WADDELL & REED
FUNDS, INC.
Total Return Fund
Growth Fund
Science and Technology Fund
International Growth Fund
Asset Strategy Fund
Limited-Term Bond Fund
High Income Fund
Municipal Bond Fund
SEMIANNUAL
REPORT
-------------------------------------------
For the six months ended September 30, 1997
<PAGE>
This report is submitted for the general information of the shareholders of
Waddell & Reed Funds, Inc. It is not authorized for distribution to prospective
investors unless accompanied with or preceded by the Waddell & Reed Funds, Inc.
current prospectus.
<PAGE>
PRESIDENT'S LETTER
SEPTEMBER 30, 1997
Dear Shareholder:
As Waddell & Reed celebrates its 60th anniversary in the financial services
industry, I would like to thank you for your continued confidence in our
products and services. Since we opened our doors in 1937, our goal has been and
continues to be to provide the best service possible to our shareholders. This
commitment is reflected in every area of our organization: starting with your
financial advisor and continuing with our investment management and customer
service people of our affiliated companies.
Your confidence in the success of the products and services offered by Waddell &
Reed and its affiliates is reflected in the growth the Funds have experienced
over our 60 years. Total mutual fund assets under management reached the $1
billion mark in 1961, and over the $5 billion mark in 1985. As of September
30, 1997, mutual fund assets under management totaled more than $20.6 billion.
We look forward to helping you meet the financial goals that are important to
you, now and for many years to come. Should you have any questions about your
account or other financial issues that are important to you, contact your
financial advisor or your local Waddell & Reed office. They're ready to help
you make the most of your financial future.
Respectfully,
Keith A. Tucker
President
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
TOTAL RETURN FUND
PORTFOLIO STRATEGY:
Common stocks and OBJECTIVE: Current income while
securities convertible into seeking capital
common stocks. growth.
Cash Reserves STRATEGY: 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. (May purchase
securities subject to repurchase
agreements. May invest in certain
options and futures.)
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the Total Return Fund
from time to time. For more information
about the Fund's cash reserves
flexibility, please consult the
Prospectus.
FOUNDED: 1992
SCHEDULED DIVIDEND FREQUENCY: ANNUALLY (December)
PERFORMANCE SUMMARY - Class B Shares
PER SHARE DATA
For the Six Months ended September 30, 1997
- -------------------------------------------
NET ASSET VALUE ON
9/30/97 $22.79
3/31/97 18.18
------
CHANGE PER SHARE $ 4.61
======
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual
Total Return
----------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 9-30-97 30.68% 33.68%
5-year period ended 9-30-97 18.29% 18.29%
Period from 9-21-92*
through 9-30-97 18.06% 18.06%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and reflects
payment of the applicable contingent deferred sales charge upon redemption at
the end of each period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of each period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1997, Total Return Fund had net assets totaling $411,110,473
invested in a diversified portfolio of:
91.83% Common Stocks
7.89% Cash and Cash Equivalents
0.28% Preferred Stock
As a shareholder of Total Return Fund, for every $100 you had invested on
September 30, 1997, your Fund owned:
$56.46 Manufacturing Stocks
12.73 Wholesale and Retail Trade Stocks
9.84 Finance, Insurance and Real Estate Stocks
7.89 Cash and Cash Equivalents
5.15 Transportation, Communication, Electric
and Sanitary Services Stocks
4.92 Services Stocks
1.82 Contract Construction Stocks
1.19 Agriculture, Forestry and Fisheries Stocks
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS
Apparel and Accessory Stores - 2.29%
Gap, Inc. (The) ........................ 110,500 $ 5,531,851
Payless ShoeSource, Inc.* .............. 64,800 3,867,718
Total ................................. 9,399,569
Building Materials and Garden Supplies - 0.80%
Home Depot, Inc. (The) ................. 63,300 3,299,513
Business Services _ 0.21%
Manpower Inc. .......................... 21,500 849,250
Chemicals and Allied Products - 15.50%
Air Products and Chemicals, Inc. ....... 63,500 5,266,500
Avon Products, Inc. .................... 27,500 1,705,000
BetzDearborn Inc. ...................... 51,400 3,514,475
Colgate-Palmolive Company .............. 66,200 4,613,279
Crompton & Knowles Corporation ......... 43,500 1,155,447
Dow Chemical Company (The) ............. 31,800 2,883,847
du Pont (E.I.) de Nemours and Company .. 110,400 6,796,445
Geon Company (The) ..................... 40,700 834,350
Lilly (Eli) and Company ................ 37,000 4,456,169
Merck & Co., Inc. ...................... 38,700 3,867,562
Monsanto Company ....................... 101,100 3,942,900
Novartis AG ............................ 600 920,316
PPG Industries, Inc. ................... 69,000 4,325,403
Pfizer Inc. ............................ 71,800 4,312,452
Praxair, Inc. .......................... 55,200 2,825,522
Procter & Gamble Company (The) ......... 66,200 4,571,904
Solutia Inc.* .......................... 8,340 166,800
Union Carbide Corporation .............. 48,300 2,351,582
Warner-Lambert Company ................. 38,600 5,208,568
Total ................................. 63,718,521
Communication - 1.92%
AirTouch Communications* ............... 56,000 1,984,472
Cox Communications, Inc.* .............. 76,700 2,118,838
Grupo Televisa, S.A. GDR* .............. 32,600 1,163,396
SBC Communications Inc. ................ 25,400 1,558,925
360. Communications Company* ........... 51,500 1,075,062
Total ................................. 7,900,693
Depository Institutions - 4.45%
BankAmerica Corporation ................ 55,200 4,046,822
Chase Manhattan Corporation (The) ...... 30,500 3,599,000
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Depository Institutions (Continued)
Citicorp ............................... 30,900 $ 4,138,653
Norwest Corporation .................... 62,500 3,828,125
U. S. Bancorp. ......................... 27,600 2,663,400
Total ................................. 18,276,000
Electric, Gas and Sanitary Services - 0.94%
Duke Energy Corp. ...................... 78,300 3,870,917
Electronic and Other Electric Equipment - 8.49%
AMP Incorporated ....................... 28,400 1,521,161
Aeroquip-Vickers Inc. .................. 33,100 1,621,900
Analog Devices, Inc.* .................. 157,800 5,286,300
Emerson Electric Co. ................... 44,200 2,547,025
General Electric Company ............... 132,600 9,025,021
Harman International Industries,
Incorporated .......................... 7,980 399,495
Intel Corporation ...................... 95,400 8,815,532
Maytag Corporation ..................... 46,800 1,597,050
Molex Incorporated, Class A ............ 42,187 1,720,428
NextLevel Systems, Inc.* ............... 73,600 1,232,800
Rival Company (The) .................... 69,700 1,123,913
Total ................................. 34,890,625
Engineering and Management Services - 0.46%
Fluor Corporation ...................... 35,400 1,898,325
Food and Kindred Products - 2.06%
CPC International Inc. ................. 43,100 3,992,138
PepsiCo, Inc. .......................... 110,500 4,482,101
Total ................................. 8,474,239
Food Stores - 0.43%
Kroger Co. (The)* ...................... 58,000 1,750,846
Forestry - 1.19%
Georgia-Pacific Corporation ............ 23,500 2,452,812
Weyerhaeuser Company ................... 41,400 2,458,125
Total ................................. 4,910,937
Furniture and Fixtures - 0.10%
Lear Corporation* ...................... 8,500 418,625
Furniture and Home Furnishings Stores - 0.82%
Circuit City Stores, Inc. .............. 83,200 3,353,958
General Building Contractors - 0.29%
Pulte Corporation ...................... 31,100 1,189,575
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
General Merchandise Stores - 4.79%
Dayton Hudson Corporation .............. 75,800 $ 4,543,225
Federated Department Stores, Inc.* ..... 45,900 1,979,437
Kohl's Corporation* .................... 57,000 4,047,000
May Department Stores Company (The) .... 55,200 3,004,922
Wal-Mart Stores, Inc. .................. 167,400 6,131,025
Total ................................. 19,705,609
Health Services - 1.00%
Tenet Healthcare Corporation* .......... 86,300 2,513,488
Vencor, Incorporated* .................. 38,600 1,592,250
Total ................................. 4,105,738
Heavy Construction, Excluding Building - 0.24%
Foster Wheeler Corporation ............. 22,100 971,008
Industrial Machinery and Equipment - 13.59%
Applied Materials, Inc.* ............... 85,300 8,127,469
Case Corporation ....................... 62,200 4,144,075
Caterpillar Inc. ....................... 145,000 7,820,865
cisco Systems, Inc.* ................... 88,200 6,446,803
Compaq Computer Corporation* ........... 94,750 7,082,563
Deere & Company ........................ 108,800 5,861,600
Eaton Corporation ...................... 27,600 2,549,550
Hewlett-Packard Company ................ 12,900 897,350
Ingersoll-Rand Company ................. 33,150 1,427,505
International Business Machines Corporation 34,200 3,623,045
New Holland NV ......................... 70,700 2,085,650
Parker Hannifin Corporation ............ 49,650 2,234,250
United Technologies Corporation ........ 44,200 3,580,200
Total ................................. 55,880,925
Instruments and Related Products - 4.26%
General Motors Corporation, Class H .... 40,900 2,704,512
Guidant Corporation .................... 107,000 5,992,000
Medtronic, Inc. ........................ 88,400 4,154,800
Xerox Corporation ...................... 55,500 4,672,378
Total ................................. 17,523,690
Insurance Carriers - 2.39%
Aetna Inc. ............................. 38,500 3,135,325
American International Group, Inc. ..... 19,800 2,043,103
Oxford Health Plans Inc.* .............. 62,000 4,644,172
Total ................................. 9,822,600
Miscellaneous Retail - 0.16%
OfficeMax, Inc.* ....................... 43,875 666,330
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Motion Pictures - 0.76%
Walt Disney Company (The) .............. 38,700 $ 3,120,188
Nondepository Institutions - 3.00%
Associates First Capital Corporation ... 30,800 1,917,300
Fannie Mae ............................. 102,600 4,822,200
Freddie Mac ............................ 159,200 5,611,800
Total ................................. 12,351,300
Paper and Allied Products - 1.42%
Champion International Corporation ..... 30,700 1,870,766
International Paper Company ............ 35,400 1,949,195
Willamette Industries, Inc. ............ 52,800 2,019,600
Total ................................. 5,839,561
Petroleum and Coal Products - 2.20%
Exxon Corporation ...................... 31,200 1,998,734
Mobil Corporation ...................... 45,200 3,344,800
Royal Dutch Petroleum Company .......... 66,400 3,685,200
Total ................................. 9,028,734
Prepackaged Software - 2.49%
Microsoft Corporation* ................. 39,700 5,254,017
Oracle Systems Corporation* ............ 136,650 4,983,352
Total ................................. 10,237,369
Primary Metal Industries - 0.79%
Aluminum Company of America ............ 35,900 2,943,800
Nucor Corporation ...................... 5,700 300,316
Total ................................. 3,244,116
Railroad Transportation - 1.42%
Burlington Northern Santa Fe Corporation 19,900 1,922,838
Union Pacific Corporation .............. 62,200 3,899,131
Total ................................. 5,821,969
Rubber and Miscellaneous Plastics Products - 0.92%
Goodyear Tire & Rubber Company (The) ... 55,200 3,795,000
Special Trade Contractors - 1.29%
Telefonaktiebolaget LM Ericsson,
Class B, ADR .......................... 110,500 5,300,464
Transportation by Air - 0.59%
AMR Corporation* ....................... 22,100 2,446,183
Transportation Equipment - 7.13%
AlliedSignal Inc. ...................... 77,400 3,289,500
Boeing Company (The) ................... 70,200 3,821,477
See Notes to Schedules of Investments on page 58 - 59.
<PAGE>
THE INVESTMENTS OF
TOTAL RETURN FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Transportation Equipment (Continued)
Chrysler Corporation ................... 121,500 $ 4,472,658
Dana Corporation ....................... 42,000 2,073,750
Ford Motor Company ..................... 92,100 4,167,525
General Motors Corporation ............. 72,100 4,826,158
Northrop Grumman Corporation ........... 46,700 5,668,212
Sundstrand Corporation ................. 17,200 991,150
Total ................................. 29,310,430
Wholesale Trade - Durable Goods - 0.86%
Motorola, Inc. ......................... 49,400 3,550,625
Wholesale Trade - Nondurable Goods - 2.58%
Gillette Company (The) ................. 103,200 8,907,398
Safeway Inc.* .......................... 31,200 1,696,500
Total ................................. 10,603,898
TOTAL COMMON STOCKS - 91.83% $377,527,330
(Cost: $238,528,271)
PREFERRED STOCK - 0.28%
Communication
Telebras S.A., ADR ..................... 9,000 $ 1,158,750
(Cost: $1,204,706)
TOTAL SHORT-TERM SECURITIES - 6.91% $ 28,407,082
(Cost: $28,407,082)
TOTAL INVESTMENT SECURITIES - 99.02% $407,093,162
(Cost: $268,140,059)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.98% 4,017,311
NET ASSETS - 100.00% $411,110,473
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
GROWTH FUND
PORTFOLIO STRATEGY:
Common stocks and OBJECTIVE: Capital appreciation.
securities convertible
into common stocks.
Cash Reserves STRATEGY: Invests primarily in common stocks, or
securities convertible into common
stocks, of companies that offer above-
average growth potential, including
relatively new or unseasoned companies.
(May purchase securities subject to
repurchase agreements. May invest in
certain options and futures.)
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the Growth Fund from
time to time. For more information
about the Fund's cash reserves
flexibility, please consult the
Prospectus.
FOUNDED: 1992
SCHEDULED DIVIDEND FREQUENCY: ANNUALLY (December)
PERFORMANCE SUMMARY - Class B Shares
PER SHARE DATA
For the Six Months Ended September 30, 1997
- -------------------------------------------
NET ASSET VALUE ON
9/30/97 $24.34
3/31/97 18.16
------
CHANGE PER SHARE $ 6.18
======
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
----------------------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 9-30-97 10.85% 13.85%
5-year period ended 9-30-97 21.84% 21.84%
Period from 9-21-92*
through 9-30-97 21.70% 21.70%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and
reflects payment of the applicable contingent deferred sales charge upon
redemption at the end of each period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of each period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1997, Growth Fund had net assets totaling $260,501,179 invested
in a diversified portfolio of:
86.15% Common Stocks
13.85% Cash and Cash Equivalents
As a shareholder of Growth Fund, for every $100 you had invested on September
30, 1997, your Fund owned:
$48.01 Services Stocks
17.38 Manufacturing Stocks
13.85 Cash and Cash Equivalents
11.71 Transportation, Communication, Electric
and Sanitary Services Stocks
5.50 Wholesale and Retail Trade Stocks
3.55 Finance, Insurance and Real Estate Stocks
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS
Automotive Dealers and Service Stations - 1.74%
O'Reilly Automotive, Inc.* ............. 200,000 $ 4,525,000
Business Services _ 21.50%
America Online, Inc.* .................. 160,000 12,069,920
BMC Software, Inc.* .................... 50,000 3,235,900
CKS Group, Inc.* ....................... 100,000 3,725,000
CUC International Inc.* ................ 150,000 4,650,000
CompuServe Corporation* ................ 100,000 1,381,200
FactSet Research Systems, Inc.* ........ 175,000 5,206,250
HBO & Company .......................... 111,800 4,213,406
IDX Systems Corporation* ............... 14,000 484,750
IMNET Systems, Inc.* ................... 100,000 2,678,100
Parametric Technology Corporation* ..... 130,000 5,732,090
SCB Computer Technology, Inc.* ......... 225,000 4,781,250
Shared Medical Systems Corporation ..... 100,000 5,287,500
Synopsys, Inc.* ........................ 60,000 2,548,080
Total ................................. 55,993,446
Communication - 10.67%
COLT Telecom Group plc, ADR* ........... 200,000 6,350,000
Cincinnati Bell Inc. ................... 100,000 2,843,700
Intermedia Communications of
Florida, Inc.* ........................ 150,000 7,045,200
360. Communications Company* ........... 300,000 6,262,500
WorldCom, Inc.* ........................ 150,000 5,301,450
Total ................................. 27,802,850
Electric, Gas and Sanitary Services - 0.44%
Superior Services, Inc.* ............... 40,000 1,142,480
Electronic and Other Electric Equipment - 1.15%
Computer Products, Inc.* ............... 100,000 2,996,800
Engineering and Management Services - 3.23%
MAXIMUS, Inc.* ......................... 150,000 4,340,550
Transition Systems, Inc.* .............. 200,000 4,075,000
Total ................................. 8,415,550
Food and Kindred Products - 1.00%
Tootsie Roll Industries, Inc. .......... 51,500 2,613,625
Furniture and Home Furnishings Stores - 0.80%
Williams-Sonoma, Inc.* ................ 48,750 2,079,480
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Health Services - 6.83%
American Healthcorp, Inc.* ............. 200,000 $ 2,800,000
Concentra Managed Care, Inc.* .......... 174,135 6,165,424
Quorum Health Group, Inc.* ............. 150,000 3,675,000
Vencor, Incorporated* .................. 125,000 5,156,250
Total ................................. 17,796,674
Hotels and Other Lodging Places - 1.29%
Vail Resorts, Inc.* .................... 125,500 3,357,125
Industrial Machinery and Equipment - 1.54%
Franklin Electronic Publishers, Inc.* .. 150,000 2,025,000
Tractor Supply Company* ................ 100,000 1,987,500
Total ................................. 4,012,500
Instruments and Related Products - 4.89%
LUNAR CORPORATION* ..................... 160,000 3,074,880
St. Jude Medical, Inc.* ................ 100,000 3,506,200
STERIS Corporation* .................... 150,000 6,163,950
Total ................................. 12,745,030
Insurance Carriers - 1.54%
United HealthCare Corporation .......... 80,000 4,000,000
Miscellaneous Manufacturing Industries - 4.42%
Blyth Industries, Inc.* ................ 180,000 5,040,000
Getty Communications PLC* .............. 100,000 1,806,200
Tiffany & Co. .......................... 110,000 4,675,000
Total ................................. 11,521,200
Miscellaneous Retail - 1.24%
MSC Industrial Direct Co., Inc.* ....... 70,000 3,220,000
Personal Services - 3.79%
Block (H&R), Inc. ...................... 120,000 4,635,000
Equity Corporation International* ...... 225,000 5,245,200
Total ................................. 9,880,200
Prepackaged Software - 11.37%
Broderbund Software, Inc.* ............. 120,000 4,072,440
Cerner Corporation* .................... 150,000 3,595,200
Dendrite International, Inc.* .......... 200,000 3,175,000
Expert Software, Inc.* ................. 150,000 796,800
HPR Inc.* .............................. 160,000 3,509,920
Intuit Inc.* ........................... 175,000 5,621,875
J. D. Edwards* ......................... 60,000 2,017,500
Medic Computer Systems, Inc.* .......... 200,000 6,837,400
Total ................................. 29,626,135
Real Estate - 2.01%
Stewart Enterprises, Inc., Class A ..... 120,000 5,242,440
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Stone, Clay and Glass Products - 2.99%
Department 56, Inc.* ................... 150,000 $ 4,340,550
Gentex Corporation* .................... 139,000 3,453,177
Total ................................. 7,793,727
Tobacco Products - 1.39%
General Cigar Holdings, Inc.* .......... 125,000 3,609,375
Trucking and Warehousing - 0.60%
Heartland Express, Inc.* ............... 57,733 1,569,587
Wholesale Trade - Durable Goods - 1.72%
OmniCare, Inc. ......................... 137,600 4,472,000
TOTAL COMMON STOCKS - 86.15% $224,415,224
(Cost: $153,700,601)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Fabricated Metal Products - 0.61%
Danaher Corporation,
5.6563% Master Note ................... $1,592 1,592,000
Food and Kindred Products - 1.25%
ConAgra Inc.,
5.71%, 10-9-97 ........................ 3,175 3,170,971
General Mills, Inc.,
5.5113% Master Note ................... 82 82,000
Total ................................. 3,252,971
Instruments and Related Products - 3.93%
Baxter International Inc.:
5.6%, 10-6-97 ......................... 2,000 1,998,444
5.65%, 10-6-97 ........................ 4,545 4,541,433
Hughes Electronics Corp.,
5.75%, 10-24-97 ....................... 3,700 3,686,408
Total ................................. 10,226,285
Insurance Carriers - 1.02%
USAA Capital Corp.,
5.50%, 10-7-97 ........................ 2,670 2,667,553
Personal Services - 0.77%
Block Financial Corp.,
5.51%, 10-8-97 ........................ 2,010 2,007,847
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
GROWTH FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Textile Mill Products - 1.81%
Sara Lee Corporation,
5.5063% Master Note ................... $4,722 $ 4,722,000
Tobacco Products - 2.72%
B.A.T. Capital Corp.:
5.55%, 10-10-97 ....................... 2,295 2,291,816
5.57%, 10-10-97 ....................... 4,800 4,793,316
Total ................................. 7,085,132
Transportation Equipment - 1.60%
Echlin Inc.,
5.55%, 10-1-97 ........................ 4,165 4,165,000
TOTAL SHORT-TERM SECURITIES - 13.71% $ 35,718,788
(Cost: $35,718,788)
TOTAL INVESTMENT SECURITIES - 99.86% $260,134,012
(Cost: $189,419,389)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.14% 367,167
NET ASSETS - 100.00% $260,501,179
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
SHAREHOLDER SUMMARY
- ------------------------------------------------------------------------
SCIENCE AND TECHNOLOGY FUND
PORTFOLIO STRATEGY:
Technology-related OBJECTIVE: Long-term capital growth.
stocks
Generally at least 80% STRATEGY: Invests in common
in science or technology stocks of companies whose
securities; may have more products, processes or services
than 20% in debt securities. are expected to benefit from scientific
or technological discoveries or
developments. (May purchase
securities subject to repurchase
agreements. May invest in certain
options and futures.)
Cash Reserves The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the Science and
Technology Fund from time to time. For
more information about the Fund's cash
reserves flexibility, please consult the
Prospectus.
FOUNDED: 1997
SCHEDULED DIVIDEND FREQUENCY: ANNUALLY (DECEMBER)
PERFORMANCE SUMMARY -- Class B Shares
PER SHARE DATA
For the Period Ended September 30, 1997
- ---------------------------------------
NET ASSET VALUE ON
09/30/97 $10.38
07/31/97* 10.00
------
CHANGE PER SHARE $ 0.38
======
Past performance is not necessarily an indication of future results.
TOTAL RETURN HISTORY
Aggregate Total Return
---------------------------
With Without
Period CDSC** CDSC***
- ------ ----------- ------------
Period from 7-31-97*
through 9-30-97 0.80% 3.80%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and
reflects payment of the applicable contingent deferred sales charge upon
redemption at the end of each period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of each period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1997, Science and Technology Fund had net assets totaling
$2,215,428 invested in a diversified portfolio of:
52.73% Cash and Cash Equivalents
47.27% Common Stocks
As a shareholder of Science and Technology Fund, for every $100 you had invested
on September 30, 1997, your Fund owned:
$52.73 Cash and Cash Equivalents
29.93 Services Stocks
8.40 Manufacturing Stocks
5.17 Transportation, Communication, Electric, Gas
and Sanitary Services Stocks
3.77 Wholesale and Retail Trade Stocks
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
SCIENCE AND TECHNOLOGY FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS
Business Services - 21.56%
America Online, Inc.* .................. 500 $ 37,718
At Home Corporation, Series A* ......... 2,300 53,114
CUC International Inc.* ................ 2,000 62,000
IDX Systems Corporation* ............... 1,500 51,937
McAfee Associates, Inc.* ............... 500 26,500
Parametric Technology Corporation* ..... 600 26,456
Primark Corporation* ................... 2,000 59,124
Simulation Sciences, Inc.* ............. 900 17,803
TMP Worldwide Inc.* .................... 900 21,768
Transaction Systems Architects, Inc.* ... 1,700 69,062
Vantive Corporation (The) .............. 1,300 31,281
Visio Corporation* ..................... 500 20,812
Total ................................. 477,575
Communication - 5.17%
Intermedia Communications of Florida,
Inc.* ................................. 1,000 46,968
Nokia Corporation, Series A, ADR ....... 200 18,775
Paging Network, Inc.* .................. 1,900 24,164
WorldCom Inc.* ......................... 700 24,740
Total ................................. 114,647
Electronic and Other Electric Equipment - 6.03%
Advanced Fibre Communications, Inc.* ... 2,000 81,936
Tellabs* ............................... 1,000 51,593
Total ................................. 133,529
Engineering & Management Services - 0.76%
Incyte Pharmaceuticals, Inc.* .......... 200 16,794
Food and Kindred Products - 1.63%
J. M. Smucker Company (The) ............ 1,300 36,157
Health Services - 2.53%
American Healthcorp, Inc.* ............. 4,000 56,000
Instruments and Related Products - 0.74%
STERIS Corporation* .................... 400 16,437
Prepackaged Software - 5.08%
HPR Inc.* .............................. 600 13,162
Intuit Inc.* ........................... 1,000 32,125
J. D. Edwards* ......................... 2,000 67,250
Total.................................. 112,537
Wholesale Trade - Durable Goods - 2.49%
OmniCare, Inc. ......................... 1,700 55,250
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
SCIENCE AND TECHNOLOGY FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Wholesale Trade -- Nondurable Goods - 1.28%
Cardinal Health, Inc. .................. 400 $ 28,400
TOTAL COMMON STOCKS - 47.27% $1,047,326
(Cost: $981,609)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Food and Kindred Products - 0.45%
General Mills, Inc.,
5.5113% Master Note ................... $10 10,000
Textile Mill Products - 1.58%
Sara Lee Corporation,
5.5063% Master Note ................... 35 35,000
Total Commercial Paper - 2.03% 45,000
United States Government
Fannie Mae:
5.4%, 10-2-97 ......................... 65 64,990
5.55%, 10-6-97 ........................ 205 204,842
5.4%, 10-9-97 ......................... 95 94,886
5.42%, 10-14-97 ....................... 315 314,384
5.4%, 11-6-97 ......................... 160 159,136
Freddie Mac,
5.4%, 10-9-97 ......................... 120 119,856
Total United States Government Securities - 43.25% 958,094
TOTAL SHORT-TERM SECURITIES - 45.28% $1,003,094
(Cost: $1,003,094)
TOTAL INVESTMENT SECURITIES - 92.55% $2,050,420
(Cost: $1,984,703)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 7.45% 165,008
NET ASSETS - 100.00% $2,215,428
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
INTERNATIONAL GROWTH FUND
PORTFOLIO STRATEGY:
Normally at least 80% in OBJECTIVE: Long-term appreciation
foreign securities. Not of capital with current
more than 75% in securities income as a secondary
in any one country. consideration.
Maximum of 15% in currency STRATEGY: Invests in securities
exchange contracts (common or preferred stocks
and/or debt securities) issued
Cash Reserves by companies or governments of any
nation, including the United States.
Securities are selected for their
potential to provide long-term growth.
The Fund provides an opportunity to
invest in foreign companies in many
different industries. (May purchase
securities subject to repurchase
agreements. May invest in certain
options and futures.) International
Growth Fund (formerly Global Income
Fund) changed its name and investment
objective effective April 20, 1995.
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the International
Growth Fund from time to time. For more
information about the Fund's cash
reserves flexibility, please consult the
Prospectus.
FOUNDED: 1992
SCHEDULED DIVIDEND FREQUENCY: ANNUALLY (December)
PERFORMANCE SUMMARY - Class B Shares
PER SHARE DATA
For the Six Months Ended September 30, 1997
- -------------------------------------------
NET ASSET VALUE ON
9/30/97 $14.12
3/31/97 12.40
------
CHANGE PER SHARE $ 1.72
======
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 9-30-97 28.82% 31.82%
5-year period ended 9-30-97 9.23% 9.23%
Period from 9-21-92*
through 9-30-97 9.44% 9.44%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and reflects
payment of the applicable contingent deferred sales charge upon redemption at
the end of each period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of each period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1997, International Growth Fund had net assets totaling
$73,090,580 invested in a diversified portfolio of:
86.20% Common Stocks
8.75% Cash and Cash Equivalents and Open Forward Currency Contracts
5.05% Preferred Stocks
As a shareholder of International Growth Fund, for every $100 you had invested
on September 30, 1997, your Fund owned:
86.20% Common Stocks
8.75% Cash and Cash Equivalents and Open Forward Currency Contracts
5.05% Preferred Stocks
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
INTERNATIONAL GROWTH FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS
Argentina - 0.59%
Capex S.A., Class A (A) ................ 50,000 $ 427,500
Australia - 0.69%
Westpac Banking Corporation (A) ........ 80,000 505,226
Brazil - 0.79%
CompanLia de Saneamento Desico do Estado
De Sao Paulo (A) ...................... 2,200,000 576,410
Denmark - 0.63%
Sydbank A/S (A) ........................ 10,000 462,254
Finland - 1.98%
Nokia Corporation, Series K (A) ........ 7,000 663,012
TT Tieto Oy, Class B (A) ............... 7,000 787,409
Total ................................. 1,450,421
France - 8.25%
Accor S.A. (A) ......................... 2,400 443,269
Atos SA (A)* ........................... 4,000 432,753
Business Objects S.A., ADR* ............ 30,000 301,860
Cap Gemini Sogeti S.A. (A)* ............ 10,000 648,793
Cofidur (A)* ........................... 10,933 348,214
Coflexip Stena Offshore SA, ADR ........ 16,400 920,450
GEA Grenobloise d'Electronique et
d'Automatismes (A) .................... 10,000 379,164
Generale de Geophysique S.A. (A)* ...... 4,500 614,246
SGS-THOMSON Microelectronics N.V.* ..... 7,500 704,063
Societe Industrielle de Transports
Automobiles S.A. (A) .................. 1,500 298,276
Suez Lyonnaise des Eaux (A) ............ 8,400 937,092
Total ................................. 6,028,180
Germany - 8.36%
Altana AG (A) .......................... 6,000 441,401
Deutsche Bank AG (A) ................... 13,000 915,172
eff-eff Fritz Fuss GmbH & Co. (A) ...... 5,000 175,429
Hoechst AG (A) ......................... 20,000 887,330
K&M Mobel AG (A)* ...................... 25,000 244,751
Plettac AG (A) ......................... 2,000 414,238
Schering AG (A) ........................ 4,970 521,581
Siemens AG (A) ......................... 9,600 648,384
VEBA AG (A) ............................ 16,000 934,865
Volkswagen AG (A) ...................... 1,335 926,968
Total ................................. 6,110,119
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
INTERNATIONAL GROWTH FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Hong Kong - 3.14%
Angang New Steel Co. Ltd., H shares (A) 550,000 $ 161,702
Founder Hong Kong Limited (A) .......... 840,000 819,592
JCG Holdings Ltd. (A) .................. 480,000 384,596
New World Infrastructure Ltd. (A)* ..... 100,000 263,634
Shanghai Industrial Holdings Limited ... 107,000 663,737
Total ................................. 2,293,261
Indonesia - 0.16%
Pt Steady Safe Transportation
Service, F (A) ........................ 290,416 113,270
Italy - 0.43%
Telecom Italia S.p.A., Risp (A) ........ 80,000 311,150
Japan - 6.32%
Banyu Pharmaceutical Company, Ltd. (A) . 11,000 180,410
Eisai Co., Ltd. (A) .................... 15,000 268,379
Imagineer Co. Limited (A) .............. 19,000 192,007
Nintendo Corp., Ltd. (A) ............... 10,000 936,012
Promise Co., Ltd. (A) .................. 7,150 373,121
Rohm Company (A) ....................... 4,000 470,491
Sankyo Co., Ltd. (A) ................... 20,000 692,483
Sanyo Electric Co., Ltd. (A) ........... 100,000 306,482
Showa Corporation (A) .................. 37,000 257,445
Sony Corporation (A) ................... 10,000 944,295
Total ................................. 4,621,125
Mexico - 1.12%
Empresas ICA Sociedad Controladora,
S.A. de C.V., ADS* .................... 10,000 175,620
Gruma, S.A., Class B (A)* .............. 62,553 296,261
Grupo Financiero Inbursa, S.A. de
C.V., Class B (A) ..................... 80,000 350,064
Total ................................. 821,945
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
INTERNATIONAL GROWTH FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Netherlands - 13.43%
ASM Lithography Holding NV* ............ 15,000 $ 1,483,125
Akzo Nobel N.V. (A) .................... 5,000 854,308
Cap Gemini Sogeti S.A. (A)* ............ 15,000 490,580
Fugro N.V. (A) ......................... 41,290 1,441,675
Internatio-Muller N.V. (A) ............. 18,450 595,072
Koninklijke Boskalis Westminster
N.V. (A) .............................. 32,400 642,954
Koninklijke Hoogovens N.V. (A) ......... 10,200 660,528
Koninklijke Pakhoed NV (A) ............. 15,454 547,353
Ordina N.V. (A)* ....................... 54,000 971,213
Philips Electronics N.V., NY Shares .... 10,000 840,000
Smit Internationale N.V. (A) ........... 27,000 847,777
Stork N.V. (A) ......................... 10,000 443,105
Total ................................. 9,817,690
Norway - 2.43%
Blom ASA (A) ........................... 60,000 625,079
Merkantildata A/S (A) .................. 25,000 728,555
Schibsted AS (A) ....................... 24,000 418,972
Total ................................. 1,772,606
Philippines - 0.18%
Belle Corporation (A)* ................. 1,000,000 132,353
Portugal - 0.59%
Portugal Telecom, S.A., ADS ............ 10,000 434,370
Russian Federation _ 1.26%
Open Joint Stock Company
Vimpel-Communications, ADR* ........... 22,000 918,500
Singapore - 0.40%
Uraco Holdings Limited (A) ............. 650,000 295,319
Spain - 1.72%
Abengoa, S.A. (A)* ..................... 13,113 676,562
Tele Pizza, S.A. (A)* .................. 8,354 582,160
Total ................................. 1,258,722
Sweden - 6.19%
Biacore International AB, ADR* ......... 15,000 177,180
Biora AB (A)* .......................... 40,000 373,920
Bure Investment AB (A) ................. 20,000 259,374
Frontec AB, Class B (A)* ............... 16,000 144,302
Incentive AB ........................... 6,350 606,139
Modern Times Group MTG AB (A) .......... 6,000 46,806
Nordbanken AB (A) ...................... 25,000 852,512
Ortivus AB, B Shares (A)* .............. 16,600 721,245
Skandia Group Insurance
Company Ltd. (A) ...................... 30,000 1,339,004
Total ................................. 4,520,482
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
INTERNATIONAL GROWTH FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Switzerland - 11.25%
AFG Arbonia-Forster Holding AG (A)* .... 625 $ 369,543
Choco Lindt & Spru AG, Registered (A) .. 20 393,262
Clariant AG (A) ........................ 1,050 844,620
Credit Suisse Group, Registered
Shares (A) ............................ 17,000 2,296,666
Julius Baer Holding AG (A) ............. 340 522,448
Novartis AG (A) ........................ 501 768,464
SMH Swiss Corporation (A) .............. 760 452,499
Swisslog Holding AG (A)* ............... 11,750 896,700
TAG Heuer International SA (A)* ......... 3,830 513,475
Union Bank of Switzerland (A) .......... 1,000 1,168,099
Total ................................. 8,225,776
Thailand - 0.07%
Srithai Superware Public Company
Limited, F (A) ........................ 102,300 53,024
Turkey _ 0.94%
Haci Omer Sabanci Holding
A.S., ADR* ............................ 64,000 688,000
United Kingdom - 14.23%
Avis Europe PLC (A)* ................... 250,000 608,983
COLT Telecom Group plc, ADR* ........... 24,200 768,350
Corporate Services Group plc (A) ....... 225,000 769,496
Dr Solomon's Group PLC, ADR* ........... 34,500 884,063
Freepages Group plc (A)* ............... 1,000,000 588,818
General Elctric Company plc ............ 113,000 710,937
Hays plc (A) ........................... 60,000 679,480
Ionica Group plc (A)* .................. 103,000 637,222
JBA Holdings plc (A) .................... 44,000 608,660
Johnson Matthey plc (A) ................ 63,000 688,046
Misys plc (A) .......................... 60,700 1,522,675
Rentokil Initial plc (A) ............... 164,000 679,931
Vodafone Group Plc (A) ................. 100,000 537,196
Williams plc (A) ....................... 120,500 717,301
Total ................................. 10,401,158
United States - 1.05%
Transocean Offshore Inc. ............... 16,000 766,992
TOTAL COMMON STOCKS - 86.20% $63,005,853
(Cost: $55,942,384)
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
INTERNATIONAL GROWTH FUND
SEPTEMBER 30, 1997
Shares Value
PREFERRED STOCKS
Austria - 0.34%
Bau Holding AG (A) ..................... 5,000 $ 251,256
Germany - 3.93%
Marschollek, Lautenschlager und
Partner AG (A) ........................ 2,500 602,682
Moebel Walther AG (A) .................. 6,000 297,097
Porsche AG (A) ......................... 450 783,063
SAP Aktiengesellschaft (A) ............. 4,500 1,187,454
Total ................................. 2,870,296
Portugal _ 0.78%
Lusomundo-SGPS, S.A. (A) ............... 76,000 567,328
TOTAL PREFERRED STOCKS - 5.05% $ 3,688,880
(Cost: $2,922,980)
Face
Amount in
Thousands
UNREALIZED GAIN ON OPEN FORWARD CURRENCY CONTRACTS - 0.42%
French Francs, 6-4-98 (B) .............. F 18,969 200,307
Deutsche Marks, 6-4-98 (B) ............. DM 2,026 87,969
Deutsche Marks, 7-29-98 (B) ............ DM 2,270 14,879
Total ................................. $ 303,155
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Fabricated Metal Products - 2.13%
Danaher Corporation,
5.6563% Master Note ................... $1,560 1,560,000
Food and Kindred Products - 0.33%
General Mills, Inc.,
5.5113% Master Note ................... 244 244,000
Instruments and Related Products - 1.55%
Hughes Electronics Corp.,
5.75%, 10-24-97 ....................... 1,135 1,130,831
Personal Services - 4.12%
Block Financial Corp.,
5.53%, 10-6-97 ........................ 3,010 3,007,688
Textile Mill Products - 3.08%
Sara Lee Corporation,
5.5063% Master Note ................... 2,253 2,253,000
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
INTERNATIONAL GROWTH FUND
SEPTEMBER 30, 1997
Value
TOTAL SHORT-TERM SECURITIES - 11.21% $ 8,195,519
(Cost: $8,195,519)
TOTAL INVESTMENT SECURITIES - 102.88% $75,193,407
(Cost: $67,060,883)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (2.88%) (2,102,827)
NET ASSETS - 100.00% $73,090,580
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
ASSET STRATEGY FUND
Stocks 70% OBJECTIVE: To seek high total return
(can range from 0-100%) over the long term.
Bonds 25%
(can range from 0-100%) STRATEGY: Invests in stocks, bonds
and short-term
Short-Term Instruments 5% instruments, both in the
(can range from 0-100%) United States and abroad, which are
allocated in a mix that varies based on
the current outlook for the different
markets. (May purchase securities
subject to repurchase agreements. May
invest in certain options and futures.)
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the Asset Strategy
Fund from time to time. For more
information about the Fund's cash
reserves flexibility, please consult the
Prospectus.
FOUNDED: 1995
SCHEDULED DIVIDEND FREQUENCY: QUARTERLY (March, June, September and
December)
PERFORMANCE SUMMARY - Class B Shares
PER SHARE DATA
For the Six Months ended September 30, 1997
- ----------------------------------------
DIVIDENDS PAID $0.08
=====
NET ASSET VALUE ON
9/30/97 $11.30
3/31/97 9.73
------
CHANGE PER SHARE $ 1.57
======
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual
Total Return
----------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 9-30-97 12.19% 15.19%
Period from 4-20-95*
through 9-30-97 6.79% 7.53%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and reflects
payment of the applicable contingent deferred sales charge upon redemption at
the end of each period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of each period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1997, Asset Strategy Fund had net assets totaling $15,858,814
invested in a diversified portfolio of:
56.65% Common Stocks
19.35% Corporate Debt Securities
13.37% Cash and Cash Equivalents
6.79% United States Government Securities
3.84% Foreign Government Securities
As a shareholder of Asset Strategy Fund, for every $100 you had invested on
September 30, 1997, your Fund owned:
$56.65Common Stocks
19.35Corporate Debt Securities
13.37Cash and Cash Equivalents
6.79United States Government Securities
3.84Foreign Government Securities
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
ASSET STRATEGY FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS
Apparel and Accessory Stores - 1.43%
Payless ShoeSource, Inc. ............... 3,800 $ 226,811
Auto Repair, Services and Parking - 2.38%
Avis Rent A Car, Inc.* ................. 6,000 143,250
Hertz Corp (The), Class A .............. 6,200 233,659
Total ................................. 376,909
Business Services - 2.32%
BISYS Group, Inc. (The)* ............... 3,600 115,535
BMC Software, Inc.* .................... 3,900 252,400
Total ................................. 367,935
Chemicals and Allied Products - 5.19%
American Home Products Corporation ..... 2,400 175,200
BetzDearborn Inc. ...................... 3,300 225,637
Imperial Chemical Industries plc ADR ... 4,200 277,725
Monsanto Company ....................... 3,700 144,300
Total ................................. 822,862
Communication - 5.27%
AT&T Corporation ....................... 5,700 252,578
Clear Channel Communications, Inc.* .... 3,400 220,575
SBC Communications Inc. ................ 5,900 362,113
Total ................................. 835,266
Depository Institutions _ 2.78%
BankAmerica Corporation ................ 2,200 161,286
Norwest Corporation .................... 2,200 134,750
U. S. Bancorp. ......................... 1,500 144,750
Total ................................. 440,786
Electric, Gas and Sanitary Services - 1.43%
Duke Energy Corp. ...................... 4,600 227,410
Food and Kindred Products - 0.92%
CPC International Inc. ................. 800 74,100
ConAgra, Inc. .......................... 1,100 72,600
Total ................................. 146,700
Forestry - 1.57%
Weyerhaeuser Company ................... 4,200 249,375
Furniture and Fixtures - 1.71%
Lear Corporation* ...................... 5,500 270,875
See Notes to Schedule of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
ASSET STRATEGY FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
General Merchandise Stores - 3.57%
Federated Department Stores, Inc.* ..... 5,500 $ 237,188
Wal-Mart Stores, Inc. .................. 9,000 329,625
Total ................................. 566,813
Health Services - 0.80%
Centennial HealthCare Corporation* ..... 5,500 127,188
Industrial Machinery and Equipment - 4.16%
Case Corporation ....................... 2,400 159,900
Compaq Computer Corporation* ........... 2,000 149,500
New Holland NV* ........................ 2,700 79,650
Parker Hannifin Corporation ............ 6,000 270,000
Total ................................. 659,050
Instruments and Related Products - 1.29%
General Motors Corporation, Class H .... 3,100 204,987
Miscellaneous Retail - 1.16%
Costco Companies, Inc.* ................ 4,900 184,206
Paper and Allied Products - 2.34%
Champion International Corporation ..... 2,300 140,155
Mead Corporation (The) ................. 3,200 231,200
Total ................................. 371,355
Personal Services - 1.81%
Equity Corporation International* ...... 12,300 286,738
Petroleum and Coal Products - 4.26%
Mobil Corporation ...................... 4,400 325,600
Royal Dutch Petroleum Company .......... 6,300 349,650
Total ................................. 675,250
Prepackaged Software - 4.90%
Intuit Inc.* ........................... 5,000 160,625
J. D. Edwards* ......................... 7,000 235,375
McAfee Associates, Inc.* ............... 4,500 238,500
Oracle Systems Corporation* ............ 3,900 142,225
Total.................................. 776,725
Railroad Transportation - 1.77%
Burlington Northern Santa Fe Corporation 1,600 154,600
Union Pacific Corporation .............. 2,000 125,374
Total ................................. 279,974
Transportation by Air - 1.63%
Southwest Airlines Co. ................. 8,100 258,690
See Notes to Schedule of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
ASSET STRATEGY FUND
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Transportation Equipment - 2.15%
Hayes Wheels International, Inc.* ...... 5,600 $ 190,400
Sundstrand Corporation ................. 2,600 149,825
Total ................................. 340,225
Wholesale Trade - Durable Goods _ 1.81%
Motorola, Inc. ......................... 4,000 287,500
TOTAL COMMON STOCKS - 56.65% $ 8,983,630
(Cost: $7,847,524)
Principal
Amount in
Thousands
CORPORATE DEBT SECURITIES
Chemicals and Allied Products - 1.87%
The BOC Group, Inc.,
5.875%, 1-29-2001 ..................... $ 300 296,280
Depository Institutions _ 3.88%
Banco de Inversion y Comercio Exterior S.A.,
9.375%, 12-27-2000 (C) ................ 300 314,250
Banco Nacional de Comercio Exterior, S.N.C.,
7.5%, 7-1-2000 ........................ 300 300,375
Total ................................. 614,625
Electric, Gas and Sanitary Services - 1.95%
Companhia Paranaense de Energia-COPEL
9.75%, 5-2-2005 (C) ................... 300 309,750
Food and Kindred Products - 5.72%
Cervejarias Kaiser S.A.,
8.875%, 9-26-2005 (C) ................. 300 300,750
JG Summit Holdings, Inc.,
8.0%, 5-6-2002 (C)..................... 300 289,875
Pepsi-Gemex, S.A. de C.V.,
9.75%, 3-30-2004 ...................... 300 316,875
Total ................................. 907,500
Industrial Machinery and Equipment - 1.89%
Tyco International Ltd.,
6.5%, 11-1-2001 ...................... 300 300,309
Primary Metal Industries - 2.03%
Ispat Mexicana, S.A. de C.V.,
10.375%, 3-15-2001 (C) ................ 300 321,375
Stone, Clay and Glass Products - 2.01%
Vicap, S.A. de C.V.,
10.25%, 5-15-2002 ..................... 300 318,750
TOTAL CORPORATE DEBT SECURITIES - 19.35% $ 3,068,589
(Cost: $3,012,257)
See Notes to Schedule of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
ASSET STRATEGY FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
OTHER GOVERNMENT SECURITIES
Argentina - 1.97%
Republic of Argentina (The),
9.25%, 2-23-2001 ...................... $ 300 $ 313,500
Mexico - 1.87%
United Mexican States,
6.97%, 8-12-2000 ...................... 300 296,250
TOTAL OTHER GOVERNMENT SECURITIES - 3.84% $ 609,750
(Cost: $590,795)
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Banks:
7.04%, 1-2-2003 ....................... 300 299,766
6.5%, 2-15-2023 ....................... 2,800 589,820
United States Treasury:
7.25%, 2-15-98 ........................ 60 60,375
7.125%, 2-29-2000 ..................... 60 61,669
7.5%, 2-15-2005 ....................... 60 64,781
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 6.79% $ 1,076,411
(Cost: $1,125,771)
SHORT-TERM SECURITIES
Fabricated Metal Products - 4.76%
Danaher Corporation,
5.6563% Master Note ................... 755 755,000
Food and Kindred Products - 4.43%
General Mills, Inc.,
5.5113% Master Note ................... 702 702,000
Textile Mill Products - 2.34%
Sara Lee Corporation,
5.5063% Master Note ................... 371 371,000
TOTAL SHORT-TERM SECURITIES - 11.53% $ 1,828,000
(Cost: $1,828,000)
TOTAL INVESTMENT SECURITIES - 98.16% $15,566,380
(Cost: $14,404,347)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.84% 292,434
NET ASSETS - 100.00% $15,858,814
See Notes to Schedule of Investments on pages 58 - 59.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
LIMITED-TERM BOND FUND
PORTFOLIO STRATEGY:
OBJECTIVE: High level of current income
Dollar-weighted average consistent with
maturity of portfolio is preservation of capital.
between two and five years.
At least 65% investment-grade
bonds.
STRATEGY: Invests primarily in debt securities of
investment grade, including debt
securities issued or guaranteed by the
U.S. Government or its agencies or
instrumentalities, with the portfolio
having a dollar-weighted average
maturity of not less than two years, but
not more than five years. (May purchase
securities subject to repurchase
agreements. May invest in certain
options and futures.)
FOUNDED: 1992
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
PERFORMANCE SUMMARY - Class B Shares
PER SHARE DATA
For the Six Months Ended September 30, 1997
- ----------------------------------------
DIVIDENDS PAID $0.23
=====
NET ASSET VALUE ON
9/30/97 $10.11
3/31/97 9.90
------
CHANGE PER SHARE $ 0.21
======
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual
Total Return
----------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 9-30-97 3.24% 6.24%
5-year period ended 9-30-97 4.30% 4.30%
Period from 9-21-92*
through 9-30-97 4.35% 4.35%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and reflects
payment of the applicable contingent deferred sales charge upon redemption at
the end of each period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of each period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1997, Limited-Term Bond Fund had net assets totaling
$18,174,655 invested in a diversified portfolio of:
93.84% Bonds
6.16% Cash and Cash Equivalents
As a shareholder of Limited-Term Bond Fund, for every $100 you had invested on
September 30, 1997, your Fund owned:
$55.67Corporate Bonds
35.67U.S. Government Securities
6.16Cash and Cash Equivalents
2.50Municipal Bond
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Chemicals and Allied Products - 2.83%
American Home Products Corporation,
7.7%, 2-15-2000 ....................... $500 $ 515,145
Communication - 2.84%
GTE Corporation,
8.85%, 3-1-98 ......................... 510 516,074
Depository Institutions - 6.60%
Ahmanson (H. F.), Series A,
6.35%, 9-1-1998 ....................... 600 601,158
Wells Fargo & Company,
8.375%, 5-15-2002 ..................... 558 598,042
Total ................................. 1,199,200
Electronic and Other Electric Equipment - 2.85%
Black & Decker Corp.,
7.5%, 4-1-2003 ........................ 500 517,420
General Merchandise Stores - 5.61%
Penney (J.C.) Company, Inc.,
10.0%, 10-15-97 ....................... 505 505,682
Sears, Roebuck and Co.,
8.2%, 4-15-99 ......................... 500 513,955
Total ................................. 1,019,637
Industrial Machinery and Equipment - 2.86%
Tenneco Inc.,
8.2%, 11-15-99 ........................ 500 519,025
Instruments and Related Products - 4.00%
Baxter International Inc.,
8.125%, 11-15-2001 .................... 350 368,907
Polaroid Corporation,
8.0%, 3-15-99 ......................... 350 358,501
Total ................................. 727,408
Nondepository Institutions - 8.56%
Associates Corporation of North America,
8.25%, 12-1-99 ........................ 500 520,955
Avco Financial Services, Inc.,
7.375%, 8-15-2001 ..................... 500 515,030
Ford Motor Credit Company,
4.3%, 7-15-98 ......................... 9 9,215
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Nondepository Institutions (Continued)
General Motors Acceptance Corporation,
7.75%, 1-15-99 ........................ $500 $ 509,835
Total ................................. 1,555,035
Personal Services - 2.75%
Service Corporation International,
6.375%, 10-1-2000...................... 500 500,660
Petroleum and Coal Products - 3.03%
Chevron Corporation,
8.11%, 12-1-2004 ...................... 520 550,493
Railroad Transportation - 2.89%
Union Pacific Corporation,
7.875%, 2-15-2002 ..................... 500 524,830
Security and Commodity Brokers - 2.84%
Salomon Inc.,
7.75%, 5-15-2000....................... 500 516,955
Textile Mill Products - 2.84%
Fruit of the Loom, Inc.,
7.875%, 10-15-99 ...................... 500 516,620
Transportation by Air - 2.85%
Federal Express Corporation,
10.0%, 9-1-98 ......................... 500 517,605
Wholesale Trade - Durable Goods - 2.32%
Westinghouse Electric Corporation,
8.875%, 6-1-2001 ..................... 400 422,292
TOTAL CORPORATE DEBT SECURITIES - 55.67% $10,118,399
(Cost: $10,015,044)
MUNICIPAL BOND - 2.50%
Kansas
Kansas Development Finance Authority,
Health Facilities Revenue Bonds
(Stormont-Vail HealthCare, Inc.),
7.25%, 11-15-2002 ..................... 440 $ 454,300
(Cost: $440,000)
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
LIMITED-TERM BOND FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
5.5%, 4-15-2013 ....................... $ 14 $ 13,771
6.4%, 2-15-2018 ....................... 250 249,530
Federal National Mortgage Association:
6.0%, 11-1-2000 ....................... 319 313,930
7.27%, 4-24-2003 ...................... 500 500,860
7.95%, 3-7-2005 ....................... 500 517,265
7.5%, 11-15-2006 ...................... 500 506,015
8.0%, 2-1-2008 ........................ 225 232,947
6.5%, 10-15-2008 ...................... 212 210,921
7.0%, 7-15-2010 ....................... 368 372,600
6.5%, 12-1-2010 ....................... 642 637,623
6.0%, 1-1-2011 ........................ 508 494,957
6.5%, 2-1-2011 ........................ 529 525,404
7.0%, 5-1-2011 ........................ 443 447,192
7.0%, 7-1-2011 ........................ 448 452,618
7.0%, 9-1-2012 ........................ 503 507,960
7.0%, 9-25-2020 ....................... 27 27,488
7.0%, 4-1-2026 ........................ 474 472,441
TOTAL UNITED STATES GOVERNMENT SECURITIES - 35.67% $ 6,483,522
(Cost: $6,483,079)
TOTAL SHORT-TERM SECURITIES - 4.35% $ 790,000
(Cost: $790,000)
TOTAL INVESTMENT SECURITIES - 98.19% $17,846,221
(Cost: $17,728,123)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.81% 328,434
NET ASSETS - 100.00% $18,174,655
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
HIGH INCOME FUND
PORTFOLIO STRATEGY:
Invests generally in OBJECTIVE: High level of current
High-Risk, High-Yield income, by investing
Fixed Income Securities primarily in a
diversified portfolio of
Maximum 20% Common Stock high-yield, high-risk fixed income
securities, with a secondary objective
of capital growth when consistent with
the primary objective.
STRATEGY: Invests generally in debt securities in
lower rating categories as classified by
recognized rating agencies; may also
invest up to 20% in common stocks. (May
purchase securities subject to
repurchase agreements. May invest in
certain options and futures.)
FOUNDED: 1997
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
PERFORMANCE SUMMARY -- Class B Shares
PER SHARE DATA
For the Period Ended September 30, 1997
- ---------------------------------------
DIVIDENDS PAID $0.06
=====
NET ASSET VALUE ON
9/30/97 $10.11
7/31/97* 10.00
-----
CHANGE PER SHARE $0.11
=====
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Aggregate Total Return
---------------------------
With Without
Period CDSC** CDSC***
- ------ ----------- ------------
Period from 7-31-97*
through 9-30-97 -1.28% 1.72%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and reflects
payment of the applicable contingent deferred sales charge upon redemption at
the end of each period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of each period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1997, High Income Fund had net assets totaling $2,580,903
invested in a diversified portfolio of:
71.72% Corporate Debt Securities
28.28% Cash and Cash Equivalents
As a shareholder of High Income Fund, for every $100 you had invested on
September 30, 1997, your Fund owned:
$28.28 Cash and Cash Equivalents
25.06 Manufacturing Bonds
22.63 Transportation, Communication, Electric
and Sanitary Services Bonds
10.99 Services Bonds
6.02 Wholesale and Retail Trade Bonds
3.91 Mining Bonds
3.11 Agriculture, Forestry and Fisheries Bonds
<PAGE>
THE INVESTMENTS OF
HIGH INCOME FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Agricultural Production - Crops - 3.11%
Hines Horticulture, Inc.,
11.75%, 10-15-2005 .................. $ 75 $ 80,250
Auto Repair, Services and Parking - 2.06%
Safelite Glass Corp.,
9.875%, 12-15-2006 (C) .............. 50 53,250
Business Services - 1.02%
Lamar Advertising Company,
9.625%, 12-1-2006 ................... 25 26,438
Chemicals and Allied Products - 2.00%
Spinnaker Industries, Inc.,
10.75%, 10-15-2006 .................. 50 51,500
Coal Mining - 1.98%
Anker Coal Group, Inc.,
9.75%, 10-1-2007 (C) ................ 50 51,000
Communication - 19.55%
ACME Television, LLC
0.0%, 9-20-2004 (C) ................. 100 73,500
Adelphia Communications Corporation:
9.25%, 10-1-2002 (C) ................ 50 50,375
9.875%, 3-1-2005 .................... 25 25,875
Brooks Fiber Properties, Inc.,
0.0%, 11-1-2006 (D) ................. 75 57,750
Microcell Telecommunications Inc.,
0.0%, 6-1-2006 (D) .................. 100 68,500
NEXTEL Communications, Inc.,
0.0%, 8-15-2004 (D) ................. 25 21,625
NEXTLINK Communications, Inc.,
9.625%, 10-1-2007 ................... 100 104,500
Salem Communications Corporation,
9.5%, 10-1-2007 (C) ................. 75 76,312
Sinclair Broadcasting Group,
10%, 9-30-2005 ...................... 25 26,250
Total ............................... 504,687
Eating and Drinking Places - 0.99%
SC International Services, Inc.,
9.25%, 9-1-2007 (C) ................. 25 25,438
Electric, Gas and Sanitary Services - 1.06%
Allied Waste North America, Inc.,
10.25%, 12-1-2006 ................... 25 27,375
See Notes to Schedule of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
HIGH INCOME FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Electronic and Other Electric Equipment - 1.98%
Communications Instruments, Inc.,
10.0%, 9-15-2004 (C) ................ $ 50 $ 51,000
Fabricated Metal Products - 2.96%
Safety Components International, Inc.,
10.125%, 7-15-2007 (C) .............. 75 76,500
Food and Kindred Products - 2.01%
Southern Foods Group, L.P.,
9.875%, 9-1-2007 (C) ................ 50 51,875
Food Stores - 1.07%
Ralphs Grocery Company,
11.0%, 6-15-2005 .................... 25 27,500
Health Services - 2.89%
Genesis ElderCare Acquisition Corp.,
9.0%, 8-1-2007 (C) .................. 75 74,625
Industrial Machinery and Equipment - 2.99%
Falcon Building Products, Inc.,
9.5%, 6-15-2007 (C).................. 50 51,375
Walbro Corporation,
9.875%, 7-15-2005 ................... 25 25,750
Total ............................... 77,125
Motion Pictures - 5.02%
All American Communications, Inc.,
10.875%, 10-15-2001 ................. 50 54,125
Regal Cinemas, Inc.,
8.5%, 10-1-2007 (C) ................. 75 75,469
Total ............................... 129,594
Oil and Gas Extraction - 1.93%
Coho Energy, Inc.,
8.875%, 10-15-2007 .................. 50 49,812
Paper and Allied Products - 2.96%
Huntsman Packaging Corporation,
9.125%, 10-1-2007 (C) ............... 75 76,500
Primary Metal Industries - 3.13%
Weirton Steel Corporation:
11.375%, 7-1-2004 ................... 50 54,250
10.75%, 6-1-2005 .................... 25 26,625
Total ............................... 80,875
See Notes to Schedule of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
HIGH INCOME FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Printing and Publishing - 3.04%
ITT Publimedia B.V.,
9.375%, 9-15-2007 (C) ............... 75 78,375
Textile Mill Products - 2.93%
Delta Mills, Inc.,
9.625%, 9-1-2007 (C) ................ 75 75,563
Transportation Equipment - 1.06%
Aetna Industries, Inc.,
11.875%, 10-1-2006 .................. 25 27,437
Trucking and Warehousing - 2.02%
Pierce Leahy Corp.,
9.125%, 7-15-2007 ................... 50 52,125
Wholesale Trade - Durable Goods - 1.03%
Exide Corporation,
10.0%, 4-15-2005 .................... 25 26,500
Wholesale Trade - Nondurable Goods - 2.93%
LaRoche Industries Inc.,
9.5%, 9-15-2007 (C) ................. 75 75,750
TOTAL CORPORATE DEBT SECURITIES - 71.72% $1,851,094
(Cost: $1,826,694)
SHORT-TERM SECURITIES
Commercial Paper
Food and Kindred Products - 3.87%
General Mills, Inc.,
5.5113% Master Note ................. 100 100,000
Textile Mill Products - 3.22%
Sara Lee Corporation,
5.5063% Master Note ................. 83 83,000
Total Commercial Paper - 7.09% 183,000
United States Government Securities
Fannie Mae:
5.47%, 10-6-97 ...................... 175 174,867
5.42%, 10-14-97 ..................... 105 104,794
5.43%, 11-3-97 ...................... 45 44,776
Freddie Mac:
5.4%, 10-1-97 ....................... 154 154,000
5.4%, 10-9-97 ....................... 145 144,826
Total United States Government Securities - 24.15% 623,263
See Notes to Schedule of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
HIGH INCOME FUND
SEPTEMBER 30, 1997
Value
TOTAL SHORT-TERM SECURITIES - 31.24% $ 806,263
(Cost: $806,263)
TOTAL INVESTMENT SECURITIES - 102.96% $2,657,357
(Cost: $2,632,957)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (2.96%) (76,454)
NET ASSETS - 100.00% $2,580,903
See Notes to Schedule of Investments on pages 58 - 59.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
MUNICIPAL BOND FUND
PORTFOLIO STRATEGY:
Minimum 80% OBJECTIVE: Income which is not subject
Municipal Bonds. to Federal income taxation.
(Income may be subject to state
Maximum 5% non-investment and local taxes, and a portion
grade debt securities. may be subject to Federal taxes,
including alternative minimum
Less than 25% of its assets tax.)
in securities of issuers
located in any single state.
STRATEGY: Invests in municipal bonds (debt
securities the interest on which is
generally exempt from Federal income
tax). (May purchase securities subject
to repurchase agreements. May invest in
certain options and futures.)
FOUNDED: 1992
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
PERFORMANCE SUMMARY - Class B Shares
PER SHARE DATA
For the Six Months Ended September 30, 1997
- -------------------------------------------
DIVIDENDS PAID $0.22
=====
NET ASSET VALUE ON
9/30/97 $11.21
3/31/97 10.74
------
CHANGE PER SHARE $0.47
======
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual
Total Return
----------------
With Without
CDSC** CDSC***
------ -------
Period
- ------
1-year period ended 9-30-97 5.63% 8.63%
5-year period ended 9-30-97 6.69% 6.69%
Period from 9-21-92*
through 9-30-97 6.72% 6.72%
*Initial public offering of the Fund.
**"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted represents past performance and
reflects payment of the applicable contingent deferred sales charge upon
redemption at the end of each period.
***"CDSC" refers to the contingent deferred sales charge described in the
Prospectus. Performance data quoted in this column represents past
performance without reflecting deduction of the applicable contingent
deferred sales charge upon redemption at the end of each period.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1997, Municipal Bond Fund had net assets totaling $38,460,108
invested in a diversified portfolio.
As a shareholder of Municipal Bond Fund, for every $100 you had invested on
September 30, 1997, your Fund owned:
$16.25Industrial Revenue Bonds
12.94Other Municipal Bonds
10.55Public Power Revenue Bonds
10.47Hospital Revenue Bonds
9.79Airport Revenue Bonds
7.64Transportation Revenue Bonds
6.95Housing Revenue Bonds
6.12Electric Utility Revenue Bonds
4.97Special Tax Bonds
4.58Lifecare Centers Revenue Bonds
2.65City General Obligation Bonds
2.41Education Revenue Bonds
2.36Resource Recovery Revenue Bonds
2.32Cash and Cash Equivalents
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS
ARIZONA - 0.73%
City of Bullhead City, Arizona, Bullhead
Parkway Improvement District,
Improvement Bonds,
6.1%, 1-1-2013 ........................ $ 270 $280,462
ARKANSAS - 3.90%
City of Blytheville, Arkansas, Solid Waste
Recycling and Sewage Treatment Revenue
Bonds (Nucor Corporation Project), Series 1992,
6.9%, 12-1-2021 ....................... 1,000 1,083,750
Baxter County, Arkansas, Industrial Development
Revenue Refunding Bonds (Aeroquip Corporation
Project), Series 1993,
5.8%, 10-1-2013 ....................... 400 415,000
Total ................................. 1,498,750
CALIFORNIA - 3.76%
Foothill/Eastern Transportation Corridor
Agency, Toll Road Revenue Bonds, Series
1995A,
0.0%, 1-1-2013 (D) .................... 2,000 1,445,000
COLORADO - 5.44%
City and County of Denver, Colorado, Special
Facilities Airport Revenue Bonds (United
Air Lines Project), Series 1992A,
6.875%, 10-1-2032 ..................... 1,000 1,071,250
Metex Metropolitan District, El Paso County,
Colorado, General Obligation Refunding Bonds,
Series 1997A,
5.3%, 12-1-2012 ....................... 1,000 1,020,000
Total ................................. 2,091,250
DISTRICT OF COLUMBIA - 1.87%
District of Columbia, Redevelopment Land
Agency (Washington, D.C.), Sports Arena
Special Tax Revenue Bonds (Series 1996),
5.625%, 11-1-2010 ..................... 710 719,763
GUAM - 0.68%
Guam Power Authority, Revenue Bonds,
1992 Series A,
6.3%, 10-1-2022 ....................... 250 261,250
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
ILLINOIS - 1.09%
Illinois Development Finance Authority,
Local Government Program Revenue Bonds,
Series 1993 (Village of Maywood Project),
6.0%, 1-1-2008 ........................ $ 400 $417,500
INDIANA - 5.06%
City of Sullivan, Indiana, Pollution
Control Revenue Refunding Bonds
(Indiana Michigan Power Company Project),
Series C,
5.95%, 5-1-2009 ....................... 1,500 1,546,875
East Chicago Elementary School Building
Corporation (Lake County, Indiana),
First Mortgage Bonds, Series 1993A,
5.5%, 1-15-2016 ....................... 400 400,500
Total ................................. 1,947,375
IOWA - 0.91%
Scott County, Iowa, Refunding Certificates
of Participation (County Golf Course
Project, Series 1993),
6.2%, 5-1-2013 ........................ 340 350,200
KANSAS - 1.32%
City of Olathe, Kansas, Multifamily Housing
Revenue Refunding Bonds (Jefferson Place Apartments
Project), Series 1997B,
6.1%, 7-1-2022 ........................ 500 508,125
LOUISIANA - 0.57%
Parish of St. Charles, State of Louisiana,
Pollution Control Revenue Bonds (Union
Carbide Project), Series 1992,
7.35%, 11-1-2022 ...................... 200 221,000
MARYLAND - 7.43%
Prince George's County, Maryland,
Project and Refunding Revenue Bonds
(Dimensions Health Corporation Issue),
Series 1994,
5.375%, 7-1-2014 ...................... 1,000 988,750
Northeast Maryland Waste Disposal
Authority, Solid Waste Revenue Bonds
(Montgomery County Resource Recovery
Project), Series 1993A,
6.2%, 7-1-2010 ........................ 665 695,756
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MARYLAND (Continued)
Montgomery County Revenue Authority
(Maryland), Golf Course System Revenue
Bonds, Series 1996A,
6.125%, 10-1-2022 ..................... $ 650 $ 671,125
Maryland Health and Higher Educational
Facilities Authority, Project and
Refunding Revenue Bonds, Doctors Community
Hospital Issue, Series 1993,
5.75%, 7-1-2013 ....................... 500 501,875
Total ................................. 2,857,506
MICHIGAN - 2.55%
Michigan State Hospital Finance
Authority, Hospital Revenue Refunding
Bonds (Crittenton Hospital),
Series 1994A,
5.25%, 3-1-2014 ....................... 1,000 981,250
MISSOURI - 0.67%
City of Ste. Genevieve, Missouri, Waterworks
Revenue Bonds, Series 1993,
6.6%, 2-1-2013 ........................ 250 258,750
MONTANA - 4.05%
Montana Health Facility Authority, Health Care
Revenue Bonds, Series 1996 (Community Medical
Center, Inc.),
6.375%, 6-1-2018 ...................... 1,500 1,556,250
NEBRASKA - 1.36%
Nebraska Higher Education Loan Program, Inc.,
Senior Subordinate Bonds, 1993-2
Series A-SA,
6.2%, 6-1-2013 ........................ 500 524,375
NEVADA - 2.58%
West Wendover Recreation District, Elko
County, Nevada, General Obligation
(Limited Tax), Recreational Facilities
and Refunding Bonds, Series 1996,
6.25%, 12-1-2021 ...................... 950 991,562
NEW JERSEY - 4.15%
New Jersey Economic Development Authority,
Economic Development Refunding Bonds (Preston
Trucking Company, Inc. - 1996 Project),
6.5%, 9-1-2014 ........................ 1,500 1,595,625
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
NEW MEXICO - 4.97%
City of Albuquerque, New Mexico, Gross
Receipts/Lodgers' Tax Refunding and
Improvement Revenue Bonds, Series 1991B,
0.0%, 7-1-2013 ........................ $4,500 $1,912,500
NEW YORK - 7.20%
New York State Thruway Authority,
Local Highway and Bridge Service
Contract Bonds, Series 1995,
6.25%, 4-1-2014 ....................... 1,400 1,494,500
New York City Industrial Development Agency,
Amended and Restated Industrial Development
Revenue Bonds (1991 Japan Airlines Company,
Ltd. Project),
6.0%, 11-1-2015 ....................... 1,000 1,061,250
Onondaga County Resource Recovery Agency,
Project Revenue Bonds (Resource Recovery
Facility - 1992 Series),
7.0%, 5-1-2015 ........................ 200 212,750
Total ................................. 2,768,500
NORTH CAROLINA - 2.96%
North Carolina Eastern Municipal Power
Agency, Power System Revenue Bonds,
Refunding Series 1993 B,
7.0%, 1-1-2008 ........................ 1,000 1,138,750
OHIO - 2.27%
City of Moraine, Ohio, Solid Waste
Disposal Revenue Bonds (General Motors
Corporation Project), Series 1994,
6.75%, 7-1-2014 ....................... 750 872,813
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
OKLAHOMA - 6.22%
Oklahoma Housing Finance Agency, Single
Family Mortgage Revenue Bonds
(Homeownership Loan Program),
1996 Series A,
7.05%, 9-1-2026 ....................... $1,000 $1,105,000
Tulsa Public Facilities Authority (Oklahoma):
Recreational Facilities Revenue Bonds,
Series 1985,
6.2%, 11-1-2012 ....................... 500 521,875
Assembly Center Lease Payment Revenue
Bonds, Refunding Series 1985,
6.6%, 7-1-2014 ........................ 200 229,500
Holdenville Industrial Authority, Correctional
Facility Revenue Bonds, Series 1995,
6.35%, 7-1-2006 ....................... 500 537,500
Total ................................. 2,393,875
PENNSYLVANIA - 4.58%
Montgomery County Industrial Development
Authority, Retirement Community Revenue Bonds
(Adult Communities Total Services, Inc.
Obligated Group), Series 1996B,
5.625%, 11-15-2012 .................... 1,750 1,760,938
SOUTH CAROLINA - 2.53%
York County, South Carolina, Pollution Control
Facilities Revenue Refunding Bonds (Bowater
Incorporated Project), Series 1991A,
7.4%, 1-1-2010 ........................ 900 972,000
TENNESSEE - 2.75%
Tennessee Housing Development Agency,
Homeownership Program Bonds, Issue T,
7.375%, 7-1-2023 ...................... 1,000 1,058,750
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
THE INVESTMENTS OF
MUNICIPAL BOND FUND
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
TEXAS - 9.17%
Dallas-Fort Worth International Airport,
Facility Improvement Corporation, American
Airlines, Inc. Revenue Bonds, Series 1990,
7.5%, 11-1-2025 ....................... $1,500 1,631,250
Port of Corpus Christi, Authority of
Nueces County, Texas, Pollution Control
Revenue Bonds (Hoechst Celanese Corporation
Project), Series 1992,
6.875%, 4-1-2017 ...................... 1,000 1,088,750
Sabine River Authority of Texas,
Collateralized Pollution Control
Revenue Refunding Bonds (Texas
Utilities Electric Company Project),
Series 1993B,
5.85%, 5-1-2022 ....................... 800 807,000
Total ................................. 3,527,000
WASHINGTON - 6.91%
Public Utility District No. 1 of Pend Oreille
County, Washington, Electric Revenue Bonds,
1996 Series A (Subject to AMT),
6.375%, 1-1-2015 ...................... 1,500 1,552,500
Washington Public Power Supply System,
Nuclear Project No. 1, Refunding
Revenue Bonds, Series 1996A,
6.0%, 7-1-2008 ........................ 1,000 1,103,750
Total ................................. 2,656,250
TOTAL MUNICIPAL BONDS - 97.68% $37,567,369
(Cost: $35,301,795)
TOTAL SHORT-TERM SECURITIES - 1.17% $ 452,000
(Cost: $452,000)
TOTAL INVESTMENT SECURITIES - 98.85% $38,019,369
(Cost: $35,753,795)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.15% 440,739
NET ASSETS - 100.00% $38,460,108
See Notes to Schedules of Investments on pages 58 - 59.
<PAGE>
WADDELL & REED FUNDS, INC.
SEPTEMBER 30, 1997
Notes to Schedules of Investments
* No income dividends were paid during the preceding 12 months.
(A) Listed on an exchange outside the United States.
(B) Face amounts are denominated in the indicated foreign currency where
applicable (F - French Francs, DM - Deutsche Mark).
(C) As of September 30, 1997, the following restricted securities were owned:
Principal
Acquisition Amount Market
Security Date in 000's Cost Value
-------- ----------- --------------------------------
Asset Strategy Fund
Banco de Inversion y
Comercio Exterior S.A.,
9.375%, 12-27-20002/18/97 $300$ 312,000 $ 314,250
Cervejarias Kaiser S.A.,
8.875%, 9-26-2005 9/16/97 300 299,070 300,750
Companhia Paranaense de Energia-COPEL
9.75%, 5-2-2005 4/22/97 300 298,854 309,750
Ispat Mexicana, S.A. de C.V.,
10.375%, 3-15-20013/17/97 300 303,375 321,375
JG Summit Holdings, Inc.,
8.0%, 5-6-2002 5/19/97 300 296,625 289,875
Vicap, S.A. de C.V.,
10.25%, 5-15-2002 6/18/97 300 309,600 318,750
--------- ----------
$1,819,524 $1,854,750
========= ==========
High Income Fund
ACME Television, LLC
0.0%, 9-20-2004 9/24/97 $100$ 72,783 $ 73,500
Adelphia Communications Corporation,
9.25%, 10-1-2002 9/22/97 50 50,000 50,375
Anker Coal Group, Inc.,
9.75%, 10-1-2007 9/22/97 50 50,000 51,000
Communications Instruments, Inc.,
10.0%, 9-15-2004 9/12/97 50 50,000 51,000
Delta Mills, Inc.,
9.625%, 9-1-2007 8/20/97 25 25,000 25,188
9/3/97 50 50,250 50,375
Falcon Building Products, Inc.,
9.5%, 6-15-2007 9/3/97 50 51,375 51,375
Genesis ElderCare Acquisition Corp.,
9.0%, 8-1-2007 9/10/97 75 74,063 74,625
Huntsman Packaging Corporation,
9.125%, 10-1-2007 9/19/97 75 75,000 76,500
ITT Publimedia B.V.,
9.375%, 9-15-2007 9/19/97 75 75,000 78,375
LaRoche Industries Inc.,
9.5%, 9-15-2007 9/18/97 75 74,664 75,750
Regal Cinemas, Inc.,
8.5%, 10-1-2007 9/19/97 75 74,446 75,469
SC International Services, Inc.,
9.25%, 9-1-2007 8/21/97 25 24,967 25,438
Safelite Glass Corp.,
9.875%, 12-15-2006 9/3/97 50 53,250 53,250
Safety Components International, Inc.,
10.125%, 7-15-20079/11/97 75 76,313 76,500
Salem Communications Corporation,
9.5%, 10-1-2007 9/17/97 75 75,000 76,312
Southern Foods Group, L.P.,
9.875%, 9-1-2007 8/27/97 50 50,000 51,875
---------- ----------
$1,002,111 $1,016,907
========== ==========
The total market value of restricted securities represents 11.70% and
39.40% of the total net assets of Asset Strategy Fund and High Income Fund,
respectively, at September 30, 1997.
(D) The security does not bear interest for an initial period of time and
subsequently becomes interest bearing.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 4 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 Total Science and
Return Growth Technology
Fund Fund Fund
Assets ------------ ----------- -----
- ------
Investment securities--at
value (Notes 1 and 4).. $407,093,162 $260,134,012 $2,050,420
Cash ................... 1,602 2,764 51,327
Receivables:
Fund shares sold ...... 1,322,019 638,431 165,593
Investment securities sold 5,220,295 2,034,642 ---
Dividends and interest. 348,946 84,068 673
Unamortized organization
expenses (Note 2) ..... --- --- ---
Prepaid registration fees (Note 2) --- --- 25,456
Prepaid insurance premium 3,564 2,398 ---
------------ ------------ ----------
Total assets ........ 413,989,588 262,896,315 2,293,469
Liabilities ------------ ----------- ----------
Payable to Fund shareholders 1,061,910 558,071 ---
Payable for investment
securities purchased .. 1,488,822 1,604,150 51,175
Accrued service fee -
Class B (Note 3)....... 233,324 142,409 451
Accrued transfer agency and
dividend disbursing (Note 3) 62,283 61,650 562
Due to custodian ....... --- --- ---
Organization expenses payable --- --- ---
Registration fees payable --- --- 25,456
Accrued distribution
fee - Class B (Note 3). 8,425 5,341 45
Dividends payable ...... --- --- ---
Accrued accounting
services fee (Note 3).. 5,000 4,167 ---
Accrued management fee (Note 3) 7,973 5,768 40
Other .................. 11,378 13,580 312
------------ ------------ ----------
Total liabilities ... 2,879,115 2,395,136 78,041
------------ ------------ ----------
Total net assets ... $411,110,473 $260,501,179 $2,215,428
Net Assets ============ ============ ==========
$0.01 par value capital stock
Capital stock ......... $ 180,391 $ 107,008 $ 2,135
Additional paid-in capital 258,694,888 181,696,556 2,143,437
Accumulated undistributed income (loss):
Accumulated undistributed net
investment income (loss) (477,077) (1,300,152) 4,152
Accumulated undistributed
net realized gain (loss)
on investments ...... 13,759,168 9,283,144 (13)
Net unrealized appreciation
of investments ...... 138,953,103 70,714,623 65,717
------------ ------------ ----------
Net assets applicable to
outstanding units
of capital ......... $411,110,473 $260,501,179 $2,215,428
============ ============ ==========
Net asset value, redemption and
offering price per share:
Class B Shares ......... $22.79 $24.34 $10.38
Class Y Shares ......... $23.09 $24.66 $---
Capital shares outstanding:
Class B Shares ......... 18,007,503 10,683,606 213,475
Class Y Shares ......... 31,559 17,193 ---
Capital shares authorized 500,000,000 500,000,000 500,000,000
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 International Asset Limited-
Growth Strategy Term Bond
Fund Fund Fund
Assets ------------ ----------- -----------
Investment securities--at
value (Notes 1 and 4) . $75,193,407 $15,566,380 $17,846,221
Cash ................... --- 753 3,777
Receivables:
Fund shares sold ...... 309,328 49,145 46,545
Investment securities sold --- 320,568 ---
Dividends and interest 137,945 113,554
320,616
Unamortized organization
expenses (Note 2) ..... --- 405 ---
Prepaid registration fees (Note 2) --- --- ---
Prepaid insurance premium 979 363 407
----------- ----------- -----------
Total assets ........ 75,641,659 16,051,168 18,217,566
Liabilities ----------- ----------- -----------
Payable to Fund shareholders 115,001 7,520 22,225
Payable for investment
securities purchased .. 2,363,278 168,144 ---
Accrued service fee -
Class B (Note 3) ...... 35,446 8,811 9,973
Accrued transfer agency and
dividend disbursing (Note 3) 16,869 4,407 4,988
Due to custodian ....... 3,230 --- ---
Organization expenses payable --- 405 ---
Registration fees payable --- --- ---
Accrued distribution
fee - Class B (Note 3) 1,495 322 370
Dividends payable ...... --- --- 2,465
Accrued accounting
services fee (Note 3) . 2,500 833 833
Accrued management fee (Note 3) 1,615 351 278
Other .................. 11,645 1,561 1,779
----------- ----------- -----------
Total liabilities ... 2,551,079 192,354 42,911
----------- ----------- -----------
Total net assets ... $73,090,580 $15,858,814 $18,174,655
Net Assets............ =========== =========== ===========
$0.01 par value capital stock
Capital stock ......... $ 51,766 $ 14,028 $ 17,983
Additional paid-in capital 57,233,693 14,405,510 18,191,372
Accumulated undistributed income (loss):
Accumulated undistributed net
investment income (loss) (93,163) 50,206 ---
Accumulated undistributed
net realized gain (loss)
on investments ...... 7,762,765 227,037 (152,798)
Net unrealized appreciation
of investments ...... 8,135,519 1,162,033 118,098
----------- ----------- -----------
Net assets applicable to
outstanding units
of capital ......... $73,090,580 $15,858,814 $18,174,655
.............. =========== =========== ===========
Net asset value, redemption and
offering price per share:
Class B Shares ......... $14.12 $11.30 $10.11
Class Y Shares ......... $14.32 $11.31 $10.11
Capital shares outstanding:
Class B Shares ......... 5,156,405 1,388,620 1,785,020
Class Y Shares ......... 20,204 14,211 13,236
Capital shares authorized 500,000,000 500,000,000 500,000,000
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 High Municipal
Income Bond
Fund Fund
Assets ------------ -----------
Investment securities--at
value (Notes 1 and 4) . $2,657,357 $38,019,369
Cash ................... 78,209 ---
Receivables:
Fund shares sold ...... 170,975 33,509
Investment securities sold --- ---
Dividends and interest 24,175 659,756
Unamortized organization
expenses (Note 2) ..... --- ---
Prepaid registration fees (Note 2) 24,949 ---
Prepaid insurance premium --- 715
---------- -----------
Total assets ........ 2,955,665 38,713,349
Liabilities ---------- -----------
Payable to Fund shareholders 110 162,685
Payable for investment
securities purchased .. 344,809 ---
Accrued service fee -
Class B (Note 3) ...... 441 21,739
Accrued transfer agency and
dividend disbursing (Note 3) 275 5,861
Due to custodian ....... --- 33,830
Organization expenses payable --- ---
Registration fees payable 24,949 ---
Accrued distribution
fee - Class B (Note 3) 53 790
Dividends payable ...... 1,508 22,831
Accrued accounting
services fee (Note 3) . --- 1,667
Accrued management fee (Note 3) 44 591
Other .................. 2,573 3,247
---------- -----------
Total liabilities ... 374,762 253,241
---------- -----------
Total net assets ... $2,580,903 $38,460,108
Net Assets ========== ===========
$0.01 par value capital stock
Capital stock ......... $ 2,553 $ 34,304
Additional paid-in capital 2,553,974 36,522,278
Accumulated undistributed income (loss):
Accumulated undistributed net
investment income (loss) --- ---
Accumulated undistributed
net realized gain (loss)
on investments ...... (24) (362,048)
Net unrealized appreciation
of investmennts ..... 24,400 2,265,574
---------- -----------
Net assets applicable to
outstanding units
of capital ......... $2,580,903 $38,460,108
.............. ========== ===========
Net asset value, redemption and
offering price per share:
Class B Shares ......... $10.11 $11.21
Class Y Shares ......... $ --- $ ---
Capital shares outstanding:
Class B Shares ......... 255,324 3,430,391
Class Y Shares ......... --- ---
Capital shares authorized 500,000,000 500,000,000
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended SEPTEMBER 30, 1997
Total Science and
Return Growth Technology
Fund Fund Fund
Investment Income ------------ ----------- -----------
Income (Note 1B):
Interest and amortization $ 877,374 $ 1,050,930 $ 8,853
Dividends ............. 2,280,371 132,941 10
----------- ----------- -------
Total income ........ 3,157,745 1,183,871 8,863
----------- ----------- -------
Expenses (Notes 2 and 3):
Distribution fees - Class B 1,408,121 854,948 1,447
Investment management fee 1,333,560 923,673 1,289
Service fee - Class B.. 439,270 270,605 493
Transfer agency and dividend
disbursing - Class B 292,275 296,363 1,030
Registration fees ..... 50,427 40,025 ---
Accounting services fee 29,167 24,167 ---
Custodian fees ........ 11,477 6,451 400
Audit fees ............ 9,565 8,279 ---
Amortization of organization
expenses ............ 3,259 3,259 ---
Legal fees ............ 9,208 5,630 ---
Shareholder servicing fee -
Class Y ............. 529 302 ---
Distribution fees - Class Y 823 446 ---
Other ................. 52,241 49,875 52
----------- ----------- -------
Total expenses ...... 3,639,922 2,484,023 4,711
----------- ----------- -------
Net investment income (loss) (482,177) (1,300,152) 4,152
----------- ----------- -------
Realized and Unrealized Gain
(Loss) on Investments (Notes 1 and 4)
Realized net gain (loss)
on securities ......... 11,081,239 (1,116,528) (13)
Realized net gain (loss) from foreign
currency transactions . 5,100 --- ---
Realized net gain on forward
currency contracts .... --- --- ---
Realized net loss on futures
contracts closed ...... --- --- ---
----------- ----------- -------
Realized net gain (loss)
on investments ...... 11,086,339 (1,116,528) (13)
.............. ----------- ----------- -------
Unrealized appreciation in value
of securities during the period 70,663,577 68,272,086 65,717
Unrealized appreciation from
translation of assets and
liabilities in foreign currencies --- --- ---
Unrealized appreciation on
forward currency contracts
during the period ..... --- --- ---
----------- ----------- -------
Unrealized appreciation 70,663,577 68,272,086 65,717
----------- ----------- -------
Net gain on investments 81,749,916 67,155,558 65,704
----------- ----------- -------
Net increase in net assets
resulting from operations $81,267,739 $65,855,406 $69,856
=========== =========== =======
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended SEPTEMBER 30, 1997
International Asset Limited-
Growth Strategy Term Bond
Fund Fund Fund
Investment Income ------------ ----------- -----------
Income (Note 1B):
Interest and amortization $ 115,096 $ 248,658 $596,689
Dividends ............. 576,715 61,356 ---
---------- ---------- --------
Total income ........ 691,811 310,014 596,689
---------- ---------- --------
Expenses (Notes 2 and 3):
Distribution fees - Class B 235,932 53,697 67,118
Investment management fee 255,253 58,469
50,389
Service fee - Class B . 71,827 17,500 19,389
Transfer agency and dividend
disbursing - Class B 77,029 19,925 23,359
Registration fees ..... 26,355 12,061 16,961
Accounting services fee 15,000 5,000 5,000
Custodian fees ........ 48,013 2,518 1,787
Audit fees ............ 9,138 6,909 7,176
Amortization of organization
expenses ............ 3,259 76 3,259
Legal fees ............ 1,581 758 518
Shareholder servicing fee -
Class Y ............. 219 116 100
Distribution fees - Class Y 332 183 156
Other ............. 14,561 4,657 4,570
---------- ---------- --------
Total expenses ...... 758,499 181,869 199,782
---------- ---------- --------
Net investment income (loss) (66,688) 128,145 396,907
---------- ---------- --------
Realized and Unrealized Gain
(Loss) on Investments (Notes 1 and 4)
Realized net gain (loss)
on securities ......... 5,129,359 453,045 (64,476)
Realized net gain (loss) from foreign
currency transactions . (26,475) (42) ---
Realized net gain on forward
currency contracts .... 73,787 --- ---
Realized net loss on futures
contracts closed ...... --- --- ---
---------- ---------- --------
Realized net gain (loss)
on investments ...... 5,176,671 453,003 (64,476)
---------- ---------- --------
Unrealized appreciation in value
of securities during the period 2,833,648 1,663,536 434,967
Unrealized appreciation from
translation of assets and
liabilities in foreign currencies 26,571 --- ---
Unrealized appreciation on
forward currency contracts
during the period ..... 229,367 --- ---
---------- ---------- --------
Unrealized appreciation 3,089,586 1,663,536 434,967
---------- ---------- --------
Net gain on investments 8,266,257 2,116,539 370,491
---------- ---------- --------
Net increase in net assets
resulting from operations $8,199,569 $2,244,684 $767,398
========== ========== ========
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF OPERATIONS
For the Period Ended SEPTEMBER 30, 1997
High Municipal
Income Bond
Fund Fund
Investment Income ------------ -----------
Income (Note 1B):
Interest and amortization $12,647 $1,124,722
Dividends ............. --- ---
------- ----------
Total income ........ 12,647 1,124,722
------- ----------
Expenses (Notes 2 and 3):
Distribution fees - Class B 1,423 142,290
Investment management fee 1,182 106,119
Service fee - Class B . 459 42,285
Transfer agency and dividend
disbursing - Class B 495 30,498
Registration fees ..... --- 19,493
Accounting services fee --- 10,000
Custodian fees ........ 360 3,701
Audit fees ............ --- 6,674
Amortization of organization
expenses ............ --- 3,259
Legal fees ............ --- 1,106
Shareholder servicing fee -
Class Y ............. --- 1
Distribution fees - Class Y --- 1
Other ................. (34) 4,164
.................. ------- ----------
Total expenses ...... 3,885 369,591
------- ----------
Net investment income (loss) 8,762 755,131
------- ----------
Realized and Unrealized Gain
(Loss) on Investments (Notes 1 and 4)
Realized net gain (loss)
on securities ......... (24) 9,411
Realized net gain (loss) from foreign
currency transactions . --- ---
Realized net gain on forward
currency contracts .... --- ---
Realized net loss on futures
contracts closed ...... --- (122,469)
------- ----------
Realized net gain (loss)
on investments ...... (24) (113,058)
------- ----------
Unrealized appreciation in value
of securities during the period 24,400 1,752,634
Unrealized appreciation from
translation of assets and
liabilities in foreign currencies --- ---
Unrealized appreciation on
forward currency contracts
during the period ..... --- ---
------- ----------
Unrealized appreciation 24,400 1,752,634
------- ----------
Net gain on investments 24,376 1,639,576
------- ----------
Net increase in net assets
resulting from operations $33,138 $2,394,707
======= ==========
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended SEPTEMBER 30, 1997
Total Science and
Return Growth Technology
Fund Fund Fund
------------ ----------- -----------
Increase in Net Assets
Operations:
Net investment income
(loss) .............. $ (482,177) $ (1,300,152) $ 4,152
Realized net gain (loss)
on investments ...... 11,086,339 (1,116,528) (13)
Unrealized appreciation 70,663,577 68,272,086
65,717
------------ ------------ ----------
Net increase in net assets
resulting from operations 81,267,739 65,855,406 69,856
------------ ------------ ----------
Distributions to shareholders (Note 1E):*
From net investment income
Class B ............. --- --- ---
Class Y ............. --- --- ---
From realized net gain on
investment transactions
Class B ............. --- --- ---
Class Y ............. --- --- ---
------------ ------------ ----------
--- --- ---
------------ ------------ ----------
Capital share transactions
(Note 6) .............. 11,885,558 (3,705,937) 2,145,572
------------ ------------ ----------
Total increase ........ 93,153,297 62,149,469 2,215,428
Net Assets
Beginning of period .... 317,957,176 198,351,710 ---
------------ ------------ ----------
End of period .......... $411,110,473 $260,501,179 $2,215,428
============ ============ ==========
Undistributed net
investment income (loss) $(477,077) $(1,300,152) $4,152
========= =========== ======
*See "Financial Highlights" on pages 68 - 81.
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended SEPTEMBER 30, 1997
International Asset Limited-
Growth Strategy Term Bond
Fund Fund Fund
------------- ----------- -----------
Increase in Net Assets
Operations:
Net investment income
(loss) .............. $ (66,688) $ 128,145 $ 396,907
Realized net gain (loss)
on investments ...... 5,176,671 453,003 (64,476)
Unrealized appreciation 3,089,586 1,663,536 434,967
----------- ----------- -----------
Net increase in net assets
resulting from operations 8,199,569 2,244,684 767,398
----------- ----------- -----------
Distributions to shareholders (Note 1E):*
From net investment income
Class B ............. --- (107,147) (393,659)
Class Y ............. --- (1,785) (3,248)
From realized net gain on
investment transactions
Class B ............. --- --- ---
Class Y ............. --- --- ---
----------- ----------- -----------
--- (108,932) (396,907)
----------- ----------- -----------
Capital share transactions
(Note 6) .............. 14,191,664 209,356 (70,875)
----------- ----------- -----------
Total increase ........ 22,391,233 2,345,108 299,616
Net Assets
Beginning of period .... 50,699,347 13,513,706 17,875,039
----------- ----------- -----------
End of period .......... $73,090,580 $15,858,814 $18,174,655
=========== =========== ===========
Undistributed net
investment income ... $(93,163) $50,206 $---
======== ======= ====
*See "Financial Highlights" on pages 68 - 81.
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended SEPTEMBER 30, 1997
High Municipal
Income Bond
Fund Fund
------------ -----------
Increase in Net Assets
Operations:
Net investment income
(loss) .............. $ 8,762 $ 755,131
Realized net gain (loss)
on investments ...... (24) (113,058)
Unrealized appreciation 24,400 1,752,634
---------- -----------
Net increase in net assets
resulting from operations 33,138 2,394,707
---------- -----------
Dividends to shareholders (Note 1E):*
From net investment income
Class B ............. (8,762) (755,121)
Class Y ............. --- (10)
From realized net gain on
investment transactions
Class B ............. --- ---
Class Y ............. --- ---
---------- -----------
(8,762) (755,131)
---------- -----------
Capital share transactions
(Note 6) .............. 2,556,527 201,918
---------- -----------
Total increase ........ 2,580,903 1,841,494
Net Assets
Beginning of period .... --- 36,618,614
---------- -----------
End of period .......... $2,580,903 $38,460,108
========== ===========
Undistributed net
investment income ..... $--- $---
==== ====
*See "Financial Highlights" on pages 68 - 81.
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended MARCH 31, 1997
Total International
Return Growth Growth
Fund Fund Fund
------------ ----------- -----------
Increase (Decrease)
in Net Assets
Operations:
Net investment income
(loss) .............. $ (440,135) $ (635,983) $ (164,361)
Realized net gain (loss)
on investments ....... 3,484,953 13,839,883 3,176,354
Unrealized appreciation
(depreciation) ...... 26,027,620 (39,982,914) 4,292,907
------------ ------------ -----------
Net increase (decrease) in
net assets resulting from
operations ......... 29,072,438 (26,779,014) 7,304,900
.............. ------------ ------------ -----------
Distributions to shareholders (Note 1E):*
From net investment income
Class B ............. --- --- (27,619)
Class Y ............. --- --- (21)
From realized net gain on
investment transactions
Class B ............. (1,707,064) (6,956,540) ---
Class Y ............. (541) (30) ---
------------ ------------ -----------
(1,707,605) (6,956,570) (27,640)
------------ ------------ -----------
Capital share transactions
(Note 6) .............. 82,272,487 29,529,409 22,541,081
------------ ------------ -----------
Total increase (decrease) 109,637,320 (4,206,175)
29,818,341
Net Assets
Beginning of period .... 208,319,856 202,557,885 20,881,006
------------ ------------ -----------
End of period .......... $317,957,176 $198,351,710 $50,699,347
============ ============ ===========
Undistributed net
investment income ..... $--- $--- $---
==== ==== ====
*See "Financial Highlights" on pages 68 - 81.
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Fiscal Year Ended MARCH 31, 1997
Asset Limited- Municipal
Strategy Term Bond Bond
Fund Fund Fund
------------ ----------- -----------
Increase (Decrease)
in Net Assets
Operations:
Net investment income
(loss) .............. $ 318,307 $ 852,548 $ 1,499,010
Realized net gain (loss)
on investments ...... (222,565) (88,346) 308,152
Unrealized appreciation
(depreciation) ...... (178,352) (110,492) 23,298
----------- ----------- -----------
Net increase (decrease) in
net assets resulting from
operations ......... (82,610) 653,710 1,830,460
----------- ----------- -----------
Distributions to shareholders (Note 1E):*
From net investment income
Class B ............. (293,198) (851,617) (1,498,961)
Class Y ............. (759) (931) (49)
From realized net gain on
investment transactions
Class B ............. (191,005) (15,809) ---
Class Y ............. (14) (4) ---
----------- ----------- -----------
(484,976) (868,361) (1,499,010)
----------- ----------- -----------
Capital share transactions
(Note 6) .............. 858,835 (5,592,840) 2,417,313
----------- ----------- -----------
Total increase (decrease) 291,249 (5,807,491) 2,748,763
Net Assets
Beginning of period .... 13,222,457 23,682,530 33,869,851
----------- ----------- -----------
End of period .......... $13,513,706 $17,875,039 $36,618,614
=========== =========== ===========
Undistributed net
investment income ..... $31,035 $--- $---
======= ==== ====
*See "Financial Highlights" on pages 68 - 81.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
TOTAL RETURN FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six For the fiscal period
months year ended March 31, from
ended---------------------------------9-21-92* to
9/30/97 1997 1996 1995 1994 3-31-93
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $18.18 $16.34 $12.73 $11.99 $11.07 $10.00
------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income
(loss)........... (0.03) (0.02) (0.01) 0.00 (0.01) 0.02
Net realized and
unrealized gain
on investments .. 4.64 1.97 3.67 0.74 0.93 1.07
------ ------ ------ ------ ------ ------
Total from investment
operations ....... 4.61 1.95 3.66 0.74 0.92 1.09
------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income .......... (0.00) (0.00) (0.00) (0.00) (0.00) (0.02)
From capital gains (0.00) (0.11) (0.05) (0.00) (0.00) (0.00)
------ ------ ------ ------ ------ ------
Total distributions. (0.00) (0.11) (0.05) (0.00) (0.00) (0.02)
------ ------ ------ ------ ------ ------
Net asset value,
end of period .... $22.79 $18.18 $16.34 $12.73 $11.99 $11.07
====== ====== ====== ====== ====== ======
Total return ....... 25.36% 11.93% 28.75% 6.17% 8.31% 10.91%
Net assets, end of
period (000
omitted) ..........$410,381$317,453$208,233$104,691$61,735$12,460
Ratio of expenses
to average net
assets ........... 1.93%** 1.95% 1.99% 2.05% 2.16% 2.21%**
Ratio of net investment
income to average
net assets ....... -0.26%**-0.17% -0.11% -0.04% -0.12% 0.32%**
Portfolio turnover
rate ............. 17.97% 26.23% 16.78% 16.60% 17.31% 23.97%**
Average commission
rate paid ......... $0.0596 $0.0578
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
TOTAL RETURN FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six fiscal For the
months year period from
ended ended December 29, 1995*
9/30/97 3/31/97 to March 31, 1996
-------- ------- --------------------
Net asset value,
beginning of
period ........... $18.35 $16.38 $15.32
------ ------ ------
Income from investment
operations:
Net investment
income........... 0.05 .04 0.03
Net realized and
unrealized gain
on investments .. 4.69 2.04 1.03
------ ------ ------
Total from investment
operations ....... 4.74 2.08 1.06
------ ------ ------
Less distribution from
capital gains .... (0.00) (0.11) (0.00)
------ ------ ------
Net asset value,
end of period .... $23.09 $18.35 $16.38
====== ====== ======
Total return ....... 25.83% 12.69% 6.92%
Net assets, end of
period (000
omitted) .......... $729 $504 $87
Ratio of expenses
to average net
assets ........... 1.36%** 1.18% 0.96%**
Ratio of net investment
income to average
net assets ....... 0.53%** 0.65% 1.04%**
Portfolio turnover
rate ............. 17.97% 26.23% 16.78%**
Average commission
rate paid ......... $0.0596 $0.0578
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
GROWTH FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six For the fiscal period
months year ended March 31, from
ended ---------------------------9-21-92* to
9/30/97 1997 1996 1995 1994 3-31-93
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $18.16 $21.00 $16.90 $14.08 $11.68 $10.00
------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... (0.12) (0.06) (0.02) 0.00 (0.04) (0.02)
Net realized and
unrealized gain (loss)
on investments .. 6.30 (2.18) 4.49 3.15 2.75 1.79
------ ------ ------ ------ ------ ------
Total from investment
operations ....... 6.18 (2.24) 4.47 3.15 2.71 1.77
------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income .......... (0.00) (0.00) (0.00) (0.00) (0.00) (0.01)
From capital gains (0.00) (0.60) (0.37) (0.33) (0.31) (0.08)
------ ------ ------ ------ ------ ------
Total distributions (0.00) (0.60) (0.37) (0.33) (0.31) (0.09)
------ ------ ------ ------ ------ ------
Net asset value,
end of period .... $24.34 $18.16 $21.00 $16.90 $14.08 $11.68
====== ====== ====== ====== ====== ======
Total return ....... 34.03% -10.97% 26.57% 22.61% 23.16% 17.71%
Net assets, end of period
(000 omitted) ...$260,077$198,088$202,557$100,683$43,524$7,976
Ratio of expenses
to average net
assets ........... 2.18%** 2.12% 2.14% 2.23% 2.34% 2.50%**
Ratio of net investment
income to average
net assets ....... -1.14%**-0.27% -0.25% 0.01% -0.97% -0.68%**
Portfolio turnover
rate .............. 16.66% 37.20% 31.84% 56.30% 69.12% 124.44%**
Average commission
rate paid ......... $0.0499 $0.0516
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
GROWTH FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six fiscal For the
months year period from
ended ended December 29, 1995*
9/30/97 3/31/97 to March 31, 1996
-------- ------- --------------------
Net asset value,
beginning of
period ........... $18.32 $21.04 $20.21
------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... (0.03) 0.01 .04
Net realized and
unrealized gain (loss)
on investments .. 6.37 (2.13) .79
------ ------ ------
Total from investment
operations ....... 6.34 (2.12) .83
------ ------ ------
Less distributions:
From net investment
income .......... (0.00) (0.00) (0.00)
From capital gains (0.00) (0.60) (0.00)
------ ------ ------
Total distributions (0.00) (0.60) (0.00)
------ ------ ------
Net asset value,
end of period .... $24.66 $18.32 $21.04
====== ====== ======
Total return ....... 34.61% -10.37% 4.11%
Net assets, end of
period (000
omitted) .......... $424 $264 $1
Ratio of expenses
to average net
assets ........... 1.33%** 1.17% 1.17%**
Ratio of net investment
income to average
net assets ....... -0.30%** 0.31% 0.78%**
Portfolio turnover
rate ............. 16.66% 37.20% 31.84%**
Average commission
rate paid ......... $0.0499 $0.0516
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
SCIENCE AND TECHNOLOGY FUND
Class B Shares
For a Share of Capital Stock Outstanding
Throughout the Period:
For the
period
from
7/31/97*
through
9/30/97
---------
Net asset value,
beginning of period $10.00
------
Income from investment
operations:
Net investment
income .......... 0.02
Net realized and
unrealized gain
on investments .. 0.36
------
Total from investment
operations ....... 0.38
------
Less distributions:
From net investment
income........... (0.00)
From capital gains (0.00)
------
Total distributions (0.00)
------
Net asset value,
end of period ..... $10.38
======
Total return ....... 3.80%
Net assets, end of
period (000
omitted) ......... $2,215
Ratio of expenses
to average net
assets ............ 2.40%**
Ratio of net investment
income to average net
assets ............ 2.11%**
Portfolio
turnover rate ..... 0.00%
Average commission
rate paid $0.0330
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
INTERNATIONAL GROWTH FUND*
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six For the fiscal period
months year ended March 31, from
ended ---------------------------9-21-92** to
9/30/97 1997 1996 1995 1994 3-31-93
------ ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $12.40 $9.94 $9.36 $9.37 $9.68 $10.00
------ ------ ------ ----- ----- ------
Income from investment
operations:
Net investment
income (loss) ... (0.01) (0.03) 0.08 0.36 0.34 0.20
Net realized and
unrealized gain (loss)
on investments .. 1.73 2.50 0.63 (0.01) (0.31) (0.32)
------ ------ ------ ----- ----- ------
Total from investment
operations ....... 1.72 2.47 0.71 0.35 0.03 (0.12)
------ ------ ------ ----- ----- ------
Less distributions:
Declared from net
investment income (0.00) (0.01) (0.11) (0.36) (0.26) (0.20)
In excess of net
investment income (0.00) (0.00) (0.02) (0.00) (0.00) (0.00)
Tax-basis return of
capital.......... (0.00) (0.00) (0.00) (0.00) (0.08) (0.00)
------ ------ ------ ----- ----- ------
Total distributions (0.00) (0.01) (0.13) (0.36) (0.34) (0.20)
------ ------ ------ ----- ----- ------
Net asset value,
end of period .... $14.12 $12.40 $9.94 $9.36 $9.37 $ 9.68
====== ====== ====== ===== ===== ======
Total return ....... 13.87% 24.85% 7.64% 3.84% 0.33% -1.28%
Net assets, end of
period (000
omitted) .........$72,801 $50,472$20,874 $11,188$10,282 $7,181
Ratio of expenses
to average net
assets ........... 2.40%***2.46% 2.50% 2.29% 2.24% 2.06%***
Ratio of net investment
income to average
net assets ....... -0.22%***-0.52% 0.63% 3.87% 3.56% 3.88%***
Portfolio turnover
rate ............. 53.81% 94.76% 88.55% 13.33% 34.90% 8.35%***
Average commission
rate paid ......... $0.0043 $0.0124
*International Growth Fund (formerly Global Income Fund) changed its name and
investment objective effective April 20, 1995.
**Commencement of operations.
***Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
INTERNATIONAL GROWTH FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six fiscal For the
months year period from
ended ended December 29, 1995*
9/30/97 3/31/97 to March 31, 1996
-------- ------- --------------------
Net asset value,
beginning of
period ........... $12.52 $9.95 $9.70
------ ------ ------
Income from investment
operations:
Net investment income 0.05 0.02 0.02
Net realized and
unrealized gain
on investments .. 1.75 2.56 0.23
------ ------ ------
Total from investment
operations ....... 1.80 2.58 0.25
------ ------ ------
Less dividends from net
investment income (0.00) (0.01) (0.00)
------ ------ ------
Net asset value,
end of period .... $14.32 $12.52 $9.95
====== ====== ======
Total return ....... 14.38% 25.93% 2.58%
Net assets, end of
period (000
omitted) .......... $290 $227 $7
Ratio of expenses
to average net
assets ........... 1.57%** 1.59% 1.84%**
Ratio of net investment
income to average
net assets ....... 0.74%** 0.05% 1.07%**
Portfolio turnover
rate ............. 53.81% 94.76% 88.55%**
Average commission
rate paid ......... $0.0043 $0.0124
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
ASSET STRATEGY FUND
Class B Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
period
from
For the For the April 20,
six fiscal 1995*
months year through
ended ended March
9/30/97 3/31/97 31, 1996
--------- --------- ---------
Net asset value,
beginning of period $9.73 $10.15 $10.00
------ ------ ------
Income from investment
operations:
Net investment
income .......... 0.09 0.23 0.16
Net realized and
unrealized gain (loss)
on investments... 1.56 (0.30) 0.14
------ ------ ------
Total from investment
operations ........ 1.65 (0.07) 0.30
------ ------ ------
Less distributions:
From net investment
income........... (0.08) (0.21) (0.15)
From capital gains (0.00) (0.14) (0.00)
------ ------ ------
Total distributions (0.08) (0.35) (0.15)
------ ------ ------
Net asset value,
end of period ..... $11.30 $9.73 $10.15
====== ====== ======
Total return ....... 16.99% -0.86% 3.00%
Net assets, end of
period (000
omitted) .........$15,698 $13,398 $13,221
Ratio of expenses
to average net
assets ............ 2.53%** 2.52% 2.54%**
Ratio of net investment
income to average net
assets ............ 1.76%** 2.21% 2.14%**
Portfolio
turnover rate ..... 91.85% 109.92% 75.02%
Average commission
rate paid ......... $0.0407 $0.0375
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
ASSET STRATEGY FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six fiscal For the
months year period from
ended ended December 29, 1995*
9/30/97 3/31/97 to March 31, 1996
-------- -------- ------------------
Net asset value,
beginning of
period ........... $9.73 $10.16 $10.23
------ ------ ------
Income from investment
operations:
Net investment
income........... 0.14 0.27 0.07
Net realized and
unrealized gain (loss)
on investments .. 1.57 (0.26) (0.08)
------ ------ ------
Total from investment
operations ....... 1.71 0.01 (0.01)
------ ------ ------
Less distributions:
From net investment
income .......... (0.13) (0.30) (0.06)
From capital gains (0.00) (0.14) (0.00)
------ ------ ------
Total distributions (0.13) (0.44) (0.06)
------ ------ ------
Net asset value,
end of period .... $11.31 $9.73 $10.16
====== ====== ======
Total return ....... 17.59% 0.05% -0.25%
Net assets, end of
period (000
omitted) .......... $161 $116 $1
Ratio of expenses
to average net
assets ........... 1.63%** 1.61% 1.95%**
Ratio of net investment
income to average
net assets ....... 2.67%** 2.97% 2.34%**
Portfolio turnover
rate ............. 91.85% 109.92% 75.02%**
Average commission
rate paid ......... $0.0407 $0.0375
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
LIMITED-TERM BOND FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six For the fiscal period
months year ended March 31, from
ended ----------------------------9-21-92* to
9/30/97 1997 1996 1995 1994 3-31-93
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $9.90 $10.00 $ 9.70 $9.84 $10.06 $10.00
------ ------ ------ ----- ------ ------
Income from investment
operations:
Net investment
income .......... 0.23 0.44 0.41 0.39 0.35 0.18
Net realized and
unrealized gain
(loss) on
investments ..... 0.21 (0.09) 0.30 (0.13) (0.20) 0.06
------ ------ ------ ----- ------ ------
Total from investment
operations ....... 0.44 0.35 0.71 0.26 0.15 0.24
------ ------ ------ ----- ------ ------
Less distributions:
Declared from net
investment income (0.23) (0.44) (0.41) (0.39) (0.35) (0.18)
From capital gains (0.00) (0.01) (0.00) (0.01) (0.02) (0.00)
------ ------ ------ ----- ------ ------
Total distributions (0.23) (0.45) (0.41) (0.40) (0.37) (0.18)
------ ------ ------ ----- ------ ------
Net asset value,
end of period .... $10.11 $9.90 $10.00 $9.70 $ 9.84 $10.06
====== ====== ====== ===== ====== ======
Total return ....... 4.44% 3.52% 7.41% 2.73% 1.41% 2.40%
Net assets, end of
period (000
omitted) .........$18,041 $17,770$23,682 $12,419$11,671 $6,259
Ratio of expenses
to average net
assets ........... 2.22%** 2.07% 2.10% 2.17% 2.14% 2.15%**
Ratio of net investment
income to average
net assets ........ 4.40%** 4.40% 4.14% 4.05% 3.41% 3.48%**
Portfolio turnover
rate ............. 17.88% 23.05% 22.08% 29.20% 25.90% 39.64%**
*Commcement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
LIMITED-TERM BOND FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six fiscal For the
months year period from
ended ended December 29, 1995*
9/30/97 3/31/97 to March 31, 1996
-------- -------- --------------------
Net asset value,
beginning of
period ........... $9.90 $10.00 $10.16
------ ------ ------
Income from investment
operations:
Net investment
income........... 0.27 0.52 0.11
Net realized and
unrealized loss
on investments .. 0.21 (0.09) (0.16)
------ ------ ------
Total from investment
operations ....... 0.48 0.43 (0.05)
------ ------ ------
Less distributions:
From net investment
income .......... (0.27) (0.52) (0.11)
From capital gains (0.00) (0.01) (0.00)
------ ------ ------
Total distributions (0.27) (0.53) (0.11)
------ ------ ------
Net asset value,
end of period .... $10.11 $9.90 $10.00
====== ====== ======
Total return ....... 4.86% 4.33% -0.49%
Net assets, end of
period (000
omitted) .......... $134 $105 $1
Ratio of expenses
to average net
assets ........... 1.41%** 1.04% 1.18%**
Ratio of net investment
income to average
net assets ....... 5.21%** 5.62% 4.70%**
Portfolio turnover
rate ............. 17.88% 23.05% 22.08%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
HIGH INCOME FUND
Class B Shares
For a Share of Capital Stock Outstanding
Throughout the Period:
For the
period
from
7/31/97*
through
9/30/97
---------
Net asset value,
beginning of period $10.00
------
Income from investment
operations:
Net investment
income .......... 0.07
Net realized and
unrealized gain
on investments... 0.11
------
Total from investment
operations ........ 0.18
------
Less distributions:
Declared from net
investment income (0.07)
From capital gains (0.00)
------
Total distributions (0.07)
------
Net asset value,
end of period ..... $10.11
======
Total return ....... 1.72%
Net assets, end of
period (000
omitted) ......... $2,581
Ratio of expenses
to average net
assets ............ 2.02%**
Ratio of net investment
income to average net
assets ............ 4.55%**
Portfolio
turnover rate ..... 0.00%
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
MUNICIPAL BOND FUND
Class B Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the For the
six For the fiscal period
months year ended March 31, from
ended----------------------------------9-21-92* to
9/30/97 1997 1996 1995 1994 3-31-93
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $10.74 $10.63 $10.30 $10.12 $10.53 $10.00
------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income .......... 0.22 0.45 0.43 0.44 0.39 0.21
Net realized and
unrealized gain
(loss) on
investments ..... 0.47 0.11 0.33 0.18 (0.28) 0.53
------ ------ ------ ------ ------ ------
Total from investment
operations ....... 0.69 0.56 0.76 0.62 0.11 0.74
------ ------ ------ ------ ------ ------
Less distributions:
Declared from net
investment income (0.22) (0.45) (0.43) (0.44) (0.39) (0.21)
From capital gains (0.00) (0.00) (0.00) (0.00) (0.13) (0.00)
------ ------ ------ ------ ------ ------
Total distributions (0.22) (0.45) (0.43) (0.44) (0.52) (0.21)
------ ------ ------ ------ ------ ------
Net asset value,
end of period .... $11.21 $10.74 $10.63 $10.30 $10.12 $10.53
====== ====== ====== ====== ====== ======
Total return ....... 6.47% 5.32% 7.48% 6.37% 0.76% 7.37%
Net assets, end of
period (000
omitted) .........$38,460 $36,618$33,869 $27,434$24,960 $8,557
Ratio of expenses
to average net
assets ........... 1.95%** 1.92% 1.93% 1.94% 1.98% 1.94%**
Ratio of net investment
income to average
net assets ....... 3.98%** 4.18% 4.05% 4.41% 3.62% 3.99%**
Portfolio turnover
rate ............. 1.45% 34.72% 42.02% 56.92% 18.93% 140.02%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS OF
MUNICIPAL BOND FUND
Class Y Shares
For a Share of Capital Stock Outstanding Throughout Each Period:
For the
For the fiscal For the
period year period from
ended ended December 29, 1995*
6/23/97** 3/31/97 to March 31, 1996
--------- -------- --------------------
Net asset value,
beginning of
period ........... $10.74 $10.63 $10.94
------ ------ ------
Income from investment
operations:
Net investment
income........... 0.10 0.52 0.12
Net realized and
unrealized gain
(loss) on
investments ..... 0.29 0.11 (0.31)
------ ------ ------
Total from investment
operations ....... 0.39 0.63 (0.19)
------ ------ ------
Less dividends from net
investment income (0.10) (0.52) (0.12)
------ ------ ------
Net asset value,
end of period .... $11.03 $10.74 $10.63
====== ====== ======
Total return ....... 3.22% 5.96% -1.80%
Net assets, end of
period (000
omitted) .......... $0 $1 $1
Ratio of expenses
to average net
assets ........... 4.95%*** 1.28% 1.18%***
Ratio of net investment
income to average
net assets ....... 4.12%*** 4.83% 4.33%***
Portfolio turnover
rate ............. 1.45% 34.72% 42.02%***
*Commencement of operations.
**All outstanding shares were redeemed on June 23, 1997 at the ending net asset
shown in the table.
***Annualized.
See notes to financial statements.
<PAGE>
WADDELL & REED FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
Note 1 - Significant Accounting Policies
Waddell & Reed Funds, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Corporation issues eight series of capital shares; each series
represents ownership of a separate mutual fund. The assets belonging to each
Fund are held separately by the custodian. The capital shares of each Fund
represent a pro rata beneficial interest in the principal, net income and
realized and unrealized capital gains or losses of its respective investments
and other assets. The following is a summary of significant accounting policies
consistently followed by the Corporation in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a pricing service or dealer in bonds.
Convertible bonds are valued using this pricing system only on days when
there is no sale reported. Stocks which are traded over-the-counter are
priced using Nasdaq (National Association of Securities Dealers Automated
Quotations system) which provides information on bid and asked or closing
prices quoted by major dealers in such stocks. Restricted securities and
securities for which quotations are not readily available are valued as
determined in good faith in accordance with procedures established by and
under the general supervision of the Corporation's Board of Directors.
Short-term debt securities are valued at amortized cost, which approximates
market. Short-term debt securities denominated in foreign currencies are
valued at amortized cost in that currency.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined in the Internal
Revenue Code), premiums and post-1984 market discount on the purchase of
bonds are amortized for both financial and tax reporting purposes over the
remaining lives of the bonds. Dividend income is recorded on the ex-
dividend date. Interest income is recorded on the accrual basis. See Note
4 -- Investment Securities Transactions.
C. Foreign currency translations -- All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars daily. Purchases and
sales of investment securities and accruals of income and expenses are
translated at the rate of exchange prevailing on the date of the
transaction. For assets and liabilities other than investments in
securities, net realized and unrealized gains and losses from foreign
currency translation arise from changes in currency exchange rates. The
Corporation combines fluctuations from currency exchange rates and
fluctuations in market value when computing net realized and unrealized
gain or loss from investments.
D. Federal income taxes -- It is the Corporation's policy to distribute all of
its taxable income and capital gains to its shareholders and otherwise
qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code. In addition, the Corporation intends to pay
distributions as required to avoid imposition of excise tax. Accordingly,
provision has not been made for Federal income taxes. See Note 5 --
Federal Income Tax Matters.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by each Fund on the record date. Net investment income
dividends and capital gains distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are due to differing treatments for items
such as deferral of wash sales and post-October losses, foreign currency
transactions, net operating losses and expiring capital loss carryforwards.
F. Futures -- See Note 7 -- Futures.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Organization
The Corporation was incorporated in Maryland on January 29, 1992 and was
inactive (except for matters relating to its organization and registration as an
investment company under the Investment Company Act of 1940 and registration of
shares under the Securities Act of 1933) until September 21, 1992 (the date of
the initial public offering). The original Corporation consisted of five mutual
funds - Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund.
On April 24, 1992, Waddell & Reed, Inc. ("W&R"), the Corporation's
principal distributor and underwriter, purchased for investment 2,000 shares of
each series of the original Corporation at their net asset value of $10.00 per
share.
The Corporation's organizational expenses in the amount of $162,960 were
advanced to the Corporation by W&R and were an obligation to be paid by the
original mutual funds. These expenses were amortized evenly over the 60-month
period following the date of the initial public offering.
Asset Strategy Fund was established in Maryland on January 31, 1995 and was
inactive (except for matters relating to its organization and registration as an
investment company under the Investment Company Act of 1940 and registration of
shares under the Securities Act of 1933) until April 20, 1995 (the date of the
initial public offering).
Asset Strategy Fund's organizational expenses in the amount of $759 were
advanced to the Corporation by W&R and are an obligation to be paid by it.
These expenses are being amortized and are payable evenly over 60 months
following the date of the initial public offering.
NOTE 3 -- Investment Management And Payments To Affiliated Persons
Waddell & Reed Investment Management Company ("WRIMCO"), a wholly-owned
subsidiary of W&R, serves as the Corporation's investment manager. WRIMCO
provides advice and supervises investments for which services it is paid a fee
computed on each Fund's net assets as of the close of business each day at the
following annual rates: Total Return Fund - 0.71% of net assets, Growth Fund -
0.81% of net assets, Science and Technology Fund - 0.71% of net assets,
International Growth Fund - 0.81% of net assets, Asset Strategy Fund - 0.81% of
net assets, Limited-Term Bond Fund - 0.56% of net assets, High Income Fund -
0.66% of net assets and Municipal Bond Fund - 0.56% of net assets. The fee is
accrued and paid daily.
The Corporation has an Accounting Services Agreement with Waddell & Reed
Services Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the
agreement, WARSCO acts as the agent in providing accounting services and
assistance to the Corporation and pricing daily the value of shares of the
Corporation. For these services, each of the Funds pays WARSCO a monthly fee of
one-twelfth of the annual fee shown in the following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Fund
------------------------ -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class B shares, each Fund pays WARSCO a monthly per account charge for
transfer agency and dividend disbursement services of $1.3125 for each
shareholder account which was in existence at any time during the prior month,
plus $0.30 for each account on which a dividend or distribution of cash or
shares had a record date in that month. For Class Y shares, each Fund pays
WARSCO a monthly fee equal to one-twelfth of .15 of 1% of the average daily net
assets of that Class for the preceding month. Each Fund also reimburses W&R,
WRIMCO and WARSCO for certain out-of-pocket costs.
The Corporation has adopted a 12b-1 plan for both Class B and Class Y
shares. Under the Distribution and Service Plan for the Class B shares, W&R,
principal underwriter and sole distributor of the Corporation's shares, is
compensated in an amount calculated and payable daily up to 1% annually of each
of the Fund's average daily net assets. This fee consists of two elements: (i)
up to 0.75% of the particular Fund's Class B net asset value for distribution
services and distribution expenses including commissions paid by the Distributor
to its sales representatives and managers and (ii) up to 0.25% of the particular
Fund's Class B net asset value may be paid to reimburse the Distributor for
continuing payments made to the Distributor's representatives and managers, its
administrative costs in overseeing these payments, and the expenses of WARSCO in
providing certain personal services to shareholders. During the period ended
September 30, 1997, the Distributor received $3,526,804 in 12b-1 payments.
During this same period W&R paid sales commissions of $1,614,044.
Under a Distribution and Service Plan for Class Y shares adopted by the
Corporation pursuant to Rule 12b-1, with respect to each Fund, the Corporation
pays W&R daily a distribution and/or service fee not to exceed, on an annual
basis, 0.25% of the particular Fund's Class Y net asset value. During the period
ended September 30, 1997, the Distributor received $1,941 in 12b-1 payments on
Class Y shares.
For Class B shares, a contingent deferred sales charge may be assessed
against a shareholder's redemption amount and paid to the Distributor, W&R. The
purpose of the deferred sales charge is to compensate the Distributor for the
costs incurred by the Distributor in connection with the sale of a Fund's
shares. The amount of the deferred sales charge will be the following percent
of the total amount invested during a calendar year to acquire the shares or the
value of the shares redeemed, whichever is less. Redemption at any time during
the calendar year of investment and the first full calendar year after the
calendar year of investment, 3%; the second full calendar year, 2%; the third
full calendar year, 1%; and thereafter, 0%. All investments made during a
calendar year shall be deemed as a single investment during the calendar year
for purposes of calculating the deferred sales charge. The deferred sales
charge will not be imposed on shares representing payment of dividends or
distributions or on amounts which represent an increase in the value of the
shareholder's account resulting from capital appreciation above the amount paid
for shares purchased during the deferred sales charge period. During the period
ended September 30, 1997, the Distributor received $470,067 in deferred sales
charges.
The Corporation paid Directors' fees of $12,166, which are included in
other expenses.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 4 -- Investment Securities Transactions
Investment securities transactions for the period ended September 30, 1997
are summarized as follows:
Total Science and
Return Growth Technology
Fund Fund Fund
----------- ---------- -----------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities ...............$ 72,615,040 $32,746,937 $ 981,610
Purchases of U.S. Government
securities ............... --- --- ---
Purchases of short-term
securities ............... 183,930,403 236,858,961 3,232,134
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities .... 61,268,918 31,813,479 ---
Proceeds from maturities
and sales of U.S.
Government securities .... --- --- ---
Proceeds from maturities
and sales of short-term
securities ............... 189,987,186 241,702,693 2,237,010
International Asset Limited-
Growth Strategy Term Bond
Fund Fund Fund
----------- ---------- -----------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities ............... $42,181,064 $10,799,317 $1,522,978
Purchases of U.S. Government
securities ............... --- 947,865 1,513,843
Purchases of short-term
securities ............... 36,890,141 12,727,698 4,716,000
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities .... 31,723,774 11,601,367 2,410,170
Proceeds from maturities
and sales of U.S.
Government securities .... --- 1,462,246 979,981
Proceeds from maturities
and sales of short-term
securities ............... 34,179,897 11,237,000 4,599,000
High Municipal
Income Bond
Fund Fund
----------- ----------
Purchases of investment
securities, excluding short-
term and U.S. Government
securities ............... $1,826,351 $1,454,020
Purchases of U.S. Government
securities ............... --- ---
Purchases of short-term
securties ................ 2,580,459 9,100,281
Proceeds from maturities
and sales of investment
securities, excluding
short-term and U.S.
Government securities .... --- 533,205
Proceeds from maturities
and sales of U.S.
Government securities .... --- ---
Proceeds from maturities
and sales of short-term
securities ............... 1,779,211 4,253,000
For Federal income tax purposes, cost of investments owned at September 30,
1997 and the related unrealized appreciation (depreciation) were as follows:
Aggregate
Cost AppreciationDepreciation Appreciation
----------- -------------------------------------
Total Return Fund $268,144,537 $140,769,681 $1,821,056 $138,948,625
Growth Fund 189,419,389 75,730,265 5,015,642 70,714,623
Science and Technology
Fund 1,984,703 76,585 10,868 65,717
International Growth
Fund 67,060,883 11,578,551 3,749,182 7,829,369
Asset Strategy Fund 14,404,347 1,297,223 135,190 1,162,033
Limited-Term Bond Fund17,728,123 166,731 48,633 118,098
High Income 2,632,957 27,217 2,817 24,400
Municipal Bond Fund 35,843,979 2,175,390 0 2,175,390
NOTE 5 -- Federal Income Tax Matters
For Federal income tax purposes, Total Return Fund and Growth Fund realized
capital gain net income of $3,484,953 and $13,839,882, respectively, during the
year ended March 31, 1997. For Federal income tax purposes, International
Growth Fund realized capital gain net income of $2,863,917 during the year ended
March 31, 1997, which includes utilization of capital loss carryforwards of
$389,830. For Federal income tax purposes, Municipal Bond Fund realized capital
gains of $302,510 during the year ended March 31, 1997, which were entirely
offset by utilization of capital loss carryforwards. Remaining prior year
capital loss carryforwards of Municipal Bond Fund totaled $160,264 at March 31,
1997. Of this amount, $31,213 is available to offset future realized capital
gain net income through March 31, 2003, and the remaining $129,051 is available
to offset future realized capital gain net income through March 31, 2004. For
Federal income tax purposes, Asset Strategy Fund and Limited-Term Bond Fund
realized capital losses of $224,368 and $88,346, respectively, during the year
ended March 31, 1997, and these losses are available to offset future realized
capital gain net income of each fund through March 31, 2005. A portion of the
capital gain net income of Total Return Fund and Growth Fund was paid to
shareholders during the year ended March 31, 1997. Remaining capital gains of
these Funds, as well as the capital gain net income of International Growth
Fund, will be distributed to shareholders.
NOTE 6 -- Commencement of Multiclass Operations
Each Fund within the Corporation is authorized to offer investors a choice
of two classes of shares, Class B and Class Y, each of which has equal rights as
to assets and voting privileges with respect to each Fund. Class Y shares are
not subject to a contingent deferred sales charge on redemptions and have
separate fee structures for transfer agency and dividend disbursement services
and Rule 12b-1 Service Plan fees. A comprehensive discussion of the terms under
which shares of either class are offered is contained in the Prospectus and the
Statement of Additional Information for the Corporation.
Income, non-class specific expenses and realized and unrealized gains and
losses are allocated daily to each class of shares based on the value of
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
Transactions in capital stock for the periods ended September 30, 1997 are
summarized below.
Total Science and
Return Growth Technology
Fund Fund Fund
----------- ------------ ------------
Shares issued from sale
of shares:
Class B ............ 2,294,409 1,159,064 214,736
Class Y ............ 4,447 3,056 ---
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ --- --- ---
Class Y ............ --- --- ---
Shares redeemed:
Class B ............ (1,752,530) (1,383,493) (1,261)
Class Y ............ (356) (271) ---
--------- --------- ---------
Increase (decrease) in outstanding
capital shares:
Class B ............ 541,879 (224,429) 213,475
Class Y ............ 4,091 2,785 ---
--------- --------- ---------
Total for Fund .... 545,970 (221,644) 213,475
========= ========= =========
Value issued from sale
of shares:
Class B ............ $48,210,225 $24,474,336 $2,158,190
Class Y ............ 93,774 61,895 ---
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ --- --- ---
Class Y ............ --- --- ---
Value redeemed:
Class B ............ (36,410,613) (28,236,309) (12,618)
Class Y ............ (7,828) (5,859) ---
----------- ----------- -----------
Increase (decrease) in outstanding
capital:
Class B ............ 11,799,612 (3,761,973) 2,145,572
Class Y ............ 85,946 56,036 ---
----------- ----------- -----------
Total for Fund .. $11,885,558 $(3,705,937) $2,145,572
=========== =========== ===========
International Asset Limited-
Growth Strategy Term Bond
Fund Fund Fund
----------- ------------ ------------
Shares issued from sale
of shares:
Class B ............ 1,395,735 223,940 315,480
Class Y ............ 2,437 2,516 2,612
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ --- 9,832 38,782
Class Y ............ --- 165 334
Shares redeemed:
Class B ............ (309,772) (222,407) (363,959)
Class Y ............ (366) (405) (328)
--------- --------- ---------
Increase (decrease) in
outstanding capital shares:
Class B ............ 1,085,963 11,365 (9,697)
Class Y ............ 2,071 2,276 2,618
--------- --------- ---------
Total for Fund .... 1,088,034 13,641 (7,079)
========= ========= =========
Value issued from sale
of shares:
Class B ............ $18,269,680 $2,418,727 $3,163,236
Class Y ............ 33,320 25,448 26,278
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ --- 106,870 388,687
Class Y ............ --- 1,785 3,349
Value redeemed:
Class B ............ (4,106,396) (2,339,089) (3,649,125)
Class Y ............ (4,940) (4,385) (3,300)
----------- ----------- -----------
Increase (decrease) in
outstanding capital:
Class B ............ 14,163,284 186,508 (97,202)
Class Y ............ 28,380 22,848 26,327
----------- ----------- -----------
Total for Fund .. $14,191,664 $ 209,356 $(70,875)
=========== =========== ===========
High Municipal
Income Bond
Fund Fund
----------- ------------
Shares issued from sale
of shares:
Class B ............ 255,890 349,358
Class Y ............ --- ---
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ 706 61,056
Class Y ............ --- ---
Shares redeemed:
Class B ............ (1,272) (390,997)
Class Y ............ --- (97)
--------- ---------
Increase (decrease) in outstanding
capital shares:
Class B ............ 255,324 19,417
Class Y ............ --- (97)
--------- ---------
Total for Fund .... 255,324 19,320
========= =========
Value issued from sale
of shares:
Class B ............ $2,562,152 $3,826,511
Class Y ............ --- ---
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ 7,101 672,299
Class Y ............ --- 7
Value redeemed:
Class B ............ (12,726) (4,295,833)
Class Y ............ --- (1,066)
----------- -----------
Increase (decrease) in outstanding
capital:
Class B ............ 2,556,527 202,977
Class Y ............ --- (1,059)
----------- -----------
Total for Fund .. $2,556,527 $ 201,918
=========== ===========
Transactions in capital stock for the period ended March 31, 1997 are
summarized below.
Total International
Return Growth Growth
Fund Fund Fund
----------- ------------ ------------
Shares issued from sale
of shares:
Class B ............ 6,808,591 3,632,678 2,238,293
Class Y ............ 24,004 14,358 17,526
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ 95,480 341,944 2,464
Class Y ............ 30 1 2
Shares redeemed:
Class B ............ (2,181,104) (2,712,593) (270,903)
Class Y ............ (1,854) --- (118)
--------- --------- ---------
Increase (decrease) in outstanding
capital shares:
Class B ............ 4,722,967 1,262,029 1,969,854
Class Y ............ 22,180 14,359 17,410
--------- --------- ---------
Total for Fund .... 4,745,147 1,276,388 1,987,264
========= ========= =========
Value issued from sale
of shares:
Class B ............ $119,248,838 $77,383,014 $25,345,167
Class Y ............ 448,206 293,327 208,529
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ 1,705,291 6,948,199 27,578
Class Y ............ 541 30 21
Value redeemed:
Class B ............ (39,096,763) (55,095,161) (3,038,791)
Class Y ............ (33,626) --- (1,423)
----------- ----------- -----------
Increase (decrease) in outstanding
capital:
Class B ............ 81,857,366 29,236,052 22,333,954
Class Y ............ 415,121 293,357 207,127
----------- ----------- -----------
Total for Fund .. $82,272,487 $29,529,409 $22,541,081
=========== =========== ===========
Asset Limited- Municipal
Strategy Term Bond Bond
Fund Fund Fund
----------- ------------ ------------
Shares issued from sale
of shares:
Class B ............ 648,628 532,545 690,053
Class Y ............ 11,760 10,427 ---
Shares issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ 47,461 84,279 123,331
Class Y ............ 77 91 5
Shares redeemed:
Class B ............ (621,105) (1,190,546) (587,793)
Class Y ............ --- --- ---
--------- --------- -------
Increase (decrease) in
outstanding capital shares:
Class B ............ 74,984 (573,722) 225,591
Class Y ............ 11,837 10,518 5
--------- --------- -------
Total for Fund .... 86,821 (563,204) 225,596
========= ========= =======
Value issued from sale
of shares:
Class B ............ $6,618,305 $5,314,824 $7,405,072
Class Y ............ 120,365 104,186 ---
Value issued from
reinvestment of
dividends and/or capital
gains distribution:
Class B ............ 483,186 840,800 1,327,022
Class Y ............ 773 956 48
Value redeemed:
Class B ............ (6,363,794) (11,853,606) (6,314,829)
Class Y ............ --- --- ---
----------- ----------- ----------
Increase (decrease) in
outstanding capital:
Class B ............ 737,697 (5,697,982) 2,417,265
Class Y ............ 121,138 105,142 48
----------- ----------- ----------
Total for Fund .. $ 858,835 $(5,592,840) $2,417,313
=========== =========== ==========
NOTE 7 -- Futures
Upon entering into a futures contract, the Fund is required to deposit, in
a segregated account, an amount of cash or U.S. Treasury Bills equal to a
varying specified percentage of the contract amount. This amount is known as
the initial margin. Subsequent payments ("variation margins") are made or
received by the Fund each day, dependent on the daily fluctuations in the value
of the underlying debt security or index. These changes in the variation
margins are recorded by the Fund as unrealized gains or losses. Upon the
closing of the contracts, the cumulative net change in the variation margin is
recorded as realized gain or loss. The Fund uses futures to attempt to reduce
the overall risk of its investments.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Waddell & Reed Funds, Inc.:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Total Return Fund, Growth Fund, Science and
Technology Fund, International Growth Fund, Asset Strategy Fund, Limited-Term
Bond Fund, High Income Fund and Municipal Bond Fund (collectively the "Funds")
comprising Waddell & Reed Funds, Inc. as of September 30, 1997, the related
statements of operations for the six-month period then ended and changes in net
assets for the six-month period then ended and the year ended March 31, 1997,
and the financial highlights for the periods presented. These financial
statements and the financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
September 30, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial positions of each of the
respective funds comprising Waddell & Reed Funds, Inc. as of September 30, 1997,
the results of their operations, the changes in their net assets, and their
financial highlights for the periods presented in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
October 31, 1997
<PAGE>
Shareholder Meeting Results
A special meeting of shareholders of Waddell & Reed Funds, Inc. Asset Strategy
Fund, Growth Fund, International Growth Fund, Limited-Term Bond Fund, Municipal
Bond Fund and Total Return Fund was held on July 28, 1997. The matters voted
upon by the shareholders and the resulting votes for each matter are presented
below.
Item 1.To elect the Board of Directors;
Broker
For WithheldNon-Votes*
Henry L. Bellmon 19,886,274 546,698 0
Dodds I. Buchanan 19,916,915 516,057 0
James M. Concannon 19,917,428 515,544 0
John A. Dillingham 19,916,208 516,764 0
Linda Graves 19,910,190 522,782 0
John F. Hayes 19,889,979 542,993 0
Glendon E. Johnson 19,893,600 539,372 0
William T. Morgan 19,911,400 521,572 0
Ronald K. Richey 19,905,216 527,756 0
William L. Rogers 19,915,304 517,668 0
Frank J. Ross, Jr. 19,917,428 515,544 0
Eleanor B. Schwartz 19,916,777 516,195 0
Keith A. Tucker 19,908,675 524,297 0
Frederick Vogel III 19,915,154 517,818 0
Paul S. Wise 19,891,894 541,078 0
Item 2.To ratify the selection of Deloitte & Touche LLP as the Fund's
independent accountants for its current fiscal year;
Broker
For Against AbstainNon-Votes*
19,329,963207,214 895,795 0
Item 3.To approve or disapprove changes to the following fundamental investment
policies and restrictions:
3.1 For Municipal Bond Fund only: Elimination of Fundamental
Restriction Regarding Repurchase Transactions
Broker
For Against AbstainNon-Votes*
1,822,130 46,096 101,669 0
3.2 Modification and/or Elimination of Fundamental Restrictions
Regarding Options, Commodities, Forward Contracts and/or Futures
Contracts
Broker
For Against AbstainNon-Votes*
Asset Strategy Fund 649,183 18,129 37,224 0
Growth Fund 5,155,642 128,955 368,687 6,216
International
Growth Fund 2,131,128 28,567 109,354 0
Limited-Term Bond Fund 903,387 33,488 34,169 0
Municipal Bond Fund 1,817,830 50,396 101,669 0
Total Return Fund 8,126,826 177,240 554,882 0
3.3 Modification of Fundamental Restriction Regarding Margin Purchases
of Securities
Broker
For Against AbstainNon-Votes*
Asset Strategy Fund 645,120 22,192 37,224 0
Growth Fund 5,152,732 131,865 368,687 6,216
International Growth Fund 2,130,849 28,846 109,354 0
Limited-Term Bond Fund 903,387 33,488 34,169 0
Municipal Bond Fund 1,818,124 50,102 101,669 0
Total Return Fund 8,131,401 172,471 555,076 0
3.4 Modification of Fundamental Restriction Regarding Short Sales of
Securities
Broker
For Against AbstainNon-Votes*
Asset Strategy Fund 649,632 17,680 37,224 0
Growth Fund 5,159,003 125,594 368,687 6,216
International Growth Fund 2,130,730 28,965 109,354 0
Limited-Term Bond Fund 903,387 33,488 34,169 0
Municipal Bond Fund 1,822,130 46,096 101,669 0
Total Return Fund 8,124,137 179,735 555,076 0
3.5 Elimination of Fundamental Restriction Regarding Investment in
Warrants and Rights (Growth Fund, International Growth Fund,
Limited-Term Bond Fund and Total Return Fund only)
Broker
For Against AbstainNon-Votes*
Growth Fund 5,160,293 124,304 368,687 6,216
International Growth Fund 2,131,128 28,567 109,354 0
Limited-Term Bond Fund 903,387 33,488 34,169 0
Total Return Fund 8,128,040 175,664 555,244 0
3.6 For all Funds (except Asset Strategy Fund): Elimination of
Fundamental Restrictions Regarding Arbitrage Transactions
Broker
For Against AbstainNon-Votes*
Growth Fund 5,158,504 126,093 368,687 6,216
International Growth Fund 2,131,128 28,567 109,354 0
Limited-Term Bond Fund 903,387 33,488 34,169 0
Municipal Bond Fund 1,822,025 46,201 101,669 0
Total Return Fund 8,130,160 173,712 555,076 0
3.7 Elimination of Fundamental Restriction Regarding Investments in
Issuers Whose Securities are Owned by Certain Persons
Broker
For Against AbstainNon-Votes*
Asset Strategy Fund 644,988 22,324 37,224 0
Growth Fund 5,156,061 128,524 368,699 6,216
International Growth Fund 2,131,165 28,530 109,354 0
Limited-Term Bond Fund 903,257 33,618 34,169 0
Municipal Bond Fund 1,821,584 46,642 101,669 0
Total Return Fund 8,126,828 177,044 555,076 0
3.8 Modification of Fundamental Policy Regarding Loans
Broker
For Against AbstainNon-Votes*
Asset Strategy Fund 650,169 17,143 37,224 0
Growth Fund 5,158,513 125,978 368,793 6,216
International Growth Fund 2,129,575 30,120 109,354 0
Limited-Term Bond Fund 898,677 38,198 34,169 0
Municipal Bond Fund 1,822,025 46,201 101,669 0
Total Return Fund 8,126,057 177,695 555,196 0
Item 4.For Asset Strategy Fund only: To approve or disapprove a change in the
goal of the Fund.
Broker
For Against AbstainNon-Votes*
645,958 17,686 40,892 0
*Broker non-votes are proxies received by the Fund from brokers or nominees when
the broker or nominee neither has received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on
a particular matter.
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Keith A. Tucker, President
Michael L. Avery, Vice President
Abel Garcia, Vice President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
John M. Holliday, Vice President
Theodore W. Howard, Vice President and Treasurer
Thomas A. Mengel, Vice President
Sharon K. Pappas, Vice President and Secretary
Louise D. Rieke, Vice President
Mark G. Seferovich, Vice President
W. Patrick Sterner, Vice President
Russell E. Thompson, Vice President
Daniel J. Vrabac, Vice President
James B. Wineland, Vice President
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
<PAGE>
WADDELL & REED FUNDS, INC.
Total Return Fund
Growth Fund
Science and Technology Fund
International Growth Fund
Asset Strategy Fund
Limited-Term Bond Fund
High Income Fund
Municipal Bond Fund
- ------------------------------------
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
WRR3000SA(9-97)
printed on recycled paper
