certain tax consequences. See the SAI for further information
regarding these and other risks.

The Funds may also invest in derivative mortgage-backed securities. These
securities are subject to significant market risks. See "Mortgage-Backed
Securities."

New financial products and risk management techniques continue to be developed.
Each Fund may use these instruments and techniques to the extent consistent with
its investment goal and regulatory requirements applicable to investment
companies.

Mortgage-Backed Securities may include pools of mortgages, such as
collateralized mortgage obligations and stripped mortgage-backed securities.
The value of these securities may be significantly affected by changes in
interest rates, the market's perception of the issuers, and the creditworthiness
of the parties involved.

The yield characteristics of mortgage-backed securities differ from those of
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently on mortgage-backed securities and
that principal may be prepaid at any time because the underlying mortgage loans
generally may be prepaid at any time. As a result, if a Fund purchases these
securities at a premium, a prepayment rate that is faster than expected will
reduce yield to maturity while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity. Conversely, if a
Fund purchases these securities at a discount, faster than expected prepayments
will increase, while slower than expected prepayments will reduce, yield to
maturity. Accelerated prepayments on securities purchased by a Fund at a
premium also impose a risk of loss of principal because the premium may not have
been fully amortized at the time the principal is repaid in full.

Timely payment of principal and interest on pass-through securities of Ginnie
Mae (but not Freddie Mac or Fannie Mae) is guaranteed by the full faith and
credit of the United States. This is not a guarantee against market decline of
the value of these securities or shares of a Fund. It is possible that the
availability (i.e., liquidity) of these securities could be adversely affected
by actions of the U.S. Government to tighten the availability of its credit.
Each Fund may invest in mortgage-backed securities as long as WRIMCO determines
that it is consistent with the Fund's investment goal and policies.

Policies and Restrictions: Limited-Term Bond Fund intends to invest a
significant percentage of its net assets in collateralized mortgage obligations.

Asset Strategy Fund does not currently intend to invest more than 40% of its
total assets in mortgage-backed securities.

Municipal Bond Fund does not currently intend to invest more than 10% of its
assets in mortgage-backed securities.

Total Return Fund does not currently intend to invest more than 5% of its total
assets in mortgage-backed securities.

Stripped Securities are the separate income or principal components of a debt
instrument. These involve risks that are similar to those of other debt
securities, although they may be more volatile. The prices of stripped
mortgage-backed securities may be particularly affected by changes in interest
rates.

Policies and Restrictions: Limited-Term Bond Fund does not currently intend to
invest more than 15% of its total assets in stripped securities. Total Return
Fund and Asset Strategy Fund do not currently intend to invest more than 5% of
their respective total assets in stripped securities.

When-Issued and Delayed-Delivery Transactions are trading practices in which
payment and delivery for the securities take place at a future date. The market
value of a security could change during this period, which could affect a Fund's
yield.

When purchasing securities on a delayed-delivery basis, a Fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations. When a Fund has sold a security on a delayed-delivery basis, a
Fund does not participate in further gains or losses with respect to the
security. If the other party to a delayed-delivery transaction fails to deliver
or pay for the securities, a Fund could miss a favorable price or yield
opportunity, or could suffer a loss.

Policies and Restrictions: Only International Growth Fund, Limited-Term Bond
Fund, Municipal Bond Fund and Asset Strategy Fund may purchase securities in
which it may invest on a when-issued or delayed delivery basis or sell them on a
delayed delivery basis.

Asset Strategy Fund does not currently intend to invest more than 5% of its
total assets in when-issued and delayed delivery transactions.

Repurchase Agreements. In a repurchase agreement, a Fund buys a security at one
price and simultaneously agrees to sell it back at a higher price. Delays or
losses could result if the other party to the agreement defaults or becomes
insolvent.

Policies and Restrictions: Each Fund, except Municipal Bond Fund, may purchase
securities subject to repurchase agreements.

Restricted and Illiquid Securities. Restricted securities are securities that
are subject to legal or contractual restrictions on resale. Restricted
securities may be illiquid due to restrictions on their resale.

Illiquid investments may be difficult to sell promptly at an acceptable price.
Difficulty in selling securities may result in a loss or may be costly to a
Fund.

Policies and Restrictions: International Growth Fund may purchase restricted
foreign securities, provided that after such purchase not more than 5% of its
total assets consist of such securities. Asset Strategy Fund may invest in
restricted securities.

Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond Fund and
International Growth Fund each may not invest more than 10% of its net assets in
illiquid investments.

Asset Strategy Fund may not purchase a security if, as a result, more than 15%
of its assets would be invested in illiquid investments.

Other Instruments may include depositary receipts, rights, warrants, and
securities of closed-end investment companies. As a shareholder in an
investment company, a Fund would bear its pro rata share of that investment
company's expenses, which could result in duplication of certain fees, including
management and administrative fees.

Policies and Restrictions: Growth Fund and Asset Strategy Fund may purchase
warrants on up to 5% of their respective assets at the time of investment,
subject to certain limitations explained in the SAI.

International Growth Fund may purchase warrants and rights to purchase
securities, provided that as a result of such purchase not more than 5% of its
assets consist of warrants, rights or a combination thereof.

No Fund may invest more than 5% of its respective assets taken at market value
at the time of investment in companies, including predecessors, with less than
three years continuous operation, subject to certain conditions explained in the
SAI. This restriction does not apply to any obligation issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, or to CMOs, other
mortgage-related securities, asset-backed securities or indexed securities.

Total Return Fund, Growth Fund, International Growth Fund and Asset Strategy
Fund may buy shares of other investment companies that do not redeem their
shares, subject to certain conditions explained in the SAI.

Diversification. Diversifying a Fund's investment portfolio can reduce the
risks of investing. This may include limiting the amount of money invested in
any one issuer or, on a broader scale, in any one industry.

Policies and Restrictions: As a fundamental policy, no Fund may invest in a
security if, as a result, it would own more than 10% of the outstanding voting
securities of an issuer, or if more than 5% of the Fund's total assets would be
invested in securities of that issuer, provided that U.S. Government Securities
are not subject to this limitation and up to 25% of the Fund's total assets may
be invested without regard to these restrictions.

As a fundamental policy, no Fund may buy a security if, as a result, 25% or more
of the Fund's total assets would then be invested in securities of issuers
having their principal business activities in the same industry, except for
municipal bonds (other than industrial development bonds) and U.S. Government
Securities.

Municipal Bond Fund will have less than 25% of its assets in securities of
issuers located in any single state.

Borrowing. If a Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off. If a Fund makes additional
investments while borrowings are outstanding, this may be considered a form of
leverage.

Policies and Restrictions: As a fundamental policy, Total Return Fund, Growth
Fund, Limited-Term Bond Fund, Municipal Bond Fund and International Growth Fund
may borrow money from banks for temporary, extraordinary or emergency purposes
but only up to 5% of their respective assets.

Asset Strategy Fund may borrow from banks. As a fundamental policy, Asset
Strategy Fund may borrow only for emergency or extraordinary purposes, but not
in an amount exceeding 33 1/3% of its total assets.

Lending. Securities loans may be made on a short-term or long-term basis for
the purpose of increasing a Fund's income. This practice could result in a loss
or a delay in recovering a Fund's securities. Loans will be made only to
parties deemed by WRIMCO to be creditworthy.

Policies and Restrictions: As a fundamental policy, no more than 10% of the
respective assets of Total Return Fund, Growth Fund, International Growth Fund
or Asset Strategy Fund, or 30% of the assets of Limited-Term Bond Fund, may be
loaned at any one time. Municipal Bond Fund may not lend its securities.

<PAGE>
About Your Account

The different ways to set up (register) your account are listed below.

Ways to Set Up Your Account
- ----------------------------------------------------

Individual or Joint Tenants
For your general investment needs

Individual accounts are owned by one person. Joint accounts can have two or
more owners (tenants).

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

Business or Organization
For investment needs of corporations, associations, partnerships, institutions,
or other groups

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

Retirement
To shelter your retirement savings from taxes

Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. In addition, contributions to these accounts may be
tax deductible.

_ Individual Retirement Accounts (IRAs) allow anyone of legal age and under 70
1\2 with earned income to invest up to $2,000 per tax year. The maximum is
$2,250 if the investor's spouse has less than $250 of earned income in the
taxable year.

_ Rollover IRAs retain special tax advantages for certain distributions from
employer-sponsored retirement plans.

_ Simplified Employee Pension Plans (SEP - IRAs) provide small business owners
or those with self-employed income (and their eligible employees) with many of
the same advantages as a Keogh, but with fewer administrative requirements.

_ Keogh Plans allow self-employed individuals to make tax-deductible
contributions for themselves up to 25% of their annual earned income, with a
maximum of $30,000 per year.

_ 401(k) Programs allow employees of corporations of all sizes to contribute a
percentage of their wages on a tax-deferred basis. These accounts need to be
established by the administrator or trustee of the plan.

_ 403(b) Custodial Accounts are available to employees of public school systems
or certain types of charitable organizations.

_ 457 Accounts allow employees of state and local governments and certain
charitable organizations to contribute a portion of their compensation on a
tax-deferred basis.

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

Gifts or Transfers to a Minor (UGMA, UTMA)
To invest for a child's education or other future needs

These custodial accounts provide a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
Federal gift tax. Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors
Act (UTMA).

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

Trust
For money being invested by a trust

The trust must be established before an account can be opened, or you may use a
trust form made available by Waddell & Reed. Contact your Waddell & Reed
account representative for the form.

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

Buying Shares

You may buy shares of each of the Funds through Waddell & Reed, Inc. and its
account representatives. To open your account you must complete and sign an
application. Your Waddell & Reed account representative can help you with any
questions you might have.

The price to buy a share of a Fund, called net asset value ("NAV"), is
calculated every business day. The Funds' shares are sold without a sales
charge.

A Fund's NAV is the value of a single share of that Fund. A Fund's NAV is
computed by adding up the value of that Fund's investments, cash, and other
assets, subtracting its liabilities, and then dividing the result by the number
of shares outstanding.

The securities in a Fund's portfolio that are listed or traded on an exchange
are valued using market quotations or, if market quotations are not available,
at their fair value in a manner determined in good faith by or at the direction
of the Board of Directors. Bonds are generally valued according to prices
quoted by a dealer in bonds that offers a pricing service. Short-term debt
securities are valued at amortized cost, which approximates market value. Other
assets are valued at their fair value by or at the direction of the Board of
Directors.

The Funds are open for business each day the New York Stock Exchange ("NYSE") is
open. Each Fund normally calculates its net asset value as of the later of the
close of business of the NYSE, normally 4 p.m. Eastern time, or the close of the
regular session of any other securities or commodities exchange on which an
option or future held by the Fund is traded.

When you place an order to buy shares, your order will be processed at the next
NAV calculated after your order is received and accepted. Note the following:

Orders are accepted only at the home office of Waddell & Reed, Inc.
All of your purchases must be made in U.S. dollars.
If you buy shares by check, and then sell those shares by any method other
than by exchange to another Fund, the payment may be delayed for up to ten
days to ensure that your previous investment has cleared.
The Funds do not issue certificates representing shares of a Fund.

When you sign your account application, you will be asked to certify that your
Social Security or taxpayer identification number is correct and that you are
not subject to backup withholding for failing to report income to the IRS.

Waddell & Reed, Inc. reserves the right to reject any purchase orders, including
purchases by exchange, and it and the Corporation reserve the right to
discontinue offering shares of the Funds for purchase.

Minimum Investments

To Open an Account $1,000

For certain
exchanges $100

For certain
retirement
accounts and
accounts opened
through Automatic
Investment Service $50

For certain
retirement
accounts and
accounts opened
through payroll
deductions for or
by employees of
WRIMCO, Waddell &
Reed, Inc. and
their affiliates$25

To Add to an Account

For certain
exchanges $100

For Automatic
Investment
Service $25

The minimum investment required to open an account may be waived or reduced for
purchases by employees of Waddell & Reed, Inc. or its affiliates, certain
pension and retirement plan accounts and participants in automatic investment
plans.

Adding to Your Account

Subject to the minimums described under "Minimum Investments," you can make
additional investments of any amount at any time.

To add to your account, make your check payable to Waddell & Reed, Inc. Mail
the check along with:

the detachable form that accompanies the confirmation of a prior purchase by
you or your year-to-date statement, or

a letter showing your account number, the account registration, and
indicating which Fund's shares you wish to purchase.

Mail to Waddell & Reed, Inc. at the address printed on your confirmation or
year-to-date statement.

Selling Shares

You can arrange to take money out of your account at any time by selling
(redeeming) some or all of your shares.

The Corporation will redeem your shares at their NAV next calculated after your
written request for redemption is received and accepted, subject to the
contingent deferred sales charge discussed herein.

Deferred
Date of Sales
Redemption Charge

any time
during the
calendar year of
investment and
the first full
calendar year after
the calendar year
of investment 3%

second full
calendar year 2%

third full
calendar year 1%

after third full
calendar year 0%

The deferred sales charge will be applied to the total amount invested during a
calendar year to acquire shares or the value of the shares redeemed, whichever
is less. All investments made during a calendar year are deemed a single
investment during that calendar year for purposes of calculating the deferred
sales charge.

To sell shares, your request must be made in writing.

Complete an Account Service Request form, available from your Waddell & Reed
account representative, or write a letter of instruction with:

the name on the account registration,
the Fund's name,
the Fund account number,
the dollar amount or number of shares to be redeemed, and
any other applicable requirements listed in the table below.

Deliver the form or your letter to your Waddell & Reed account representative,
or mail it to:

Waddell & Reed, Inc.
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217

Unless otherwise instructed, Waddell & Reed will send a check to the address on
the account.

Special Requirements for Selling Shares

Account Type Special Requirements
- --------------- --------------------------
Individual or The written instructions
Joint Tenant must be signed by all
persons required to sign
for transactions, exactly
as their names appear on
the account.

Sole The written instructions
Proprietorship must be signed by the
individual owner of the
business.
UGMA, UTMA
The custodian must sign
the written instructions
indicating capacity as
custodian.

Retirement The written instructions
account must be signed by a
properly authorized
person.

Trust The trustee must sign the
written instructions
indicating capacity as
trustee. If the trustee's
name is not in the account
registration, provide a
currently certified copy
of the trust document.

Business or At least one person
Organization authorized by corporate
resolution to act on the
account must sign the
written instructions.

Conservator, The written instructions
Guardian or must be signed by the
Other Fiduciary person properly authorized
by court order to act in
the particular fiduciary
capacity.

Note the following:

Written requests for redemption must be in good order, which requires that if
more than one person owns the shares, each owner must sign the written
request.
If you recently purchased the shares by check, the Corporation may delay
payment of redemption proceeds. You may arrange for the bank upon which the
purchase check was drawn to provide to the Corporation telephone or written
assurance, satisfactory to the Corporation, that the check has cleared and
been honored. If no such assurance is given, payment of the redemption
proceeds on these shares will be delayed until the earlier of 10 days or the
date the Corporation is able to verify that your purchase check has cleared
and been honored.
Redemptions may be suspended or payment dates postponed on days when the NYSE
is closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the Securities and Exchange Commission.
Payment is normally made in cash, although under extraordinary conditions
redemptions may be made in portfolio securities.

The Corporation reserves the right to require a signature guarantee on certain
redemption requests. This requirement is designed to protect you and Waddell &
Reed from fraud. The Corporation may require a signature guarantee in certain
situations, such as:

the request for redemption is made by a corporation, partnership or
fiduciary;
the request for redemption is made by someone other than the owner of record;
or
the check is being made payable to someone other than the owner of record.

The Corporation will accept a signature guarantee from a national bank, a
federally chartered savings and loan or a member firm of a national stock
exchange or other eligible guarantor in accordance with procedures of the
Corporation's transfer agent. A notary public cannot provide a signature
guarantee.

Contingent Deferred Sales Charge. A contingent deferred sales charge may be
assessed against your redemption amount and paid to Waddell & Reed, Inc. (the
"Distributor"), subject to the limitation described under "Distribution" and as
further described below. The purpose of the deferred sales charge is to
compensate the Distributor for the costs incurred by it in connection with the
sale of a Fund's shares. 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 a shareholder's account resulting from
capital appreciation above the amount paid for shares purchased during the
deferred sales charge period.

For purposes of determining the applicability and rate of any deferred sales
charge, it will be assumed that a redemption is made first of shares purchased
during the deferred sales charge period representing capital appreciation, next
of shares purchased during the deferred sales charge period representing payment
of dividends and distributions and then to shares held by the shareholder for
the longest period of time.

Unless instructed otherwise, the Corporation, when requested to redeem a
specific dollar amount, will redeem additional shares equal in value to the
deferred sales charge. For example, should you request a $1,000 redemption and
the applicable deferred sales charge is $27, the Fund will redeem shares having
an aggregate net asset value of $1,027, absent different instructions.

The deferred sales charge will not apply in the following circumstances:

in connection with redemptions of shares requested within one year of the
shareholder's death or disability, provided the Corporation is notified of
the death or disability at the time of the request and furnished proof of
such event satisfactory to the Distributor.

in connection with redemptions of shares that are made to effect a
distribution from a qualified retirement plan following retirement, a
required minimum distribution from an individual retirement account, Keogh
plan or Internal Revenue Code section 403(b)(7) custodial account, or a tax-
free return of an excess contribution, or that otherwise results from the
death or disability of the employee, as well as in connection with
redemptions by any tax-exempt employee benefit plan for which, as a result of
a subsequent law or legislation, the continuation of its investment would be
improper.

in connection with redemptions of shares purchased by current or retired
directors of the Corporation, or current or retired officers or employees of
the Corporation, WRIMCO, the Distributor or their affiliated companies,
registered representatives of Waddell & Reed, Inc., and by the members of
immediate families of such persons.

in connection with redemptions of shares made pursuant to a shareholder's
participation in any systematic withdrawal plan adopted for a Fund.

in connection with redemptions the proceeds of which are reinvested in shares
of a Fund within thirty days after such redemption.

in connection with the exercise of certain exchange privileges.

on redemptions effected pursuant to the Corporation's right to liquidate a
shareholder's shares of a Fund if the aggregate net asset value of those
shares is less than $500.

in connection with redemptions effected by another registered investment
company by virtue of a merger or other reorganization with a Fund or by a
former shareholder of such investment company of shares of a Fund acquired
pursuant to such reorganization.

These exceptions may be modified or eliminated by the Corporation at any time
without prior notice to shareholders, except with respect to redemptions
effected pursuant to the Corporation's right to liquidate a shareholder's
shares, which requires certain notices.

The Corporation reserves the right to redeem at NAV all shares of a Fund owned
or held by you having an aggregate NAV of less than $500. The Corporation will
give you notice of its intention to redeem your shares and a 60-day opportunity
to purchase a sufficient number of additional shares to bring the aggregate NAV
of your shares of that Fund to $500. These redemptions are not subject to the
deferred sales charge. The Corporation will not apply its redemption right to
individual retirement plan accounts, retirement accounts or accounts which have
a net asset value of less than $500 due to market forces.

You may reinvest in any one of the six Funds all or part of the amount you
redeemed by sending to the Fund the amount you want to reinvest. If you
reinvest within thirty days after the date of your redemption, the Distributor
will, with your reinvestment, restore an amount equal to the deferred sales
charge attributable to the amount reinvested by adding the deferred sales charge
amount to your reinvestment. For purposes of determining future deferred sales
charges, the reinvestment will be treated as a new investment. You may do this
only once as to shares of the Corporation.
This privilege may be eliminated or modified at any time without prior notice to
shareholders.

Under the terms of the 401(k) prototype plan which the Distributor has
available, the plan may have the right to make a loan to a plan participant by
redeeming Corporation shares held by the plan. Principal and interest payments
on the loan made in accordance with the terms of the plan may be reinvested by
the plan in shares of any of the Funds in which the plan may invest.

Shareholder Services

Waddell & Reed provides a variety of services to help you manage your account.

Personal Service

Your local Waddell & Reed account representative is available to provide
personal service. Additionally, the Waddell & Reed Customer Services staff is
available to respond promptly to your inquiries and requests.

Reports

Statements and reports sent to you include the following:

confirmation statements (after every purchase, exchange, transfer or
redemption)
year-to-date statements (quarterly)
annual and semiannual reports (every six months)

To reduce expenses, only one copy of most annual and semiannual reports will be
mailed to your household, even if you have more than one account with the Funds.
Call 913-236-2000 if you need copies of annual or semiannual reports or
historical account information.

Exchanges

You may sell your shares of any of the Funds and buy shares of another Fund
without payment of a deferred sales charge. The time period with respect to the
deferred sales charge will continue to run. Subject to certain conditions,
automatic monthly exchanges of shares of United Cash Management, Inc., a fund in
the United Group of Mutual Funds, may be made into the Funds.

Exchanges may only be made into Funds which are legally registered for sale in
the state of residence of the investor. Note that exchanges out of the Funds
may have tax consequences for you. Before exchanging into a Fund, read its
prospectus.

The Fund reserves the right to terminate or modify these exchange privileges at
any time, upon notice in certain instances.

Automatic Transactions

Flexible withdrawal service lets you set up monthly, quarterly, semiannual or
annual redemptions from your account.

Regular Investment Plans allow you to transfer money into your Fund account, or
between Fund accounts, automatically. While regular investment plans do not
guarantee a profit and will not protect you against loss in a declining market,
they can be an excellent way to invest for retirement, a home, educational
expenses, and other long-term financial goals.

Certain restrictions and fees imposed by the plan custodian may also apply for
retirement accounts. Speak with your Waddell & Reed account representative for
more information.

Regular Investment Plans

Automatic Investment Service
To move money from your bank account to an
existing account with Waddell & Reed Funds,
Inc.

Minimum Frequency
$25 Monthly

Funds Plus Service
To move money from United Cash Management, Inc.
to a Fund in Waddell & Reed Funds, Inc.,
whether in the same or a different account

Minimum Frequency
$100 Monthly

Dividends, Distributions and Taxes

Distributions

Each Fund distributes substantially all of its net investment income and net
capital gains to its shareholders each year. Ordinarily, dividends are
distributed from a Fund's net investment income, which includes accrued
interest, earned discount, dividends and other income earned on portfolio assets
less expenses, at the following times: Total Return Fund, Growth Fund and
International Growth Fund, annually in December; Asset Strategy Fund, quarterly
in March, June, September and December; and Limited-Term Bond Fund and Municipal
Bond Fund, declared daily and paid monthly. Net capital gains (and any net
realized gains from foreign currency transactions) ordinarily are distributed in
December. Each Fund may make additional distributions if necessary to avoid
Federal income or excise taxes on its undistributed income and capital gains.

Distribution Options.
When you open an account, specify on your application how you want to receive
your distributions. Each Fund offers three options:

1. Share Payment Option. Your dividend and capital gains distributions will be
automatically paid in additional shares of the distributing Fund. If you do not
indicate a choice on your application, you will be assigned this option.

2. Income-Earned Option. Your capital gains distributions will be
automatically paid in additional shares of the distributing Fund, but you will
be sent a check for each dividend distribution.

3. Cash Option. You will be sent a check for your dividends and capital gains
distributions.

For retirement accounts, all distributions are automatically paid in additional
shares of the distributing Fund.

Taxes

Each Fund intends to qualify, in the case of Asset Strategy Fund, or to continue
to qualify for treatment as a regulated investment company under the Internal
Revenue Code of 1986, as amended ("Code"), so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of net investment income, net short-term capital gains and
net gains from certain foreign currency transactions) and net capital gains (the
excess of net long-term capital gains over net short term capital losses) that
are distributed to its shareholders. In addition, Municipal Bond Fund intends
to continue to qualify to pay "exempt-interest" dividends, which requires, among
other things, that at the close of each calendar quarter at least 50% of the
value of its total assets must consist of obligations the interest on which is
excludable from gross income under section 103(a) of the Code.

There are requirements that all Funds must follow in order to avoid Federal
taxation. In its effort to adhere to these requirements, a Fund may have to
limit its investment activity in some types of instruments.

As with any investment, you should consider how your investment in a Fund will
be taxed. If your account is not a tax-deferred retirement account (or you are
not otherwise exempt from income tax), you should be aware of the following tax
implications:

Taxes on distributions. Dividends from a Fund's investment company taxable
income generally are taxable to you as ordinary income, whether received in cash
or paid in additional Fund shares. Distributions by Municipal Bond Fund that
are designated by it as exempt-interest dividends generally may be excluded by
you from your gross income. Distributions of a Fund's realized net capital
gains, when designated as such, are taxable to you as long-term capital gains,
whether received in cash or paid in additional Fund shares and regardless of the
length of time you have owned your shares. Each Fund notifies you after each
calendar year-end as to the amounts of dividends and distributions paid (or
deemed paid) to you for that year.

A portion of the dividends paid by Total Return Fund, Growth Fund, Asset
Strategy Fund and/or International Growth Fund, whether received in cash or paid
in additional Fund shares, may be eligible for the dividends-received deduction
allowed to corporations. The eligible portion may not exceed the aggregate
dividends received by the Fund from U.S. corporations. However, dividends
received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the alternative minimum
tax ("AMT"). No part of the dividends paid by any other Fund is expected to be
eligible for this deduction.

Withholding. Each Fund is required to withhold 31% of all taxable dividends,
distributions and redemption proceeds payable to individuals and certain other
noncorporate shareholders who do not furnish the Fund with a correct taxpayer
identification number. Withholding at that rate from taxable dividends and
distributions also is required for such shareholders who otherwise are subject
to backup withholding.

Taxes on transactions. Your redemption of Fund shares will result in taxable
gain or loss to you, depending on whether the redemption proceeds are more or
less than your adjusted basis for the redeemed shares. An exchange of shares of
one Fund for shares of any other Fund generally will have similar tax
consequences. In addition, if you purchase shares of a Fund within thirty days
before or after redeeming other shares of that Fund at a loss, part or all of
that loss will not be deductible and will increase the basis of the newly
purchased shares.

Exempt-interest dividends paid by Municipal Bond Fund may be subject to income
taxation under state and local tax laws. In addition, a portion of those
dividends is expected to be attributable to interest on certain bonds that is
treated as a "tax preference item" for purposes of the AMT; such portion, which
that Fund anticipates will be not more than one-third of the dividends it will
pay to its shareholders, must be treated by you as such a tax preference item in
calculating your liability, if any, for the AMT. Municipal Bond Fund will
provide you with information concerning the amount of distributions subject to
the AMT after the end of each calendar year. Shareholders who may be subject to
the AMT should consult with their tax advisers concerning investment in that
Fund.

Interest on indebtedness incurred or continued to purchase or carry shares of
Municipal Bond Fund will not be deductible for Federal income tax purposes to
the extent that Fund's distributions consist of exempt-interest dividends.
Proposals may be introduced before Congress for the purpose of restricting or
eliminating the Federal income tax exemption for interest on municipal bonds.
If such a proposal were enacted, the availability of municipal bonds for
investment by that Fund and the value of its portfolio would be affected. In
that event, that Fund may decide to reevaluate its investment goal and policies.

The foregoing is only a summary of some of the important Federal tax
considerations generally affecting the Funds and their shareholders. There may
be other Federal, state or local tax considerations applicable to a particular
investor. You are urged to consult your own tax adviser.

<PAGE>
About the Management and Expenses of the Funds

Waddell & Reed Funds, Inc. is a mutual fund: an investment that pools
shareholders' money and invests it toward a specified goal. In technical terms,
Waddell & Reed Funds, Inc. is an open-end management investment company
organized as a corporation under Maryland law on January 29, 1992.

The Corporation is governed by a Board of Directors, which has overall
responsibility for the management of its affairs. The majority of directors are
not affiliated with Waddell & Reed, Inc.

The Corporation has six series of shares (the "Funds"), each of which operates
as a separate mutual fund with separate assets and liabilities. Each Fund is a
diversified fund. An investor in one of the Funds has an interest only in that
Fund.

The Corporation does not hold annual meetings of shareholders; however, certain
significant corporate matters, such as the approval of a new investment advisory
agreement or a change in a fundamental investment policy, which require
shareholder approval will be presented to shareholders at a meeting called by
the Board of Directors for such purpose.

Special meetings of shareholders may be called for any purpose upon receipt by a
Fund of a request in writing signed by shareholders holding not less than 10% of
all shares entitled to vote at such meeting, provided certain conditions stated
in the Bylaws of the Corporation are met. There will normally be no meeting of
the shareholders for the purpose of electing directors until such time as less
than a majority of directors holding office have been elected by shareholders,
at which time the directors then in office will call a shareholders' meeting for
the election of directors. To the extent that Section 16(c) of the Investment
Company Act of 1940, as amended ("1940 Act"), applies to the Corporation, the
directors are required to call a meeting of shareholders for the purpose of
voting upon the question of removal of any director when requested in writing to
do so by the shareholders of record of not less than 10% of the outstanding
shares.

Each Fund only has one class of shares. Each share of a Fund has the same
rights to dividends and to vote as other shares of the Fund. Shares are fully
paid and nonassessable when bought.

WRIMCO and Its Affiliates

The Funds are managed by WRIMCO, subject to the authority of the Corporation's
Board of Directors. WRIMCO provides investment advice to each of the Funds and
supervises each Fund's investments. Waddell & Reed, Inc. and its predecessors
served as investment manager to each of the registered investment companies in
the United Group of Mutual Funds, except United Asset Strategy Fund, Inc., since
1940 or the inception of the company, whichever was later, and to TMK/United
Funds, Inc. since that fund's inception, until January 8, 1992, when it assigned
its duties as investment manager and assigned its professional staff for
investment management services to WRIMCO. WRIMCO has also served as investment
manager for Torchmark Government Securities Fund, Inc. and Torchmark Insured
Tax-Free Fund, Inc. since each commenced operations in February 1993 and United
Asset Strategy Fund, Inc. since it commenced operations in March 1995.

Russell E. Thompson is primarily responsible for the day-to-day management of
the portfolio of Total Return Fund. Mr. Thompson has held his Fund
responsibilities since September 1992. He is Senior Vice President of WRIMCO
and Senior Vice President of Waddell & Reed Asset Management Company, an
affiliate of WRIMCO. He is Vice President of the Fund and Vice President of
other investment companies for which WRIMCO serves as investment manager. Mr.
Thompson has served as the portfolio manager for investment companies managed by
Waddell & Reed, Inc. and its successor, WRIMCO, since January 1976 and has been
an employee of Waddell & Reed, Inc. and its successor, WRIMCO, since March 1971.

Mark G. Seferovich is primarily responsible for the day-to-day management of the
portfolio of Growth Fund. Mr. Seferovich has held his Fund responsibilities
since September 1992. He is Vice President of WRIMCO, Vice President of the
Fund and Vice President of investment companies for which WRIMCO serves as
investment manager. Mr. Seferovich has served as the portfolio manager of
investment companies managed by Waddell & Reed, Inc. and its successor, WRIMCO,
since February 1989 and has been an employee of Waddell & Reed, Inc. and its
successor, WRIMCO, since February 1989.

W. Patrick Sterner is primarily responsible for the day-to-day management of the
portfolio of Limited-Term Bond Fund. Mr. Sterner has held his Fund
responsibilities since September 1992. He is Vice President of WRIMCO and Vice
President of Waddell & Reed Asset Management Company, an affiliate of WRIMCO.
He is also Vice President of the Fund and Vice President of another investment
company for which WRIMCO serves as investment manager. He has been an employee
of WRIMCO since August 1992. Prior to that date, Mr. Sterner was Chief
Investment Officer of a bank.

John M. Holliday is primarily responsible for the day-to-day management of the
portfolio of Municipal Bond Fund. Mr. Holliday has held his Fund
responsibilities since September 1992. He is Senior Vice President of WRIMCO
and Senior Vice President of Waddell & Reed Asset Management Company, an
affiliate of WRIMCO. He is Vice President of the Fund and Vice President of
other investment companies for which WRIMCO serves as investment manager. Mr.
Holliday has served as the portfolio manager for investment companies managed by
Waddell & Reed, Inc. and its successor, WRIMCO, since August 1979 and has been
an employee of Waddell & Reed, Inc. and its successor, WRIMCO, since April 1978.

Mark L. Yockey is primarily responsible for the day-to-day management of the
portfolio of International Growth Fund. Mr. Yockey has held his Fund
responsibilities since April 1995. He is Vice President of WRIMCO, Vice
President of the Fund and Vice President of other investment companies for which
WRIMCO serves as investment manager. Mr. Yockey has served as the portfolio
manager for investment companies managed by Waddell & Reed, Inc. and its
successor, WRIMCO, since January 1990 and has been an employee of Waddell &
Reed, Inc. and its successor, WRIMCO, since November 1986.

James D. Wineland is primarily responsible for the day-to-day management of the
portfolio of Asset Strategy Fund. Mr. Wineland has held his Fund
responsibilities since April 1995. He is Vice President of WRIMCO, Vice
President of the Fund and Vice President of other investment companies for which
WRIMCO serves as investment manager. Mr. Wineland has served as the portfolio
manager for investment companies managed by Waddell & Reed, Inc. and its
successor, WRIMCO, since January 1988 and has been an employee of Waddell &
Reed, Inc. and its successor, WRIMCO, since November 1984.

Other members of WRIMCO's investment management department provide input on
market outlook, economic conditions, investment research and other
considerations relating to the Funds' investments.

Waddell & Reed, Inc. serves as the principal underwriter and sole distributor of
the Corporation's shares. Waddell & Reed, Inc. also serves as underwriter for
each of the funds in the United Group of Mutual Funds and serves as the
distributor for TMK/United Funds, Inc.

Waddell & Reed Services Company acts as transfer agent ("Shareholder Servicing
Agent") for the Corporation and processes the payments of dividends to
shareholders. Waddell & Reed Services Company also acts as agent ("Accounting
Services Agent") in providing bookkeeping and accounting services and assistance
to the Corporation and pricing daily the value of shares of the Funds.

WRIMCO and Waddell & Reed Services Company are subsidiaries of Waddell & Reed,
Inc. Waddell & Reed, Inc. is a direct subsidiary of Waddell & Reed Financial
Services, Inc., a holding company and an indirect subsidiary of United Investors
Management Company, a holding company, and Torchmark Corporation, a holding
company.

WRIMCO places transactions for the portfolio of each Fund and in doing so may
consider sales of shares of each Fund and other funds it manages as a factor in
the selection of brokers to execute portfolio transactions.

Breakdown of Expenses

Like all mutual funds, the Funds pay fees related to their daily operations.
Expenses paid out of each Fund's assets are reflected in the share price or
dividends of that Fund; they are neither billed directly to shareholders nor
deducted from shareholder accounts.

Each Fund pays a management fee to WRIMCO for providing investment advice and
supervising its investments. Each Fund also pays other expenses, which are
explained below.

Management Fee

The management fee is computed on each Fund's net asset value as of the close of
business each day at an annual rate as follows:

Annual
Fund Rate
---- ------
Total Return
Fund 0.71%
Growth Fund 0.81%
Limited-Term
Bond Fund 0.56%
Municipal Bond
Fund 0.56%
International
Growth Fund 0.81%
Asset Strategy
Fund 0.81%

The management fee is accrued and paid to WRIMCO daily. The management fee for
Growth Fund, International Growth Fund and Asset Strategy Fund is higher than
that of most funds. Prior to April 20, 1995, the management fee for
International Growth Fund (formerly Global Income Fund) was computed at the
annual rate of 0.66%.

For the fiscal year ended March 31, 1995, management fees for each Fund then in
existence as a percentage of each such Fund's net assets were as follows:

Management
Fund Fee
- ---- ---
Total Return
Fund 0.70%

Growth Fund 0.80%

Limited-Term
Bond Fund 0.56%

Municipal
Bond Fund 0.56%

International
Growth Fund 0.66%
(formerly Global
Income Fund)

Other Expenses

While the management fee is a significant component of each Fund's annual
operating costs, each Fund has other expenses as well.

Each Fund pays the Accounting Services Agent a monthly fee based on the average
net assets of the Fund for accounting services. Each Fund pays the Shareholder
Servicing Agent a monthly fee for each account that was in existence at any time
during the month and a fee for each account on which a dividend or distribution
had a record date during the month. Inquiries concerning your accounts should
be sent to the Shareholder Servicing Agent at the address shown on the inside
back cover of this Prospectus or to the Corporation.

Each Fund also pays other expenses, such as fees and expenses of certain
directors, audit and outside legal fees, costs of materials sent to
shareholders, taxes, brokerage commissions, interest, insurance premiums,
custodian fees, fees payable by a Fund under Federal or other securities laws
and to the Investment Company Institute, and extraordinary expenses including
litigation and indemnification relative to litigation.

For the fiscal year ended March 31, 1995, total expenses for each Fund then in
existence as a percentage of each such Fund's average net assets were as
follows: Total Return Fund 2.05%; Growth Fund 2.23%; Limited-Term Bond Fund
2.17%; Municipal Bond Fund 1.94%; and International Growth Fund (formerly Global
Income Fund) 2.29%. Asset Strategy Fund began operations April 20, 1995, and
will be responsible for the same type of expenses as those Funds in existence on
March 31, 1995.

The Funds may have a high portfolio turnover. See the Financial Highlights
Table for past turnover rates of Total Return Fund, Growth Fund, Limited-Term
Bond Fund, Municipal Bond Fund, and International Growth Fund. Asset Strategy
Fund cannot precisely predict what its portfolio turnover rates will be;
however, it is anticipated that the annual turnover rate for the common stock
portion of its portfolio will not exceed 200% and the annual turnover rate for
the other portion of its portfolio will not exceed 200%. International Growth
Fund's ability to invest all or a substantial amount of its assets in foreign
securities may result in a higher turnover rate and higher commission costs. A
high turnover rate will increase a Fund's transaction costs and commission costs
and could generate taxable income or loss.

Distribution

The Corporation, pursuant to Rule 12b-1 of the Investment Company Act of 1940
(the "1940 Act") and as authorized under a Distribution and Service Plan (the
"Plan"), may finance the distribution of the shares of the Funds.

The Plan provides that the Corporation, with respect to each Fund, may
compensate the Distributor in an amount calculated and payable daily up to 1%
annually of each of the Fund's average daily net assets. There are two parts to
this fee: up to 0.75% may be paid to the Distributor for distribution services
and distribution expenses including commissions paid by the Distributor to its
sales representatives and managers (the "distribution fee") with respect to the
distribution of the particular Fund's shares, and up to 0.25% may be paid to
reimburse the Distributor for continuing payments made to the Distributor's
account representatives and managers, its administrative costs in overseeing
these payments, and the expenses of Waddell & Reed Services Company, a
subsidiary of the Distributor, in providing certain personal services to
shareholders.

The service fee of 0.25% annually of each Fund's daily net asset value is paid
to the Distributor for providing personal services to shareholders through the
Distributor's account representatives and sales managers and to maintain
shareholder accounts. Up to 0.05% of the 0.25% service fee may be paid by the
Distributor to Waddell & Reed Services Company to cover its costs in providing
the services to shareholders in order to maintain shareholder accounts. These
ongoing payments will be made only in amounts sufficient to constitute
reimbursement for expenses actually incurred and will cease if the Plan and
Underwriting Agreement with the Distributor terminate.

In addition to these fees, the Distributor may be compensated for distribution
of the Fund shares by a contingent deferred sales charge ("deferred sales
charge") imposed at the time of redemption. See "About Your Account."

The distribution fee and the deferred sales charge are designed to allow
investors to purchase shares without a front end sales charge and at the same
time to allow the Distributor to pay commissions to its field sales force and
pay other expenses of distribution including the cost of prospectuses for
prospective investors, sales literature, advertising, sales office expenses and
overhead. In this respect, the distribution fee and deferred sales charge are
comparable to a front end sales charge. See "Expenses" for the amount of these
charges and the service fee that may be paid over certain periods. The
distribution fee would be the equivalent of a 6.25% and 7.25% front end sales
charge after 9 and 10.5 years respectively, assuming a 5% growth rate. These
are the maximum sales charges permitted under Rules of the National Association
of Securities Dealers, Inc. ("NASD") for asset based sales charges and front end
sales charges, respectively, were the Corporation's shares offered with such
charges.

No payment of the distribution fee will be made, and no deferred sales charge
will be paid, to the Distributor by any Fund if, and to the extent that, the
aggregate of the distribution fees paid by the Fund and the deferred sales
charges received by the Distributor would exceed the maximum amount of such
charges that the Distributor is permitted to receive under NASD rules as then in
effect. During any one period of time, the amount paid by the Distributor in
commissions to its sales force and attendant promotional and overhead costs may
exceed the amount it receives from the distribution fees and deferred sales
charges. Although such fees and charges are paid to reimburse the Distributor
for such expenses, the expenses are not a liability of the Corporation, and the
Corporation at any time may on written notice terminate the Plan and the
Underwriting Agreement with the Distributor without penalty and without further
payment of the distribution fee. In such event the deferred sales charge may
remain in effect as to investments made prior to termination.

<PAGE>
Waddell & Reed Funds, Inc.

Custodian Underwriter
UMB Bank, n.a. Waddell & Reed, Inc.
Kansas City, Missouri 6300 Lamar Avenue
P. O. Box 29217
Legal Counsel Shawnee Mission, Kansas
Kirkpatrick & Lockhart LLP 66201-9217
1800 M Street, N. W. (913) 236-2000
Washington, D. C.
Shareholder Servicing
Independent Accountants Agent
Price Waterhouse LLP Waddell & Reed
Kansas City, Missouri Services Company
6300 Lamar Avenue
Investment Manager P. O. Box 29217
Waddell & Reed Investment Shawnee Mission, Kansas
Management Company 66201-9217
6300 Lamar Avenue (913) 236-2000
P. O. Box 29217
Shawnee Mission, Kansas Accounting Services
66201-9217 Agent
(913) 236-2000 Waddell & Reed
Services Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000

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Waddell & Reed Funds, Inc.
PROSPECTUS
June 30, 1995

Waddell & Reed Funds, Inc.
Total Return Fund
Growth Fund
Limited-Term Bond Fund
Municipal Bond Fund
International Growth Fund
Asset Strategy Fund

WRP3000(6-95)

printed on recycled paper

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WADDELL & REED FUNDS, INC.

6300 Lamar Avenue

P. O. Box 29217

Shawnee Mission, Kansas 66201-9217

(913) 236-2000

June 30, 1995

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information (the "SAI") is not a prospectus.
Investors should read this SAI in conjunction with the prospectus (the
"Prospectus") of Waddell & Reed Funds, Inc. (the "Corporation") dated June 30,
1995, which may be obtained from the Corporation or its principal underwriter
and distributor, Waddell & Reed, Inc., at the address or telephone number shown
above.

TABLE OF CONTENTS

Performance Information .......................... 2

Investment Goals and Policies .................... 4

Investment Management and Other Services ......... 40

Purchase, Redemption and Pricing of Shares ....... 46

Directors and Officers ........................... 52

Payments to Shareholders ......................... 57

Taxes ............................................ 58

Portfolio Transactions and Brokerage ............. 63

Other Information ................................ 67

Appendix A ....................................... 68

Appendix B ....................................... 70

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PERFORMANCE INFORMATION

Waddell & Reed, Inc., the Corporation's principal underwriter and
distributor ("Distributor"), or the Corporation may from time to time publish
for one or more of the six Funds (the "Funds") total return information, yield
information and/or performance rankings in advertisements and sales materials.

Total Return

An average annual total return quotation is computed by finding the average
annual compounded rates of return over the one-, five-, and ten-year periods
that would equate the initial amount invested to the ending redeemable value.
Total return is calculated by assuming an initial $1,000 investment. Shares
redeemed during the first four years after their purchase may be subject to a
contingent deferred sales charge (the "deferred sales charge") in a maximum
amount equal to 3%. See "Purchase, Redemption and Pricing of Shares." The
average annual total return quotations reflect the imposition of the maximum
applicable deferred sales charge. All dividends and distributions are assumed
to be reinvested at net asset value as of the day the dividend or distribution
is paid. No sales load is charged on reinvested dividends or distributions.
The formula used to calculate the average annual total return is:

n
P(1 + T) = ERV

Where : P = $1,000 initial payment
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of the $1,000 investment for the
periods shown.

Non-standardized performance information may also be presented that may not
reflect the deferred sales charge.

The average annual total return quotations with the maximum deferred sales
charge deducted as of March 31, 1995, which is the most recent balance sheet
included in this SAI, for the periods shown were as follows:

One Year Period Period from
From 4-1-94 9-21-92* to
to 3-31-95 3-31-95
--------------- -----------

Total Return Fund 3.17% 9.78%
Growth Fund 19.61% 25.32%
Limited-Term Bond Fund -0.23% 2.22%
Municipal Bond Fund 3.37% 5.36%
International Growth Fund 0.84% 0.75%

*Date of initial public offering

The average annual total return quotations without the maximum deferred
sales charge deducted as of March 31, 1995, which is the most recent balance
sheet included in this SAI, for the periods shown were as follows:

One Year Period Period from
From 4/1/94 9/21/92* to
to 3-31-95 3-31-95
--------------- --------------

Total Return Fund 6.17% 10.12%
Growth Fund 22.61% 25.60%
Limited-Term Bond Fund 2.73% 2.59%
Municipal Bond Fund 6.37% 5.72%
International Growth Fund 3.84% 1.12%

*Date of initial public offering

International Growth Fund (formerly Global Income Fund) changed its name
and investment objective effective April 20, 1995. Prior to this change, this
Fund's policies related to providing a high level of current income rather than
long-term appreciation. Asset Strategy Fund began operations on April 20, 1995,
therefore, total return quotations are not shown for this Fund.

Yield

A yield quoted for a Fund is computed by dividing the net investment income
per share earned during the period for which the yield is shown by the maximum
offering price per share on the last day of that period according to the
following formula:

6
Yield = 2((((a - b)/cd)+1) -1)

Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.

The yields computed according to the formula for the 30-day period ended on
March 31, 1995, the date of the most recent balance sheet included in this SAI,
for Limited-Term Bond Fund and Municipal Bond Fund are:

Limited-Term Bond Fund 4.92%
Municipal Bond Fund 4.78%

Municipal Bond Fund may also advertise or include in sales materials its
tax equivalent yield, which is calculated by applying the stated income tax rate
to only the net investment income exempt from taxation according to a standard
formula which provides for computation of tax equivalent yield by dividing that
portion of the Fund's yield which is tax-exempt by one minus a stated income tax
rate and adding the product to that portion, if any, of the yield of the Fund
that is not tax-exempt.

The tax equivalent yield computed according to the formula for the 30-day
period ended on March 31, 1995, the date of the most recent balance sheet
included in this SAI, is 5.59%, 6.56%, 6.84%, 7.36% and 7.78% for marginal tax
brackets of 15%, 28%, 31%, 36% and 39.6%, respectively.

Changes in yields primarily reflect different interest rates received by a
Fund as its portfolio securities change. Yield is also affected by portfolio
quality, portfolio maturity, type of securities held and operating expenses.
Yield quotations do not reflect the imposition of the deferred sales charge
described above. If such deferred sales charge imposed at the time of
redemption was reflected, it would reduce the performance quoted.

Non-standardized performance information may also be presented.

Performance Rankings

The Distributor or the Corporation also may from time to time publish for
one or more of the six Funds in advertisements or sales material performance
rankings as published by recognized independent mutual fund statistical services
such as Lipper Analytical Services, Inc., or by publications of general interest
such as Forbes, Money, The Wall Street Journal, Business Week, Barron's, Fortune
or Morningstar Mutual Fund Values. A Fund may also compare its performance to
that of other selected mutual funds or selected recognized market indicators
such as the Standard & Poor's 500 Stock Index and the Dow Jones Industrial
Average. Performance information may be quoted numerically or presented in a
table, graph or other illustration.

All performance information which a Fund advertises or includes in sales
material is historical in nature and is not intended to represent or guarantee
future results. The value of a Fund's shares when redeemed may be more or less
than their original cost.

INVESTMENT GOALS AND POLICIES

The investment goals and policies of the Funds are described in the
Prospectus, which refers to the Funds' investment methods and practices.
Additional information regarding certain methods and practices are included
below.

Asset Allocation

Asset Strategy Fund allocates its assets among the following classes, or
types, of investments:

The short-term class includes all types of domestic and foreign securities
and money market instruments with remaining maturities of three years or less.
Short-term instruments may include corporate debt securities, such as commercial
paper and notes; government securities issued by U.S. or foreign governments or
their agencies or instrumentalities; bank deposits and other financial
institution obligations; repurchase agreements involving any type of security;
and other similar short-term instruments. These instruments may be denominated
in U.S. dollars or foreign currency.

The bond class includes all varieties of domestic and foreign fixed-income
securities with maturities greater than three years. Securities in this class
may include bonds, notes, adjustable-rate preferred stocks, convertible bonds,
mortgage-related and asset-backed securities, domestic and foreign government
and government agency securities, zero coupon bonds, and other intermediate and
long-term securities. As with the short-term class, these securities may be
denominated in U.S. dollars or foreign currency. The Fund may also invest in
lower quality, high-yielding debt securities (commonly referred to as "junk
bonds"). The Fund currently intends to limit its investments in these
securities to 20% of its assets.

The stock class includes domestic and foreign equity securities of all
types (other than adjustable rate preferred stocks, which are included in the
bond class). Securities in the stock class may include common stocks, fixed-
rate preferred stocks (including convertible preferred stocks), warrants,
rights, depositary receipts, securities of closed-end investment companies, and
other equity securities issued by companies of any size, located anywhere in the
world.

In making asset allocation decisions, Waddell & Reed Investment Management
Company, investment manager to the Funds, ("WRIMCO") typically evaluates
projections of risk, market conditions, economic conditions, volatility, yields,
and returns.

Securities - General

Certain of the Funds may invest in securities including common stock,
preferred stock, debt securities and convertible securities, as described in the
Prospectus. These securities may include the following described securities
from time to time.

All of the Funds (other than Municipal Bond Fund) may purchase debt
securities whose principal amount at maturity is dependent upon the performance
of a specified equity security. The issuer of such debt securities, typically
an investment banking firm, is unaffiliated with the issuer of the equity
security to whose performance the debt security is linked. Equity-linked debt
securities differ from ordinary debt securities in that the principal amount
received at maturity is not fixed, but is based on the price of the linked
equity security at the time the debt security matures. The performance of
equity-linked debt securities depends primarily on the performance of the linked
equity security and may also be influenced by interest rate changes. In
addition, although the debt securities are typically adjusted for diluting
events such as stock splits, stock dividends and certain other events affecting
the market value of the linked equity security, the debt securities are not
adjusted for subsequent issuances of the linked equity security for cash. Such
an issuance could adversely affect the price of the debt security. In addition
to the equity risk relating to the linked equity security, such debt securities
are also subject to credit risk with regard to the issuer of the debt security.
In general, however, such debt securities are less volatile than the equity
securities to which they are linked.

All of the Funds (other than Municipal Bond Fund) may also invest in a type
of convertible preferred stock that pays a cumulative, fixed dividend that is
senior to, and expected to be in excess of, the dividends paid on the common
stock of the issuer. At the mandatory conversion date, the preferred stock is
converted into not more than one share of the issuer's common stock at the "call
price" that was established at the time the preferred stock was issued. If the
price per share of the related common stock on the mandatory conversion date is
less than the call price, the holder of the preferred stock will nonetheless
receive only one share of common stock for each share of preferred stock (plus
cash in the amount of any accrued but unpaid dividends). At any time prior to
the mandatory conversion date, the issuer may redeem the preferred stock upon
issuing to the holder a number of shares of common stock equal to the call price
of the preferred stock in effect on the date of redemption divided by the market
value of the common stock, with such market value typically determined one or
two trading days prior to the date notice of redemption is given. The issuer
must also pay the holder of the preferred stock cash in an amount equal to any
accrued but unpaid dividends on the preferred stock. This convertible preferred
stock is subject to the same market risk as the common stock of the issuer,
except to the extent that such risk is mitigated by the higher dividend paid on
the preferred stock. The opportunity for equity appreciation afforded by an
investment in such convertible preferred stock, however, is limited, because in
the event the market value of the issuer's common stock increases to or above
the call price of the preferred stock, the issuer may (and would be expected to)
call the preferred stock for redemption at the call price. This convertible
preferred stock is also subject to credit risk with regard to the ability of the
issuer to pay the dividend established upon issuance of the preferred stock.
Generally, convertible preferred stock is less volatile than the related common
stock of the issuer.

Specific Securities and Investment Practices

U.S. Government Securities.

Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government Securities") include Treasury Bills (which
mature within one year of the date they are issued), Treasury Notes (which have
maturities of one to ten years) and Treasury Bonds (which generally have
maturities of more than 10 years). All such Treasury securities are backed by
the full faith and credit of the United States.

U.S. Government agencies and instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Housing Administration,
Federal National Mortgage Association, Farmers Home Administration, Export-
Import Bank of the United States, Small Business Administration, Government
National Mortgage Association, General Services Administration, Central Bank for
Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
Farm Credit Banks, Land Banks, Maritime Administration, the Tennessee Valley
Authority, the Resolution Funding Corporation, and the Student Loan Marketing
Association.

Securities issued or guaranteed by U.S. Government agencies and
instrumentalities are not always supported by the full faith and credit of the
United States. Some, such as securities issued by the Federal Home Loan Banks,
are backed by the right of the agency or instrumentality to borrow from the
Treasury. Others, such as securities issued by the Federal National Mortgage
Association, are supported only by the credit of the instrumentality and not by
the Treasury. If the securities are not backed by the full faith and credit of
the United States, the owner of the securities must look principally to the
agency issuing the obligation for repayment and may not be able to assert a
claim against the United States in the event that the agency or instrumentality
does not meet its commitment. Limited-Term Bond Fund will invest in securities
of agencies and instrumentalities only if WRIMCO is satisfied that the credit
risk involved is acceptable.

The various types of U.S. Government Securities include mortgage-backed
securities of the Government National Mortgage Association ("Ginnie Mae"), the
Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Federal National
Mortgage Association ("Fannie Mae"). These mortgage-backed securities include
pass-through securities and participation certificates. Another type of
mortgage-backed security is the collateralized mortgage obligation. See
"Mortgage-Backed Securities." Timely payment of principal and interest on
Ginnie Mae pass-throughs is guaranteed by the full faith and credit of the
United States. Freddie Mac and Fannie Mae are both instrumentalities of the
U.S. Government, but their obligations are not backed by the full faith and
credit of the United States. It is possible that the availability and the
marketability (i.e., liquidity) of the securities discussed in this section
could be adversely affected by actions of the U.S. Government to tighten the
availability of its credit.

Zero Coupon Bonds.

A broker-dealer creates a derivative zero by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury Securities),
TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury Receipts) are
examples of derivative zeros.

A Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and principal
components of an outstanding U.S. Treasury bond and selling them as individual
securities. Bonds issued by the Resolution Funding Corporation (REFCORP) and
the Financing Corporation (FICO) can also be separated in this fashion.
Original issue zeros are zero coupon securities originally issued by the U.S.
Government, a government agency, or a corporation in zero coupon form.

Municipal Bonds.

Municipal bonds are issued by a wide range of state and local governments,
agencies and authorities for various purposes. The two main kinds of municipal
bonds are "general obligation" bonds and "revenue" bonds. In "general
obligation" bonds, the issuer has pledged its full faith, credit and taxing
power for the payment of principal and interest. "Revenue" bonds are payable
only from specific sources; these may include revenues from a particular
facility or class of facilities or special tax or other revenue source.

A special class of bonds issued by state and local government authorities
and agencies are "industrial development bonds." Only those industrial
development bonds the interest on which is free from Federal income taxation
(although it may be an item of tax preferences for purposes of the alternative
minimum tax) will be considered "municipal bonds." In general, industrial
development bonds are revenue bonds and are issued by or on behalf of public
authorities to obtain funds to finance privately operated facilities. They
generally depend for their credit quality on the credit standing of the company
involved. Municipal Bond Fund may not be an appropriate investment for entities
that are "substantial users" of facilities financed by industrial development
bonds or for investors who are "related persons," as such terms are defined in
the Internal Revenue Code of 1986, as amended (the "Code"). Such entities and
persons should consult with their tax advisers before investing in Municipal
Bond Fund. Municipal Bond Fund does not intend to invest 25% or more of its
assets in industrial development bonds.

Municipal leases and participation interests therein are another specific
type of municipal bond. The factors to be considered in determining whether or
not any rated municipal lease obligations are liquid include (i) the frequency
of trades and quotes for the obligations; (ii) the number of dealers willing to
purchase or sell the security and the number of other potential buyers; (iii)
the willingness of dealers to undertake to make a market in the securities; (iv)
the nature of marketplace trades, including the time needed to dispose of the
security, the method of soliciting offers and the mechanics of transfer; (v) the
likelihood that the marketability of the obligation will be maintained through
the time the instrument is held; (vi) the credit quality of the issuer and the
lessee; and (vii) the essentiality to the lessee of the property covered by the
lease. Unrated municipal lease obligations are considered illiquid. These
obligations, which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a variety of equipment and facilities. The
Funds have not held and do not intend to hold such obligations directly as a
lessor of the property, but may from time to time purchase a participation
interest in a municipal obligation from a bank or other third party. A
participation interest gives a Fund a specified, undivided interest in the
obligation in proportion to its purchased interest in the total amount of the
obligation. Municipal leases frequently have risks distinct from those
associated with general obligation or revenue bonds. State constitutions and
statutes set forth requirements that states or municipalities must meet to incur
debt, including voter referenda, interest rate limits or public sale
requirements. Leases, installment purchases or conditional sale contracts have
evolved as a means for governmental issuers to acquire property and equipment
without being required to meet these constitutional and statutory requirements.
Many leases and contracts include "non-appropriation clauses" providing that the
governmental issuer has no obligation to make future payments under the lease or
contract unless money is appropriated for such purpose by the legislative body
on a yearly or other periodic basis. Non-appropriation clauses free the issuer
from debt issuance limitations. In determining the liquidity of a municipal
lease obligation, WRIMCO will differentiate between direct interests in
municipal leases and municipal lease-backed securities, the latter of which may
take the form of a lease-backed revenue bond, a tax-exempt asset-backed security
or any other investment structure using a municipal lease-purchased agreement as
its base. While the former may present liquidity issues, the latter are based
on a well established method of securing payment of a municipal lease
obligation.

WRIMCO and the Funds rely on the opinion of bond counsel for the issuer in
determining whether obligations are municipal bonds. If a court holds that an
obligation held by a Fund is not a municipal bond (i.e., that the interest
thereon is taxable), Municipal Bond Fund will sell the obligation as soon as
possible, but it might incur a loss upon such sale.

With respect to ratings of municipal bonds (see Appendix B to this SAI),
now or in the future, Standard and Poor's Corporation ("S&P") or Moody's
Investors Services ("MIS") may use different rating designations for municipal
bonds depending on their maturities on issuance or other characteristics. For
example, MIS currently rates the top four categories of "municipal notes" (i.e.,
municipal bonds generally with a maturity at the time of issuance ranging from
six months to three years) as MIG 1, MIG 2, MIG 3 and MIG 4. Subject to the
particular Fund's investment policies and goal, municipal bonds purchased by a
Fund (other than Asset Strategy Fund) will comply with the percentage limits
discussed in the Prospectus if they are within the top four rating designations
of S&P or MIS for the type of municipal bond in question. A Fund is not
required to dispose of any municipal bond if its rating falls below the rating
required for its purchase, nor does such a fall in rating affect the amount of
unrated municipal bonds which a Fund may buy.

Mortgage-Backed Securities.

A mortgage-backed security may be an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages. Mortgage-backed securities are based on different types of mortgages
including those on commercial real estate or residential properties. Some
mortgage-backed securities, such as collateralized mortgage obligations
("CMOs"), make payments of both principal and interest at a variety of
intervals; others make semiannual interest payments at a predetermined rate and
repay principal at maturity (like a typical bond). Pass-through securities and
participation certificates represent pools of mortgages that are assembled, with
interests sold in the pool; the assembly is made by an "issuer," such as a
mortgage banker, commercial bank or savings and loan association, which
assembles the mortgages in the pool and passes through payments of principal and
interest for a fee payable to it. Payments of principal and interest by
individual mortgagors are passed through to the holders of the interest in the
pool. Monthly or other regular payments on pass-through securities and
participation certificates include payments of principal (including prepayments
on mortgages in the pool) rather than only interest payments.

Each Fund (other than Municipal Bond Fund) may purchase mortgage-backed
securities issued by both government and non-government entities such as banks,
mortgage lenders, or other financial institutions. Other types of mortgage-
backed securities will likely be developed in the future, and each Fund may
invest in them if WRIMCO determines they are consistent with the Fund's
investment objective and policies. Municipal Bond Fund may only purchase
mortgage-backed securities issued by government entities.

The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers. In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues. Mortgage-backed securities are subject to prepayment risk.
Prepayment, which occurs when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities of these securities
and may lower their total returns.

Growth Fund and International Growth Fund do not currently intend to invest
in mortgage-backed securities.

Stripped Mortgage-Backed Securities.

Stripped mortgage-backed securities are created when a U.S. Government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities. The holder of the "principal-only" security ("PO") receives the
principal payments made by the underlying mortgage-backed security, while the
holder of the "interest-only" security ("IO") receives interest payments from
the same underlying security.

The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates. As interest rates fall, prepayment rates
tend to increase, which tends to reduce prices of IOs and increase prices of
POs. Rising interest rates can have the opposite effect.

Growth Fund, Municipal Bond Fund and International Growth Fund do not
currently intend to invest in stripped securities.

Asset-Backed Securities.

Asset-backed securities represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as pass-
through securities. Interest and principal payments ultimately depend upon
payment of the underlying loans by individuals, although the securities may be
supported by letters of credit or other credit enhancements. The value of
asset-backed securities may also depend on the creditworthiness of the servicing
agent for the loan pool, the originator of the loans, or the financial
institution providing the credit enhancement. Each Fund may invest in asset-
backed securities as long as WRIMCO determines that it is consistent with the
Fund's investment goals and policies.

Bank Deposits.

Among the debt securities in which the Funds may invest are deposits in
banks (represented by certificates of deposit or other evidence of deposit
issued by such banks) of varying maturities. The Federal Deposit Insurance
Corporation insures the principal of certain such deposits ("Insured Deposits"),
currently to the extent of $100,000 per bank. Insured Deposits are not
marketable, and a Fund may invest in them only within the limit mentioned under
"Illiquid Investments" unless such obligations are payable at principal amount
plus accrued interest on demand or within seven days after demand.

Variable or Floating Rate Instruments.

Variable or floating rate instruments (including notes purchased directly
from issuers) bear variable or floating interest rates and carry rights that
permit holders to demand payment of the unpaid principal balance plus accrued
interest from the issuers or certain financial intermediaries. Floating rate
securities have interest rates that change whenever there is a change in a
designated base rate while variable rate instruments provide for a specified
periodic adjustment in the interest rate. These formulas are designed to result
in a market value for the instrument that approximates its par value. Each Fund
may invest in variable and floating rate instruments as long as WRIMCO
determines that it is consistent with the Fund's investment goal and policies.

Loans and Other Direct Debt Instruments.

Direct debt instruments are interests in amounts owed by a corporate,
governmental, or other borrower to lenders or lending syndicates (loans and loan
participations), to suppliers of goods or services (trade claims or other
receivables), or to other parties. Direct debt instruments are subject to a
Fund's policies regarding the quality of debt securities.

Purchasers of loans and other forms of direct indebtedness depend primarily
upon the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any nationally recognized rating
service. If a Fund does not receive scheduled interest or principal payments on
such indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protections than an unsecured
loan in the event of non-payment of scheduled interest or principal. However,
there is no assurance that the liquidation of collateral from a secured loan
would satisfy the borrower's obligation, or that the collateral could be
liquidated. Indebtedness of borrowers whose creditworthiness is poor involves
substantially greater risks, and may be highly speculative. Borrowers that are
in bankruptcy or restructuring may never pay off their indebtedness, or may pay
only a small fraction of the amount owed. Direct indebtedness of developing
countries also involves a risk that the governmental entities responsible for
the repayment of the debt may be unable, or unwilling, to pay interest and
principal when due.

Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, a Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. Direct debt instruments may also involve a risk of
insolvency of the lending bank or other intermediary. Direct debt instruments
that are not in the form of securities may offer less legal protection to a Fund
in the event of fraud or misrepresentation. In the absence of definitive
regulatory guidance, a Fund relies on WRIMCO's research in an attempt to avoid
situations where fraud or misrepresentation could adversely affect the Fund.

A loan is often administered by a bank or other financial institution that
acts as agent for all holders. The agent administers the terms of the loan, as
specified in the loan agreement. Unless, under the terms of the loan or other
indebtedness, a Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be subject
to the claims of the agent's general creditors, the Fund might incur certain
costs and delays in realizing payment on the loan or loan participation and
could suffer a loss of principal or interest.

Direct indebtedness purchased by a Fund may include letters of credit,
revolving credit facilities, or other standby financing commitments obligating a
Fund to pay additional cash on demand. These commitments may have the effect of
requiring a Fund to increase its investment in a borrower at a time when it
would not otherwise have done so, even if the borrower's condition makes it
unlikely that the amount will ever be repaid. A Fund will set aside appropriate
liquid assets in a segregated custodial account to cover its potential
obligations under standby financing commitments.

For purposes of the limitations on the amount of total assets that a Fund
will invest in any one issuer or in issuers within the same industry, a Fund
generally will treat the borrower as the "issuer" of indebtedness held by the
Fund. In the case of loan participations where a bank or other lending
institution serves as financial intermediary between a Fund and the borrower, if
the participation does not shift to the Fund the direct debtor-creditor
relationship with the borrower, Securities and Exchange Commission ("SEC")
interpretations require the Fund, in appropriate circumstances, to treat both
the lending bank or other lending institution and the borrower as "issuers" for
these purposes. Treating a financial intermediary as an issuer of indebtedness
may restrict a Fund's ability to invest in indebtedness related to a single
financial intermediary, or a group of intermediaries engaged in the same
industry, even if the underlying borrowers represent many different companies
and industries.

Foreign Securities.

International Growth Fund and Asset Strategy Fund may invest in foreign
securities, subject to the restrictions described in the Prospectus. Limited-
Term Bond Fund and Municipal Bond Fund may not invest in foreign securities.
Total Return Fund and Growth Fund may purchase securities of foreign issuers
only if immediately after any such purchase not more than 10% of that Fund's
assets (including foreign currency exchange contracts) are foreign securities
and only if those foreign securities (i) are, or are represented by Depositary
Receipts that are, listed or admitted to trading on a domestic or foreign
securities exchange, or in the case of American Depositary Receipts, so listed
or traded in the U.S. over-the-counter ("OTC") market; or (ii) are issued or
guaranteed by any foreign government or any subdivision, agency or
instrumentality thereof.

In general, depositary receipts are securities convertible into and
evidencing ownership of securities of foreign corporate issuers, although
depositary receipts may not necessarily be denominated in the same currency as
the securities into which they may be converted. American Depositary Receipts,
in registered form, are dollar-denominated receipts typically issued by a U.S.
bank or trust company evidencing ownership of the underlying securities.
International Depositary Receipts and European Depositary Receipts, in bearer
form, are foreign receipts evidencing a similar arrangement and are designed for
use by non-U.S. investors and traders in non-U.S. markets. Global Depositary
Receipts are more recently developed receipts designed to facilitate the trading
of foreign issuers by U.S. and non-U.S. investors and traders.

WRIMCO believes that there are investment opportunities as well as risks in
investing in foreign securities. Individual foreign economies may differ
favorably or unfavorably from the U.S. economy or each other in such matters as
gross national product, rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position. Individual foreign companies may
also differ favorably or unfavorably from domestic companies in the same
industry. Foreign currencies may be stronger or weaker than the U.S. dollar or
than each other. WRIMCO believes that ability to invest assets abroad might
enable a Fund to take advantage of these differences and strengths where they
are favorable.

Further, an investment in foreign securities may be affected by changes in
currency rates and in exchange control regulations (i.e., currency blockage). A
Fund may bear a transaction charge in connection with the exchange of currency.
There may be less publicly available information about a foreign company than
about a domestic company. Foreign companies are not generally subject to
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic companies. Most foreign stock markets have
substantially less volume than the New York Stock Exchange ("NYSE") and
securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. There is generally less government
regulation of stock exchanges, brokers and listed companies than in the United
States. In addition, with respect to certain foreign countries, there is a
possibility of expropriation or confiscatory taxation, political or social
instability or diplomatic developments that could adversely affect investments
in securities of issuers located in those countries. If it should become
necessary, a Fund would normally encounter greater difficulties in commencing a
lawsuit against the issuer of a foreign security than it would against a U.S.
issuer.

Restricted Securities.

Asset Strategy Fund may invest in restricted securities subject to its
limitation on investment in illiquid investments. International Growth Fund may
purchase foreign restricted securities; however, as an operating policy,
International Growth Fund may not purchase restricted securities if as a result
of such purchase more than 5% of its total assets would consist of restricted
securities. The other Funds do not intend to invest in restricted securities.

Restricted Securities generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the Securities
Act of 1933, or in a registered public offering. Where registration is
required, a Fund may be obligated to pay all or part of the registration expense
and a considerable period may elapse between the time it decides to seek
registration and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, a Fund might obtain a less favorable price than
prevailed when it decided to seek registration of the security.

There are risks associated with investment in restricted securities in that
there can be no assurance of a ready market for resale. Also, the contractual
restrictions on resale might prevent a Fund from reselling the securities at a
time when such sale would be desirable. Restricted securities in which a Fund
seeks to invest need not be listed or admitted to trading on a foreign or
domestic exchange and may be less liquid than listed securities.

Lending Securities.

Each of the Funds except Municipal Bond Fund may lend its portfolio
securities to attempt to increase income. If a Fund does this, the borrower
pays the Fund an amount equal to the dividends or interest on the securities
that the Fund would have received if it had not loaned the securities. The Fund
also receives additional compensation.

Any securities loan that a Fund makes must be collateralized in accordance
with applicable regulatory requirements (the "Guidelines"). Under the present
Guidelines, the collateral must consist of cash, U.S. Government Securities or
bank letters of credit, at least equal in value to the market value of the
securities loaned on each day that the loan is outstanding. If the market value
of the loaned securities exceeds the value of the collateral, the borrower must
add more collateral so that it at least equals the market value of the
securities loaned. If the market value of the securities decreases, the
borrower is entitled to the return of the excess collateral.

There are two methods of receiving compensation for making loans. The
first is to receive a negotiated loan fee from the borrower. This method is
available for all three types of collateral. The second method, which is not
available when letters of credit are used as collateral, is for a Fund to
receive interest on the investment of the cash collateral or to receive interest
on the U.S. Government Securities used as collateral. Part of the interest
receive in either case may be shared with the borrower.

The letters of credit that a Fund may accept as collateral are agreements
by banks (other than the borrowers of the Fund's securities), entered into at
the request of the borrower and for its account and risk, under which the banks
are obligated to pay to the Fund, while the letter is in effect, amounts
demanded by the Fund if the demand meets the terms of the letter. The Fund's
right to make this demand secures the borrower's obligations to it. The terms
of any such letters and the creditworthiness of the banks providing them (which
might include the Fund's custodian bank) must be satisfactory to the Fund. A
Fund may lend securities only to creditworthy broker-dealers and financial
institutions, and will make loans only under rules of the NYSE, which presently
require the borrower to return the securities to the Fund within five business
days after the Fund instructs it to do so. WRIMCO will evaluate the
creditworthiness of the borrower. If a Fund loses its voting rights on
securities loaned, it will have the securities returned to it in time to vote
them if a material event affecting the investment is to be voted on. A Fund may
pay reasonable finder's, administrative and custodian fees in connection with
loans of securities.

No more than 10% of the respective assets of Total Return Fund, Growth
Fund, International Growth Fund or Asset Strategy Fund, or 30% of the assets of
Limited-Term Bond Fund, may be loaned at any one time. There may be risks of
delay in receiving additional collateral from the borrower if the market value
of the securities loaned increases, risks of delay in recovering the securities
loaned or even loss of rights in the collateral should the borrower of the
securities fail financially.

Repurchase Agreements.

Each of the Funds, except Municipal Bond Fund, may purchase securities
subject to repurchase agreements subject to its limitation on investment in
illiquid investments. See "Illiquid Investments." A repurchase agreement is an
instrument under which a Fund purchases a security and the seller (normally a
commercial bank or broker-dealer) agrees, at the time of purchase, that it will
repurchase the security at a specified time and price. The amount by which the
resale price is greater than the purchase price reflects an agreed-upon market
interest rate effective for the period of the agreement. The return on the
securities subject to the repurchase agreement may be more or less than the
return on the repurchase agreement.

The majority of the repurchase agreements in which a Fund would engage are
overnight transactions, and the delivery pursuant to the resale typically will
occur within one to five days of the purchase. The primary risk is that a Fund
may suffer a loss if the seller fails to pay the agreed-upon amount on the
delivery date and that amount is greater than the resale price of the underlying
securities and other collateral held by the Fund. In the event of bankruptcy or
other default by the seller, there may be possible delays and expenses in
liquidating the underlying securities or other collateral, decline in their
value and loss of interest. The return on such collateral may be more or less
than that from the repurchase agreement. The Funds' repurchase agreements will
be structured so as to fully collateralize the loans, i.e., the value of the
Securities subject to the repurchase agreement, which will be held by the Fund's
custodian bank or by a third party that qualifies as a custodian under section
17(f) of the Investment Company Act of 1940, as amended ("1940 Act"), is and,
during the entire term of the agreement, remains at least equal to the value of
the loan, including the accrued interest earned thereon. Repurchase agreements
are entered into only with those entities approved by WRIMCO on the basis of
criteria established by the Board of Directors.

Warrants and Rights.

Growth Fund may not invest more than 5% of its assets (at the time of
investment) in warrants (other than those that have been acquired in units or
attached to other securities). Of such 5%, no more than 2% of its assets (at
the time of investment) may be invested in warrants that are not listed on the
NYSE or the American Stock Exchange. Asset Strategy Fund does not currently
intend to purchase warrants, valued at the lower of cost or market, in excess of
5% of its net assets. Included in that amount, but not to exceed 2% of its net
assets, may be warrants that are not listed on the NYSE or the American Stock
Exchange. Warrants acquired by Asset Strategy Fund in units or attached to
securities are not subject to these restrictions. International Growth Fund may
purchase warrants or rights to purchase securities ("rights") provided that the
Fund will not purchase warrants or rights if as a result of such purchase more
than 5% of its total assets would consist of warrants, rights or a combination
thereof, not including warrants or rights acquired in units or attached to other
securities. Certain states may impose a lower percentage limit on investments
in warrants and rights.

Warrants are options to purchase equity securities at a specified price
valid for a specific period of time. Their prices do not necessarily move
parallel to the prices of the underlying securities. Rights are similar to
warrants, but normally have a short duration and are distributed directly by the
issuer to its shareholders. Rights and warrants have no voting rights, receive
no dividends, and have no rights with respect to the assets of the issuer.
Warrants and rights are highly volatile and, therefore, more susceptible to
sharp decline in value than the underlying security might be. They are also
generally less liquid than an investment in the underlying shares.

When-Issued and Delayed Delivery Transactions.

International Growth Fund, Municipal Bond Fund, Limited-Term Bond Fund and
Asset Strategy Fund may each purchase any securities in which it may invest on a
when-issued or delayed delivery basis or sell them on a delayed delivery basis.
Municipal Bond Fund and Limited-Term Bond Fund do not intend to enter into such
transactions in an amount exceeding 5% of their respective total assets. The
value of when-issued or delayed delivery securities may be less or more when
delivered than the purchase price paid or received. For example, delivery to
the Fund and payment by the Fund in the case of a purchase by it, or delivery by
the Fund and payment to it in the case of a sale by the Fund, may take place a
month or more after the date of the transaction. The purchase or sale price are
fixed on the transaction date. A Fund will enter into when-issued or delayed
delivery transactions in order to secure what is considered to be an
advantageous price and yield at the time of entering into the transaction. The
securities so purchased by a Fund are subject to market fluctuation; their value
may be less when delivered than the purchase price paid. No interest accrues to
a Fund until delivery and payment is completed. When a Fund makes a commitment
to purchase securities on a when-issued or delayed delivery basis it will record
the transaction and thereafter reflect the value of the securities in
determining its net asset value per share. The securities so sold by a Fund on
a delayed delivery basis are also subject to market fluctuation; their value
when a Fund delivers them may be more than the purchase price the Fund receives.
When a Fund makes a commitment to sell securities on a delayed basis, it will
record the transaction and thereafter value the securities at the sales price in
determining the Fund's net asset value per share.

Ordinarily a Fund purchases securities on a when-issued or delayed delivery
basis with the intention of actually taking delivery of the securities.
However, before the securities are delivered to the Fund and before it has paid
for them (the "settlement date"), the Fund could sell the securities if WRIMCO
decided it was advisable to do so for investment reasons. The Fund will hold
aside or segregate cash or other securities, other than those purchased on a
when-issued or delayed delivery basis, at least equal to the amount it will have
to pay on the settlement date; these other securities may, however, be sold at
or before the settlement date to pay the purchase price of the when-issued or
delayed delivery securities.

Illiquid Investments.

Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond Fund
and International Growth Fund may not invest more than 10% of their respective
net assets in illiquid investments. Asset Strategy Fund may not invest more
than 15% of its assets in illiquid investments. Investments currently
considered to be illiquid include: (i) repurchase agreements not terminable
within seven days; (ii) securities for which market quotations are not readily
available; (iii) unlisted options and their underlying collateral; (iv) Insured
Deposits, unless they are payable at principal amount plus accrued interest on
demand or within seven days after demand; (v) restricted securities not
determined to be liquid pursuant to guidelines established by or under the
direction of the Board of Directors; (vi) securities involved in swap, cap,
collar and floor transactions; (vii) non-government stripped fixed-rate
mortgage-backed securities; and (viii) direct debt instruments. The assets used
as cover for OTC options written by a Fund will be considered illiquid unless
the OTC options are sold to qualified dealers who agree that the Fund may
repurchase any OTC option it writes at a maximum price to be calculated by a
formula set forth in the option agreement. The cover for an OTC option written
subject to this procedure will be considered illiquid only to the extent that
the maximum repurchase price under the formula exceeds the intrinsic value of
the option.

Options, Futures and Other Strategies.

As discussed in the Prospectus, WRIMCO may use a variety of financial
instruments ("Financial Instruments"), including certain options, futures
contracts (sometimes referred to as "futures"), options on futures contracts,
forward currency contracts, swaps and indexed securities to attempt to enhance
the Funds' income or yield or to attempt to hedge the Funds' portfolios.
Certain of these Financial Instruments are described in Appendix A to this
Statement of Additional Information.

Hedging strategies can be broadly categorized as "short hedges" and "long
hedges." A short hedge is a purchase or sale of a Financial Instrument intended
partially or fully to offset potential declines in the value of one or more
investments held in a Fund's portfolio. Thus, in a short hedge a Fund takes a
position in a Financial Instrument whose price is expected to move in the
opposite direction of the price of the investment being hedged.

Conversely, a long hedge is a purchase or sale of a Financial Instrument
intended partially or fully to offset potential increases in the acquisition
cost of one or more investments that a Fund intends to acquire. Thus, in a long
hedge a Fund takes a position in a Financial Instrument whose price is expected
to move in the same direction as the price of the prospective investment being
hedged. A long hedge is sometimes referred to as an anticipatory hedge. In an
anticipatory hedge transaction, a Fund does not own a corresponding security
and, therefore, the transaction does not relate to a security the Fund owns.
Rather, it relates to a security that the Fund intends to acquire. If a Fund
does not complete the hedge by purchasing the security it anticipated
purchasing, the effect on the Fund's portfolio is the same as if the transaction
were entered into for speculative purposes.

Financial Instruments on securities generally are used to attempt to hedge
against price movements in one or more particular securities positions that a
Fund owns or intends to acquire. Financial Instruments on indices, in contrast,
generally are used to attempt to hedge against price movements in market sectors
in which a Fund has invested or expects to invest. Financial Instruments on
debt securities may be used to hedge either individual securities or broad debt
market sectors.

The use of Financial Instruments is subject to applicable regulations of
the SEC, the several exchanges upon which they are traded, the Commodity Futures
Trading Commission ("CFTC") and various state regulatory authorities. In
addition, a Fund's ability to use Financial Instruments will be limited by tax
considerations. See "Taxes."

In addition to the instruments, strategies and risks described below and in
the Prospectus, WRIMCO expects to discover additional opportunities in
connection with options, futures contracts, options on futures contracts,
forward currency contracts and other similar or related techniques. These new
opportunities may become available as WRIMCO develops new techniques, as
regulatory authorities broaden the range of permitted transactions and as new
options, futures contracts, options on futures contracts, forward currency
contracts or other techniques are developed. WRIMCO may utilize these
opportunities to the extent that they are consistent with a Fund's investment
goals and permitted by the Funds' investment limitations and applicable
regulatory authorities. The Fund's Prospectus or Statement of Additional
Information will be supplemented to the extent that new products or techniques
involve materially different risks than those described below or in the
Prospectus.

Special Risks. The use of Financial Instruments involves special
considerations and risks, certain of which are described below. Risks
pertaining to particular Financial Instruments are described in the sections
that follow.

(1) Successful use of most Financial Instruments depends upon WRIMCO's
ability to predict movements of the overall securities, currency and interest
rate markets, which requires different skills than predicting changes in the
prices of individual securities. There can be no assurance that any particular
strategy will succeed.

(2) There might be imperfect correlation, or even no correlation, between
price movements of a Financial Instrument and price movements of the investments
being hedged. For example, if the value of a Financial Instrument used in a
short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of correlation
might occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which Financial
Instruments are traded. The effectiveness of hedges using Financial Instruments
on indices will depend on the degree of correlation between price movements in
the index and price movements in the securities being hedged.

Because there are a limited number of types of exchange-traded options and
futures contracts, it is likely that the standardized contracts available will
not match a Fund's current or anticipated investments exactly. A Fund may
invest in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund's other investments.

Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match a Fund's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation may
also result from differing levels of demand in the options and futures markets
and the securities markets, from structural differences in how options and
futures and securities are traded, or from imposition of daily price fluctuation
limits or trading halts. A Fund may purchase or sell options and futures
contracts with a greater or lesser value than the securities it wishes to hedge
or intends to purchase in order to attempt to compensate for differences in
volatility between the contract and the securities, although this may not be
successful in all cases. If price changes in a Fund's options or futures
positions are poorly correlated with its other investments, the positions may
fail to produce anticipated gains or result in losses that are not offset by
gains in other investments.

(3) If successful, the above-discussed strategies can reduce risk of loss
by wholly or partially offsetting the negative effect of unfavorable price
movements. However, such strategies can also reduce opportunity for gain by
offsetting the positive effect of favorable price movements. For example, if a
Fund entered into a short hedge because WRIMCO projected a decline in the price
of a security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the Financial Instrument. Moreover, if the price of the
Financial Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss. In either such case, the Fund would
have been in a better position had it not attempted to hedge at all.

(4) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in Financial Instruments involving obligations to third parties.
(i.e., Financial Instruments other than purchased options). If a Fund were
unable to close out its positions in such Financial Instruments, it might be
required to continue to maintain such assets or accounts or make such payments
until the position expired or matured. These requirements might impair a Fund's
ability to sell a portfolio security or make an investment at a time when it
would otherwise be favorable to do so, or require that a Fund sell a portfolio
security at a disadvantageous time. A Fund's ability to close out a position in
a Financial Instrument prior to expiration or maturity depends on the existence
of a liquid secondary market or, in the absence of such a market, the ability
and willingness of the other party to the transaction ("contra party") to enter
into a transaction closing out the position. Therefore, there is no assurance
that any position can be closed out at a time and price that is favorable to the
Fund.

Cover. Transactions using Financial Instruments, other than purchased
options, expose the Fund to an obligation to another party. A Fund will not
enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities, currencies or other options, futures
contracts or forward contracts, or (2) cash, receivables and short-term debt
securities, with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above. Each Fund will
comply with SEC guidelines regarding cover for these instruments and will, if
the guidelines so require, set aside cash, U.S. Government Securities or other
liquid, high-grade debt securities in a segregated account with its custodian in
the prescribed amount as determined daily on a mark-to-market basis.

Assets used as cover or held in a segregated account cannot be sold while
the position in the corresponding Financial Instrument is open, unless they are
replaced with other appropriate assets. As a result, the commitment of a large
portion of a Fund's assets to cover or segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.

Options. As discussed in the Prospectus, certain of the Funds may purchase
and/or write (sell) call and put options on equity and debt securities, foreign
currencies, stock indices and bond indices. The purchase of call options serves
as a long hedge, and the purchase of put options serves as a short hedge.
Writing put or call options can enable a Fund to enhance income or yield by
reason of the premiums paid by the purchasers of such options. However, if the
market price of the security underlying a put option declines to less than the
exercise price on the option, minus the premium received, the Fund would expect
to suffer a loss.

Writing call options can serve as a limited short hedge, because declines
in the value of the hedged investment would be offset to the extent of the
premium received for writing the option. However, if the security appreciates
to a price higher than the exercise price of the call option, it can be expected
that the option will be exercised and the Fund will be obligated to sell the
security at less than its market value. If the call option is an OTC option,
the securities or other assets used as cover would be considered illiquid to the
extent described under "Illiquid Investments."

Writing put options can serve as a limited long hedge because increases in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and a Fund will be obligated
to purchase the security or currency at more than its market value.

The value of an option position will reflect, among other things, the
current market value of the underlying investment, the time remaining until
expiration, the relationship of the exercise price to the market price of the
underlying investment, the historical price volatility of the underlying
investment and general market conditions. Options that expire unexercised have
no value.

A Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, a Fund may terminate its
obligation under a call option that it had written by purchasing an identical
call option; this is known as a closing purchase transaction. Conversely, a
Fund may terminate a position in a put or call option it had purchased by
writing an identical put or call option; this is known as a closing sale
transaction. Closing transactions permit a Fund to realize profits or limit
losses on an option position prior to its exercise or expiration.

Risks of Options on Securities. Certain of the Funds may purchase or write
both exchange-traded and OTC options. Exchange markets for options on debt
securities and foreign currencies exist, but these instruments are primarily
traded on the OTC market. Exchange-traded options in the United States are
issued by a clearing organization affiliated with the exchange on which the
option is listed that, in effect, guarantees completion of every exchange-traded
option transaction. In contrast, OTC options are contracts between a Fund and
its contra party (usually a securities dealer or a bank) with no clearing
organization guarantee. Thus, when a Fund purchases an OTC option, it relies on
the contra party from whom it purchased the option to make or take delivery of
the underlying investment upon exercise of the option. Failure by the contra
party to do so would result in the loss of any premium paid by the Fund as well
as the loss of any expected benefit of the transaction.

Generally, the OTC foreign currency options used by a Fund are European-
style options. This means that the option is only exercisable immediately prior
to its expiration. This is in contrast to American-style options, which are
exercisable at any time prior to the expiration date of the option.

A Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. Each Fund (other than
Asset Strategy Fund) intends to purchase or write only those exchange-trade
options for which there appears to be a liquid secondary market. However, there
can be no assurance that such a market will exist at any particular time.
Closing transactions can be made for OTC options only by negotiating directly
with the contra party, or by a transaction in the secondary market if any such
market exists. Although a Fund will enter into OTC options only with contra
parties that are expected to be capable of entering into closing transactions
with the Fund, there is no assurance that the Fund will in fact be able to close
out an OTC option position at a favorable price prior to expiration. In the
event of insolvency of the contra party, the Fund might be unable to close out
an OTC option position at any time prior to its expiration.

If a Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by a Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.

Option premiums paid to control an amount of related investments are small
in relation to the market value of related investments and, consequently, put
and call options offer large amounts of leverage. The leverage offered by
trading in options will result in a Fund's net asset value being more sensitive
to changes in the value of the related investment.

Options on Indices. Puts and calls on indices are similar to puts and
calls on securities or futures contracts except that all settlements are in cash
and gain or loss depends on changes in the index in question rather than on
price movements in individual securities or futures contracts. When a Fund
writes a call on an index, it receives a premium and agrees that, prior to the
expiration date, the purchaser of the call, upon exercise of the call, will
receive from the Fund an amount of cash if the closing level of the index upon
which the call is based is greater than the exercise price of the call. The
amount of cash is equal to the difference between the closing price of the index
and the exercise price of the call times a specified multiple ("multiplier"),
which determines the total dollar value for each point of such difference. When
a Fund buys a call on an index, it pays a premium and has the same rights as to
such call as are indicated above. When a Fund buys a put on an index, it pays a
premium and has the right, prior to the expiration date, to require the seller
of the put, upon the Fund's exercise of the put, to deliver to the Fund an
amount of cash if the closing level of the index upon which the put is based is
less than the exercise price of the put, which amount of cash is determined by
the multiplier, as described above for calls. When a Fund writes a put on an
index, it receives a premium and the purchaser has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the difference between the closing level of the index and the exercise price
times the multiplier if the closing level is less than the exercise price.

Risks of Options on Indices. The risks of investment in options on indices
may be greater than options on securities. Because index options are settled in
cash, when a Fund writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. The Fund can offset some of the risk of writing a call index option
by holding a diversified portfolio of securities similar to those on which the
underlying index is based. However, the Fund cannot, as a practical matter,
acquire and hold a portfolio containing exactly the same securities as underlie
the index and, as a result, bears a risk that the value of the securities held
will vary from the value of the index.

Even if a Fund could assemble a portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level on the date when the option is exercised. As with
other kinds of options, a Fund as the call writer will not learn that it has
been assigned until the next business day at the earliest. The time lag between
exercise and notice of assignment poses no risk for the writer of a covered call
on a specific underlying security, such as common stock, because there the
writer's obligation is to deliver the underlying security, not to pay its value
as of a fixed time in the past. So long as the writer already owns the
underlying security, it can satisfy its settlement obligations by simply
delivering it, and the risk that its value may have declined since the exercise
date is borne by the exercising holder. In contrast, even if the writer of an
index call holds securities that exactly match the composition of the underlying
index, it will not be able to satisfy its assignment obligations by delivering
those securities against payment of the exercise price. Instead, it will be
required to pay cash in an amount based on the closing index value on the
exercise date. By the time it learns that it has been assigned, the index may
have declined, with a corresponding decline in the value of its portfolio. This
"timing risk" is an inherent limitation on the ability of index call writers to
cover their risk exposure by holding securities positions.

If a Fund has purchased an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.

Limitations on the Use of Options. The Funds' use of options is governed
by the following guidelines, which can be changed by the Corporation's Board of
Directors without a shareholder vote:

(1) options may be purchased or written only by a Fund (other than Asset
Strategy Fund) when WRIMCO believes that there exists a liquid secondary market
in such options;

(2) Total Return Fund and Growth Fund may only write call options that are
listed and covered and may only purchase put options that are listed and covered
and each such option will remain covered so long as the Fund is obligated under
the option (except in the case of closing transactions);

(3) Total Return Fund, Growth Fund, Limited-Term Bond Fund and Municipal
Bond Fund each may not write call options having aggregate exercise prices
greater than 25% of its net assets;

(4) International Growth Fund may only write covered call options on
securities that are listed on a domestic securities exchange on not more than
10% of its total assets; and

(5) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and Asset Strategy Fund each may purchase a put or call option (including
any straddles or spreads) only if the value of its premium, when aggregated with
the premiums on all other options held by the Fund, does not exceed 5% of the
Fund's total assets.

For so long as required by applicable state securities regulation, Asset
Strategy Fund will only trade OTC options (a) if exchange-traded options are
not available, (b) there is an active OTC market in such options, and (c)
transactions are all through a broker-dealer with a minimum net worth of $20
million. This guideline may be modified by the Corporation's Board of Directors
without a shareholder vote.

For further limitations on certain Funds' use of options, see "Limitations
on the Use of Futures" below.

Futures. The purchase of futures or call options on futures can serve as a
long hedge, and the sale of futures or the purchase of put options on futures
can serve as a short hedge. Writing call options on futures contracts can serve
as a limited short hedge, using a strategy similar to that used for writing call
options on securities or indices. Similarly, writing put options on futures
contracts can serve as a limited long hedge.

Futures strategies also can be used to manage the average duration of a
Fund's portfolio. If WRIMCO wishes to shorten the average duration of a Fund,
the Fund may sell a futures contract or a call option thereon, or purchase a put
option on that futures contract. If WRIMCO wishes to lengthen the average
duration of a Fund, the Fund may buy a futures contract or a call option
thereon, or sell a put option thereon.

No price is paid upon entering into a futures contract. Instead, at the
inception of a futures contract a Fund is required to deposit "initial margin"
consisting of cash, U.S. Government Securities or other liquid, high-grade debt
securities, in an amount generally equal to 10% or less of the contract value.
Margin must also be deposited when writing a call or put option on a futures
contract, in accordance with applicable exchange rules. Unlike margin in
securities transactions, initial margin on futures contracts does not represent
a borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction if
all contractual obligations have been satisfied. Under certain circumstances,
such as periods of high volatility, the Fund may be required by an exchange to
increase the level of its initial margin payment, and initial margin
requirements might be increased generally in the future by regulatory action.

Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking-to-market." Variation margin does not involve borrowing, but rather
represents a daily settlement of the Fund's obligations to or from a futures
broker. When a Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when a Fund purchases or
sells a futures contract or writes a call or put option thereon, it is subject
to daily variation margin calls that could be substantial in the event of
adverse price movements. If the Fund has insufficient cash to meet daily
variation margin requirements, it might need to sell securities at a time when
such sales are disadvantageous.

Purchasers and sellers of futures contracts and options on futures can
enter into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. Positions in futures and options on futures may
be closed only on an exchange or board of trade that provides a secondary
market. Each Fund intends to enter into futures and options on futures only on
exchanges or boards of trade where there appears to be a liquid secondary
market. However, there can be no assurance that such a market will exist for a
particular contract at a particular time. In such event, it may not be possible
to close a futures contract or options position.

Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a future or related option can vary from the
previous day's settlement price; once that limit is reached, no trades may be
made that day at a price beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily limit for several
consecutive days with little or no trading, thereby preventing liquidation of
unfavorable positions.

If a Fund were unable to liquidate a futures or related options position
due to the absence of a liquid secondary market or the imposition of price
limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the future or option or to maintain cash or securities in a segregated
account.

Risks of Futures Contracts and Options Thereon. Since futures contracts
and options thereon can replicate movements in the cash markets for the
securities in which a Fund invests without the large cash investments required
for dealing in such markets, they may subject a Fund to greater and more
volatile risks than might otherwise be the case. The principal risks associated
with the use of such instruments are (i) imperfect correlation between movements
in the market price of the portfolio investments (held or intended to be
purchased) being hedged and in the price of the futures contract or option; (ii)
possible lack of a liquid secondary market for closing out futures contracts or
options positions; (iii) the need for additional portfolio management skills and
techniques; and (iv) losses due to unanticipated market price movements.

For a hedge to be completely effective, the price change of the hedging
instrument should equal the price change of the security being hedged. Such
equal price changes are not always possible because the investment underlying
the hedging instrument may not be the same investment that is being hedged.
WRIMCO will attempt to create a closely correlated hedge, but hedging activity
may not be completely successful in eliminating market value fluctuation. See
below for additional discussion of correlation as it relates to index futures.

The ordinary spreads between prices in the cash and futures markets
(including the options on futures market), due to differences in the natures of
those markets, are subject to the following factors, which may create
distortions. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions, which could distort the normal relationships between
the cash and futures markets. Second, the liquidity of the futures market
depends on participants entering into offsetting transactions rather than making
or taking delivery. To the extent participants decide to make or take delivery,
liquidity in the futures market could be reduced, thus producing distortion.
Third, from the point of view of speculators, the deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures market
may cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate, currency exchange rate or stock
market trends by WRIMCO may still not result in a successful transaction.
WRIMCO may be incorrect in its expectations as to the extent of various interest
rate, currency exchange rate or stock market movements or the time span within
which the movements take place.

Index Futures. The risk of imperfect correlation between movements in the
price of an index future and movements in the price of the securities that are
the subject of the hedge increases as the composition of a Fund's portfolio
diverges from the securities included in the applicable index. The price of the
index futures may move more than or less than the price of the securities being
hedged. If the price of the index future moves less than the price of the
securities that are the subject of the hedge, the hedge will not be fully
effective but, if the price of the securities being hedged has moved in an
unfavorable direction, the Fund would be in a better position than if it had not
hedged at all. If the price of the securities being hedged has moved in a
favorable direction, this advantage will be partially offset by the futures
contract. If the price of the futures contract moves more than the price of the
securities, the Fund will experience either a loss or a gain on the futures
contract that will not be completely offset by movements in the price of the
securities that are the subject of the hedge. To compensate for the imperfect
correlation of movements in the price of the securities being hedged and
movements in the price of the index futures, a Fund may buy or sell index
futures in a greater dollar amount than the dollar amount of the securities
being hedged if the historical volatility of the prices of such securities being
hedged is more than the historical volatility of the prices of the securities
included in the index. It is also possible that, where a Fund has sold futures
contracts to hedge its portfolio against decline in the market, the market may
advance and the value of the securities held in the portfolio may decline. If
this occurred, the Fund would lose money on the futures contract and also
experience a decline in value of its portfolio securities. However, while this
could occur for a very brief period or to a very small degree, over time the
value of a diversified portfolio of securities will tend to move in the same
direction as the market indices on which the futures contracts are based.

Where index futures are purchased to hedge against a possible increase in
the price of securities before a Fund is able to invest in them in an orderly
fashion, it is possible that the market may decline instead. If the Fund then
concludes not to invest in them at that time because of concern as to possible
further market decline or for other reasons, it will realize a loss on the
futures contract that is not offset by a reduction in the price of the
securities it had anticipated purchasing.

Limitations on the Use of Futures. The Funds' use of futures is governed
by the following guidelines, which can be changed by the Corporation's Board of
Directors without a shareholder vote. For purposes of these guidelines, options
on futures contracts and foreign currency options traded on a commodities
exchange are considered "related options:"

(1) To the extent that Asset Strategy Fund enters into futures contracts
or related options, in each case other than for bona fide hedging purposes (as
defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are "in-the-
money") will not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into. (In general, a call option on a futures
contract is "in-the-money" if the value of the underlying futures contract
exceeds the strike, i.e., exercise, price of the call; a put option on a futures
contract is "in-the-money" if the value of the underlying futures contract is
exceeded by the strike price of the put.) This guideline does not limit to 5%
the percentage of the Fund's assets that are at risk in futures contracts and
related options transactions;

(2) Total Return Fund, Growth Fund, Limited-Term Bond Fund and Municipal
Bond Fund each may not purchase or sell futures contracts or related options if,
immediately thereafter, the sum of the initial margin deposits on the Fund's
existing futures contracts positions and initial margin and premiums paid for
related options would exceed 5% of the market value of the Fund's total assets.
This guideline does not limit to 5% the percentage of the Fund's assets that are
at risk in futures contracts and related options transactions;

(3) In instances involving the purchase by Total Return Fund, Growth Fund,
Limited-Term Bond Fund or Municipal Bond Fund of futures contracts or the
writing of related put options, an amount of cash, U.S. Government Securities or
other liquid, high-grade debt instruments, equal to the market value of the
futures positions held (or the Fund's exposure in the case of futures-related
options) less any initial margin deposits thereon held by the Fund's custodian,
will be deposited in a segregated account with the custodian to collateralize
the position and thereby ensure that the use of such futures contracts or
related options is unleveraged;

(4) The value of all futures contracts sold by Total Return Fund, Growth
Fund, Limited-Term Bond Fund or Municipal Bond Fund may not exceed the total
market value of its portfolio;

(5) Futures contracts and related options may not be purchased by Total
Return Fund, Growth Fund, Limited-Term Bond Fund or Municipal Bond Fund if
immediately thereafter more than 30% of its total assets would be so invested;

(6) International Growth Fund will not enter into financial futures
contracts and options thereon.

Asset Strategy Fund will not: (a) sell futures contracts, purchase put
options, or write call options if, as a result, more than 50% of the Fund's
total assets would be hedged with futures and options under normal conditions;
or (b) purchase futures contracts or write put options if, as a result, the
Fund's total obligations upon settlement or exercise of purchased futures
contracts and written put options would exceed 25% of its total assets. These
limitations do not apply to options attached to or acquired or traded together
with their underlying securities, and do not apply to securities that
incorporate features similar to options.

For as long as required by applicable state securities regulation,

(1) the aggregate value of securities underlying put options written by
Asset Strategy Fund, determined as of the date the put options are written, will
not exceed 50% of the Fund's net assets,

(2) Asset Strategy Fund will only buy or sell (a) options on securities,
indices or futures contracts, or (b) futures contracts, in each case that are
offered through the facilities of a national securities association or that are
listed on a national securities or commodities exchange, other than the
permitted OTC options described under "Limitations on the Use of Options" above,

(3) the aggregate premiums paid on all options on securities, indices or
futures contracts purchased by Asset Strategy Fund that are held at any time
will not exceed 20% of the Fund's total net assets, and

(4) the aggregate margin deposits on all futures and options thereon held
at any time by Asset Strategy Fund will not exceed 5% of the Fund's total
assets.

Foreign Currency Hedging Strategies--Special Considerations. Certain of
the Funds may use options and futures contracts on foreign currencies, as
described above, and foreign currency forward contracts, as described below, to
attempt to hedge against movements in the values of the foreign currencies in
which the Funds' securities are denominated. Such currency hedges can protect
against price movements in a security that a Fund owns or intends to acquire
that are attributable to changes in the value of the currency in which it is
denominated. Such hedges do not, however, protect against price movements in
the securities that are attributable to other causes.

The Funds might seek to hedge against changes in the value of a particular
currency when no Financial Instruments on that currency are available or such
Financial Instruments are more expensive than certain other Financial
Instruments. In such cases, a Fund may seek to hedge against price movements in
that currency by entering into transactions using Financial Instruments on
another currency or a basket of currencies, the values of which WRIMCO believes
will have a high degree of positive correlation to the value of the currency
being hedged. The risk that movements in the price of the Financial Instrument
will not correlate perfectly with movements in the price of the currency subject
to the hedging transaction is magnified when this strategy is used.

The value of Financial Instruments on foreign currencies depends on the
value of the underlying currency relative to the U.S. dollar. Because foreign
currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such Financial
Instruments, the Funds could be disadvantaged by having to deal in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a
global, round-the-clock market. To the extent the U.S. options or futures
markets are closed while the markets for the underlying currencies remain open,
significant price and rate movements might take place in the underlying markets
that cannot be reflected in the markets for the Financial Instruments until they
reopen.

Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, a Fund might be required to accept or make delivery of the underlying
foreign currency in accordance with any U.S. or foreign regulations regarding
the maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.

Forward Currency Contracts. Asset Strategy Fund, International Growth
Fund, Total Return Fund and Growth Fund may enter into forward currency
contracts to purchase or sell foreign currencies for a fixed amount of U.S.
dollars or another foreign currency. Such transactions may serve as long
hedges; for example, a Fund may purchase a forward currency contract to lock in
the U.S. dollar price of a security denominated in a foreign currency that the
Fund intends to acquire. Forward currency contract transactions may also serve
as short hedges; for example, a Fund may sell a forward currency contract to
lock in the U.S. dollar equivalent of the proceeds from the anticipated sale of
a security, dividend or interest payment denominated in a foreign currency.

Each of these Funds may also use forward contracts to hedge against a
decline in the value of existing investments denominated in foreign currency.
For example, if a Fund owned securities denominated in pounds sterling, it could
enter into a forward contract to sell pounds sterling in return for U.S. dollars
to hedge against possible declines in the pound's value. Such a hedge, sometimes
referred to as a "position hedge," would tend to offset both positive and
negative currency fluctuations, but would not offset changes in security values
caused by other factors. Each of these Funds could also hedge the position by
selling another currency expected to perform similarly to the pound sterling,
for example, by entering into a forward contract to sell Deutsche Marks or
European Currency Units in return for U.S. dollars. This type of hedge,
sometimes referred to as a "proxy hedge," could offer advantages in terms of
cost, yield, or efficiency, but generally would not hedge currency exposure as
effectively as a simple hedge into U.S. dollars. Proxy hedges may result in
losses if the currency used to hedge does not perform similarly to the currency
in which the hedged securities are denominated.

These Funds also may use forward currency contracts for "cross-hedging."
Under this strategy, a Fund would increase its exposure to foreign currencies
that WRIMCO believes might rise in value relative to the U.S. dollar, or shift
its exposure to foreign currency fluctuations from one country to another. For
example, if a Fund owned securities denominated in a foreign currency and WRIMCO
believed that currency would decline relative to another currency, it might
enter into a forward contract to sell an appropriate amount of the first foreign
currency, with payment to be made in the second foreign currency.

The cost to a Fund of engaging in forward currency contracts varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because forward currency contracts are
usually entered into on a principal basis, no fees or commissions are involved.
When a Fund enters into a forward currency contract, it relies on the contra
party to make or take delivery of the underlying currency at the maturity of the
contract. Failure by the contra party to do so would result in the loss of any
expected benefit of the transaction.

As is the case with futures contracts, purchasers and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures contracts, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the contra party. Thus, there can
be no assurance that a Fund will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the contra party, a Fund might be unable to close out a forward
currency contract at any time prior to maturity. In either event, the Fund
would continue to be subject to market risk with respect to the position, and
would continue to be required to maintain a position in securities denominated
in the foreign currency or to maintain cash or securities in a segregated
account.

The precise matching of forward currency contract amounts and the value of
the securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, a Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.

Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the longer term investment decisions made
with regard to overall diversification strategies. However, WRIMCO believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of a Fund will be served.

Limitations on the Use of Forward Currency Contracts. Total Return Fund
and Growth Fund may enter into forward currency contracts or maintain a net
exposure to such contracts only if (1) the consummation of the contracts would
not obligate the Fund to deliver an amount of foreign currency in excess of the
value of its portfolio securities or other assets denominated in that currency
or (2) the Fund maintains cash, U.S. Government Securities or liquid, high-grade
debt securities in a segregated account in an amount not less than the value of
its total assets committed to the consummation of the contract and not covered
as provided in (1) above, as marked to market daily.

International Growth Fund may enter into forward currency contracts only
if, thereafter, it does not have more than 15% of the value of its assets
committed to the consummation of all of such contracts. International Growth
Fund will not enter into forward currency contracts or maintain a net exposure
to such contracts where the consummation of the forward contracts would
obligate International Growth Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency.

Asset Strategy Fund does not currently intend to invest more than 5% of
its total assets in forward currency contracts.

Total Return Fund and Growth Fund each do not currently intend to invest
more than 10% of their respective total assets in forward currency contracts.

These limitations can be changed by the Corporation's Board of Directors
without a shareholder vote.

Combined Positions. A Fund may purchase and write options in combination
with each other, or in combination with futures or forward contracts, to adjust
the risk and return characteristics of its overall position. For example, a
Fund may purchase a put option and write a call option on the same underlying
instrument, in order to construct a combined position whose risk and return
characteristics are similar to selling a futures contract. Another possible
combined position would involve writing a call option at one strike price and
buying a call option at a lower price, in order to reduce the risk of the
written call option in the event of a substantial price increase. Because
combined options positions involve multiple trades, they result in higher
transaction costs and may be more difficult to open and close out.

Turnover. A Fund's options and futures activities may affect its turnover
rate and brokerage commission payments. The exercise of calls or puts written
by a Fund, and the sale or purchase of futures contracts, may cause it to sell
or purchase related investments, thus increasing its turnover rate. Once a Fund
has received an exercise notice on an option it has written, it cannot effect a
closing transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price. The
exercise of puts purchased by a Fund may also cause the sale of related
investments, also increasing turnover; although such exercise is within the
Fund's control, holding a protective put might cause it to sell the related
investments for reasons that would not exist in the absence of the put. A Fund
will pay a brokerage commission each time it buys or sells a put or call or
purchases or sells a futures contract. Such commissions may be higher than
those that would apply to direct purchases or sales.

Swap Agreements. Swap agreements, including caps, collars and floors, can
be individually negotiated and structured to include exposure to a variety of
different types of investments or market factors. Depending on their structure,
swap agreements may increase or decrease a Fund's exposure to long- or short-
term interest rates (in the U.S. or abroad), foreign currency values, mortgage-
backed security values, corporate borrowing rates, or other factors such as
security prices or inflation rates.

Swap agreements will tend to shift a Fund's investment exposure from one
type of investment to another. For example, if a Fund agrees to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options.

The net amount of the excess, if any, of a Fund's obligations over its
entitlements with respect to each swap will be accrued on a daily basis and an
amount of cash, U.S. Government Securities or other liquid high grade debt
obligations having an aggregate net asset value at least equal to the accrued
excess will be maintained in an account by a custodian that satisfies the
requirements of the 1940 Act. Each Fund will also establish and maintain such
segregated accounts with respect to its total obligations under any swaps that
are not entered into on a net basis and with respect to any caps or floors that
are written by the Fund. WRIMCO and the Funds believe that swaps, caps and
floors do not constitute senior securities under the 1940 Act and, accordingly,
will not treat them as being subject to the Funds' borrowing restrictions.

Indexed Securities. Each Fund (other than Municipal Bond Fund) may
purchase securities whose prices are indexed to the prices of other securities,
securities indices, currencies, precious metals or other commodities, or other
financial indicators, as long as WRIMCO determines that it is consistent with
the Fund's investment goal and policies. Indexed securities typically, but not
always, are debt securities or deposits whose value at maturity or coupon rate
is determined by reference to a specific instrument or statistic. Gold-indexed
securities, for example, typically provide for a maturity value that depends on
the price of gold, resulting in a security whose price tends to rise and fall
together with gold prices. Currency-indexed securities typically are short-term
to intermediate-term debt securities whose maturity values or interest rates are
determined by reference to the values of one or more specified foreign
currencies, and may offer higher yields than U.S. dollar-denominated securities
of equivalent issuers. Currency-indexed securities may be positively or
negatively indexed; that is, their maturity value may increase when the
specified currency value increases, resulting in a security that performs
similarly to a foreign-denominated instrument, or their maturity value may
decline when foreign currencies increase, resulting in a security whose price
characteristics are similar to a put on the underlying currency. Currency-
indexed securities may also have prices that depend on the values of a number of
different foreign currencies relative to each other.

Recent issuers of indexed securities have included banks, corporations, and
certain U.S. Government agencies. WRIMCO will use its judgment in determining
whether indexed securities should be treated as short-term instruments, bonds,
stocks, or as a separate asset class for purposes of Asset Strategy Fund's
investment allocations, depending on the individual characteristics of the
securities. Certain indexed securities that are not traded on an established
market may be deemed illiquid.

Investment Restrictions

Certain of the Funds' investment restrictions are described in the
Prospectus and this SAI. The following are fundamental policies and together
with certain restrictions described in the Prospectus cannot be changed without
the approval of the holders of a majority of the outstanding shares of the
affected Fund. As defined in the 1940 Act, this means the lesser of the vote of
(a) 67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy, or (b) more than 50% of
the outstanding shares of the Fund. If a percentage restriction is adhered to
at the time of an investment or transaction, later changes in percentage
resulting from a change in value of portfolio securities or amount of total
assets will not be considered a violation of the restriction.

(i) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not buy real estate, any
nonliquid interests in real estate investment trusts or interests in
real estate limited partnerships; however, each of these Funds may buy
obligations or instruments which it otherwise may buy even though the
issuer invests in real estate or interests in real estate. Asset
Strategy Fund may not invest in real estate limited partnerships or
purchase or sell real estate unless acquired as a result of ownership
of securities (but this shall not prevent this Fund from purchasing and
selling securities issued by companies or other entities or investment
vehicles that deal in real estate or interests therein, nor shall this
prevent this Fund from purchasing interests in pools of real estate
mortgage loans).

(ii) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not acquire shares of an
investment company which issues redeemable securities. Total Return
Fund, Growth Fund and International Growth Fund may buy shares of an
investment company which does not issue redeemable securities if the
Fund does so in a regular transaction in the open market and in
compliance with the requirements of the 1940 Act. Notwithstanding the
foregoing, each of these Funds may also acquire investment company
shares as part of a merger, consolidation or other reorganization.

(iii) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not lend money or other assets,
other than through certain limited types of loans; however, subject to
the restrictions stated in this SAI and in the Prospectus regarding the
types of securities each of these Funds may buy, each of these Funds
may buy debt securities which have been sold to the public and other
obligations customarily acquired by institutional investors and, except
Municipal Bond Fund, may lend its portfolio securities and enter into
repurchase agreements. Asset Strategy Fund may not make loans, except
(a) by lending portfolio securities provided that no securities loan
will be made if, as a result thereof, more than 10% of this Fund's
total assets (taken at current value) would be lent to another party;
(b) through the purchase of a portion of an issue of debt securities in
accordance with its investment objective, policies, and limitations;
and (c) by engaging in repurchase agreements with respect to portfolio
securities.

(iv) No Fund may invest for the purpose of exercising control or management
of another issuer.

(v) No Fund may buy or continue to hold securities of an issuer if, to the
knowledge of the Corporation, the directors and officers of the
Corporation and of WRIMCO (each owning beneficially 0.5% of the
securities of such issuer) own in the aggregate more than 5% of that
issuer's securities.

(vi) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not sell securities short, buy
securities on margin or engage in arbitrage transactions; however, each
of these Funds may make margin deposits in connection with its use of
any financial instrument permitted by its policies. Also, as
applicable, each of these Funds may enter into escrow and collateral
arrangements in connection with options, futures contracts and other
financial instruments. Asset Strategy Fund may not sell securities
short, provided that transactions in futures contracts, options and
other financial instruments are not deemed to constitute short sales.
Asset Strategy Fund may not purchase securities on margin, except that
this Fund may obtain such short-term credits as are necessary for the
clearance of transactions, and provided that this Fund may make initial
and variation margin payments in connection with transactions in
futures contracts, options and other financial instruments.

(vii) No Fund may engage in the underwriting of securities of other issuers,
except to the extent that, in connection with the disposition of
portfolio securities, the Fund may be deemed an underwriter under
Federal securities laws.

(viii) No Fund may invest in a security if, as a result, it would own more
than 10% of the outstanding voting securities of an issuer, or if more
than 5% of the Fund's total assets would be invested in securities of
that issuer, provided that U.S. Government Securities are not subject
to this limitation and up to 25% of the Fund's total assets may be
invested without regard to these restrictions.

(ix) No Fund may buy a security if, as a result, 25% or more of the Fund's
total assets would then be invested in securities of issuers having
their principal business activities in the same industry, except for
municipal bonds other than industrial development bonds and U.S.
Government Securities.

(x) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not purchase warrants, except
Growth Fund and International Growth Fund may purchase warrants to the
extent described above. See "Investments in Warrants."

(xi) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not buy or sell commodities or
commodity contracts except to the extent that instruments in which
these Funds may invest for hedging, income enhancing or other purposes
as such purposes may be permitted by the CFTC and the Fund's policies,
are considered to be commodities or commodity contracts. Asset
Strategy Fund may not purchase or sell physical commodities unless
acquired as a result of ownership of securities (but this shall not
prevent this Fund from purchasing and selling currencies, futures
contracts, options, forward currency contracts or other financial
instruments).

(xii) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not issue senior securities.
Asset Strategy Fund may not issue bonds or any other class of
securities preferred over shares of the Fund in respect of the Fund's
assets or earnings, provided that this Fund may issue additional series
and classes of shares in accordance with its Articles of Incorporation.

Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not borrow money, except that
these Funds may borrow money (and pledge assets in connection
therewith) from banks for temporary, extraordinary or emergency
purposes but only up to 5% of their respective assets. Asset Strategy
Fund may not borrow money, except that this Fund may borrow money for
emergency or extraordinary purposes (not for leveraging or investment)
in an amount not exceeding 33 1/3% of the value of its total assets
(less liabilities other than borrowings). Any borrowings that come to
exceed 33 1/3% of the value of Asset Strategy Fund's total assets by
reason of a decline in net assets will be reduced within three days to
the extent necessary to comply with the 33 1/3% limitation. For
purposes of this limitation, "three days" means three days, exclusive
of Sundays and holidays.

(xiii) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not invest in interests in oil,
gas or mineral leases or mineral development programs, including oil
and gas limited partnerships.

For purposes of applying restriction (viii) there may be a question as to
who is the "issuer" of municipal bonds. For example, municipal bonds may be
created by a particular government but be backed only by the assets and revenues
of a subdivision of that government such as an agency, instrumentality,
authority or other subdivision. In such case, such subdivision would be
considered the "issuer" for the purposes of the 5% restriction. In the case of
industrial development bonds, the nongovernmental user of facilities financed by
them is also considered as a separate "issuer." This restriction does not apply
to U.S. Government Securities. The method of determining who is an "issuer" may
be changed without shareholder vote. In applying this 5% restriction, the same
standards apply as set forth above for determining who is an "issuer;" however,
it also considers for the purpose of this 5% restriction that a guarantee by a
government or other entity of a municipal bond is a separate security which
would be given a value and included in the 5% restriction if the value of all
municipal bonds created by the government or entity and owned by a Fund should
exceed 10% of the value of its total assets.

The following investment limitations of Asset Strategy Fund are not
fundamental and may be changed by the Board of Directors without shareholder
approval:

(1) Asset Strategy Fund may borrow money only from a bank. Asset Strategy
Fund will not purchase any security while borrowings representing more than 5%
of its total assets are outstanding.

(2) Asset Strategy Fund does not currently intend to purchase any security
if, as a result, more than 15% of its net assets would be invested in illiquid
investments.

(3) Asset Strategy Fund does not currently intend to lend assets other
than securities to other parties, except by acquiring loans, loan
participations, or other forms of direct debt instruments. (This limitation
does not apply to purchases of debt securities or to repurchase agreements.)

(4) Asset Strategy Fund does not currently intend to (a) purchase
securities of other investment companies, except in the open market where no
commission except the ordinary broker's commission is paid and if, as a result
of such purchase, the Fund does not have more than 10% of its total assets
invested in such securities, or (b) purchase or retain securities issued by
other open-end investment companies. Limitations (a) and (b) do not apply to
securities received as dividends, through offers of exchange, or as a result of
a reorganization, consolidation, or merger. However, in the event that the Fund
purchases or retains securities issued by any other open-end investment company,
WRIMCO will waive its advisory fee on that portion of the Fund's assets invested
in such securities and the Fund will only purchase securities of no-load, open-
end investment companies.

(5) Asset Strategy Fund does not currently intend to purchase the
securities of any issuer (other than securities issued or guaranteed by domestic
or foreign governments or political subdivision thereof) if, as a result, more
than 5% of its total assets would be invested in the securities of business
enterprises that, including predecessors, have a record of less than three years
of continuous operation. This restriction does not apply to any obligation
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
or to CMOs, other mortgage-related securities, asset-backed securities or
indexed securities.

(6) Asset Strategy Fund does not currently intend to purchase warrants,
valued at the lower of cost or market, in excess of 5% of its net assets.
Included in that amount, but not to exceed 2% of its net assets, may be warrants
that are not listed on the New York Stock Exchange or the American Stock
Exchange. Warrants acquired by Asset Strategy Fund in units or attached to
securities are not subject to these restrictions.

(7) Asset Strategy Fund does not currently intend to invest in oil, gas,
or other mineral exploration or development programs or leases.

(8) Asset Strategy Fund does not currently intend to invest in non-
mortgage asset-backed securities.

For the Funds' limitations on futures and options transactions, see the
sections entitled "Limitations on the Use of Futures" and "Limitations on the
Use of Options" under "Options, Futures and Other Strategies."

Portfolio Turnover

A portfolio turnover rate is, in general, the percentage computed by taking
the lesser of purchases or sales of portfolio securities for a year and dividing
it by the monthly average of the market value of such securities during the
year, excluding certain short-term securities. A Fund's turnover rate may vary
greatly from year to year as well as within a particular year and may be
affected by cash requirements for the redemption of its shares.

The portfolio turnover rates for the fiscal years ended March 31, 1995 and
1994 for each of the Funds then in existence were as follows:

1995 1994
----- ----

Total Return Fund 16.60% 17.31%
Growth Fund 56.30 69.12%
Limited-Term Bond Fund 29.20 25.90%
Municipal Bond Fund 56.92 18.93%
International Growth Fund* 13.33 34.90%

*International Growth Fund (formerly Global Income Fund) changed its name and
investment objective effective April 20, 1995.

Asset Strategy Fund cannot precisely predict what its portfolio turnover
rate will be, but it is anticipated that its annual turnover rate for the common
stock portion of its portfolio will not exceed 200% and that the annual turnover
rate for the other portion of its portfolio will not exceed 200%.

A high turnover rate will increase transaction costs and commission costs
that will be borne by the Funds and could generate taxable income or loss.

INVESTMENT MANAGEMENT AND OTHER SERVICES

The Management Agreement

The Corporation has an Investment Management Agreement (the "Management
Agreement") with WRIMCO. Under the Management Agreement, WRIMCO is employed to
supervise the investments of the Funds and provide investment advice to the
Funds. The address of WRIMCO and Waddell & Reed, Inc. is 6300 Lamar Avenue,
P.O. Box 29217, Shawnee Mission, Kansas 66201-9217. Waddell & Reed, Inc. (the
"Distributor") is the Corporation's principal underwriter and distributor.

The Management Agreement permits WRIMCO or an affiliate of WRIMCO to enter
into a separate agreement for transfer agency services ("Shareholder Servicing
Agreement") and a separate agreement for accounting services ("Accounting
Services Agreement") with the Corporation. The Management Agreement contains
detailed provisions as to the matters to be considered by the Corporation's
Board of Directors prior to approving any Shareholder Servicing Agreement or
Accounting Services Agreement.

Torchmark Corporation and United Investors Management Company

WRIMCO is a wholly-owned subsidiary of Waddell & Reed, Inc. Waddell &
Reed, Inc. is a wholly-owned subsidiary of Waddell & Reed Financial Services,
Inc., a holding company. Waddell & Reed Financial Services, Inc. is a wholly-
owned subsidiary of United Investors Management Company. United Investors
Management Company is a wholly-owned subsidiary of Torchmark Corporation.
Torchmark Corporation is a publicly held company. The address of Torchmark
Corporation and United Investors Management Company is 2001 Third Avenue South,
Birmingham, Alabama 35233.

Waddell & Reed, Inc. and its predecessors served as investment manager to
each of the registered investment companies in the United Group of Mutual Funds,
except United Asset Strategy Fund, Inc., since 1940 or the company's inception
date, whichever was later, and to TMK/United Funds, Inc. since that fund's
inception, until January 8, 1992 when it assigned its duties as investment
manager for these funds (and the related professional staff) to WRIMCO. WRIMCO
has also served as investment manager for Torchmark Government Securities Fund,
Inc. and Torchmark Insured Tax-Free Fund, Inc. since they each commenced
operations in February 1993 and United Asset Strategy Fund, Inc. since it
commenced operations in March 1995. Waddell & Reed, Inc. serves as principal
underwriter for the Funds, the investment companies in the United Group of
Mutual Funds and TMK/United Funds, Inc.

Shareholder Services

Under the Shareholder Servicing Agreement entered into between the
Corporation and Waddell & Reed Services Company (the "Agent"), a subsidiary of
the Distributor, the Agent performs shareholder servicing functions, including
the maintenance of shareholder accounts, the issuance, transfer and redemption
of shares, distribution of dividends and payment of redemptions, the furnishing
of related information to the Corporation and handling of shareholder inquiries.
A new Shareholder Servicing Agreement, or amendments to the existing one, may be
approved by the Corporation's Board of Directors without shareholder approval.

Accounting Services

Under the Accounting Services Agreement entered into between the
Corporation and the Agent, the Agent provides the Corporation with bookkeeping
and accounting services and assistance, including maintenance of the
Corporation's records, pricing of the Corporation's shares, and preparation of
prospectuses for existing shareholders, proxy statements and certain reports. A
new Accounting Services Agreement, or amendments to an existing one, may be
approved by the Corporation's Board of Directors without shareholder approval.

Payments for Management, Accounting and Shareholder Services

Under the Management Agreement, for WRIMCO's management services, the
Corporation pays WRIMCO a fee as described in the Prospectus. The management
fees paid to WRIMCO during the fiscal years ended March 31, 1995 and 1994 for
each of the Funds then in existence were as follows:

1995 1994 1993*
---- ----- ----

Total Return Fund $599,703 $255,556 $21,358
Growth Fund 537,667 185,715 17,277
Limited-Term Bond Fund 64,948 52,456 10,247
Municipal Bond Fund 140,752 95,328 12,598
International Growth Fund** 70,373 62,024 19,695

*For the period 9/21/92, the date of initial public offering, to 3/31/93.
**International Growth Fund (formerly Global Income Fund) changed its name,
investment objective and management fee effective April 20, 1995.

For purposes of calculating the daily fee the Corporation does not include
money owed to it by the Distributor for shares which it has sold but not yet
paid to the Corporation. The Corporation accrues and pays this fee daily.

The Management Agreement requires WRIMCO to reduce or refund to a Fund the
amount of those of the Fund's operating and management expenses which exceed the
lowest of the expense limitations of any state in which the Fund's shares are
qualified for sale.

Under the Shareholder Servicing Agreement, each Fund pays the Agent a
monthly fee of $1.0208 for each shareholder account that 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. It also pays
certain out-of-pocket expenses of the Agent, including long distance telephone
communications costs; microfilm and storage costs for certain documents; forms,
printing and mailing costs; and costs of legal and special services not provided
by the Distributor, WRIMCO or the Agent.

Under the Accounting Services Agreement, each Fund pays the Agent 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

Fees paid to the Agent during the fiscal years ended March 31, 1995 and
1994 for each of the Funds then in existence were as follows:

1995 1994 1993*
---- ----- ----

Total Return Fund $30,833 $20,000 $833
Growth Fund 28,333 13,333 ---
Limited-Term Bond Fund 10,000 4,167 ---
Municipal Bond Fund 12,500 10,833 ---
International Growth Fund** 10,000 5,833 ---

*For the period 9/21/92, the date of initial public offering, to 3/31/93.
**International Growth Fund (formerly Global Income Fund) changed its name
and investment objective effective April 20, 1995.

Because the Corporation pays a management fee for investment supervision
and an accounting services fee for accounting services as discussed above,
WRIMCO and the Agent, respectively, pay all of their own expenses in providing
these services. Amounts paid by the Corporation under the Shareholder Servicing
Agreement are described above. The Distributor and its affiliates pay the
Corporation's Directors and officers who are affiliated with the Distributor and
its affiliates. The Corporation pays the fees and expenses of the Corporation's
other Directors.

The Corporation pays all of its other expenses. These include, for each
Fund, the costs of materials sent to shareholders, audit and outside legal fees,
taxes, brokerage commissions, interest, insurance premiums, custodian fees, fees
payable by the Corporation under Federal or other securities laws and to the
Investment Company Institute and nonrecurring and extraordinary expenses,
including litigation and indemnification relating to litigation.

Distribution Arrangement

The Distributor acts as principal underwriter and distributor of the
Corporation's shares pursuant to an underwriting agreement ("Agreement"). The
Agreement requires the Distributor to use its best efforts to sell the shares of
the Corporation but is not exclusive, and permits and recognizes that the
Distributor also distributes shares of other investment companies and other
securities. Shares are sold on a continuous basis.

Under a Distribution and Service Plan (the "Plan") adopted by the
Corporation pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Corporation, with respect to each Fund, pays the Distributor daily a
distribution fee at the annual rate of up to 0.75% of the particular Fund's net
asset value and a service fee of up to 0.25% of the particular Fund's net asset
value.

The Distributor offers the Corporation's shares through its registered
representatives and sales managers (sales force) unless it elects, which is not
contemplated, to make distribution of shares also through other broker-dealers.
In distributing shares through its sales force, the Distributor will pay
commissions and incentives to the sales force at or about the time of sale and
will incur other expenses including for prospectuses, sales literature,
advertisements, sales office maintenance, processing of orders and general
overhead with respect to its efforts to distribute the Corporation's shares.
The Plan and the Agreement contemplate that the Distributor may be compensated
for these distribution efforts through the distribution fee. The sales force
may be paid continuing compensation based on the value of the shares held by
shareholders to whom the member of the sales force is assigned to provide
personal services, and the Distributor or its subsidiary, Waddell & Reed
Services Company, may also provide services to shareholders through telephonic
means and written communications. The amounts actually paid by the Distributor
in providing these services to shareholders are reimbursed by the service fee,
subject to the limitations set forth in the Plan. A service fee is not payable,
however, unless the amounts have actually been expended by the Distributor in
providing these continuing services. For the fiscal year ended March 31, 1995,
the Corporation paid (or accrued) the following amounts to the Distributor as
distribution fees and service fees under the Plan for each of the Funds then in
existence: Total Return Fund - $638,040 and $197,508; Growth Fund - $501,677
and $154,029; Limited-Term Bond Fund - $87,444 and $24,936; Municipal Bond Fund
- - $189,123 and $54,969; and International Growth Fund (formerly Global Income
Fund) - $80,153 and $12,428. The distribution fees were paid to compensate the
Distributor for its expenses relating to sales force compensation, providing
prospectuses and sales literature to prospective investors, advertising, sales
processing, field office expenses and home office sales management in connection
with the distribution of Fund shares. The service fees were paid to reimburse
the Distributor for its expense of compensating its sales personnel for personal
services to the particular Fund's shareholders.

The Plan and Agreement were approved by the Corporation's Board of
Directors, including the Directors who are not interested persons of the
Corporation or of the Distributor and who have no direct or indirect financial
interest in the operations of the Plan or any agreement referred to in the Plan
(hereafter the "Plan Directors"). The Plan was also approved as to each Fund by
the Distributor as the sole shareholder of the shares of each of the Funds at
the time. The Plan will be submitted for approval by shareholders of each Fund
at the first meeting of shareholders following the commencement of the public
distribution of the Corporation's shares.

Among other things, the Plan provides that (i) the Distributor will submit
to the Directors at least quarterly, and the Directors will review, reports
regarding all amounts expended under the Plan and the purposes for which such
expenditures were made, (ii) the Plan will continue in effect only so long as it
is approved at least annually, and any material amendments thereto are approved
by the Directors including the Plan Directors acting in person at a meeting
called for that purpose, (iii) payments by the Corporation under the Plan shall
not be materially increased without the affirmative vote of the holders of a
majority of the outstanding shares of each affected Fund, and (iv) while the
Plan remains in effect, the selection and nomination of the Directors who are
Plan Directors shall be committed to the discretion of the Plan Directors.

In approving the Plan and the Agreement, the Directors, including the Plan
Directors, considered that investors will be offered an alternative to
purchasing shares of a mutual fund with a front end sales charge and considered
the incentive provided by the service fee to the Distributor, and particularly
to its sales force, to provide continuing service to shareholders in maintaining
their investments in the Corporation's shares. In addition, these Directors
considered the features of the distribution system including (i) the conditions
under which the deferred sales charge would be imposed and the amount thereof,
(ii) the advantage to investors of having the entire amount of their purchase
payment immediately invested in the Corporation's shares, (iii) the
Distributor's belief that the ability of the sales force to receive sales
commissions when the shares are sold and continuing service fees thereafter will
prove attractive to the sales force, resulting in the greater growth of each of
the Funds than might otherwise be the case, (iv) the advantages to shareholders
of a Fund of the economies of scale resulting from growth of the Fund's assets
and the ability to achieve greater diversification of Fund investments than if
the Fund's assets were limited, (v) the services provided to the Corporation and
its shareholders by the Distributor and its affiliates, (vi) the Distributor's
expenses and costs in promoting the sale of Corporation shares and particularly
the payments of commissions and incentives to its sale force and (vii) the
indirect costs to shareholders of the distribution and service fees. The
Directors also recognized the Distributor's willingness to undertake the
distribution expenses without the concomitant receipt of an initial front end
sales charge and without any guarantee that the compensation under the Plan will
not unilaterally be terminated by the Corporation before the Distributor can
recover its expenses. The Directors also considered all the fees that would be
payable to the Distributor and its affiliates for the various services provided
to the Corporation and its shareholders, which fees would increase if the Plan
is successful and the Funds attained and maintained significant asset levels.

For the Corporation's fiscal year ended March 31, 1995, the Distributor
earned deferred sales charges from each of the Funds then in existence as
follows: Total Return Fund - $146,112; Growth Fund - $99,036; Limited-Term Bond
Fund - $46,384; Municipal Bond Fund - $61,925; and International Growth Fund
(formerly Global Income Fund) - $13,960.

Custodial and Auditing Services

The custodian for each Fund is UMB Bank, n.a., Kansas City, Missouri. In
general, the custodian is responsible for holding each Fund's cash and
securities. The Funds may place and maintain foreign securities and cash with a
foreign custodian in accordance with Rule 17f-5 of the 1940 Act. Price
Waterhouse LLP, Kansas City, Missouri, the Funds' independent accountants,
audits the Corporation's financial statements.

PURCHASE, REDEMPTION AND PRICING OF SHARES

Determination of Offering Price

The net asset value of each of the shares of a Fund is the value of the
Fund's assets, less its liabilities, divided by the total number of shares
outstanding. For example, if on a particular day a Fund owned securities worth
$100 and had cash of $15, the total value of the assets would be $115. If it
owed $5, the net asset value would be $110 ($115 minus $5). If it had 11 shares
outstanding, the net asset value of one share would be $10 ($110 divided by 11).

The offering price of a share is its net asset value next determined
following acceptance of a purchase order. The number of shares you receive for
your purchase depends on the next offering price after the Distributor receives
and accepts your order at its principal business office at the address shown on
the cover of this SAI. You will be sent a confirmation after your purchase
which will indicate how many shares you have purchased. Shares are normally
issued for cash only.

The Distributor need not accept any purchase order, and it or the
Corporation may determine to discontinue offering Corporation shares for
purchase.

The net asset value per share is ordinarily computed once on each day that
the NYSE is open for trading as of the later of the close of the regular session
of the NYSE or the close of the regular session of any domestic securities or
commodities exchange on which an option or future held by a Fund is traded. The
NYSE annually announces the days on which it will not be open for trading. The
most recent announcement indicates that it will not be open on the following
days: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. However, it is possible
that the NYSE may close on other days. The net asset value changes every
business day, since the value of the assets and the number of shares outstanding
changes every business day.

The portfolio securities of each Fund, except as otherwise noted, listed or
traded on a stock exchange, are valued on the basis of the last sale on that day
or, lacking any sales, at a price which is the mean between the closing bid and
asked prices. Other securities which are traded over-the-counter are priced
using NASDAQ (National Association of Securities Dealers Automated Quotations),
which provides information on bid and asked prices quoted by major dealers in
such stocks. Bonds, other than convertible bonds, are generally valued using a
pricing system provided by a major dealer in bonds. Convertible bonds are
valued using this pricing system only on days when there is no sale reported.
Short-term debt securities are valued at amortized cost, which approximates
market. When market quotations are not readily available, securities and other
assets are valued at fair value as determined in good faith by or under the
direction of the Board of Directors. Foreign currency exchange rates are
generally determined prior to the close of trading of the regular session of the
NYSE. Occasionally events affecting the value of foreign investments and such
exchange rates occur between the time at which they are determined and the close
of the regular session of trading on the NYSE, which events will not be
reflected in a computation of a Fund's net asset value on that day. If events
materially affecting the value of such investments or currency exchange rates
occur during such time period, the investments will be valued at their fair
value as determined in good faith by or under the direction of the Board of
Directors. The foreign currency exchange transactions of a Fund conducted on a
spot (that is, cash) basis are valued at the spot rate for purchasing or selling
currency prevailing on the foreign exchange market. This rate under normal
market conditions differs from the prevailing exchange rate in an amount
generally less than one-tenth of one percent due to the costs of converting from
one currency to another.

Options and futures contracts purchased and held by a Fund are valued at
the last sales price thereof on the securities or commodities exchanges on which
they are traded, or, if there are no transactions, at the mean between bid and
asked prices. Ordinarily, the close of the regular session for option trading
on national securities exchanges is 4:10 P.M. Eastern time and the close of the
regular session for commodities exchanges is 4:15 P.M. Eastern time. Futures
contracts will be valued with reference to established futures exchanges. The
value of a futures contract purchased by a Fund will be either the closing price
of that contract or the bid price. Conversely, the value of a futures contract
sold by a Fund will be either the closing price or the asked price.

Minimum Initial and Subsequent Investments

Initial investments must be at least $1,000 with the exceptions described
in this paragraph. A $100 minimum initial investment pertains to exchanges of
shares from one Fund to another Fund. A $50 minimum initial investment pertains
to purchases for certain retirement plan accounts and to accounts for which an
investor has arranged, at the time of initial investment, to make subsequent
purchases for the account by having regular monthly withdrawals of $25 or more
made from a bank account. A minimum initial investment of $25 is applicable to
purchases made through payroll deduction for or by employees of WRIMCO, the
Distributor, their affiliates or certain retirement plan accounts. Except with
respect to certain exchanges and automatic withdrawals from a bank account, a
shareholder may make subsequent investments of any amount.

Flexible Withdrawal Service

If you qualify, you may arrange to receive regular monthly, quarterly,
semiannual or annual payments by redeeming shares on a regular basis through the
Flexible Withdrawal Service (the "Service"). To qualify for the Service, you
must have invested at least $10,000 in shares which you still own of any of the
Funds or you must own shares having a value of at least $10,000.

The maximum amount of the withdrawal for monthly, quarterly, semiannual and
annual withdrawals is 2%, 6%, 12% and 24% respectively of the value of your
account at the time the Service is established. The withdrawal proceeds are not
subject to the deferred sales charge, but only within these percentage
limitations. The minimum withdrawal is $50.

To start the Service, you must fill out a form (available from the
Distributor), advising the Distributor how you want your shares redeemed to make
the payments. You have three choices within the above stated maximums:

First. To get a monthly, quarterly, semiannual or annual payment of $50 or
more;

Second. To get a monthly payment, which will change each month, equal to a
percentage of the value of the shares in your account; or

Third. To get a monthly or quarterly payment, which will change each month
or quarter, by redeeming a number of shares fixed by you (at least five shares).

Shares ordinarily are redeemed on the 20th day of the month in which the
payment is to be made (or on the prior business day if the 20th is not a
business day). Payments are usually made within five days of the redemption.

Retirement Plan Accounts may be subject to a fee imposed by the plan
custodian for use of their service.

The dividends and distributions on shares of a Fund that you have made
available for the Service are paid in additional shares of that Fund. All
payments under the Service are made by redeeming shares, which may involve a
gain or loss for tax purposes. To the extent that payments exceed dividends and
distributions, the number of shares you own will decrease. When all of the
shares in your account are redeemed, you will not receive any payments. Thus,
the payments are not an annuity or income or return on your investment.

You may, at any time, change the manner in which you have chosen to have
shares redeemed. You can change to any of the other choices originally
available to you. For example, if you started out with a $50 monthly payment,
you could change to a $200 quarterly payment. Subject to the deferred sales
charge, you can at any time redeem part or all of the shares of a Fund in your
account; if you redeem all of the shares, the Service is terminated. The Fund
can also terminate the Service by notifying you in writing.

After the end of each calendar year, information on shares redeemed will be
sent to you to assist you in completing your Federal income tax return.

Exchange Privilege

You may exchange shares of one Fund of the Corporation for shares of
another Fund of the Corporation without charge. The exchange will be made at
the net asset values next determined after receipt and acceptance of your
written request by the Corporation. When you exchange shares, the total shares
you receive will have the same aggregate net asset value as the total shares you
exchange.

These exchange rights may be eliminated or modified at any time by the
Corporation, upon notice in certain circumstances.

The redemption of a Fund's shares as part of an exchange is not subject to
the deferred sales charge. For purposes of computing the deferred sales charge,
if any, applicable to the redemption of the shares acquired in the exchange,
those acquired shares are treated as having been purchased when the original
redeemed shares were purchased.

You may have a specific dollar amount of shares of United Cash Management,
Inc., a fund in the United Group of Mutual Funds for which WRIMCO also acts as
investment manager, automatically redeemed each month and invested into a Fund.
The shares of United Cash Management, Inc. which you designate must be worth at
least $100, which may be allocated among different Funds so long as each Fund
receives a value of at least $25. Minimum initial investment and minimum
balance requirements apply to such service. These exchange and other rights can
in most instances be eliminated or modified at any time, upon notice in certain
circumstances, and any related request may not be accepted.

Retirement Plans

As described in the Prospectus, your account may be set up as a funding
vehicle for a retirement plan. For individual taxpayers meeting certain
requirements, Waddell & Reed, Inc. offers prototype documents for the following
retirement plans. All of these plans involve investment in shares of one or
more of the Funds.

Individual Retirement Accounts (IRAs). Investors having earned income may
set up a plan that is commonly called an IRA. Under an IRA, an investor can
contribute each year up to 100% of his or her earned income, up to an annual
maximum of $2,000. The annual maximum is $2,250 if an investor's spouse has
earned income of $250 or less in a taxable year. If an investor's spouse has at
least $2,000 of earned income in a taxable year, the annual maximum is $4,000
($2,000 for each spouse). The contributions are deductible unless the investor
(or, if married, either spouse) is an active participant in a qualified
retirement plan or if, notwithstanding that the investor or one or both spouses
so participate, their adjusted gross income does not exceed certain levels.

An investor may also use an IRA to receive a rollover contribution which is
either (a) a direct rollover from an employer's plan or (b) a rollover of an
eligible distribution paid to the investor from an employer's plan or another
IRA. To the extent a rollover contribution is made to an IRA, the distribution
will not be subject to Federal income tax until distributed from the IRA. A
direct rollover generally applies to any distribution from an employer's plan
(including a custodial account under Section 403(b)(7) of the Code, but not an
IRA) other than certain periodic payments, required minimum distributions and
other specified distributions. In a direct rollover, the eligible rollover
distribution is paid directly to the IRA, not to the investor. If, instead, an
investor receives payment of an eligible rollover distribution, all or a portion
of that distribution generally may be rolled over to an IRA within 60 days after
receipt of the distribution. Because mandatory Federal income tax withholding
applies to any eligible rollover distribution which is not paid in a direct
rollover, investors should consult their tax advisers or pension consultants as
to the applicable tax rules. If you already have an IRA, you may have the
assets in that IRA transferred directly to an IRA offered by Waddell & Reed,
Inc.

Simplified Employee Pension (SEP) plans and Salary Reduction SEP (SARSEP)
plans. Employers can make contributions to SEP-IRAs established for employees.
An employer may contribute up to 15% of compensation, not to exceed $22,500, per
year for each employee.

Keogh Plans. Keogh plans, which are available to self-employed
individuals, are defined contribution plans that may be either a money purchase
plan or a profit sharing plan. As a general rule, an investor under a defined
contribution Keogh plan can contribute each year up to 25% of his or her annual
earned income, with an annual maximum of $30,000.

457 Plans. If an investor is an employee of a state or local government or
of certain types of charitable organizations, he or she may be able to enter
into a deferred compensation arrangement in accordance with Section 457 of the
Code.

TSAs - Custodial Accounts and Title I Plans. If an investor is an employee
of a public school system or of certain types of charitable organizations, he or
she may be able to enter into a deferred compensation arrangement through a
custodian account under Section 403(b) of the Code. Some organizations have
adopted Title I plans, which are funded by employer contributions in addition to
employee deferrals.

401(k) Plans. With a 401(k) plan, employees can make tax-deferred
contributions into a plan to which the employer may also contribute, usually on
a matching basis. An employee may defer each year up to 25% of compensation,
subject to certain annual maximums, which may be increased each year based on
cost-of-living adjustments.

More detailed information about these arrangements and applicable forms are
available from the Distributor. These plans may involve complex tax questions
as to premature distributions and other matters. Investors should consult their
tax adviser or pension consultant.

Redemptions

The Prospectus gives information as to redemption procedures and deferred
sales charges. Redemption payments are made within seven days unless delayed
because of emergency conditions determined by the SEC, when the NYSE is closed
other than for weekends or holidays, or when trading on the NYSE is restricted.
Payment is made in cash, although under extraordinary conditions redemptions may
be made in portfolio securities. Payment for redemptions of shares of the
Corporation may be made in portfolio securities when the Corporation's Board of
Directors determines that conditions exist making cash payments undesirable.
Redemptions made in securities will be made only in readily marketable
securities and the shareholder will incur commission or other transaction
charges in order to convert these securities into cash. Securities used for
payment of redemptions are valued at the value used in figuring net asset value.
The Corporation, however, has elected to be governed by Rule 18f-1 under the
1940 Act, pursuant to which it is obligated to redeem shares solely in cash up
to the lesser of $250,000 or 1% of its net asset value during any 90-day period
for any one shareholder.

As stated in the Prospectus, a deferred sales charge is inapplicable in a
variety of circumstances. The deferred sales charge is the subject of an
effective order of exemption issued by the staff of the SEC. For purposes of
determining application of the deferred sales charge, "employees" include
retired employees and "directors" includes retired directors. A retired
employee is an individual separated from service from the Distributor or any of
its affiliated companies with a vested interest in any employee benefit plan
sponsored by the Distributor or any of its affiliated companies. "Account
representatives" includes retired account representatives. A "retired account
representative" is any account representative who was, at the time of separation
from service from the Distributor, a Senior Account Representative. A custodian
under the Uniform Gifts (or Transfers) to Minors Act purchasing for the child of
any employee or account representative may redeem shares without a deferred
sales charge whether or not the custodian is an eligible purchaser.

Reinvestment Privilege

The Prospectus discusses the reinvestment privilege under which you may
reinvest in any one or more of the Funds all or part of any amount you redeemed
and have the corresponding amount of the deferred sales charge, if any, which
you paid restored to your account by adding the amount of that charge to the
amount you are reinvesting. If shares of a Fund are then being offered, you can
put all or part of your redemption payment back into that Fund's shares at the
net asset value next determined after you have returned the amount. Your
written request to do this must be received within 30 days after your
redemption. You can do this only once as to shares of that Fund. For purposes
of determining future deferred sales charges, the reinvestment will be treated
as a new investment. You do not use up this privilege by redeeming shares to
invest the proceeds at net asset value in a Keogh plan or an IRA.

DIRECTORS AND OFFICERS

The day-to-day affairs of the Corporation are handled by outside
organizations selected by the Board of Directors. The Board of Directors has
responsibility for establishing broad corporate policies for the Corporation and
for overseeing overall performance of the selected experts. It has the benefit
of advice and reports from independent counsel and independent auditors.

The principal occupation during at least the past five years of each
Director and officer of the Corporation is given below. Each of the persons
listed through and including Mr. Wright is a member of the Corporation's Board
of Directors. The other persons are officers but not members of the Board of
Directors. For purposes of this section, the term "Fund Complex" includes each
of the registered investment companies in the United Group of Mutual Funds,
Waddell & Reed Funds, Inc., TMK/United Funds, Inc., Torchmark Government
Securities Fund, Inc. and Torchmark Insured Tax-Free Fund, Inc. Each of the
Corporation's Directors is also a Director of each of the funds in the Fund
Complex and each of the Corporation's officers is also an officer of one or more
of the funds in the Fund Complex.

RONALD K. RICHEY*
2001 Third Avenue South
Birmingham, Alabama 35233
Chairman of the Board of Directors of the Fund and each of the other funds
in the Fund Complex; Chairman of the Board of Directors of Waddell & Reed
Financial Services, Inc., United Investors Management Company and United
Investors Life Insurance Company; Chairman of the Board of Directors and Chief
Executive Officer of Torchmark Corporation; Chairman of the Board of Directors
of Vesta Insurance Group, Inc.; formerly, Chairman of the Board of Directors of
Waddell & Reed, Inc.

KEITH A. TUCKER*
President of the Fund and each of the other funds in the Fund Complex;
President, Chief Executive Officer and Director of Waddell & Reed Financial
Services, Inc.; Chairman of the Board of Directors of WRIMCO, Waddell & Reed,
Inc., Waddell & Reed Services Company, Waddell & Reed Asset Management Company
and Torchmark Distributors, Inc., an affiliate of Waddell & Reed, Inc.; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; Director of Southwestern Life Corporation; formerly,
partner in Trivest, a private investment concern; formerly, Director of Atlantis
Group, Inc., a diversified company.

HENRY L. BELLMON
Route 1
P. O. Box 26
Red Rock, Oklahoma 74651
Rancher; Professor, Oklahoma State University; formerly, Governor of
Oklahoma; prior to his current service as Director of the funds in the United
Group, TMK/United Funds, Inc., Waddell & Reed Funds, Inc., Torchmark Government
Securities Fund, Inc. and Torchmark Insured Tax-Free Fund, Inc., he served in
such capacity for the funds in the United Group and TMK/United Funds, Inc.

DODDS I. BUCHANAN
903 13th Street
Boulder, Colorado 80302
Advisory Director, The Hand Companies; President, Buchanan Ranch Corp.;
formerly, Senior Vice President and Director of Marketing Services, The Meyer
Group of Management Consultants; formerly, Chairman, Department of Marketing,
Transportation and Tourism, University of Colorado; formerly, Professor of
Marketing, College of Business, University of Colorado.

JAY B. DILLINGHAM
926 Livestock Exchange Building
Kansas City, Missouri 64102
Formerly, President and Director of Kansas City Stock Yards Company;
formerly, Partner in Dillingham Farms, a farming operation.

JOHN F. HAYES*
335 N. Washington
Suite 260
Hutchinson, Kansas 67504-2977
Director of Central Bank and Trust; Director of Central Financial
Corporation; formerly, President of Gilliland & Hayes, P.A., a law firm.

GLENDON E. JOHNSON
7300 Corporate Center Drive
P. O. Box 020270
Miami, Florida 33126-1208
Director and Chief Executive Officer of John Alden Financial Corporation
and subsidiaries.

WILLIAM T. MORGAN*
1799 Westridge Road
Los Angeles, California 90049
Retired; formerly, Chairman of the Board of Directors and President of the
Fund and each fund in the Fund Complex then in existence. (Mr. Morgan retired
as Chairman of the Board of Directors and President of the funds in the Fund
Complex then in existence on April 30, 1993); formerly, President, Director and
Chief Executive Officer of WRIMCO and Waddell & Reed, Inc.; formerly, Chairman
of the Board of Directors of Waddell & Reed Services Company; formerly, Director
of Waddell & Reed Asset Management Company, United Investors Management Company
and United Investors Life Insurance Company, affiliates of Waddell & Reed, Inc.

DOYLE PATTERSON
1030 West 56th Street
Kansas City, Missouri 64113
Associated with Republic Real Estate, engaged in real estate management and
investment; formerly, Director of The Vendo Company, a manufacturer and
distributor of vending machines.

FREDERICK VOGEL III
1805 West Bradley Road
Milwaukee, Wisconsin 53217
Retired.

PAUL S. WISE
P. O. Box 5248
8648 Silver Saddle Drive
Carefree, Arizona 85377
Director of Potash Corporation of Saskatchewan.

LESLIE S. WRIGHT
2302 Brookshire Place
Birmingham, Alabama 35213
Chancellor of Samford University; formerly, Director of City Federal
Savings and Loan Association; formerly, President of Samford University.

Robert L. Hechler
Vice President and Principal Financial Officer of the Fund and each of the
other funds in the Fund Complex; Vice President, Chief Operations Officer,
Director and Treasurer of Waddell & Reed Financial Services, Inc.; Executive
Vice President, Principal Financial Officer, Director and Treasurer of WRIMCO;
President, Chief Executive Officer, Principal Financial Officer, Director and
Treasurer of Waddell & Reed, Inc.; Director and Treasurer of Waddell & Reed
Asset Management Company; President, Director and Treasurer of Waddell & Reed
Services Company; Vice President, Treasurer and Director of Torchmark
Distributors, Inc.

Henry J. Herrmann
Vice President of the Fund and each of the other funds in the Fund Complex;
Vice President, Chief Investment Officer and Director of Waddell & Reed
Financial Services, Inc.; Director of Waddell & Reed, Inc.; President, Chief
Executive Officer, Chief Investment Officer and Director of WRIMCO and Waddell &
Reed Asset Management Company; Senior Vice President and Chief Investment
Officer of United Investors Management Company.

Theodore W. Howard
Vice President, Treasurer and Principal Accounting Officer of the Fund and
each of the other funds in the Fund Complex; Vice President of Waddell & Reed
Services Company.

Sharon K. Pappas
Vice President, Secretary and General Counsel of the Fund and each of the
other funds in the Fund Complex; Vice President, Secretary and General Counsel
of Waddell & Reed Financial Services, Inc.; Senior Vice President, Secretary and
General Counsel of WRIMCO and Waddell & Reed, Inc.; Director, Senior Vice
President, Secretary and General Counsel of Waddell & Reed Services Company;
Director, Secretary and General Counsel of Waddell & Reed Asset Management
Company; Vice President, Secretary and General Counsel of Torchmark
Distributors, Inc.; formerly, Assistant General Counsel of WRIMCO, Waddell &
Reed Financial Services, Inc., Waddell & Reed, Inc., Waddell & Reed Asset
Management Company and Waddell & Reed Services Company.

John M. Holliday
Vice President of the Corporation and nine other funds in the Fund Complex;
Senior Vice President of WRIMCO and of Waddell & Reed Asset Management Company;
formerly, Senior Vice President of Waddell & Reed, Inc.

Mark G. Seferovich
Vice President of the Corporation and two other funds in the Fund Complex;
Vice President of WRIMCO; formerly, Vice President of Waddell & Reed, Inc.

W. Patrick Sterner
Vice President of the Corporation and one other fund in the Fund Complex;
Vice President of WRIMCO; Vice President of Waddell & Reed Asset Management
Company; formerly, Chief Investment Officer of The Merchants Bank.

Russell E. Thompson
Vice President of the Corporation and two other funds in the Fund Complex;
Senior Vice President of WRIMCO; Senior Vice President of Waddell & Reed Asset
Management Company; formerly, Senior Vice President of Waddell & Reed, Inc.

James Wineland
Vice President of the Corporation and three other funds in the Fund
Complex; Vice President of WRIMCO; formerly, Vice President of Waddell & Reed,
Inc.

Mark Yockey
Vice President of the Corporation and two other funds in the Fund Complex.

The address of each person is 6300 Lamar Avenue, P.O. Box 29217, Shawnee
Mission, Kansas 66201-9217 unless a different address is given.

As of the date of this SAI, four of the Corporation's Directors may be
deemed to be "interested persons" as defined in the 1940 Act of the Distributor
or of WRIMCO and, as such, also of the Corporation. The Directors who may be
deemed to be "interested persons" are indicated as such by an asterisk.

The Board of Directors has created an honorary position of Director
Emeritus, which position a Director may elect after resignation from the Board
of Directors provided the Director has attained the age of 75 and has served as
a Director of the Corporation for a total of at least five years. A Director
Emeritus receives fees in recognition of his past services whether or not
services are rendered in his capacity as Director Emeritus, but has no authority
or responsibility with respect to management of the Corporation. Currently, no
person serves as Director Emeritus.

The Corporation, the funds in the United Group (except United Asset
Strategy Fund, Inc.) and TMK/United Funds, Inc. pay to each Director a total of
$40,000 per year, plus $1,000 for each meeting of the Board of Directors
attended (prior to January 1, 1995, the fee was $500 for each meeting of the
Board of Directors attended) and $500 for each committee meeting attended which
is not in conjunction with a Board of Directors meeting, other than Directors
who are affiliates of Waddell & Reed, Inc. The fees to the Directors who
receive them are divided among the Corporation, the funds in the United Group
(except United Asset Strategy Fund, Inc.) and TMK/United Funds, Inc. based on
their relative size. During the Corporation's fiscal year ended March 31, 1995,
the Corporation's Directors received the following fees for service as a
director:

COMPENSATION TABLE

Pension
or Retirement Total
Aggregate Benefits Compensation
Compensation Accrued As From Fund
From Part of Fund and Fund
Director Fund Expenses Complex
- -------- ------------ -------------- ------------
Ronald K. Richey $ 0 $0 $ 0
Keith A Tucker 0 0 0
Henry L. Bellmon 641 0 43,000
Dodds I. Buchanan 641 0 43,000
Jay B. Dillingham 641 0 43,000
John F. Hayes 641 0 43,000
Glendon E. Johnson 641 0 43,000
William T. Morgan 641 0 43,000
Doyle Patterson 641 0 43,000
Frederick Vogel III 641 0 43,000
Paul S. Wise 641 0 43,000
Leslie S. Wright 621 0 41,500

The officers are paid by WRIMCO or its affiliates.

Shareholdings

As of May 31, 1995, all of the Corporation's Directors and officers as a
group owned less than 1% of the outstanding shares of the Corporation. As of
such date, no person owned of record or was known by the Corporation to own
beneficially 5% or more of the Corporation's outstanding shares.

PAYMENTS TO SHAREHOLDERS

General

There are two (three, in the case of certain Funds) sources for the
payments a Fund makes to you as a shareholder, other than payments when you
redeem your shares. The first source is a Fund's net investment income, which
is derived from the dividends, interest and earned discount on the securities it
holds, less its expenses. The second source is realized capital gains, which
are derived from the proceeds received from the sale of securities at a price
higher than a Fund's tax basis (usually cost) in such securities; these gains
can be either long-term or short-term, depending on how long a Fund has owned
the securities before it sells them. The third source (in the case of Total
Return Fund, Growth Fund, International Growth Fund and Asset Strategy Fund)is
net realized gains from foreign currency transactions. The payments made to
shareholders from net investment income, net short-term capital gains, and net
realized gains from certain foreign currency transactions are called dividends.
Payments, if any, from long-term capital gains are called distributions.

Each Fund pays distributions only if it has net capital gains (the excess
of net long-term capital gains over net short-term capital losses). It may or
may not have such gains, depending on whether securities are sold and at what
price. If a Fund has net capital gains, it will pay distributions once each
year, in the latter part of the fourth calendar quarter. Even if a Fund has net
capital gains for a year, it does not pay the gains out if it has applicable
prior year losses to offset the gains.

Choices you Have on your Dividends and Distributions

In your application form, you can give instructions that (i) you want cash
for your dividends and distributions, (ii) you want your dividends and
distributions reinvested in Fund shares, or (iii) you want cash for your
dividends and want your distributions reinvested in shares of the distributing
Fund. You can change your instructions at any time. If you give no
instructions, your dividends and distributions will be reinvested in Fund
shares. All reinvestments are at net asset value without any sales charge. The
net asset value used for this purpose is that computed as of the payment date
for the dividend or distribution, although this could be changed by the Board of
Directors.

Even if you get dividends and distributions in cash, you can thereafter
reinvest them (or distributions only) in Fund shares at net asset value (i.e.,
no sales charge) next determined after receipt by the Distributor of the amount
clearly identified as a reinvestment. The reinvestment must be within 45 days
after the payment.

TAXES

General

In order to qualify, in the case of Asset Strategy Fund, or to continue to
qualify for treatment as a regulated investment company ("RIC") under the Code,
a Fund (each Fund being treated as a separate entity for these purposes) must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of taxable net
investment income, net short-term capital gains and, for certain Funds, net
gains from certain foreign currency transactions) plus, in the case of Municipal
Bond Fund, its net interest income excludable from gross income under Section
103(a) of the Code ("Distribution Requirement"), and must meet several
additional requirements. With respect to each Fund, these requirements include
the following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, futures or forward
contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, or any of the following, that were held for less than three months -
- - options or futures (other than those on foreign currencies), or foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and futures with respect to securities) ("Short-Short Limitation");
(3) at the close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government Securities, securities of other RICs and other securities that are
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities; and (4) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its total
assets may be invested in securities (other than U.S. Government Securities or
the securities of other RICs) of any one issuer.

Dividends and distributions declared by a Fund in October, November or
December of any year and payable to shareholders of record on a date in any of
those months are deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if they are paid by the Fund during the
following January. Accordingly, those dividends and distributions will be taxed
to shareholders for the year in which that December 31 falls.

If shares of a Fund are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any distributions received on those shares. Investors also
should be aware that if shares are purchased shortly before the record date for
a dividend or distribution, the purchaser will receive some portion of the
purchase price back as a taxable dividend or distribution.

Each Fund will be subject to a nondeductible 4% excise tax ("Excise Tax")
to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gains net
income for the one-year period ending on October 31 of that year, plus certain
other amounts. It is the Fund's policy to make sufficient distributions each
year to avoid imposition of the Excise Tax. The Code permits the Fund to defer
into the next calendar year net capital losses incurred between each November 1
and the end of the current calendar year.

Income from Foreign Securities

Dividends and interest received by a Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
International Growth Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, that Fund will be eligible to,
and may, file an election with the Internal Revenue Service that will enable its
shareholders, in effect, to receive the benefit of the foreign tax credit with
respect to any foreign and U.S. possessions income taxes paid by it. Pursuant
to any such election, International Growth Fund would treat those taxes as
dividends paid to its shareholders and each shareholder would be required to (1)
include in gross income, and treat as paid by the shareholder, the shareholder's
proportionate share of those taxes, (2) treat the shareholder's share of those
taxes and of any dividend paid by that Fund that represents income from foreign
or U.S. possessions sources as the shareholder's own income from those sources
and (3) either deduct the taxes deemed paid by the shareholder in computing the
shareholder's taxable income or, alternatively, use the foregoing information in
calculating the foreign tax credit against the shareholder's Federal income tax.
International Growth Fund will report to its shareholders shortly after each
taxable year their respective shares of that Fund's income from sources within,
and taxes paid to, foreign countries and U.S. possessions if it makes this
election.

Each of International Growth Fund, Asset Strategy Fund, Total Return Fund
and Growth Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, a Fund will be
subject to Federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain on disposition of the stock (collectively
"PFIC income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC
income will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.

If a Fund invests in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
would have to be distributed to satisfy the Distribution Requirement and to
avoid imposition of the Excise Tax -- even if those earnings and gain were not
received by the Fund. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.

The "Tax Simplification and Technical Corrections Bill of 1993," passed in
May 1994 by the House of Representatives, would substantially modify the
taxation of U.S. shareholders of foreign corporations, including eliminating the
provision described above dealing with PFICs and replacing them (and other
provisions) with a regulatory scheme involving entities called "passive foreign
corporations." Three similar bills were passed by Congress in 1991 and 1992 and
vetoed. It is unclear at this time whether, and in what form, the proposed
modifications may be enacted into law.

Proposed regulations have been published pursuant to which open-end RICs,
such as the Funds, would be entitled to elect to "mark-to-market" their stock in
certain PFICs. "Marking-to-market," in this context, means recognizing as gain
for each taxable year the excess, as of the end of that year, of the fair market
value of such a PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).

Foreign Currency Gains and Losses

Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of debt securities denominated in a foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time a
Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally are treated
as ordinary income or loss. These gains or losses, referred to under the Code
as "section 988" gains or losses, may increase or decrease the amount of a
Fund's investment company taxable income to be distributed to its shareholders.

Income from Options, Futures and Currencies

The use of hedging and option income strategies, such as writing (selling)
and purchasing options and futures and entering into forward contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the gains and losses a Fund realizes in connection
therewith. Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in options,
futures and forward contracts derived by a Fund with respect to its business of
investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement. However, income from the disposition of
options and futures (other than those on foreign currencies) will be subject to
the Short-Short Limitation if they are held for less than three months. Income
from the disposition of foreign currencies, and options, futures and forward
contracts thereon, that are not directly related to a Fund's principal business
of investing in securities (or options and futures with respect to securities)
also will be subject to the Short-Short Limitation if they are held for less
than three months.

If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gains (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Fund intends that, when it engages in hedging transactions, they will qualify
for this treatment, but at the present time it is not clear whether this
treatment will be available for all of each Fund's hedging transactions. To the
extent this treatment is not available, a Fund may be forced to defer the
closing out of certain options, futures and forward contracts beyond the time
when it otherwise would be advantageous to do so, in order for the Fund to
qualify or continue to qualify as a RIC.

Any income a Fund earns from writing options is treated as short-term
capital gains. If a Fund enters into a closing purchase transaction, it will
have short-term capital gains or losses based on the difference between the
premium it receives for the option it wrote and the premium it pays for the
option it buys. If an option written by a Fund lapses without being exercised,
the premium it receives also will be a short-term gain. If such an option is
exercised and thus the Fund sells the securities subject to the option, the
premium the Fund receives will be added to the exercise price to determine the
gain or loss on the sale. A Fund will not write so many options that it could
fail to qualify or continue to qualify as a RIC.

Certain options and futures in which the Funds may invest will be "section
1256 contracts." Section 1256 contracts held by a Fund at the end of its
taxable year, other than section 1256 contracts that are part of a "mixed
straddle" with respect to which the Fund has made an election not to have the
following rules apply, are "marked-to-market" (that is, treated as sold for
their fair market value) for Federal income tax purposes, with the result that
unrealized gains or losses are treated as though they were realized. Sixty
percent of any net gains or losses recognized on these deemed sales, and 60% of
any net realized gains or losses from any actual sales of section 1256
contracts, are treated as long-term capital gains or losses, and the balance are
treated as short-term capital gains or losses. Section 1256 contracts also may
be marked-to-market for purposes of the Excise Tax and for other purposes.

Code section 1092 (dealing with straddles) may also affect the taxation of
options and futures contracts in which the Funds may invest. That section
defines a "straddle" as offsetting positions with respect to personal property;
for these purposes, options and futures contracts are personal property.
Section 1092 generally provides that any loss from the disposition of a position
in a straddle may be deducted only to the extent the loss exceeds the unrealized
gain on the offsetting position(s) of the straddle. Section 1092 also provides
certain "wash sale" rules, which apply to transactions where a position is sold
at a loss and a new offsetting position is acquired within a prescribed period,
and "short sale" rules applicable to straddles. If a Fund makes certain
elections, the amount, character and timing of the recognition of gains and
losses from the affected straddle positions will be determined under rules that
vary according to the elections made. Because only a few of the regulations
implementing the straddle rules have been promulgated, the tax consequences of
straddle transactions to the Funds are not entirely clear.

Zero Coupon and Payment-in-Kind Securities

Certain Funds may acquire zero coupon or other securities issued with
original issue discount. As the holder of those securities, a Fund must include
in its income the original issue discount that accrues on the securities during
the taxable year, even if the Fund receives no corresponding payment on the
securities during the year. Similarly, a Fund must include in its gross income
securities it receives as "interest" on payment-in-kind securities. Because
each Fund annually must distribute substantially all of its investment company
taxable income, including any original issue discount and other non-cash income,
in order to satisfy the Distribution Requirement and to avoid imposition of the
Excise Tax, a Fund may be required in a particular year to distribute as a
dividend an amount that is greater than the total amount of cash it actually
receives. Those distributions will be made from a Fund's cash assets or from
the proceeds of sales of portfolio securities, if necessary. A Fund may realize
capital gains or losses from those sales, which would increase or decrease its
investment company taxable income and/or net capital gains. In addition, any
such gains may be realized on the disposition of securities held for less than
three months. Because of the Short-Short Limitation, any such gains would
reduce a Fund's ability to sell other securities, or certain options, futures or
forward contracts, held for less than three months that it might wish to sell in
the ordinary course of its portfolio management.

Municipal Bond Fund

The aggregate dividends excludable from the gross income of a Municipal
Bond Fund shareholder may not exceed the Fund's net tax-exempt income. If the
Fund's shares are sold at a loss after being held for six months or less, the
loss will be disallowed to the extent of any exempt-interest dividends received
on those shares. Tax-exempt interest attributable to certain private activity
bonds ("PABs") (including a proportionate part of the exempt-interest dividends
paid by the Fund attributable thereto) is subject to the alternative minimum
tax. Exempt-interest dividends received by a corporate shareholder also may be
indirectly subject to that tax without regard to whether the Fund's tax-exempt
interest was attributable to those PABs.

Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by PABs or industrial development
bonds should consult their tax advisers before purchasing shares of the Fund
because, for users of certain of these facilities, the interest on such bonds is
not exempt from Federal income tax. For these purposes, the term "substantial
user" is defined generally to include a "non-exempt person" who regularly uses
in trade or business a part of a facility financed from the proceeds of PABs or
industrial development bonds.

Up to 85% of social security and railroad retirement benefits may be
included in taxable income for recipients whose adjusted gross income (including
income from tax-exempt sources such as the Fund) plus 50% of their benefits
exceeds certain base amounts. Exempt-interest dividends from the Fund still are
tax-exempt to the extent described in the Prospectus; they are only included in
the calculation of whether a recipient's income exceeds the established amounts.

If the Fund invests in any instruments that generate taxable income, under
the circumstances described in the Prospectus, distributions of the income
earned thereon will be taxable to the Fund's shareholders as ordinary income to
the extent of its earnings and profits. Moreover, if the Fund realizes capital
gains as a result of market transactions, any distribution of those gains will
be taxable to its shareholders. There also may be collateral Federal income tax
consequences regarding the receipt of exempt-interest dividends by shareholders
such as S corporations, financial institutions, and property and casualty
insurance companies. A shareholder falling into any such category should
consult its tax adviser concerning its investment in shares of the Fund.

PORTFOLIO TRANSACTIONS AND BROKERAGE

One of the duties undertaken by WRIMCO pursuant to the Management Agreement
is to arrange for the purchase and sale of securities for the portfolio of each
Fund. With respect to Limited-Term Bond Fund and Municipal Bond Fund, many
purchases are made directly from issuers or from underwriters, dealers or banks.
Purchases from underwriters include a commission or concession paid by the
issuer to the underwriter. Purchases from dealers will include the spread
between the bid and the asked prices. Otherwise, transactions in securities
other than those for which an exchange is the primary market are generally done
with dealers acting as principals or market makers. Brokerage commissions are
paid primarily for effecting transactions in securities traded on an exchange
and otherwise only if it appears likely that a better price or execution can be
obtained.

To effect the portfolio transactions of a Fund, WRIMCO is authorized to
engage broker-dealers ("brokers") which, in its best judgment based on relevant
factors, will implement the policy of the Fund to achieve "best execution"
(prompt and reliable execution at the best price obtainable) for reasonable and
competitive commissions. WRIMCO need not seek competitive commission bidding
but is expected to minimize the commissions paid to the extent consistent with
the interests and policies of the Fund. Subject to review by the Board of
Directors, such policies include the selection of brokers which provide
execution and/or research services and or other services, including pricing or
quotation services directly or through others ("brokerage services") considered
by WRIMCO to be useful or desirable for its investment management of the Fund
and/or the other funds and accounts over which WRIMCO or its affiliates have
investment discretion.

Such brokerage services are, in general, defined by reference to Section
28(e) of the Securities Exchange Act of 1934 as including (i) advice, either
directly or through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities and the
availability of securities and purchasers or sellers; (ii) furnishing analyses
and reports; or (iii) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody). "Investment
discretion" is, in general, defined as having authorization to determine what
securities shall be purchased or sold for an account, or making those decisions
even though someone else has responsibility.

The commissions paid to brokers that provide such brokerage services may be
higher than another qualified broker would charge for effecting comparable
transactions if a good faith determination is made by WRIMCO that the commission
is reasonable in relation to the brokerage services provided. Subject to the
foregoing considerations WRIMCO may also consider the willingness of particular
brokers and dealers to sell shares of the Fund and other funds managed by WRIMCO
and its affiliates as a factor in its selection. No allocation of brokerage or
principal business is made to provide any other benefits to WRIMCO or its
affiliates.

The investment research provided by a particular broker may be useful only
to one or more of the other advisory accounts of WRIMCO and its affiliates and
investment research received for the commissions of those other accounts may be
useful both to the Corporation and one or more of such other accounts. To the
extent that electronic or other products provided by such brokers to assist
WRIMCO in making investment management decisions are used for administration or
other non-research purposes, a reasonable allocation of the cost of the product
attributable to its non-research use is made by WRIMCO.

Such investment research (which may be supplied by a third party at the
instance of a broker) includes information on particular companies and
industries as well as market, economic or institutional activity areas. It
serves to broaden the scope and supplement the research activities of WRIMCO;
serves to make available additional views for consideration and comparisons; and
enables WRIMCO to obtain market information on the price of securities held in a
Fund's portfolio or being considered for purchase.

In placing transactions for a portfolio, WRIMCO may consider sales of
shares of each portfolio of the Corporation and other funds managed by WRIMCO
and its affiliates as a factor in the selection of brokers to execute portfolio
transactions. WRIMCO intends to allocate brokerage on the basis of this factor,
among others, only if the sale is $2 million or more. This results in the
consideration only of sales which by their nature would not ordinarily be made
by the Distributor's direct sales force and is done in order to prevent the
direct sales force from being disadvantaged by the fact that it cannot
participate in the Corporation's brokerage.

The table below sets forth the brokerage commissions paid by each of the
Funds then in existence during the fiscal years ended March 31, 1995, 1994 and
1993. These figures do not include principal transactions or spreads or
concessions on principal transactions, i.e., those in which a Fund sells
securities to a broker-dealer firm or buys from a broker-dealer firm securities
owned by it.

1995 1994 1993*
---- ----- -----

Total Return Fund $ 84,002 $70,780 $16,390
Growth Fund 44,809 26,876 1,525
Limited-Term Bond Fund --- --- ---
Municipal Bond Fund --- --- ---
International Growth Fund* --- --- ---
-------- ------- -------
Total $128,811 $97,656 $17,915
======== ======= =======

*Formerly Global Income Fund.

The next table shows for each of the Funds the transactions, other than
principal transactions, which were directed to broker-dealers who provided
research as well as execution and the brokerage commissions paid during the
fiscal year ended March 31, 1995 for each of the Funds then in existence. These
transactions were allocated to these broker-dealers by the internal allocation
procedures described above.

Amount of Brokerage
Transactions Commissions
------------ -----------

Total Return Fund ................. $36,432,287 $58,077
Growth Fund ....................... 14,866,446 27,784
Limited-Term Bond Fund ............ --- ---
Municipal Bond Fund ............... --- ---
International Growth Fund* ........ --- ---
---------- -------
Total .......................... $51,298,733 $85,861
========== =======

*Formerly Global Income Fund

As of March 31, 1995, Waddell & Reed Growth Fund owned Merrill Lynch & Co.,
Inc. securities in the aggregate amount of $2,999,003. Merrill Lynch & Co.,
Inc. is a regular broker of the Fund.

The Corporation, WRIMCO and Waddell & Reed, Inc. have adopted a Code of
Ethics which imposes restrictions on the personal investment activities of their
employees, officers and interested directors.

Buying and Selling With Other Funds

The individual who manages each of the respective Funds may manage other
advisory accounts with similar investment objectives. It can be anticipated
that WRIMCO will frequently place concurrent orders for all or most accounts for
which WRIMCO has responsibility. Transactions effected pursuant to such
combined orders are averaged as to price and allocated in accordance with the
purchase or sale orders actually placed for each fund or advisory account. One
or more of the Funds and one or more of the funds in the United Group,
TMK/United Funds, Inc., Torchmark Government Securities Fund, Inc. and Torchmark
Insured Tax-Free Fund, Inc. or accounts over which Waddell & Reed Asset
Management Company exercises investment discretion frequently buy or sell the
same securities at the same time. If this happens, the amount of each purchase
or sale is divided. This is done on the basis of the amount of securities each
fund or account wanted to buy or sell. Sharing in large transactions could
affect the price a Fund pays or receives or the amount it buys or sells.
However, sometimes a better negotiated commission is available.

OTHER INFORMATION

General

The Corporation was organized on January 29, 1992. The name of
International Growth Fund (formerly Global Income Fund) was changed effective
April 20, 1995.

The Shares of the Funds

The shares of each Fund represent an interest in that Fund's securities and
other assets and in its profits or losses. Each share of each Fund has the same
rights to dividends and to receive assets if the Corporation liquidates (winds-
up) as every other share of that Fund. Each fractional share has the same
rights, in proportion, as a full share. All shares of each Fund are fully paid
and nonassessable when you buy them.

Each share of each Fund is entitled to one vote. On certain matters such
as the election of Directors, all shares of all of the Funds vote together as a
single class. On other matters affecting a particular Fund, the shares of that
Fund vote as a separate class; an example would be a change in an investment
restriction of a particular Fund. In voting on the Management Agreement or the
Plan, approval by the shareholders of a Fund is effective as to that Fund
whether or not enough votes are received from the shareholders of any of the
other Funds to approve the Management Agreement or the Plan for the other Funds.

Those shares held by the Distributor or its corporate affiliates (as
described below) will be voted in proportion to the voting instructions which
are received on any matter. Voting instructions to abstain on any item to be
voted upon will be applied to reduce the votes eligible to be cast by the
Distributor and its corporate affiliates.

Initial Investment and Organizational Expenses

On April 24, 1992, the Distributor purchased for investment 2,000 shares of
each Fund at a net asset value of $10.00 per share.

The Corporation's organizational expenses in the amount of $162,960 have
been advanced by the Distributor and are an obligation to be paid by the
Corporation. These expenses are being amortized over the 60-month period
following the date of the initial public offering of the Corporation's shares.
In the event that all or part of the Distributor's initial investment in the
Corporation's shares is redeemed prior to the full reimbursement of the
organizational expenses, the Corporation's obligation to make reimbursement will
cease.

<PAGE>
APPENDIX A

The Funds may use some or all of the following instruments as discussed in
the Prospectus and this SAI:

Options on Equity and Debt Securities and Foreign Currencies--A call option
is a short-term contract pursuant to which the purchaser of the option, in
return for a premium, has the right to buy the security or currency underlying
the option at a specified price at any time during the term of the option. The
writer of the call option, who receives the premium, has the obligation, upon
exercise of the option during the option term, to deliver the underlying
security or currency against payment of the exercise price. A put option is a
similar contract that gives its purchaser, in return for a premium, the right to
sell the underlying security or currency at a specified price during the option
term. The writer of the put option, who receives the premium, has the
obligation, upon exercise of the option during the option term, to buy the
underlying security or currency at the exercise price.

Options on Stock Indices--A stock index assigns relative values to the
stocks included in the index and fluctuates with changes in the market values of
those stocks. A stock index option operates in the same way as a more
traditional stock option, except that exercise of a stock index option is
effected with a cash payment and does not involve delivery of securities. Thus,
upon exercise of a stock index option, the purchaser will realize, and the
writer will pay, an amount based on the difference between the exercise price
and the closing price of the stock index.

Options on Bond Indices--A bond index assigns relative values to the debt
securities included in the index and fluctuates with changes in such values.
Settlement of bond index options is effected with a cash payment and does not
involve delivery of securities. Thus, upon settlement of a bond index option,
the purchaser will realize, and the writer will pay, an amount based on the
difference between the exercise price and the closing price of the bond index.

Stock Index and Bond Index Futures Contracts--An index futures contract is
a bilateral agreement pursuant to which one party agrees to accept, and the
other party agrees to make, delivery of an amount of cash equal to a specified
dollar amount times the difference between the value of the stock or bond index,
as the case may be, at the close of trading of the contract and the price at
which the futures contract is originally struck. No physical delivery of the
securities comprising the index is made. Generally, contracts are closed out
prior to the expiration date of the contract.

Interest Rate and Foreign Currency Futures Contracts--Interest rate and
foreign currency futures contracts are bilateral agreements pursuant to which
one party agrees to make, and the other party agrees to accept, delivery of a
specified type of debt security or currency at a specified future time and at a
specified price. Although such futures contracts by their terms call for actual
delivery or acceptance of debt securities or currency, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery.

Options on Futures Contracts--Options on futures contracts are similar to
options on securities or currency, except that an option on a futures contract
gives the purchaser the right, in return for the premium, to assume a position
in a futures contract (a long position if the option is a call and a short
position if the option is a put), rather than to purchase or sell a security or
currency, at a specified price at any time during the option term. Upon
exercise of the option, the delivery of the futures position to the holder of
the option will be accompanied by delivery of the accumulated balance that
represents the amount by which the market price of the futures contract exceeds,
in the case of a call, or is less than, in the case of a put, the exercise price
of the option on the future. The writer of an option, upon exercise, will
assume a short position in the case of a call and a long position in the case of
a put.

Forward Currency Contracts--A forward currency contract involves an
obligation to purchase or sell a specific currency at a specified future date,
which may be any fixed number of days from the contract date agreed upon by the
parties, at a price set at the time the contract is entered into.

<PAGE>
APPENDIX B

The following are descriptions of some of the ratings of securities which
the Fund may use. The Fund may also use ratings provided by other nationally
recognized statistical rating organizations in determining the securities
eligible for investment.

DESCRIPTION OF BOND RATINGS

Standard & Poor's Ratings Group. A Standard & Poor's ("S&P") corporate
bond rating is a current assessment of the creditworthiness of an obligor with
respect to a specific obligation. This assessment of creditworthiness may take
into consideration obligors such as guarantors, insurers or lessees.

The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.

The ratings are based on current information furnished to S&P by the
issuer or obtained by S&P from other sources it considers reliable. S&P does
not perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information, or
based on other circumstances.

The ratings are based, in varying degrees, on the following considerations:

1. Likelihood of default -- capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;

2. Nature of and provisions of the obligation;

3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization or other arrangement under the
laws of bankruptcy and other laws affecting creditors' rights.

AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

AA -- Debt rated AA also qualifies as high quality debt. Capacity to pay
interest and repay principal is very strong, and debt rated AA differs from AAA
issues only in small degree.

A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

BB, B, CCC, CC, C - Debt rated BB, B, CCC, CC and C is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions.

BB -- Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B -- Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.

CCC -- Debt rated CCC has a currently indefinable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC -- The rating CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.

C -- The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

CI -- The rating CI is reserved for income bonds on which no interest is
being paid.

D -- Debt rated D is in payment default. It is used when interest payments
or principal payments are not made on a due date even if the applicable grace
period has not expired, unless Standard & Poor's believes that such payments
will be made during such grace periods. The D rating will also be used upon a
filing of a bankruptcy petition if debt service payments are jeopardized.

Plus (+) or Minus (-) -- To provide more detailed indications of credit
quality, the ratings from AA to CCC may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.

NR -- Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

Debt Obligations of issuers outside the United States and its territories
are rated on the same basis as domestic corporate and municipal issues. The
ratings measure the creditworthiness of the obligor but do not take into account
currency exchange and related uncertainties.

Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, bonds rated in the top
four categories (AAA, AA, A, BBB, commonly known as "investment grade" ratings)
are generally regarded as eligible for bank investment. In addition, the laws
of various states governing legal investments may impose certain rating or other
standards for obligations eligible for investment by savings banks, trust
companies, insurance companies and fiduciaries generally.

Moody's Investors Service, Inc. A brief description of the applicable
Moody's Investors Service ("MIS") rating symbols and their meanings follows:

Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.

A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Some bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.

NOTE: Bonds within the above categories which possess the strongest investment
attributes are designated by the symbol "1" following the rating.

Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.

Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C -- Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.

Description of Preferred Stock Ratings

Standard & Poor's Ratings Group. A S&P preferred stock rating is an
assessment of the capacity and willingness of an issuer to pay preferred stock
dividends and any applicable sinking fund obligations. A preferred stock rating
differs from a bond rating inasmuch as it is assigned to an equity issue, which
issue is intrinsically different from, and subordinated to, a debt issue.
Therefore, to reflect this difference, the preferred stock rating symbol will
normally not be higher than the debt rating symbol assigned to, or that would be
assigned to, the senior debt of the same issuer.

The preferred stock ratings are based on the following considerations:

1. Likelihood of payment - capacity and willingness of the issuer to meet the
timely payment of preferred stock dividends and any applicable sinking fund
requirements in accordance with the terms of the obligation;

2. Nature of, and provisions of, the issue;

3. Relative position of the issue in the event of bankruptcy, reorganization,
or other arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.

AAA -- This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.

AA -- A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.

A -- An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions.

BBB -- An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the 'A' category.

BB, B, CCC -- Preferred stock rated BB, B, and CCC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such issues will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

CC -- The rating CC is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.

C -- A preferred stock rated C is a non-paying issue.

D -- A preferred stock rated D is a non-paying issue with the issuer in
default on debt instruments.

NR -- This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.

Plus (+) or minus (-) -- To provide more detailed indications of preferred
stock quality, the rating from AA to CCC may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.

A preferred stock rating is not a recommendation to purchase, sell, or hold
a security inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished
to S&P by the issuer or obtained by S&P from other sources it considers
reliable. S&P does not perform an audit in connection with any rating and may,
on occasion, rely on unaudited financial information. The ratings may be
changed, suspended, or withdrawn as a result of changes in, or unavailability
of, such information, or based on other circumstances.

Moody's Investors Service, Inc. Because of the fundamental differences
between preferred stocks and bonds, a variation of Moody's familiar bond rating
symbols is used in the quality ranking of preferred stock. The symbols are
designed to avoid comparison with bond quality in absolute terms. It should
always be borne in mind that preferred stock occupies a junior position to bonds
within a particular capital structure and that these securities are rated within
the universe of preferred stocks.

Note: MIS applies numerical modifiers 1, 2 and 3 in each rating
classification; the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.

Preferred stock rating symbols and their definitions are as follows:

aaa -- An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.

aa -- An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance the earnings
and asset protection will remain relatively well-maintained in the foreseeable
future.

a -- An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classification, earnings and asset protection are, nevertheless, expected
to be maintained at adequate levels.

baa -- An issue which is rated baa is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and
asset protection appear adequate at present but may be questionable over any
great length of time.

ba -- An issue which is rated ba is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.

b -- An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.

caa -- An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payments.

ca -- An issue which is rated ca is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of eventual
payments.

c -- This is the lowest rated class of preferred or preference stock.
Issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

DESCRIPTION OF NOTE RATINGS

Standard and Poor's Rating's Group. A S&P note rating reflects the
liquidity factors and market access risks unique to notes. Notes maturing in 3
years or less will likely receive a note rating. Notes maturing beyond 3 years
will most likely receive a long-term debt rating. The following criteria will
be used in making that assessment.

--Amortization schedule (the larger the final maturity relative to other
maturities, the more likely the issue is to be treated as a note).

--Source of Payment (the more the issue depends on the market for its
refinancing, the more likely it is to be treated as a note.)

The note rating symbols and definitions are as follows:

SP-1 Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term
of the notes.
SP-3 Speculative capacity to pay principal and interest.

Moody's Investors Service, Inc. MIS Short-Term Loan Ratings -- MIS ratings
for state and municipal short-term obligations will be designated MIS Investment
Grade (MIG). This distinction is in recognition of the differences between
short-term credit risk and long-term risk. Factors affecting the liquidity of
the borrower are uppermost in importance in short-term borrowing, while various
factors of major importance in bond risk are of lesser importance over the short
run. Rating symbols and their meanings follow:

MIG 1 -- This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.

MIG 2 -- This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

MIG 3 -- This designation denotes favorable quality. All security elements
are accounted for but this is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.

MIG 4 -- This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

Standard & Poor's Ratings Group commercial paper rating is a current
assessment of the likelihood of timely payment of debt considered short-term in
the relevant market. Ratings are graded into several categories, ranging from
"A-1" for the highest quality obligations to D for the lowest. Issuers rated A
are further referred to by use of numbers 1, 2 and 3 to indicate the relative
degree of safety. Issues assigned an A rating (the highest rating) are regarded
as having the greatest capacity for timely payment. An A-1 designation
indicates that the degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
with a plus sign (+) designation. An A-2 rating indicates that capacity for
timely payment is satisfactory; however, the relative degree of safety is not as
high as for issues designated A-1. Issues rated A-3 have adequate capacity for
timely payment; however, they are more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Issues rated B are regarded as having only speculative capacity for timely
payment. A C rating is assigned to short-term debt obligations with a doubtful
capacity for payment. Debt rated D is in payment default, which occurs when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period.

Moody's Investors Service, Inc. commercial paper ratings are opinions of
the ability of issuers to repay punctually promissory obligations not having an
original maturity in excess of nine months. Moody's employs the designations of
Prime 1, Prime 2 and Prime 3, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers. Issuers rated Prime 1 have a
superior capacity for repayment of short-term promissory obligations and
repayment capacity will normally be evidenced by (1) lending market positions in
well established industries; (2) high rates of return on Funds employed; (3)
conservative capitalization structures with moderate reliance on debt and ample
asset protection; (4) broad margins in earnings coverage of fixed financial
charges and high internal cash generation; and (5) well established access to a
range of financial markets and assured sources of alternate liquidity. Issuers
rated Prime 2 also have a strong capacity for repayment of short-term promissory
obligations as will normally be evidenced by many of the characteristics
described above for Prime 1 issuers, but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation;
capitalization characteristics, while still appropriate, may be more affected by
external conditions; and ample alternate liquidity is maintained. Issuers rated
Prime 3 have an acceptable capacity for repayment of short-term promissory
obligations, as will normally be evidenced by many of the characteristics above
for Prime 1 issuers, but to a lesser degree. The effect of industry
characteristics and market composition may be more pronounced; variability in
earnings and profitability may result in changes in the level of debt protection
measurements and requirement for relatively high financial leverage; and
adequate alternate liquidity is maintained.

DOLLAR-WEIGHTED AVERAGE MATURITY

Dollar-Weighted Average Maturity is derived by multiplying the value of
each investment by the number of days remaining to its maturity, adding these
calculations, and then dividing the total by the value of the Fund's portfolio.
An obligation's maturity is typically determined on a stated final maturity
basis, although there are some exceptions to this rule.

For example, if it is probable that the issuer of an instrument will take
advantage of a maturity-shortening device, such as a call, refunding, or
redemption provision, the date on which the instrument will probably be called,
refunded, or redeemed may be considered to be its maturity date. Also, the
maturities of mortgage-backed securities and some asset-backed securities, such
as collateralized mortgage obligations, are determined on a weighted average
life basis, which is the average time for principal to be repaid. For a
mortgage security, this average time is calculated by assuming a constant
prepayment rate for the life of the mortgage. The weighted average life of
these securities is likely to be substantially shorter than their stated final
maturity.

The following are descriptions of some of the ratings of securities which
the Funds may use. The Funds may also use ratings provided by other nationally
recognized statistical rating organizations in determining the securities
eligible for investment.

<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1995

Shares Value

COMMON STOCKS
Aerospace - 1.39%
Boeing Company (The) ................... 19,000 $ 1,023,625
Sundstrand Corporation ................. 8,600 433,225
Total ................................. 1,456,850

Airlines - 2.01%
AMR Corporation* ....................... 12,000 777,000
Southwest Airlines Co. ................. 74,150 1,325,431
Total ................................. 2,102,431

Automotive - 5.73%
Chrysler Corporation ................... 33,000 1,381,875
Dana Corporation ....................... 23,000 586,500
Eaton Corporation ...................... 15,000 813,750
Ford Motor Company ..................... 55,000 1,485,000
General Motors Corporation ............. 30,000 1,327,500
Magna International Group,
Inc., Class A ......................... 10,500 400,313
Total ................................. 5,994,938

Banks and Savings and Loans - 2.56%
Citicorp ............................... 22,500 956,250
First Bank Systems, Inc. ............... 15,000 605,625
First Interstate Bancorp ............... 9,000 711,000
Midlantic Corporation .................. 12,000 409,500
Total ................................. 2,682,375

Beverages - 1.04%
PepsiCo, Inc. .......................... 28,000 1,092,000

Biotechnology and Medical Services - 1.56%
Centocor, Inc.* ........................ 6,000 94,500
Medtronic, Inc. ........................ 12,000 832,500
Ventritex, Inc.* ....................... 37,000 707,625
Total ................................. 1,634,625

Building - 5.52%
Armstrong World Industries, Inc. ....... 27,000 1,231,875
Centex Corporation ..................... 33,200 800,950
Georgia-Pacific Corporation ............ 12,500 996,875
Louisiana-Pacific Corporation .......... 20,000 552,500
Pulte Corporation ...................... 36,100 848,350
Temple-Inland Inc. ..................... 10,500 471,188
Weyerhaeuser Company ................... 22,500 874,688
Total ................................. 5,776,426

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1995

Shares Value

COMMON STOCKS(Continued)
Chemicals Major - 6.60%
Air Products & Chemicals, Inc. ......... 34,500 $ 1,798,313
Albemarle Corporation .................. 30,300 386,325
du Pont (E.I.) de Nemours and Company .. 30,000 1,815,000
PPG Industries, Inc. ................... 37,500 1,415,625
Praxair, Inc. .......................... 30,000 697,500
Union Carbide Corporation .............. 26,000 796,250
Total ................................. 6,909,013

Chemicals Specialty and Miscellaneous Technology - 4.01%
Betz Laboratories, Inc. ................ 15,000 656,250
Geon Company (The) ..................... 40,700 1,139,600
Polaroid Corporation ................... 42,000 1,459,500
Xerox Corporation ...................... 8,000 939,000
Total ................................. 4,194,350

Computers and Office Equipment - 3.86%
Computer Associates International, Inc. . 7,500 445,313
General Motors Corporation, Class E .... 30,000 1,166,250
International Business Machines
Corporation ........................... 15,000 1,228,125
Microsoft Corporation* ................. 9,000 639,558
Oracle Systems Corporation* ............ 18,000 561,366
Total ................................. 4,040,612

Consumer Electronics and Appliances - 1.47%
Harman International Industries,
Incorporated .......................... 7,600 282,150
Whirlpool Corporation .................. 23,000 1,259,250
Total ................................. 1,541,400

Electrical Equipment - 2.57%
Emerson Electric Co. ................... 12,000 798,000
General Electric Company ............... 35,000 1,894,375
Total ................................. 2,692,375

Electronics - 8.71%
AMP Incorporated ....................... 33,000 1,188,000
Analog Devices, Inc.* .................. 60,900 1,552,950
Applied Materials, Inc.* ............... 26,000 1,431,612
cisco Systems, Inc.* ................... 30,000 1,141,860
Intel Corporation ...................... 23,000 1,950,676
LSI Logic Corporation* ................. 27,200 1,428,000
Molex Incorporated, Class A ............ 12,500 425,000
Total ................................. 9,118,098

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1995

Shares Value

COMMON STOCKS(Continued)
Engineering and Construction - 0.94%
Fluor Corporation ...................... 12,000 $ 579,000
Foster Wheeler Corporation ............. 12,000 406,500
Total ................................. 985,500

Financial - 2.31%
Federal Home Loan Mortgage Corporation . 15,000 907,500
Federal National Mortgage Association .. 9,000 732,375
Household International, Inc. .......... 18,000 783,000
Total ................................. 2,422,875

Food and Related - 0.78%
CPC International Inc. ................. 15,000 811,875

Hospital Management - 1.79%
Columbia/HCA Healthcare Corporation .... 11,200 481,600
National Medical Enterprises, Inc.* .... 30,000 476,250
United HealthCare Corporation .......... 19,500 911,625
Total ................................. 1,869,475

Household Products - 3.44%
Colgate-Palmolive Company .............. 18,000 1,188,000
Gillette Company (The) ................. 15,000 1,224,375
Procter & Gamble Company (The) ......... 18,000 1,192,500
Total.................................. 3,604,875

Leisure Time - 2.89%
Walt Disney Company (The) .............. 21,000 1,120,875
McDonald's Corporation ................. 42,000 1,433,250
Tele-Communications, Inc., Class A* .... 22,500 471,083
Total ................................. 3,025,208

Machinery - 7.50%
Case Corporation* ...................... 41,500 1,037,500
Caterpillar Inc. ....................... 46,000 2,558,750
Clark Equipment Company* ............... 13,500 1,113,750
Deere & Company ........................ 20,500 1,665,625
Ingersoll-Rand Company ................. 12,000 394,500
Parker Hannifin Corporation ............ 12,000 531,000
Trinova Corporation .................... 18,000 551,250
Total ................................. 7,852,375

Metals and Mining - 0.43%
Phelps Dodge Corporation ............... 8,000 455,000

Multi-Industry - 2.11%
ITT Corporation ........................ 21,500 2,206,438

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1995

Shares Value

COMMON STOCKS(Continued)
Paper - 2.04%
International Paper Company ............ 18,000 $ 1,352,250
Union Camp Corporation ................. 15,000 778,125
Total ................................. 2,130,375

Railroads - 3.35%
CSX Corporation ........................ 10,500 826,875
Conrail Inc. ........................... 18,000 1,010,250
Norfolk Southern Corporation ........... 9,000 601,875
Southern Pacific Rail Corporation* ..... 14,000 245,000
Union Pacific Corporation .............. 15,000 825,000
Total ................................. 3,509,000

Retailing - 10.06%
Circuit City Stores, Inc. .............. 48,000 1,266,000
Dayton-Hudson Corporation .............. 14,000 1,001,000
Dillard Department Stores, Inc.,
Class A ............................... 28,500 787,313
Gap, Inc. (The) ........................ 21,000 745,500
Home Depot, Inc. (The) ................. 22,933 1,014,785
Limited, Inc. (The) .................... 22,500 520,313
May Department Stores Company (The) .... 30,000 1,110,000
Nordstrom, Inc. ........................ 11,000 445,500
OfficeMax, Inc.* ....................... 19,500 499,688
Penney (J.C.) Company, Inc. ............ 20,000 897,500
Sears, Roebuck and Co. ................ 6,000 320,250
Tommy Hilfiger Corporation* ............ 42,200 928,400
Toys "R" Us, Inc.* .................... 9,000 230,625
Wal-Mart Stores, Inc. .................. 30,000 765,000
Total ................................. 10,531,874

Telecommunications - 8.16%
AT&T Corporation ....................... 15,000 776,250
BellSouth Corporation .................. 9,000 535,500
General Instrument Corporation* ........ 30,000 1,042,500
MCI Communications Corporation ......... 56,000 1,151,472
MFS Communications Company, Inc. ....... 12,500 439,063
Motorola, Inc. ......................... 49,000 2,676,625
Telefonaktiebolaget LM Ericsson,
Class B, ADR ......................... 15,000 927,180
Vanguard Cellular Systems, Inc.,
Class A* .............................. 44,500 995,688
Total ................................. 8,544,278

Tire and Rubber - 1.05%
Goodyear Tire & Rubber Company (The) ... 30,000 1,102,500

TOTAL COMMON STOCKS - 93.88% $ 98,287,141
(Cost: $88,936,230)

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

SHORT-TERM SECURITIES
Banks and Savings and Loans - 1.41%
U.S. Bancorp,
Master Note ........................... $1,472 $ 1,472,000

Food and Related - 2.98%
General Mills, Inc.,
Master Note ........................... 1,469 1,469,000
Sara Lee Corporation,
Master Note ........................... 1,656 1,656,000
Total ................................. 3,125,000

Public Utilities - Electric - 1.56%
PS Colorado Credit Corp.,
6.13%, 4-3-95 ......................... 1,635 1,634,443

TOTAL SHORT-TERM SECURITIES - 5.95% $ 6,231,443
(Cost: $6,231,443)

TOTAL INVESTMENT SECURITIES - 99.83% $104,518,584
(Cost: $95,167,673)

CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.17% 172,151

NET ASSETS - 100.00% $104,690,735

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
GROWTH FUND
MARCH 31, 1995

Shares Value

COMMON STOCKS
Automotive - 2.94%
Automotive Industries Holdings, Inc.* .. 50,000 $ 1,087,500
Gentex Corporation* .................... 40,000 835,000
Superior Industries International, Inc. 40,700 1,037,850
Total ................................. 2,960,350

Biotechnology and Medical Services - 5.52%
EP Technologies, Inc. .................. 100,000 843,700
Pyxis Corporation* .................... 60,000 1,241,220
St. Jude Medical, Inc. ................. 15,000 645,000
STERIS Corporation ..................... 35,000 1,400,000
Tecnol Medical Products, Inc.* ......... 30,600 569,925
Ventritex, Inc.* ....................... 45,000 860,625
Total ................................. 5,560,470

Computers and Office Equipment - 19.59%
America Online, Inc.* .................. 40,000 2,975,000
Broderbund Software, Inc.* ............. 34,100 1,768,938
Cerner Corporation* .................... 22,000 1,056,000
Electronic Arts Inc.* .................. 24,000 541,488
HCIA Inc.* ............................. 10,000 244,370
Health Management Systems, Inc.* ...... 20,000 737,500
Integrated Silicon Systems, Inc.* ..... 15,500 447,563
Learning Company (The)* ................ 37,600 1,128,000
Macromedia, Inc.* ..................... 30,100 1,008,350
MapInfo Corporation* ................... 50,000 1,518,750
Microsoft Corporation* ................. 10,000 710,620
Minnesota Educational Computing
Corporation* .......................... 40,000 900,000
Parametric Technology Corporation* ..... 50,000 1,993,750
Synopsys, Inc.* ........................ 30,000 1,432,500
SystemSoft Corporation* ................ 60,000 525,000
Wall Data Incorporated* ................ 30,000 1,376,250
Wonderware Corporation* ............... 43,000 1,354,500
Total ................................. 19,718,579

Drugs and Hospital Supply - 4.91%
Circa Pharmaceuticals, Inc.* ........... 75,000 1,706,250
Forest Laboratories, Inc. .............. 30,000 1,428,750
OmniCare, Inc. ......................... 34,400 1,806,000
Total ................................. 4,941,000

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
GROWTH FUND
MARCH 31, 1995

Shares Value

COMMON STOCKS (Continued)
Electronics - 5.82%
Atmel Corporation* .................... 10,000 $ 386,870
Cascade Communications Corp.* .......... 10,000 692,500
Digital Link Corporation* ............. 41,600 1,274,000
Micron Technology, Inc. ................ 35,000 2,660,000
Silicon Valley Group, Inc.* ............ 30,000 847,500
Total ................................. 5,860,870

Financial - 0.74%
Regional Acceptance Corporation* ....... 50,000 750,000

Hospital Management - 6.26%
Inphynet Medical Management Inc.* ...... 25,000 446,875
MedPartners, Inc.* ..................... 10,000 222,500
National Medical Enterprises, Inc.* .... 60,000 952,500
Quorum Health Group, Inc.* ............. 25,000 517,175
Sierra Health Services, Inc.* ......... 44,000 1,446,500
United HealthCare Corporation .......... 20,000 935,000
Vencor, Incorporated* .................. 50,000 1,781,250
Total ................................. 6,301,800

Retailing - 6.54%
Books-A-Million, Inc.* ................. 50,000 725,000
Hollywood Entertainment Corporation* ... 50,000 1,743,750
Leslie's Poolmart* .................... 25,200 384,300
Movie Gallery, Inc.* ................... 30,000 810,000
Tiffany & Co. .......................... 35,000 1,085,000
Tractor Supply Company* ............... 35,000 730,625
Williams-Sonoma, Inc.* ................ 43,750 1,104,688
Total ................................. 6,583,363

Services, Consumer and Business - 4.04%
Block (H&R), Inc. ...................... 45,000 1,951,875
Fusion Systems Corporation* ............ 30,000 892,500
Stewart Enterprises, Inc., Class A ..... 45,000 1,220,625
Total ................................. 4,065,000

Telecommunications - 1.74%
MFS Communications Company, Inc.* ...... 50,000 1,756,250

Textiles and Apparel - 1.98%
Department 56, Inc. .................... 50,000 1,993,750

Trucking - 0.70%
Heartland Express, Inc.* ............... 25,000 706,250

TOTAL COMMON STOCKS - 60.78% $ 61,197,682
(Cost: $46,003,346)

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
GROWTH FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

SHORT-TERM SECURITIES
Banks and Savings and Loans - 4.15%
U.S. Bancorp,
Master Note ........................... $4,175 $ 4,175,000

Financial - 12.53%
Bell Atlantic Financial Services Inc.,
5.98%, 4-18-95 ........................ 2,610 2,602,630
Dana Credit Corp.,
6.15%, 4-21-95 ........................ 3,920 3,906,607
Merrill Lynch & Co. Inc.,
5.98%, 4-3-95 ......................... 3,000 2,999,003
Textron Financial Corp.,
6.15%, 4-18-95 ........................ 3,120 3,110,939
Total ................................. 12,619,179

Food and Related - 10.29%
General Mills, Inc.,
Master Note ........................... 4,306 4,306,000
Heinz (H.J.) Co.,
5.97%, 4-20-95 ........................ 4,000 3,987,397
Sara Lee Corporation,
Master Note ........................... 2,067 2,067,000
Total ................................. 10,360,397

Multi-Industry - 3.72%
ITT Corporation,
6.1%, 4-12-95 ......................... 3,755 3,748,001

Public Utilities - Pipelines - 2.98%
Enron Corp.,
6.15%, 4-10-95 ........................ 3,000 2,995,387

Retailing - 1.81%
K Mart Corporation,
6.15%, 4-11-95 ........................ 1,830 1,826,874

Telecommunications - 3.17%
GTE Florida Inc.,
6.1%, 4-18-95 ......................... 3,200 3,190,782

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
GROWTH FUND
MARCH 31, 1995

Value

TOTAL SHORT-TERM SECURITIES - 38.65% $ 38,915,620
(Cost: $38,915,620)

TOTAL INVESTMENT SECURITIES - 99.43% $100,113,302
(Cost: $84,918,966)

CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.57% 569,626

NET ASSETS - 100.00% $100,682,928

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

CORPORATE DEBT SECURITIES
Airlines - 2.67%
Federal Express Corporation,
10.0%, 9-1-98 ......................... $310 $ 331,164

Banks and Savings and Loans - 5.08%
First Chicago Corporation,
9.875%, 7-1-99 ........................ 302 324,291
Wells Fargo & Company,
8.375%, 5-15-2002 ..................... 300 306,849
Total ................................. 631,140

Building - 3.22%
Masco Industries, Inc.,
6.25%, 6-15-95 ........................ 400 399,572

Chemicals Specialty and Miscellaneous
Technology - 1.60%
Polaroid Corporation,
7.25%, 1-15-97......................... 200 199,416

Domestic Oil - 3.59%
BP America Inc.,
9.5%, 1-1-98 .......................... 225 236,669
Phillips Petroleum Company,
9.5%, 11-15-97 ........................ 200 208,722
Total ................................. 445,391

Drugs and Hospital Supply - 2.43%
American Home Products Corporation,
7.70%, 2-15-2000 ...................... 300 302,094

Financial - 13.51%
Associates Corporation of North America,
8.25%, 12-1-99 ........................ 300 307,671
Avco Financial Services, Inc.,
7.375%, 8-15-2001 ..................... 300 296,031
Ford Motor Credit Company,
4.3%, 7-15-98 ......................... 176 171,107
General Motors Acceptance Corporation:
6.375%, 9-23-97 ....................... 50 48,707
7.75%, 1-15-99 ........................ 300 300,234
Household Finance Corporation,
9.0%, 9-28-2001 ....................... 285 299,059
United States Leasing International, Inc.,
8.75%, 5-1-96 ......................... 250 254,500
Total ................................. 1,677,309

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

CORPORATE DEBT SECURITIES (Continued)
Food and Related - 1.99%
ConAgra, Inc.,
9.75%, 11-1-97 ........................ $236 $ 247,583

Insurance - 2.84%
CIGNA Corporation,
8.0%, 9-1-96 .......................... 350 353,049

International Oil - 2.96%
Chevron Corporation,
8.11%, 12-1-2004 ...................... 360 368,248

Multi-Industry - 4.05%
ITT Corporation,
8.25%, 8-1-2001 ....................... 500 502,390

Public Utilities - Electric - 0.77%
Connecticut Light & Power Company (The),
6.5%, 1-1-98 .......................... 100 95,863

Public Utilities - Pipelines - 2.55%
Tennessee Gas Pipeline Company,
9.25%, 5-15-96 ........................ 310 316,392

Railroads - 2.45%
CSX Transportation,
8.4%, 8-1-96 .......................... 300 304,356

Retailing - 7.09%
Dillard Department Stores, Inc.,
8.75%, 6-15-98 ........................ 100 103,610
Penney (J.C.) Company, Inc.,
10.0%, 10-15-97 ....................... 250 265,080
Sears, Roebuck and Co.,
8.2%, 4-15-99 ......................... 500 511,250
Total ................................. 879,940

Telecommunications - 3.72%
GTE Corporation,
8.85%, 3-1-98 ......................... 350 361,106
Southwestern Bell Telephone Company,
8.3%, 6-1-96 .......................... 100 101,439
Total ................................. 462,545

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

CORPORATE DEBT SECURITIES (Continued)
Textiles and Apparel - 2.57%
Fruit of the Loom, Inc.,
7.875%, 10-15-99 ...................... $318 $ 318,541

TOTAL CORPORATE DEBT SECURITIES - 63.09% $ 7,834,993
(Cost: $7,953,882)

UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
6.75%, 7-15-2003 ...................... 82 81,494
5.5%, 4-15-2013 ....................... 100 95,937
5.5%, 9-15-2013 ....................... 100 97,250
6.4%, 2-15-2018 ....................... 250 233,750
Federal National Mortgage Association:
8.0%, 2-1-2008 ........................ 345 347,606
6.0%, 1-1-2009 ........................ 367 339,785
6.0%, 2-1-2009 ........................ 365 338,543
7.0%, 9-25-2020 ....................... 64 62,319
Government National Mortgage Association,
6.5%, 10-15-2008 ...................... 284 269,037
United States Treasury:
5.625%, 8-31-97 ....................... 400 389,064
5.375%, 5-31-98 ....................... 300 286,500
5.5%, 4-15-2000........................ 300 280,032
6.375%, 8-15-2002 ..................... 400 381,312
6.25%, 2-15-2003 ...................... 400 376,688

TOTAL UNITED STATES GOVERNMENT SECURITIES - 28.82% $ 3,579,317
(Cost: $3,765,839)

SHORT-TERM SECURITIES
Banks and Savings and Loans - 3.60%
U.S. Bancorp,
Master Note ........................... 447 447,000

Food and Related - 4.75%
General Mills Inc.,
Master Note ........................... 458 458,000
Sara Lee Corporation,
Master Note ........................... 132 132,000
Total ................................. 590,000

TOTAL SHORT-TERM SECURITIES - 8.35% $1,037,000
(Cost: $1,037,000)

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
MARCH 31, 1995

Value

TOTAL INVESTMENT SECURITIES - 100.26% $12,451,310
(Cost: $12,756,721)

LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.26%) (32,544)

NET ASSETS - 100.00% $12,418,766

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

MUNICIPAL BONDS
ARIZONA - 0.96%
City of Bullhead City, Arizona, Bullhead
Parkway Improvement District,
Improvement Bonds,
6.1%, 1-1-2013 ........................ $ 270 $ 263,250

ARKANSAS - 1.35%
Baxter County, Arkansas, Industrial Development
Revenue Refunding Bonds (Aeroquip Corporation
Project), Series 1993,
5.8%, 10-1-2013 ....................... 400 370,500

CALIFORNIA - 7.32%
Sacramento County Sanitation Districts
Financing Authority, 1993 Revenue Bonds,
5.125%, 12-1-2013 ..................... 1,275 1,144,313
Carson Redevelopment Agency (California),
Redevelopment Project Area No. 2, Refunding
Tax Allocation Bonds, Series 1993,
6.0%, 10-1-2013 ....................... 500 461,875
Certificates of Participation, City of Upland,
California to San Antonio Community Hospital,
1993 Series,
5.0%, 1-1-2018 ........................ 500 400,625
Total ................................. 2,006,813

COLORADO - 4.01%
City and County of Denver, Colorado,
Airport System Revenue Bonds:
Series 1994A,
7.4%, 11-15-2004 ...................... 1,000 1,043,750
Series 1991A,
0.0%, 11-15-2003 ...................... 100 56,125
Total ................................. 1,099,875

FLORIDA - 4.62%
Lake County, Florida, Resource Recovery
Industrial Development Refunding Revenue
Bonds (NRG/Recovery Group Project),
Series 1993A,
5.95%, 10-1-2013 ...................... 965 861,263
Mid-Bay Bridge Authority (Florida),
Revenue Refunding Bonds, Series 1993A,
6.0%, 10-1-2013 ....................... 300 274,500

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

MUNICIPAL BONDS (Continued)
FLORIDA (Continued)
Hillsborough County, Florida, Capital
Improvement Non-Ad Valorem Revenue Bonds
(County Center Project), Second
Series 1992,
6.75%, 7-1-2022 ....................... $ 125 $ 130,625
Total ................................. 1,266,388

GEORGIA - 3.51%
Hospital Authority of Albany-Dougherty
County, Georgia, Revenue Bonds (Phoebe
Putney Memorial Hospital), Series 1993,
5.7%, 9-1-2013 ........................ 1,000 963,750

GUAM - 0.87%
Guam Power Authority, Revenue Bonds,
1992 Series A,
6.3%, 10-1-2022 ....................... 250 239,063

ILLINOIS - 5.50%
Illinois Health Facilities Authority,
Revenue Bonds, Series 1993 (OSF
Healthcare System),
5.75%, 11-15-2007 ..................... 700 671,125
City of Quincy, Adams County, Illinois,
Revenue Bonds, Series 1993
(Blessing Hospital),
6.0%, 11-15-2018 ...................... 500 453,125
Illinois Development Finance Authority,
Local Government Program Revenue Bonds,
Series 1993 (Village of Maywood Project),
6.0%, 1-1-2008 ........................ 400 385,000
Total ................................. 1,509,250

INDIANA - 3.08%
City of Sullivan, Indiana, Pollution
Control Revenue Refunding Bonds
(Indiana-Michigan Power Company Project),
Series C,
5.95%, 5-1-2009 ....................... 500 469,375
East Chicago Elementary School Building
Corporation (Lake County, Indiana),
First Mortgage Bonds, Series 1993A,
5.5%, 1-15-2016 ....................... 400 376,500
Total ................................. 845,875

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

MUNICIPAL BONDS (Continued)
IOWA - 1.21%
Scott County, Iowa, Refunding Certificates
of Participation (County Golf Course
Project, Series 1993),
6.2%, 5-1-2013 ........................ $ 340 $ 332,775

KANSAS - 4.88%
City of Lawrence, Kansas:
Hospital Revenue Bonds, Series 1994
(The Lawrence Memorial Hospital),
6.2%, 7-1-2019 ........................ 1,125 1,109,531
Multifamily Housing Development
Revenue Refunding Bonds (Brandon Woods,
Inc. Project), Series 1993,
6.625%, 4-1-2012 ...................... 225 227,813
Total ................................. 1,337,344

LOUISIANA - 2.63%
Parish of St. Charles, State of Louisiana:
Pollution Control Revenue Bonds (Union
Carbide Project), Series 1992,
7.35%, 11-1-2022 ...................... 200 206,750
Solid Waste Disposal Revenue Bonds
(Louisiana Power & Light Company Project),
Series 1992-A,
7.0%, 12-1-2022 ....................... 200 203,250
Louisiana Public Facilities Authority,
Student Loan Revenue Bonds,
Series 1992A-2,
6.75%, 9-1-2006 ....................... 300 310,125
Total ................................. 720,125

MARYLAND - 9.63%
Prince George's County, Maryland,
Project and Refunding Revenue Bonds
(Dimensions Health Corporation Issue),
Series 1994,
5.375%, 7-1-2014 ...................... 1,000 880,000
Northeast Maryland Waste Disposal
Authority, Solid Waste Revenue Bonds
(Montgomery County Resource Recovery
Project), Series 1993A,
6.3%, 7-1-2016 ........................ 700 680,750

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

MUNICIPAL BONDS (Continued)
MARYLAND (Continued)
Northeast Maryland Waste Disposal Authority,
Solid Waste Revenue Bonds (Montgomery
County Resource Recovery Project),
Series 1993A,
6.2%, 7-1-2010 ........................ $ 665 $ 655,856
Maryland Health and Educational Facilities
Authority, Project and Refunding Revenue
Bonds, Doctors Community Hospital Issue,
Series 1993,
5.75%, 7-1-2013 ....................... 500 423,750
Total ................................. 2,640,356

MICHIGAN - 3.09%
Michigan State Hospital Finance
Authority, Hospital Revenue Refunding
Bonds (Crittenton Hospital),
Series 1994A,
5.25%, 3-1-2014 ....................... 1,000 847,500

MISSOURI - 5.18%
The Junior College District of Metropolitan
Kansas City, Missouri, Lease Certificates
of Participation (Longview Recreation
Complex Project), Series 1994,
6.125%, 7-1-2014 ...................... 600 591,000
School District of Kansas City, Missouri,
Building Corporation, Insured Leasehold
Revenue Bonds, Series 1993D (The School
District of Kansas City, Missouri,
Elementary School Project),
5.0%, 2-1-2014 ........................ 650 580,125
City of Ste. Genevieve, Missouri, Waterworks
Revenue Bonds, Series 1993,
6.6%, 2-1-2013 ........................ 250 250,000
Total ................................. 1,421,125

MONTANA - 0.36%
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

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

MUNICIPAL BONDS (Continued)
NEBRASKA - 1.79%
Nebraska Higher Education Loan Program, Inc.,
Senior Subordinate Bonds, Series A-SA,
6.2%, 6-1-2013 ........................ $ 500 $ 491,875

NEW MEXICO - 5.02%
City of Albuquerque, New Mexico, Gross
Receipts/Lodgers' Tax Refunding and
Improvement Revenue Bonds, Series 1991B,
0.0%, 7-1-2013 ........................ 4,500 1,378,125

NEW YORK - 2.32%
New York State Thruway Authority,
Local Highway and Bridge Service
Contract Bonds, Series 1993,
5.25%, 4-1-2013 ....................... 500 442,500
Onondaga County Resource Recovery Agency,
Project Revenue Bonds (Resource Recovery
Facility - 1992 Series),
7.0%, 5-1-2015 ........................ 200 192,750
Total ................................. 635,250

NORTH CAROLINA - 3.86%
North Carolina Eastern Municipal Power
Agency, Power System Revenue Bonds,
Refunding Series 1993 B,
7.0%, 1-1-2008 ........................ 1,000 1,060,000

OHIO - 2.86%
City of Moraine, Ohio, Solid Waste
Disposal Revenue Bonds (General Motors
Corporation Project), Series 1994,
6.75%, 7-1-2014 ....................... 750 785,625

OKLAHOMA - 2.55%
Tulsa Public Facilities Authority
(Oklahoma), Assembly Center Lease Payment
Revenue Bonds, Refunding Series 1985:
6.2%, 11-1-2012 ....................... 500 490,625
6.6%, 7-1-2014 ........................ 200 209,250
Total ................................. 699,875

TENNESSEE - 3.82%
Tennessee Housing Development Agency,
Homeownership Program Bonds, Issue T,
7.375%, 7-1-2023 ...................... 1,000 1,048,750

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

MUNICIPAL BONDS (Continued)
TEXAS - 6.74%
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 $ 1,033,750
Sabine River Authority of Texas,
Collateralized Pollution Control
Revenue Refunding Bonds (Texas
Utilities Electric Company Project),
Series 1993B,
5.85%, 5-1-2022 ....................... 800 715,000
Alliance Airport Authority, Inc.,
Special Facilities Revenue Bonds,
Series 1991 (American Airlines, Inc.
Project),
7.0%, 12-1-2011 ....................... 100 101,000
Total ................................. 1,849,750

VIRGINIA - 3.54%
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 ....................... 1,000 971,250

WASHINGTON - 5.38%
Washington Public Power Supply System,
Nuclear Project No. 1, Refunding
Revenue Bonds:
Series 1994B,
7.375%, 7-1-2004 ...................... 500 546,250
Series 1989A,
6.0%, 7-1-2017 ........................ 450 428,063
Housing Authority of the County of King,
Pooled Housing Refunding Revenue Bonds,
Series 1995A,
6.8%, 3-1-2026 ........................ 500 500,625
Total ................................. 1,474,938

TOTAL MUNICIPAL BONDS - 96.08% $26,357,927
(Cost: $26,618,029)

TOTAL SHORT-TERM SECURITIES - 1.93% $ 529,000
(Cost: $529,000)

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
MARCH 31, 1995

Value

TOTAL INVESTMENT SECURITIES - 98.01% $26,886,927
(Cost: $27,147,029)

CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.99% 547,155

NET ASSETS - 100.00% $27,434,082

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

CORPORATE DEBT SECURITIES
Automotive - 1.99%
Toyota Motor Credit Corporation,
6.743%, 8-5-96 (A) .................... $ 250 $ 222,000

Banks and Savings and Loans - 3.37%
Bayerische Landesbank Girozentrale,
3.855%, 3-28-97 (B) ................... $ 250 232,188
Deutsche Bank Aktiengesellschaft,
12.0%, 10-2-96 (C) .................... L250,000 145,000
Total ................................. 377,188

TOTAL CORPORATE DEBT SECURITIES - 5.36% $ 599,188
(Cost: $668,978)

OTHER GOVERNMENT SECURITIES
Australia - 8.20%
New South Wales Treasury,
8.5%, 3-1-96 (C) ...................... $A500 366,760
Queensland Treasury Corporation:
8.0%, 5-14-97 (C) ..................... $A550 396,149
12.0%, 5-15-97 (C) .................... $A200 154,946
Total ................................. 917,855

Canada - 13.18%
Province of Alberta,
8.625%, 11-27-96 ...................... $200 204,362
Government of Canada:
7.5%, 7-1-97 (C) ...................... $C1,000 706,890
6.25%, 2-1-98 (C) ..................... $C 350 238,795
10.75%, 3-15-98 (C) ................... $C 425 324,156
Total ................................. 1,474,203

Denmark - 2.93%
Kingdom of Denmark,
9.0%, 11-15-98 (C) .................... DKr1,750 328,405

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
MARCH 31, 1995

Principal
Amount in
Thousands Value

OTHER GOVERNMENT SECURITIES (Continued)
France - 12.54%
Bon Du Tresor:
9.0%, 11-12-95 (C) .................... F1,000 $ 209,980
8.0%, 5-12-98 (C) ..................... F4,500 951,615
Credit Local de France,
4.64%, 2-23-96 (D) .................... $250 241,563
Total ................................. 1,403,158

Germany - 6.32%
Bundesobligation,
6.625%, 1-20-98 (C) ................... DM250 184,760
Bundesschatzanweisungen:
8.75%, 12-20-95 (C) ................... DM250 186,233
7.125%, 11-21-96 (C) .................. DM225 167,641
Kreditanstalt fur Weideraufbau,
10.6%, 5-18-98 (C) .................... L300,000 168,000
Total ................................. 706,634

Supranational - 3.62%
European Investment Bank,
6.75%, 5-14-98 (C) .................... F2,000 404,920

Sweden - 4.15%
Kingdom of Sweden,
10.75%, 1-23-97 (C) ................... SEK3,400 464,032

TOTAL OTHER GOVERNMENT SECURITIES - 50.94% $ 5,699,207
(Cost: $5,598,138)

UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
7.25%, 8-31-96 ........................ $1,300 1,310,361
6.875%, 4-30-97 ....................... $ 175 175,219

TOTAL UNITED STATES GOVERNMENT SECURITIES - 13.28% $ 1,485,580
(Cost: $1,517,640)

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
MARCH 31, 1995

Face
Amount in
Thousands Value

UNREALIZED LOSS ON OPEN FORWARD
CURRENCY CONTRACTS
Danish Krone, 3-25-96 (C) .............. DKr1,700 $ (57,561)
French Franc, 6-6-95 (C) ............... F1,350 (29,410)

TOTAL UNREALIZED LOSS ON OPEN FORWARD
CURRENCY CONTRACTS - (0.78%) $ (86,971)

Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Consumer Electronics and Appliances - 3.83%
TDK (USA) Corp.,
5.99%, 4-17-95 ........................ $430 428,855

Drugs and Hospital Supply - 3.80%
Warner-Lambert Company,
6.0%, 4-4-95 .......................... $425 424,788

Financial - 7.14%
Dana Credit Corp.,
6.15%, 4-21-95 ........................ $400 398,633
USL Capital Corp.,
5.95%, 4-3-95 ......................... $400 399,868
Total ................................. 798,501

Food and Related - 6.91%
General Mills, Inc.,
Master Note............................ $506 506,000
Sara Lee Corporation,
Master Note ........................... $267 267,000
Total ................................. 773,000

Insurance - 4.43%
Aon Corporation,
6.02%, 5-15-95 ........................ $500 496,321

Total Commercial Paper - 26.11% 2,921,465

Time Deposits - 3.00%
Commonwealth Bank of
Australia - Grand Cayman,
7.5%, 4-13-95 (C) ..................... $A458 336,261

TOTAL SHORT-TERM SECURITIES - 29.11% $ 3,257,726
(Cost: $3,276,384)

See Notes to Schedules of Investments on page 103.

<PAGE>
THE INVESTMENTS OF
GLOBAL INCOME FUND
MARCH 31, 1995

Value

TOTAL INVESTMENT SECURITIES - 97.91% $10,954,730
(Cost: $11,061,140)

CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.09% 233,671

NET ASSETS - 100.00% $11,188,401

See Notes to Schedules of Investments on page 103.
<PAGE>
WADDELL & REED FUNDS, INC.

Notes to Schedules of Investments

* No income dividends were paid during the preceding 12 months.

(A) Coupon resets semiannually based on the arithmetic mean of two-year swap
rates in four nations: Italy, France, Spain and the United Kingdom,
determined by the following formula (minimum coupon of 0%): 19.65% - 2 x
(average two-year swap rate in the aforementioned nations).

(B) Coupon resets semiannually based on 14.13% - 1.5 x (5-year Deutschemark
swap rate). Coupon guaranteed at 3%.

(C) 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, SEK - Swedish
Krona).

(D) Coupon resets semiannually based on 13.05% - 6-month STIBOR (Stockholm
Interbank Offer Rate).

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, 1995
<TABLE>
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
------ ------ --------- --------- ------
<S> <C> <C> <C> <C> <C>
Assets
Investment securities--at
value (Notes 1 and 4) $104,518,584 $100,113,302 $12,451,310 $26,886,927 $10,954,730
Cash .................... 4,922 4,993 4,016 4,738 1,522
Receivables:
Fund shares sold ...... 675,192 1,111,199 98,651 117,663 76,624
Dividends and interest 143,796 68,412 212,393 484,187 214,257
Investment securities
sold ................ 123,923 40,975 --- --- ---
Unamortized organization
expenses (Note 2) ..... 16,296 16,296 16,296 16,296 16,296
Prepaid insurance premium 557 468 234 362 234
------------ ------------ ----------- ----------- -----------
Total assets ........ 105,483,270 101,355,645 12,782,900 27,510,173 11,263,663
------------ ------------ ----------- ----------- -----------
Liabilities
Payable for investment
securities purchased 451,478 267,615 306,943 --- ---
Payable for Fund shares
redeemed ............ 242,368 309,490 22,962 24,553 27,893
Accrued service fee ... 59,664 54,316 6,508 14,682 3,652
Organization expenses
payable ............. 16,296 16,296 16,296 16,296 16,296
Accrued transfer agency
and dividend disbursing 14,609 16,065 2,229 3,107 1,607
Dividends payable ..... --- --- 6,703 13,764 3,974
Accrued accounting
services fee ........ 3,333 2,500 833 1,667 833
Other ................. 4,787 6,435 1,660 2,022 21,007
------------ ------------ ----------- ----------- -----------
Total liabilities ... 792,535 672,717 364,134 76,091 75,262
------------ ------------ ----------- ----------- -----------
Total net assets .. $104,690,735 $100,682,928 $12,418,766 $27,434,082 $11,188,401
============ ============ =========== =========== ===========
Net Assets
$0.01 par value capital stock
Capital stock ....... $ 82,257 $ 59,569 $ 12,802 $ 26,639 $ 11,951
Additional paid-in capital 96,142,360 83,616,019 12,785,592 28,320,895 11,541,594
Accumulated undistributed income (loss):
Accumulated undistributed
net investment income --- 6,511 --- --- ---
Accumulated undistributed
net realized gain (loss)
on investments
and foreign currency
transactions ...... (884,793) 1,806,493 (74,217) (653,350) (268,035)
Net unrealized appreciation
(depreciation) of investments
and translation of assets and
liabilities in foreign currencies
at end of period .. 9,350,911 15,194,336 (305,411) (260,102) (97,109)
------------ ------------ ----------- ----------- -----------
Net assets applicable to
outstanding units
of capital ........ $104,690,735 $100,682,928 $12,418,766 $27,434,082 $11,188,401
============ ============ =========== =========== ===========
Net asset value, redemption
and offering price
per share ............. $12.73 $16.90 $9.70 $10.30 $9.36
====== ====== ===== ====== =====
Capital shares outstanding 8,225,679 5,956,925 1,280,202 2,663,914 1,195,118
Capital shares authorized 500,000,000 500,000,000 500,000,000 500,000,000 500,000,000
See notes to financial statements.
</TABLE>
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended MARCH 31, 1995
<TABLE>
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
------ ------ --------- --------- ------
<S> <C> <C> <C> <C> <C>
Investment Income
Income:
Interest ............ $ 261,257 $1,455,978 $725,279 $1,600,720 $658,657
Dividends ........... 1,450,943 43,022 --- --- ---
------------ ------------ ----------- ----------- -----------
Total income ...... 1,712,200 1,499,000 725,279 1,600,720 658,657
------------ ------------ ----------- ----------- -----------
Expenses (Notes 2 and 3):
Distribution fees ... 638,040 501,677 87,444 189,123 80,153
Investment management fee 599,703 537,667 64,948 140,752 70,373
Service fee ......... 197,508 154,029 24,936 54,969 12,428
Transfer agency and
dividend disbursing 161,715 166,311 28,172 39,703 20,382
Registration fees ... 47,830 42,506 15,751 22,277 15,346
Accounting services fee 30,833 28,333 10,000 12,500 10,000
Custodian fees ...... 10,357 9,766 2,872 3,567 8,154
Amortization of organization
expenses .......... 6,518 6,518 6,518 6,518 6,518
Audit fees .......... 9,598 7,834 3,890 4,694 5,131
Legal fees .......... 4,571 4,145 619 1,346 8,006
Other ............... 39,416 33,703 7,353 13,792 8,264
------------ ------------ ----------- ----------- -----------
Total expenses .... 1,746,089 1,492,489 252,503 489,241 244,755
------------ ------------ ----------- ----------- -----------
Net investment income
(loss) ........ (33,889) 6,511 472,776 1,111,479 413,902
------------ ------------ ----------- ----------- -----------
Realized and Unrealized Gain
(Loss) on Investments
Realized net gain (loss)
on securities ....... (393,442) 2,636,976 (74,217) (654,808) (243,087)
Realized net gain (loss)
from foreign currency
transactions ........ (5) --- --- --- 37,933
------------ ------------ ----------- ----------- -----------
(393,447) 2,636,976 (74,217) (654,808) (205,154)
------------ ------------ ----------- ----------- -----------
Unrealized appreciation
(depreciation) in value
of securities during
the period .......... 6,249,301 13,371,790 (78,479) 1,079,863 283,430
Unrealized depreciation from
translation of assets and
liabilites in foreign
currencies .......... --- --- --- --- (79,852)
------------ ------------ ----------- ----------- -----------
6,249,301 13,371,790 (78,479) 1,079,863 203,578
------------ ------------ ----------- ----------- -----------
Net gain (loss) on
investments ....... 5,855,854 16,008,766 (152,696) 425,055 (1,576)
------------ ------------ ----------- ----------- -----------
Net increase in net assets
resulting from
operations ...... $5,821,965 $16,015,277 $320,080 $1,536,534 $412,326
============ ============ =========== =========== ===========

See notes to financial statements.
</TABLE>
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended MARCH 31, 1995
<TABLE>
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
------ ------ --------- --------- ------
<S> <C> <C> <C> <C> <C>
Increase in Net Assets
Operations:
Net investment income
(loss) ............ $ (33,889) $ 6,511 $ 472,776 $ 1,111,479 $ 413,902
Realized net gain (loss)
on investments .... (393,447) 2,636,976 (74,217) (654,808) (205,154)
Unrealized appreciation
(depreciation) .... 6,249,301 13,371,790 (78,479) 1,079,863 203,578
------------ ------------ ----------- ----------- -----------
Net increase in net assets
resulting from operations 5,821,965 16,015,277 320,080 1,536,534 412,326
------------ ------------ ----------- ----------- -----------
Dividends to shareholders from:*
Net investment income --- --- (472,776) (1,111,479) (413,902)
Realized net gain from
investment transactions --- (1,599,535) (9,889) --- ---
------------ ------------ ----------- ----------- -----------
--- (1,599,535) (482,665) (1,111,479) (413,902)
------------ ------------ ----------- ----------- -----------
Capital share transactions** 37,133,483 42,742,909 910,216 2,048,542 907,668
------------ ------------ ----------- ----------- -----------
Total increase ...... 42,955,448 57,158,651 747,631 2,473,597 906,092
Net Assets
Beginning of period ... 61,735,287 43,524,277 11,671,135 24,960,485 10,282,309
------------ ------------ ----------- ----------- -----------
End of period ......... $104,690,735 $100,682,928 $12,418,766 $27,434,082 $11,188,401
============ ============ =========== =========== ===========
Undistributed net
investment income $--- $6,511 $--- $--- $---
==== ====== ==== ==== ====
*See "Financial Highlights" on pages .
**Shares issued from sale
of shares ............. 3,945,209 3,125,059 466,132 603,090 243,352
Shares issued from reinvest-
ment of dividends and/or
capital gains
distributions ......... --- 105,331 47,776 101,809 44,248
Shares redeemed ......... (870,169) (365,439) (420,022) (507,544) (190,297)
--------- --------- ------- ------- -------
Increase in outstanding
capital shares ........ 3,075,040 2,864,951 93,886 197,355 97,303
========= ========= ======== ======= =======
Value issued from sale
of shares ............. $47,666,060 $46,616,473 $4,491,826 $6,050,262 $2,259,874
Value issued from reinvest-
ment of dividends and/or
capital gains
distributions ......... --- 1,597,857 460,066 1,014,595 410,904
Value redeemed .......... (10,532,577) (5,471,421) (4,041,676) (5,016,315) (1,763,110)
----------- ----------- ---------- ---------- ----------
Increase in outstanding
capital ............... $37,133,483 $42,742,909 $ 910,216 $2,048,542 $ 907,668
=========== =========== ========== ========== ==========
See notes to financial statements.

</TABLE>
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended MARCH 31, 1994
<TABLE>
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
------ ------ --------- --------- ------
<S> <C> <C> <C> <C> <C>
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 .
**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>
FINANCIAL HIGHLIGHTS OF
TOTAL RETURN FUND
For a Share of Capital Stock Outstanding Throughout Each Period:

For the
For the fiscal year ended March 31,period ended
----------------------------------- March 31,
1995 1994 1993*
------ ------------------
Net asset value,
beginning of
period ........... $11.99 $11.07 $10.00
------ ------ ------
Income from investment
operations:
Net investment
income (loss).... 0.00 (0.01) .02
Net realized and
unrealized gain
on investments .. .74 .93 1.07
------ ------ ------
Total from investment
operations ....... .74 .92 1.09
------ ------ ------
Less dividends from net
investment income (0.00) (0.00) (0.02)
------ ------ ------
Net asset value,
end of period .... $12.73 $11.99 $11.07
====== ====== ======
Total return ....... 6.17% 8.31% 10.91%
Net assets, end of
period (000
omitted) .......... $104,691 $61,735 $12,460
Ratio of expenses
to average net
assets ........... 2.05% 2.16% 2.21%
Ratio of net investment
income to average
net assets ....... -0.04% -0.12% 0.32%
Portfolio turnover
rate ............. 16.60% 17.31% 23.97%

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 fiscal year ended March 31,period ended
----------------------------------- March 31,
1995 1994 1993*
------ ------------------
Net asset value,
beginning of
period ........... $14.08 $11.68 $10.00
------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... 0.00 (0.04) (0.02)
Net realized and
unrealized gain
on investments .. 3.15 2.75 1.79
------ ------ ------
Total from investment
operations ....... 3.15 2.71 1.77
------ ------ ------
Less distributions:
Dividends from net
investment
income .......... (0.00) (0.00) (0.01)
Distribution from
capital gains ... (0.33) (0.31) (0.08)
------ ------ ------
Total distributions (0.33) (0.31) (0.09)
------ ------ ------
Net asset value,
end of period .... $16.90 $14.08 $11.68
====== ====== ======
Total return ....... 22.61% 23.16% 17.71%
Net assets, end of
period (000
omitted) ......... $100,683 $43,524 $7,976
Ratio of expenses
to average net
assets ........... 2.23% 2.34% 2.50%
Ratio of net investment
income to average
net assets ....... 0.01% -0.97% -0.68%
Portfolio turnover
rate ............. 56.30% 69.12% 124.44%

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
For the fiscal year ended March 31,period ended
----------------------------------- March 31,
1995 1994 1993*
------ ------------------
Net asset value,
beginning of
period ........... $9.84 $10.06 $10.00
----- ------ ------
Income from investment
operations:
Net investment
income .......... 0.39 .35 .18
Net realized and
unrealized gain
(loss) on
investments ..... (0.13) (0.20) .06
----- ------ ------
Total from investment
operations ....... .26 .15 .24
----- ------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.39) (0.35) (0.18)
Distribution from
capital gains ... (0.01) (0.02) (0.00)
----- ------ ------
Total distributions (0.40) (0.37) (0.18)
----- ------ ------
Net asset value,
end of period .... $9.70 $ 9.84 $10.06
===== ====== ======
Total return ....... 2.73% 1.41% 2.40%
Net assets, end of
period (000
omitted) ......... $12,419 $11,671 $6,259
Ratio of expenses
to average net
assets ........... 2.17% 2.14% 2.15%
Ratio of net investment
income to average
net assets ....... 4.05% 3.41% 3.48%
Portfolio turnover
rate ............. 29.20% 25.90% 39.64%

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 fiscal year ended March 31,period ended
----------------------------------- March 31,
1995 1994 1993*
------ ------------------
Net asset value,
beginning of
period ........... $10.12 $10.53 $10.00
------ ------ ------
Income from investment
operations:
Net investment
income .......... .44 .39 .21
Net realized and
unrealized gain
(loss) on
investments ..... .18 (0.28) .53
------ ------ ------
Total from investment
operations ....... .62 .11 .74
------ ------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.44) (0.39) (0.21)
Distribution from
capital gains ... (0.00) (0.13) (0.00)
------ ------ ------
Total distributions (0.44) (0.52) (0.21)
------ ------ ------
Net asset value,
end of period .... $10.30 $10.12 $10.53
====== ====== ======
Total return ....... 6.37% 0.76% 7.37%
Net assets, end of
period (000
omitted) ......... $27,434 $24,960 $8,557
Ratio of expenses
to average net
assets ........... 1.94% 1.98% 1.94%
Ratio of net investment
income to average
net assets ....... 4.41% 3.62% 3.99%
Portfolio turnover
rate ............. 56.92% 18.93% 140.02%

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 fiscal year ended March 31,period ended
----------------------------------- March 31,
1995 1994 1993*
------ ------------------
Net asset value,
beginning of
period ........... $9.37 $9.68 $10.00
----- ----- ------
Income from investment
operations:
Net investment
income .......... .36 .34 .20
Net realized and
unrealized loss
on investments .. (0.01) (0.31) (0.32)
----- ----- ------
Total from investment
operations ....... .35 .03 (0.12)
----- ----- ------
Less distributions:
Dividends declared
from net investment
income .......... (0.36) (0.26) (0.20)
Tax-basis return of
capital.......... (0.00) (0.08) (0.00)
----- ----- ------
Total distributions. (0.36) (0.34) (0.20)
----- ----- ------
Net asset value,
end of period .... $9.36 $9.37 $ 9.68
===== ===== ======
Total return ....... 3.84% 0.33% -1.28%
Net assets, end of
period (000
omitted) ......... $11,188 $10,282 $7,181
Ratio of expenses
to average net
assets ........... 2.29% 2.24% 2.06%
Ratio of net investment
income to average
net assets ....... 3.87% 3.56% 3.88%
Portfolio turnover
rate ............. 13.33% 34.90% 8.35%

See notes to financial statements.

<PAGE>
WADDELL & REED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995

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. Permanent items identified in the period ended March 31,
1995 have been reclassified to additional paid-in capital as follows:

Undistributed Undistributed Additional
Net Investment Net Realized Paid-In
Income Gain Capital
-------------- ------------- ----------
Total Return Fund $33,894 $ --- $(33,894)
Global Income Fund --- 7,406 (7,406)

Net investment income, net realized gains and net assets were not affected
by these changes.

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, 1995, the Distributor received $1,940,308 in
12b-1 payments. During this same period W&R paid sales commissions of
$1,941,437.

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,
1995, the Distributor received $367,416 in deferred sales charges.

The Corporation paid Directors' fees of $6,394.

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, 1995 are
summarized as follows:

<TABLE>
Total Limited- Municipal Global
Return Growth Term Bond Bond Income
Fund Fund Fund Fund Fund
------ ------ --------- --------- ------
<S> <C> <C> <C> <C> <C>
Purchases of investment
securities, excluding short-
term and U.S. Government
securities $48,637,946 $39,435,413 $3,217,795 $16,344,101 $1,144,934
Purchases of U.S. Government
securities --- --- 573,095 --- ---
Purchases of short-term
securities 57,160,445 292,534,046 5,621,0001 3,635,000 13,488,914
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities 13,265,449 22,085,332 1,399,018 13,577,128 1,796,925
Proceeds from maturities
and sales of U.S.
Government securities --- --- 1,861,541 --- 639,477
Proceeds from maturities
and sales of short-term
securities 53,979,664 270,567,426 4,708,210 14,553,769 11,075,073

</TABLE>

For Federal income tax purposes, cost of investments owned at March 31,
1995 and the related unrealized appreciation (depreciation) were as follows:

Aggregate
Appreciation
Cost AppreciationDepreciation(Depreciation)
----------- -------------------------------------
Total Return Fund $95,173,097 $11,962,038 $2,616,551 $9,345,487
Growth Fund 84,918,966 16,530,744 1,336,408 15,194,336
Limited-Term Bond Fund12,756,721 29,099 334,510 (305,411)
Municipal Bond Fund 27,147,029 490,876 750,978 (260,102)
Global Income Fund 11,061,140 341,065 360,504 (19,439)

NOTE 5 -- Federal Income Tax Matters

For Federal income tax purposes, Growth Fund realized capital gain net
income of $2,636,976, during the year ended March 31, 1995, of which a portion
was paid to shareholders during the year ended March 31, 1995. Remaining
capital gain net income will be distributed to the Fund's shareholders. For
Federal income tax purposes, Total Return Fund, Limited-Term Bond Fund,
Municipal Bond Fund and Global Income Fund realized net capital losses. A
portion of the net capital loss was deferred to the year ending March 31, 1996
(see discussion below). Capital loss carryovers are available to offset future
realized capital gain net income for Federal income tax purposes. Current year
net capital losses and cumulative capital loss carryovers are summarized below:

Net capital
loss for Deferred Available
the year to year for offset
ended ending through March 31,
March 31, March 31, -----------------
1995 1996 2002 2003
-------- -------- -------- --------
Total Return
Fund $659,519 $156,256 $723,114 $503,263
Limited-Term
Bond Fund 74,217 47,672 26,545 26,545
Municipal Bond
Fund 654,808 321,084 333,723 333,723
Global Income
Fund 287,847 24,934 270,669 262,913

It is the policy of each Fund to comply with excise tax distribution
requirements of the Internal Revenue Code (the "Code") Section 4982, which
requires each Fund to measure and distribute annually, if necessary, ordinary
income for the calendar year and net capital gains realized during the twelve-
month period ended October 31. Code regulations permit a Fund to defer, into
its next fiscal year, net capital losses incurred from November 1 to the end of
its fiscal year ("post-October losses").

<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,
1995, 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, 1995 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
May 5, 1995