WADDELL & REED FUNDS INC, 497, 1996-07-08

WADDELL & REED FUNDS INC
497, 1996-07-08

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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, 1996. 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.
Class B Shares

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.

This Prospectus describes one class of shares of each of the Funds--Class B
shares.

Prospectus
June 30, 1996

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.
Class B Shares dated June 30, 1996.

This supplement is dated June 30, 1996

WRS3000MO(6-96)

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 front cover page of the Prospectus of Waddell & Reed Funds,
Inc. Class B Shares dated June 30, 1996.

This supplement is dated June 30, 1996

WRS3000TX(6-96)

<PAGE>
Table of Contents

AN OVERVIEW OF THE FUNDS........................................4

EXPENSES........................................................7

FINANCIAL HIGHLIGHTS...........................................19

PERFORMANCE....................................................31
Explanation of Terms .........................................31

ABOUT WADDELL & REED...........................................33

ABOUT THE INVESTMENT PRINCIPLES OF THE FUNDS...................34
Investment Goals and Principles ..............................34
Risk Considerations ........................................40
Securities and Investment Practices ........................40

ABOUT YOUR ACCOUNT.............................................59
Ways to Set Up Your Account ..................................59
Buying Shares ................................................60
Minimum Investments ..........................................61
Adding to Your Account .......................................62
Selling Shares ...............................................62
Shareholder Services .........................................67
Personal Service ...........................................67
Reports ....................................................67
Exchanges ..................................................67
Automatic Transactions .....................................68
Dividends, Distributions and Taxes ...........................68
Distributions ..............................................68
Taxes ......................................................69

ABOUT THE MANAGEMENT AND EXPENSES OF THE FUNDS.................72
WRIMCO and Its Affiliates ....................................73
Breakdown of Expenses ........................................75
Management Fee .............................................75
Other Expenses .............................................76
Distribution ...............................................77

<PAGE>
An Overview of the Funds

The Funds: This Prospectus describes six separate series (each a "Fund" and
collectively the "Funds") 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 its 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. See "About the Management and
Expenses of the Funds" for information about management fees.

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 Class B shares of each of the Funds through Waddell &
Reed, Inc. and its account representatives. The price to buy a Class B share of
a Fund is the net asset value of a Class B share of that Fund. A sales charge
is not incurred upon purchase of shares of a Fund, but the Class B 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 Class B
shares of each of the Funds.

Redemptions: You may redeem your Class B 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 Class B 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.

Risk Considerations: Because the Funds own different types of investments,
their performance will be affected by a variety of factors. The value of each
Fund's investments and the income generated will vary from day to day, generally
reflecting changes in interest rates, market conditions and other company and
economic news. Performance will also depend on WRIMCO's skill in selecting
investments. See "About the Investment Principles of the Funds" for information
about the risks associated with each Fund's investments.

<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 1.00%
Other expenses3 0.32%
Total Fund operating
expenses4 2.03%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return:5

Assuming Assuming
Redemption No Redemption
at End of at End of
Each Period Each Period
----------- -------------
1 year $ 51 $ 21
3 years $ 74 $ 64
5 years $109 $109
10 years $236 $236

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."
3Expense information has been restated to reflect the current shareholder
servicing fee which became effective April 1, 1996.
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 is
not a representation of a Fund's future performance, which may be greater or
lesser.

<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
charge6 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 fees7 0.81%
12b-1 fees8 1.00%
Other expenses9 0.37%
Total Fund operating
expenses10 2.18%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return11 and (2) redemption at the end of each time period:

Assuming Assuming
Redemption No Redemption
at End of at End of
Each Period Each Period
----------- -------------
1 year $ 52 $ 22
3 years $ 78 68
5 years $117 117
10 years $251 251

6The 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.
7The management fee for Growth Fund is higher than that of most funds.
8It 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."
9Expense information has been restated to reflect the current shareholder
servicing fee which became effective April 1, 1996.
10Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.
11Use of an assumed annual return of 5% is for illustration purposes only and is
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
charge12 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 fees13 0.97%
Other expenses14 0.62%
Total Fund operating
expenses15 2.15%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return16 and (2) redemption at the end of each time period:

Assuming Assuming
Redemption No Redemption
at End of at End of
Each Period Each Period
----------- -------------
1 year $ 52 $ 22
3 years $ 77 67
5 years $115 115
10 years $248 248

12The 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.
13It 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."
14Expense information has been restated to reflect the current shareholder
servicing fee which became effective April 1, 1996.
15Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.
16Use of an assumed annual return of 5% is for illustration purposes only and is
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
charge17 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 fees18 0.98%
Other expenses190.41%
Total Fund operating
expenses 1.95%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return20 and (2) redemption at the end of each time period:

Assuming Assuming
Redemption No Redemption
at End of at End of
Each Period Each Period
----------- -------------
1 year $ 50 $ 20
3 years $ 71 61
5 years $105 105
10 years $227 227

17The 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.
18It 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."
19Expense information has been restated to reflect the current shareholder
servicing fee which became effective April 1, 1996.
20Use of an assumed annual return of 5% is for illustration purposes only and is
not a representation of a Fund's future performance, which may be greater or
lesser.

<PAGE>
International Growth Fund21

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
charge22 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 fees23 0.81%
12b-1 fees24 0.92%
Other expenses250.83%
Total Fund operating
expenses26 2.56%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return27 and (2) redemption at the end of each time period:

Assuming Assuming
Redemption No Redemption
at End of at End of
Each Period Each Period
----------- -------------
1 year $ 56 $ 26
3 years $ 90 80
5 years $136 136
10 years $290 290

21International Growth Fund (formerly Global Income Fund) changed its name and
investment objective effective April 20, 1995.
22The 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.
23Expense 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.
24It 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."
25Expense information has been restated to reflect the current shareholder
servicing fee which became effective April 1, 1996.
26Expense 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.
27Use of an assumed annual return of 5% is for illustration purposes only and is
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
charge28 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 fees290.81%
12b-1 fees30 1.00%
Other expenses310.76%
Total Fund operating
expenses32 2.57%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return33 and (2) redemption at the end of each time period:

Assuming Assuming
Redemption No Redemption
at End of at End of
Each Period Each Period
----------- -------------
1 year $ 56 $ 26
3 years 90 80
5 years 137 137
10 years 290 290

28The 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.
29The management fee for Asset Strategy Fund is higher than that of most funds.
30Expense 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."
31Expense information has been restated to reflect the current shareholder
servicing fee which became effective April 1, 1996.
32Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.
33Use of an assumed annual return of 5% is for illustration purposes only and is
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 Class B share outstanding throughout each period*:

For the
For the fiscal period
year ended March 31, ended
---------------------- March 31,
1996 1995 1994 1993**
------ ------ ------ ------
Net asset value,
beginning of
period ........... $12.73 $11.99 $11.07 $10.00
------ ------ ------ ------
Income from investment
operations:
Net investment income
(loss)........... (0.01) 0.00 (0.01) .02
Net realized and
unrealized gain
on investments .. 3.67 .74 .93 1.07
------ ------ ------ ------
Total from investment
operations ....... 3.66 .74 .92 1.09
------ ------ ------ ------
Less distributions:
Dividends from net
investment income (0.00) (0.00) (0.00) (0.02)
Distribution from
capital gains ... (0.05) (0.00) (0.00) (0.00)
------ ------ ------ ------
Total distributions. (0.05) (0.00) (0.00) (0.02)
------ ------ ------ ------
Net asset value,
end of period .... $16.34 $12.73 $11.99 $11.07
====== ====== ====== ======
Total return ....... 28.75% 6.17% 8.31% 10.91%
Net assets, end of
period (000
omitted) .......... $208,233$104,691$61,735 $12,460
Ratio of expenses
to average net
assets ........... 1.99% 2.05% 2.16% 2.21%***
Ratio of net investment
income to average
net assets ....... -0.11% -0.04% -0.12% 0.32%***
Portfolio turnover
rate ............. 16.78% 16.60% 17.31% 23.97%***

*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.
**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 Class B share outstanding throughout each period*:

For the
For the fiscal period
year ended March 31, ended
---------------------- March 31,
1996 1995 1994 1993**
------ ------ ------ ------
Net asset value,
beginning of
period ........... $16.90 $14.08 $11.68 $10.00
------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... (0.02) 0.00 (0.04) (0.02)
Net realized and
unrealized gain
on investments .. 4.49 3.15 2.75 1.79
------ ------ ------ ------
Total from investment
operations ....... 4.47 3.15 2.71 1.77
------ ------ ------ ------
Less distributions:
Dividends from net
investment
income .......... (0.00) (0.00) (0.00) (0.01)
Distribution from
capital gains ... (0.37) (0.33) (0.31) (0.08)
------ ------ ------ ------
Total distributions (0.37) (0.33) (0.31) (0.09)
------ ------ ------ ------
Net asset value,
end of period .... $21.00 $16.90 $14.08 $11.68
====== ====== ====== ======
Total return ....... 26.57% 22.61% 23.16% 17.71%
Net assets, end of
period (000
omitted) ......... $202,557$100,683$43,524 $7,976
Ratio of expenses
to average net
assets ........... 2.14% 2.23% 2.34% 2.50%***
Ratio of net investment
income to average
net assets ....... -0.25% 0.01% -0.97% -0.68%***
Portfolio turnover
rate .............. 31.84% 56.30% 69.12% 124.44%***
*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.
**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>
Limited-Term Bond Fund
(Audited)

For a Class B share outstanding throughout each period*:
For the
For the fiscal period
year ended March 31, ended
---------------------- March 31,
1996 1995 1994 1993**
------ ------ ------ ------
Net asset value,
beginning of
period ........... $ 9.70 $9.84 $10.06 $10.00
------ ----- ------ ------
Income from investment
operations:
Net investment
income .......... .41 0.39 .35 .18
Net realized and
unrealized gain
(loss) on
investments ..... .30 (0.13) (0.20) .06
------ ----- ------ ------
Total from investment
operations ....... .71 .26 .15 .24
------ ----- ------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.41) (0.39) (0.35) (0.18)
Distribution from
capital gains ... (0.00) (0.01) (0.02) (0.00)
------ ----- ------ ------
Total distributions (0.41) (0.40) (0.37) (0.18)
------ ----- ------ ------
Net asset value,
end of period .... $10.00 $9.70 $ 9.84 $10.06
====== ===== ====== ======
Total return ....... 7.41% 2.73% 1.41% 2.40%
Net assets, end of
period (000
omitted) ......... $23,682$12,419 $11,671 $6,259
Ratio of expenses
to average net
assets ........... 2.10% 2.17% 2.14% 2.15%***
Ratio of net investment
income to average
net assets ........ 4.14% 4.05% 3.41% 3.48%***
Portfolio turnover
rate ............. 22.08% 29.20% 25.90% 39.64%
*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.
**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>
Municipal Bond Fund
(Audited)

For a Class B share outstanding throughout each period*:
For the
For the fiscal period
year ended March 31, ended
---------------------- March 31,
1996 1995 1994 1993**
------ ------ ------ ------
Net asset value,
beginning of
period ........... $10.30 $10.12 $10.53 $10.00
------ ------ ------ ------
Income from investment
operations:
Net investment
income .......... .43 .44 .39 .21
Net realized and
unrealized gain
(loss) on
investments ..... .33 .18 (0.28) .53
------ ------ ------ ------
Total from investment
operations ....... .76 .62 .11 .74
------ ------ ------ ------
Less distributions:
Dividends declared
from net investment
income .......... (0.43) (0.44) (0.39) (0.21)
Distribution from
capital gains ... (0.00) (0.00) (0.13) (0.00)
------ ------ ------ ------
Total distributions (0.43) (0.44) (0.52) (0.21)
------ ------ ------ ------
Net asset value,
end of period .... $10.63 $10.30 $10.12 $10.53
====== ====== ====== ======
Total return ....... 7.48% 6.37% 0.76% 7.37%
Net assets, end of
period (000
omitted) ......... $33,869$27,434 $24,960 $8,557
Ratio of expenses
to average net
assets ........... 1.93% 1.94% 1.98% 1.94%***
Ratio of net investment
income to average
net assets ....... 4.05% 4.41% 3.62% 3.99%***
Portfolio turnover
rate ............. 42.02% 56.92% 18.93% 140.02%***
*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.
**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>
International Growth 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 Class B share outstanding throughout each period**:
For the
For the fiscal period
year ended March 31, ended
---------------------- March 31,
1996 1995 1994 1993***
------ ------ ------ ------
Net asset value,
beginning of
period ........... $9.36 $9.37 $9.68 $10.00
------ ----- ----- ------
Income from investment
operations:
Net investment
income .......... .08 .36 .34 .20
Net realized and
unrealized gain (loss)
on investments .. .63 (0.01) (0.31) (0.32)
------ ----- ----- ------
Total from investment
operations ....... .71 .35 .03 (0.12)
------ ----- ----- ------
Less distributions:
Dividends declared
from net investment
income .......... (0.11) (0.36) (0.26) (0.20)
In excess of net
investment income (.02) (0.00) (0.00) (0.00)
Tax-basis return of
capital.......... (0.00) (0.00) (0.08) (0.00)
------ ----- ----- ------
Total distributions. (0.13) (0.36) (0.34) (0.20)
------ ----- ----- ------
Net asset value,
end of period .... $9.94 $9.36 $9.37 $ 9.68
====== ===== ===== ======
Total return ....... 7.64% 3.84% 0.33% -1.28%
Net assets, end of
period (000
omitted) ......... $20,874$11,188 $10,282 $7,181
Ratio of expenses
to average net
assets ........... 2.50% 2.29% 2.24% 2.06%****
Ratio of net investment
income to average
net assets ....... 0.63% 3.87% 3.56% 3.88%****
Portfolio turnover
rate ............. 88.55% 13.33% 34.90% 8.35%****
*International Growth Fund (formerly Global Income Fund) changed its name and
investment objective effective April 20, 1995.
**On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.
***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>
Asset Strategy 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 Class B share outstanding throughout the period*:

For the
period
from
April 20,
1995
through
March
31, 1996**
---------
Net asset value,
beginning of period $10.00
------
Income from investment
operations:
Net investment
income .......... .16
Net realized and
unrealized gain
on investments... .14
------
Total from investment
operations ........ .30
Less dividends from
net investment
income........... (0.15)
------
Net asset value,
end of period ..... $10.15
======
Total return ....... 3.00%
Net assets, end of
period (000
omitted) ......... $13,221
Ratio of expenses
to average net
assets ............ 2.54%
Ratio of net investment
income to average net
assets ............ 2.14%
Portfolio
turnover rate ..... 75.02%

*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.

**The Fund's inception date is January 31, 1995; however, since the Fund
did not have investment activity or incur expenses prior to the date of
public offering, the per share information is for a capital share
outstanding for the period from April 20, 1995 (initial public
offering) through March 31, 1996. Ratios have been annualized.

<PAGE>
Performance

Mutual fund performance is commonly measured as total return. The Funds
may also advertise their performance by showing yield and performance rankings.
Performance information is calculated and presented separately for each class of
Fund shares.

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(s) of each Fund are set forth below. There is no assurance that a
Fund will achieve its goal.

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 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 reduce the
Fund's yield.

See "Securities and Investment Practices" 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 goal 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 seeks 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. During normal market conditions, the Fund will have at
least 65% of its assets invested in growth securities.

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 reduce 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"), the 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 reduce 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 seeks 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" for information 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 reduce 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 seeks
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 International Growth 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 U.S. Government Securities) or preferred stocks or both; or
(ii) invest completely or substantially in U.S. securities. A defensive posture
may reduce the Fund's yield.

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.

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.

WRIMCO normally invests the Fund's assets according to its investment
strategy; however, as a temporary defensive measure at times when WRIMCO
believes that a mix of stocks, bonds and certain short-term instruments does 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 Services ("S&P") or Prime 1 by Moody's Investors Service, Inc.
("MIS"), or unrated securities judged by WRIMCO to be of equivalent quality.
S&P and MIS ratings are described in Appendix A to the SAI. A defensive posture
may reduce the Fund's yield.

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.

Risk Considerations

There are risks inherent in any investment. Each Fund is subject to
varying degrees of market risk, financial risk, and, in some cases, prepayment
risk. Market risk is the potential for fluctuations in the price of the
security because of market factors. Because of market risk, you should
anticipate that the share price of each Fund will fluctuate. Financial risk is
based on the financial situation of the issuer. The financial risk of each Fund
depends on the credit quality of the underlying securities. Prepayment risk is
the possibility that, during periods of falling interest rates, a debt security
with a high stated interest rate will be prepaid prior to its expected maturity
date.

Because each Fund owns different types of investments, its performance will
be affected by a variety of factors. The value of a Fund's investments and the
income it generates will vary from day to day, generally reflecting changes in
interest rates, market conditions, and other company and economic news. With
respect to Asset Strategy Fund, performance will also depend on WRIMCO's skill
in allocating assets.

The Funds may also invest in certain derivative instruments, including
options, futures contracts, options on futures contracts, indexed securities,
swaps, caps, collars, floors, stripped securities and mortgage-backed
securities. The use of derivative instruments involves special risks. See
"Risks of Derivative Instruments" for further information on the risks of
investing in these instruments.

Securities and Investment Practices

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' 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 policies and
restrictions unless it believes that doing so will help that 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 the affected shareholders. The
goal of each Fund is a fundamental policy. 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.

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.

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.

Lower-quality debt securities (commonly called "junk bonds") 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.

Subject to its investment restrictions, a Fund may invest in debt
securities rated in any rating category of the established rating services,
including securities rated in the lowest rating category (such as those rated D
by S&P and C by MIS). In addition, Asset Strategy Fund will treat unrated
securities judged by WRIMCO to be of equivalent quality to a rated security to
be equivalent to securities having that rating. Debt securities rated at least
BBB by S&P or Baa by MIS are considered to be investment grade debt securities.
Securities rated BBB or Baa may have speculative characteristics. 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.
While credit ratings are only one factor WRIMCO relies on in evaluating high-
yield debt securities, certain risks are associated with credit ratings. Credit
ratings evaluate the safety of principal and interest payments, not market value
risk. Credit ratings for individual securities may change from time to time,
and a Fund may retain a portfolio security whose rating has been changed.

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. Bonds are selected on the basis of quality, yield and
diversification. 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.

Debt Holdings, by Ratings. During the fiscal year ended March 31, 1996,
the percentage of the assets of Asset Strategy Fund invested in debt securities
in each of the rating categories of S&P and the corporate debt securities not
rated by an established rating service, determined on a dollar-weighted average,
were as follows:

Percentage of
Rated Assets of Asset
by S&P Strategy Fund
- ------ ----------------
AAA 35.6%
AA 5.4
A 13.4
BBB 4.3
BB 2.3
B 2.6
CCC 0.0
CC 0.0
C 0.0
D 0.0

Unrated(equivalent to)
AAA 0.0%
AA 0.0
A 0.0
BBB 0.0
BB 0.0
B 0.0
CCC 0.3
CC 0.0
C 0.0
D 0.0

The percentage of assets in each category was calculated on the basis of a
monthly dollar-weighted average. The monthly dollar-weighted average was
calculated using the market value of the securities in Asset Strategy Fund's
portfolio at the end of each month in the thirteen-month period ended with its
last fiscal year, averaged over its last fiscal year. The rating used for each
security is that security's rating as of the end of each month and, as ratings
may change over time, does not necessarily indicate past or future ratings of
any particular security or the ratings of securities in the Fund's portfolio in
general. Asset composition of the Fund by rating categories at any particular
time does not necessarily indicate future asset composition by rating
categories.

Preferred Stock is also rated by S&P and MIS, as described in Appendix A to
the SAI. The Funds (other than Municipal Bond Fund) 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.

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

At least 65% of the total assets of Municipal Bond Fund will be invested
during normal market conditions in bonds exclusive of other municipal debt
obligations. 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, Asset
Strategy 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.

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
United States 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: 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 are (i) 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) 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 U.S. over-the-counter ("OTC") market, or (iii) 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 United States. 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 total assets in the securities issued by the
government of any one foreign country.

Under normal market 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 the limitations stated 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 swaps, caps,
collars, floors, options, futures contracts, 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, caps, collars and floors 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.

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.

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 instruments and
strategies and their risk considerations.

Options. A Fund 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.

Policies and Restrictions: 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 stocks 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 the 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).

Policies and Restrictions: 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.

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.

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.

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.

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 goal(s) and investment
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 United States 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 goal and investment 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, collars
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.

Mortgage-Backed Securities may include pools of mortgages, such as
collateralized mortgage obligations ("CMOs") 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 and marketability (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 goal(s) and investment
policies.

Policies and Restrictions: Limited-Term Bond Fund does not currently
intend to invest more than 25% of its total assets in CMOs.

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

Risks of Derivative Instruments. The use of options, futures contracts,
options on futures contracts, forward contracts, swaps, caps, collars and
floors, and the investment in indexed securities, stripped securities and
mortgage-backed 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. An embedded
derivative is a derivative that is part of another financial instrument.
Embedded derivatives typically, but not always, are debt securities whose return
of principal or interest, in part, is determined by reference to something that
is not intrinsic to the security itself. 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 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 or currency exchange rate 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.

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 goal, investment policies and regulatory requirements
applicable to investment companies.

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, Municipal Bond Fund and Limited-Term Bond Fund do not
currently intend to invest more than 5% of their respective 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: As a fundamental policy, Municipal Bond Fund
may not purchase securities subject to repurchase agreements. Each of the other
Funds 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. Certain
restricted securities may be determined to be liquid in accordance with
guidelines adopted by the Corporation's Board of Directors.

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 restricted securities. Asset Strategy Fund
may invest in restricted securities. The other Funds do not intend to 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 net assets would be invested in illiquid investments.

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. Borrowing for
temporary measures may include borrowing to cover redemptions or settlements of
securities transactions. Total Return Fund, Growth Fund, Limited-Term Bond
Fund, Municipal Bond Fund and International Growth Fund do not intend to borrow
for other than emergency or extraordinary purposes.

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

Other Instruments may include 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: As a fundamental policy, Growth Fund and, as an
operating policy, 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. As a fundamental policy, 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 total assets consist of warrants,
rights or a combination thereof, subject to certain limitations stated in the
SAI.

No Fund may invest more than 5% of its assets taken at market value at the
time of investment in companies, including predecessors, with less than three
years continuous operation. This restriction does not apply to U.S. Government
Securities or to CMOs, other mortgage-related securities, asset-backed
securities or indexed securities.

As a fundamental policy, Total Return Fund, Growth Fund and International
Growth Fund may buy shares of other investment companies that do not redeem
their shares only if they do so in a regular transaction in the open market and
in compliance with the requirements of the Investment Company Act of 1940. Each
of these Funds may purchase such securities if, as a result of such purchase, no
more than 10% of its total assets are invested in such securities. Asset
Strategy Fund does not currently intend to purchase securities of other
investment companies that do not redeem their shares except in the open market
where no commission except the ordinary broker's commission is paid and if, as a
result of such purchase, not more than 10% of its total assets are invested in
such 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 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.

o 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.

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

o 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.

o 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.

o 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.

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

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

The securities in a Fund's portfolio that are listed or traded on an
exchange are valued primarily 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 (the
"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.

Certain of the Funds may invest in securities listed on foreign exchanges
which may trade on Saturdays or on customary U.S. national business holidays
when the NYSE is closed. Consequently, the NAV of such Fund shares may be
significantly affected on days when the Funds do not price their shares and when
you have no access to the Funds.

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 whether
you are 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 stating
the Fund whose 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 Class B shares at their NAV next
calculated after receipt of a written request for redemption in good order,
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 must
Joint Tenant be signed by all persons
required to sign for
transactions, exactly as their
names appear on the account.
Sole The written instructions must
Proprietorship 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 must
Account 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 authorized
Organization by corporate resolution to act
on the account must sign the
written instructions.
Conservator, The written instructions must
Guardian or be signed by the person
Other Fiduciary properly authorized by court
order to act in the particular
fiduciary capacity.

Note the following:

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 Class B shares. The deferred sales charge will not be imposed
on Class B 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 Class B 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 Class B
shares purchased during the deferred sales charge period representing capital
appreciation, next of Class B shares purchased during the deferred sales charge
period representing payment of dividends and distributions and then of Class B
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 Class B 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 NAV of $1,027, absent different instructions.

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

in connection with redemptions of Class B 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 Class B 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 Class B 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 Class B 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 Class
B 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 Class B shares of a Fund if the aggregate NAV 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 Class B 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 Class B 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 an aggregate NAV 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 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 Class B shares of any of the Funds and buy Class B shares
of another Fund, or Class B shares of United Cash Management, Inc., a fund in
the United Group of Mutual Funds, 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 Class A shares of
United Cash Management, Inc. 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 certain 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 Class B 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 Class B 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 Class B shares of the distributing Fund.

Taxes

Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"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 certain tax 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 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 other 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.

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 must
be treated by you as a "tax preference item" for purposes of calculating your
liability, if any, for the AMT; that Fund anticipates such portion will be not
more than 40% of the dividends it will pay to its shareholders. 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.

Entities or other persons who are "substantial users" (or persons related
to "substantial users") of facilities financed by private activity bonds
("PABs") should consult their tax advisers before purchasing Fund shares
because, for users of certain of these facilities, the interest on PABs 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.

Withholding. Each Fund is required to withhold 31% of all taxable
dividends, capital gains 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 capital gains 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 (regardless of class) at a
loss, part or all of that loss will not be deductible and will increase the
basis of the newly-purchased shares.

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, diversified 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.

Each Fund has two classes of shares. Prior to December 2, 1995, the Funds
offered only one class of shares to the public. Shares outstanding on that date
were designated as Class B shares, which are offered by this Prospectus. In
addition, the Funds offer Class Y shares through a separate Prospectus. Class Y
shares are designed for institutional investors. Class Y shares are not subject
to a contingent deferred sales charge and are not subject to redemption fees.
Class Y shares are subject to Rule 12b-1 fees and may have other expenses that
differ in amount from those of the Class B shares. Additional information about
Class Y shares may be obtained by calling 913-236-2000 or by writing to Waddell
& Reed, Inc. at the address on the inside back cover of this Prospectus.

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 (the "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 share (regardless of class) has one vote. All shares of a Fund (and
classes thereof) vote together as a single class, except as to any matter for
which a separate vote of any Fund or class is required by the 1940 Act, and
except as to any matter which affects the interests of one or more particular
Fund or class, in which case only the shareholders of the affected Fund or class
is entitled to vote, each as a separate class. Shares are fully paid and
nonassessable when purchased.

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 have 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 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 Waddell & Reed Asset Management Company, an affiliate of WRIMCO,
Vice President of the Fund and Vice President of another investment company 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. Mr. Sterner was Chief Investment Officer of The
Merchants Bank from 1985 to August 1992.

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.

Thomas A. Mengel is primarily responsible for the day-to-day management of
the portfolio of International Growth Fund. Mr. Mengel has held his Fund
responsibilities since May 1, 1996. Mr. Mengel is Vice President of WRIMCO.
From 1993 to 1996, Mr. Mengel was the President of Sal. Oppenheim jr. & Cie.
Securities, Inc.; from 1992 to 1993, Mr. Mengel was a Vice President at Hauck
and Hope Securities; and from 1989 to 1992, Mr. Mengel was the Manager of German
Equities at Berliner Bank, in Berlin, Germany.

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, 1996, management fees for each Fund as
a percentage of each such Fund's net assets were as follows:

Management
Fund Fee
- ---- ---
Total Return
Fund 0.71%

Growth Fund 0.81%

Limited-Term
Bond Fund 0.56%

Municipal
Bond Fund 0.56%

International
Growth Fund 0.80%
(formerly Global
Income Fund)

Asset Strategy
Fund 0.76%

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. With respect to its
Class B shares, each Fund pays the Shareholder Servicing Agent a monthly fee for
each Class B shareholder 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, 1996, total expenses for each Fund's
Class B shares as a percentage of average net assets were as follows: Total
Return Fund 1.99%; Growth Fund 2.14%; Limited-Term Bond Fund 2.10%; Municipal
Bond Fund 1.93%; International Growth Fund (formerly Global Income Fund) 2.50%;
and Asset Strategy Fund 2.54%.

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. A turnover rate in excess of 100%
could be considered high.

Distribution

The Corporation, pursuant to Rule 12b-1 of the 1940 Act and as authorized
under a Distribution and Service Plan (the "Plan"), may finance the distribution
of the Class B shares of the Funds and/or the service and maintenance of Class B
shareholder accounts.

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 the Fund's average net assets of its Class B shares. 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 Class B shares, and up to 0.25% may
be paid to the Distributor to finance the provision of certain personal services
by the Distributor and Waddell & Reed Services Company to Class B shareholders
and the provision of services to maintain Class B shareholder accounts (the
"service fee").

In addition to these fees, the Distributor may be compensated for
distribution of the Class B shares of a Fund 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 Class B 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. (the "NASD") for asset-based sales charges and
front-end sales charges, respectively, were the Corporation's Class B 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.

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 Massachusetts Avenue, N. W. (913) 236-2000
Washington, D. C. 20036
Shareholder Servicing Agent
Independent Accountants Waddell & Reed
Price Waterhouse LLP Services Company
Kansas City, Missouri 6300 Lamar Avenue
P. O. Box 29217
Investment Manager Shawnee Mission, Kansas
Waddell & Reed Investment 66201-9217
Management Company (913) 236-1579
6300 Lamar Avenue
P. O. Box 29217 Accounting Services Agent
Shawnee Mission, Kansas Waddell & Reed
66201-9217 Services Company
(913) 236-2000 6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
(913) 236-2000

Our INTERNET address is:
http://www.waddell.com

<PAGE>
Waddell & Reed Funds, Inc.
Class B Shares
PROSPECTUS
June 30, 1996

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

WRP3000(6-96)

printed on recycled paper

<PAGE>
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.

Waddell & Reed Funds, Inc.
Class Y Shares

This Prospectus describes one class of shares of each of the Funds--Class Y
shares.

Prospectus
June 30, 1996

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

<PAGE>
Table of Contents

AN OVERVIEW OF THE FUNDS........................................3

EXPENSES........................................................6

FINANCIAL HIGHLIGHTS...........................................12

PERFORMANCE....................................................18
Explanation of Terms .........................................18

ABOUT WADDELL & REED...........................................20

ABOUT THE INVESTMENT PRINCIPLES OF THE FUNDS...................21
Investment Goals and Principles ..............................21
Risk Considerations ........................................27
Securities and Investment Practices ........................27

ABOUT YOUR ACCOUNT.............................................46
Buying Shares ................................................46
Minimum Investments ..........................................48
Adding to Your Account .......................................48
Selling Shares ...............................................48
Telephone Transactions .......................................50
Shareholder Services .........................................50
Personal Service ...........................................50
Reports ....................................................51
Exchanges ..................................................51
Dividends, Distributions and Taxes ...........................51
Distributions ..............................................51
Taxes ......................................................52

ABOUT THE MANAGEMENT AND EXPENSES OF THE FUNDS.................55
WRIMCO and Its Affiliates ....................................56
Breakdown of Expenses ........................................58
Management Fee .............................................58
Other Expenses .............................................59
Distribution ...............................................60

<PAGE>
An Overview of the Funds

The Funds: This Prospectus describes the Class Y shares of each of the Funds of
Waddell & Reed Funds, Inc. (the "Corporation"), 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:

Purchases: You may buy Class Y shares of each of the Funds through Waddell &
Reed, Inc. and its account representatives. The price to buy a Class Y share of
a Fund is the net asset value of a Class Y share of that Fund. A sales charge
is not incurred upon purchase of Class Y shares of a Fund, nor are the Class Y
shares subject to a contingent deferred sales charge. See "About Your Account"
for information on how to purchase Class Y shares of each of the Funds.

Redemptions: You may redeem your shares at net asset value. When you sell your
Class Y shares, they may be worth more or less than what you paid for them. See
"About Your Account" for a description of redemption 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
charge None

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

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).34

Management fees 0.71%
12b-1 fees35 0.25%
Other expenses 0.27%
Total Fund operating
expenses 1.23%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return36 and (2) redemption at the end of each time period:

1 year $13
3 years $39

34Expense ratios are based on: the management fees and other Fund-level
expenses of the Fund for the fiscal year ended March 31, 1996; the maximum 12b-1
fee; and the other expenses attributable to the Class Y shares that are
anticipated for the current year based on annualization of the Class Y expenses
incurred during the fiscal year ended March 31, 1996. Actual expenses may be
greater or lesser than those shown.
35See "Breakdown of Expenses" for further information about the 12b-1 fee.
36Use of an assumed annual return of 5% is for illustration purposes only and is
not a representation of a Fund's future performance, which may be greater or
lesser.

<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
charge None

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

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).37

Management fees38 0.81%
12b-1 fees39 0.25%
Other expenses 0.28%
Total Fund operating
expenses 1.34%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return40 and (2) redemption at the end of each time period:

1 year $14
3 years $42

37Expense ratios are based on: the management fees and other Fund-level
expenses of the Fund for the fiscal year ended March 31, 1996; the maximum 12b-1
fee; and the other expenses attributable to the Class Y shares that are
anticipated for the current year based on annualization of the Class Y expenses
incurred during the fiscal year ended March 31, 1996. Actual expenses may be
greater or lesser than those shown.
38The management fee for Growth Fund is higher than that of most funds.
39See "Breakdown of Expenses" for further information about the 12b-1 fee.
40Use of an assumed annual return of 5% is for illustration purposes only and is
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
charge None

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

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).41

Management fees 0.56%
12b-1 fees42 0.25%
Other expenses 0.53%
Total Fund operating
expenses 1.34%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return43 and (2) redemption at the end of each time period:

1 year $14
3 years $42

41Expense ratios are based on: the management fees and other Fund-level
expenses of the Fund for the fiscal year ended March 31, 1996; the maximum 12b-1
fee; and the other expenses attributable to the Class Y shares that are
anticipated for the current year based on annualization of the Class Y expenses
incurred during the fiscal year ended March 31, 1996. Actual expenses may be
greater or lesser than those show.
42See "Breakdown of Expenses" for further information about the 12b-1 fee.
43Use of an assumed annual return of 5% is for illustration purposes only and is
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
charge None

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

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).44

Management fees 0.56%
12b-1 fees45 0.25%
Other expenses 0.39%
Total Fund operating
expenses 1.20%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return46 and (2) redemption at the end of each time period:

1 year $12
3 years $38

44Expense ratios are based on: the management fees and other Fund-level
expenses of the Fund for the fiscal year ended March 31, 1996; the maximum 12b-1
fee; and the other expenses attributable to the Class Y shares that are
anticipated for the current year based on annualization of Class Y expenses
incurred during the fiscal year ended March 31, 1996. Actual expenses may be
greater or lesser than those shown.
45See "Breakdown of Expenses" for further information about the 12b-1 fee.
46Use of an assumed annual return of 5% is for illustration purposes only and is
not a representation of a Fund's future performance, which may be greater or
lesser.

<PAGE>
International Growth Fund47

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
charge None

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

Exchange fee None

Annual fund operating expenses (as a percentage of average net assets).48

Management fees490.81%
12b-1 fees50 0.25%
Other expenses 0.72%
Total Fund operating
expenses 1.78%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return51 and (2) redemption at the end of each time period:

1 year $18
3 years $56

47International Growth Fund (formerly Global Income Fund) changed its name and
investment objective effective April 20, 1995.
48Expense ratios are based on: the management fees, which have been restated to
reflect the current management fees which became effective April 20, 1995, and
other Fund-level expenses of the Fund for the fiscal year ended March 31, 1996;
the maximum 12b-1 fee; and the other expenses attributable to the Class Y shares
that are anticipated for the current year based on annualization of the Class Y
expenses incurred during the fiscal year ended March 31, 1996. Actual expenses
may be greater or lesser than those shown.
49The management fee for International Growth Fund is higher than that of most
funds.
50See "Breakdown of Expenses" for further information about the 12b-1 fee.
51Use of an assumed annual return of 5% is for illustration purposes only and is
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
charge None

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 fees520.81%
12b-1 fees53 0.25%
Other expenses 0.69%
Total Fund operating
expenses54 1.75%

Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return55 and (2) redemption at the end of each time period:

1 year $18
3 years $55

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."

52The management fee for Asset Strategy Fund is higher than that of most funds.
53See "Breakdown of Expenses" for further information about the 12b-1 fee.
54Expense ratios are based on: the management fees of the Fund for the fiscal
year ended March 31, 1996; the maximum 12b-1 fee; and the other expenses
attributable to the Class Y shares that are anticipated for the current year
based on annualization of the Class Y expenses incurred during the fiscal year
ended March 31, 1996. Actual expenses may be greater or lesser than those
shown.
55Use of an assumed annual return of 5% is for illustration purposes only and is
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 Class Y share outstanding throughout the period:

For the
period from
December 29, 1995
to March 31, 1996*
--------------------
Net asset value,
beginning of
period ........... $15.32
------
Income from investment
operations:
Net investment
income........... 0.03
Net realized and
unrealized gain
on investments .. 1.03
------
Total from investment
operations ....... 1.06
------
Less dividends from net
investment income (0.00)
------
Net asset value,
end of period .... $16.38
======
Total return ....... 6.92%
Net assets, end of
period (000
omitted) .......... $87
Ratio of expenses
to average net
assets ........... 0.96%**
Ratio of net investment
income to average
net assets ....... 1.04%**
Portfolio turnover
rate ............. 16.78%

*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.

**Annualized.

<PAGE>
Financial Highlights
GROWTH 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 Class Y share outstanding throughout the period:

For the
period from
December 29, 1995
to March 31, 1996*
--------------------
Net asset value,
beginning of
period ........... $20.21
------
Income from investment
operations:
Net investment
income........... .04
Net realized and
unrealized gain
on investments .. .79
------
Total from investment
operations ....... .83
------
Less dividends from net
investment income (0.00)
------
Net asset value,
end of period .... $21.04
======
Total return ....... 4.11%
Net assets, end of
period (000
omitted) .......... $1
Ratio of expenses
to average net
assets ........... 1.17%**
Ratio of net investment
income to average
net assets ....... 0.78%**
Portfolio turnover
rate ............. 31.84%

*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.

**Annualized.

<PAGE>
Financial Highlights
LIMITED-TERM BOND 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 Class Y share outstanding throughout the period:

For the
period from
December 29, 1995
to March 31, 1996*
--------------------
Net asset value,
beginning of
period ........... $10.16
------
Income from investment
operations:
Net investment
income........... .11
Net realized and
unrealized loss
on investments .. (0.16)
------
Total from investment
operations ....... (0.05)
------
Less dividends from net
investment income (0.11)
------
Net asset value,
end of period .... $10.00
======
Total return ....... -0.49%
Net assets, end of
period (000
omitted) .......... $1
Ratio of expenses
to average net
assets ........... 1.18%**
Ratio of net investment
income to average
net assets ....... 4.70%**
Portfolio turnover
rate ............. 22.08%

*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.

**Annualized.

<PAGE>
Financial Highlights
MUNICIPAL BOND 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 Class Y share outstanding throughout the period:

For the
period from
December 29, 1995
to March 31, 1996*
--------------------
Net asset value,
beginning of
period ........... $10.94
------
Income from investment
operations:
Net investment
income........... .12
Net realized and
unrealized loss
on investments .. (0.31)
------
Total from investment
operations ....... (0.19)
------
Less dividends from net
investment income (0.12)
------
Net asset value,
end of period .... $10.63
======
Total return ....... -1.80%
Net assets, end of
period (000
omitted) .......... $1
Ratio of expenses
to average net
assets ........... 1.18%**
Ratio of net investment
income to average
net assets ....... 4.33%**
Portfolio turnover
rate ............. 42.02%

*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.

**Annualized.

<PAGE>
Financial Highlights
INTERNATIONAL GROWTH 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 Class Y share outstanding throughout the period:

For the
period from
December 29, 1995
to March 31, 1996*
--------------------
Net asset value,
beginning of
period ........... $9.70
------
Income from investment
operations:
Net investment
income........... .02
Net realized and
unrealized gain
on investments .. .23
------
Total from investment
operations ....... .25
------
Less dividends from net
investment income (0.00)
------
Net asset value,
end of period .... $9.95
======
Total return ....... 2.58%
Net assets, end of
period (000
omitted) .......... $7
Ratio of expenses
to average net
assets ........... 1.84%**
Ratio of net investment
income to average
net assets ....... 1.07%**
Portfolio turnover
rate ............. 88.55%

*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.

**Annualized.

<PAGE>
Financial Highlights
ASSET STRATEGY 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 Class Y share outstanding throughout the period:

For the
period from
December 29, 1995
to March 31, 1996*
-------------------
Net asset value,
beginning of
period ........... $10.23
------
Income from investment
operations:
Net investment
income........... .07
Net realized and
unrealized loss
on investments .. (0.08)
------
Total from investment
operations ....... (0.01)
------
Less dividends from net
investment income (0.06)
------
Net asset value,
end of period .... $10.16
======
Total return ....... -0.25%
Net assets, end of
period (000
omitted) .......... $1
Ratio of expenses
to average net
assets ........... 1.95%**
Ratio of net investment
income to average
net assets ....... 2.34%**
Portfolio turnover
rate ............. 75.02%

*On December 2, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class B shares.

**Annualized.

<PAGE>
Performance

Explanation of Terms

Non-standardized performance information is for periods other than those
required to be presented or differs otherwise from standardized performance
information.