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SUPPLEMENT TO THE PROSPECTUS
Waddell & Reed Funds, Inc. Class B Shares
The following information supplements and supersedes any contrary information
contained in the Prospectus:
At a special meeting of shareholders scheduled for July 24, 1997, shareholders
of each series (each, a "Fund") of Waddell & Reed Funds, Inc. will be asked to
approve proposals relating to the following, as applicable to one or more of the
Funds:
1. Goal of Asset Strategy Fund. Shareholders will be asked to approve changing
Asset Strategy Fund's goal to state that the Fund "seeks high total return over
the long term." If approved, Asset Strategy Fund intends to eliminate the
current non-fundamental, operating policy limiting the amount of a reallocation
among its asset classes and to revise the current non-fundamental, operating
policy regarding the specified mix and ranges of its assets as follows:
Mix Range
Stock class 0-100%
70%
Bond class 0-100%
25%
Short-term class 0-100%
5%
2. Investment Restrictions. Shareholders of each Fund will be asked to approve
elimination of or changes to certain of the Funds' fundamental restrictions. If
approved, the current fundamental restrictions regarding repurchase transactions
(Municipal Bond Fund only), arbitrage transactions, securities owned by
affiliated persons and (except for Municipal Bond Fund) warrants and rights
would be eliminated. Also, if approved, the current fundamental restrictions
regarding investments in commodities and commodity contracts, loans, margin
purchases and short sales would be modified.
If the foregoing changes to a Fund's fundamental investment restrictions are
approved, that Fund intends to implement a new non-fundamental, operating policy
regarding derivative instruments. This operating policy would be in addition to
the other non-fundamental restrictions and policies set forth in the prospectus
and Statement of Additional Information and could be changed by the Board of
Directors without shareholder approval.
To be attached to the cover page of the Prospectus of Waddell & Reed Funds, Inc.
Class B shares dated June 30, 1996, as supplemented January 30, 1997.
This Supplement is dated May 29, 1997.
WRS3000E
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SUPPLEMENT TO THE PROSPECTUS
Waddell & Reed Funds, Inc. Class Y Shares
The following information supplements and supersedes any contrary information
contained in the Prospectus:
At a special meeting of shareholders scheduled for July 24, 1997, shareholders
of each series (each, a "Fund") of Waddell & Reed Funds, Inc. will be asked to
approve proposals relating to the following, as applicable to one or more of the
Funds:
1. Goal of Asset Strategy Fund. Shareholders will be asked to approve changing
Asset Strategy Fund's goal to state that the Fund "seeks high total return over
the long term." If approved, Asset Strategy Fund intends to eliminate the
current non-fundamental, operating policy limiting the amount of a reallocation
among its asset classes and to revise the current non-fundamental, operating
policy regarding the specified mix and ranges of its assets as follows:
Mix Range
Stock class 0-100%
70%
Bond class 0-100%
25%
Short-term class 0-100%
5%
2. Investment Restrictions. Shareholders of each Fund will be asked to approve
elimination of or changes to certain of the Funds' fundamental restrictions. If
approved, the current fundamental restrictions regarding repurchase transactions
(Municipal Bond Fund only), arbitrage transactions, securities owned by
affiliated persons and (except for Municipal Bond Fund) warrants and rights
would be eliminated. Also, if approved, the current fundamental restrictions
regarding investments in commodities and commodity contracts, loans, margin
purchases and short sales would be modified.
If the foregoing changes to a Fund's fundamental investment restrictions are
approved, that Fund intends to implement a new non-fundamental, operating policy
regarding derivative instruments. This operating policy would be in addition to
the other non-fundamental restrictions and policies set forth in the prospectus
and Statement of Additional Information and could be changed by the Board of
Directors without shareholder approval.
To be attached to the cover page of the Prospectus of Waddell & Reed Funds, Inc.
Class Y shares dated June 30, 1996, as supplemented January 30, 1997.
This Supplement is dated May 29, 1997.
WRS3000YF
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WADDELL & REED FUNDS, INC.
Supplement to the Statement of Additional Information
Dated June 30, 1996, as Previously Supplemented
The following information supplements and supersedes any contrary information
contained in the Statement of Additional Information:
Investment Restrictions. At a special meeting of shareholders scheduled for
July 24, 1997 ("Special Meeting"), shareholders of each series (each, a "Fund")
of Waddell & Reed Funds, Inc. will be asked to approve elimination and
modification of certain of the Funds' fundamental investment restrictions. If
approved, the following investment restrictions will supersede and replace the
restrictions listed in the "Investment Restrictions" section:
Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond Fund
and International Growth Fund may not buy real estate, any nonliquid
interests in real estate investment trusts or interests in real estate
limited partnerships; however, each of these Funds may buy obligations
or instruments that it otherwise may buy even though the issuer invests
in real estate or interests in real estate. Asset Strategy Fund may
not invest in real estate limited partnerships or purchase or sell real
estate unless acquired as a result of ownership of securities (but this
shall not prevent this Fund from purchasing and selling securities
issued by companies or other entities or investment vehicles that deal
in real estate or interests therein, nor shall this prevent this Fund
from purchasing interests in pools of real estate mortgage loans).
(ii) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal
Bond Fund, Municipal Bond Fund and International Growth Fund may not
acquire shares of an investment company that issues redeemable
securities. Total Return Fund, Growth Fund and International Growth
Fund may buy shares of an investment company that does not issue
redeemable securities if the Fund does so in a regular transaction in
the open market and in compliance with the requirements of the
Investment Company Act of 1940, as amended ("1940 Act").
Notwithstanding the foregoing, each of these Funds may also acquire
investment company shares as part of a merger, consolidation or other
reorganization.
(iii) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal
Bond Fund and International Growth Fund may not lend money or other
assets, other than through certain limited types of loans; however,
each of these Funds may buy debt securities and other obligations
consistent with its goal and its other investment policies and
restrictions, may enter into repurchase agreements and, except
Municipal Bond Fund, may lend its portfolio securities. Asset Strategy
Fund may not make loans, except (a) by lending portfolio securities
provided that no securities loan will be made if, as a result thereof,
more than 10% of this Fund's total assets (taken at current value)
would be lent to another party; (b) through the purchase of debt
securities and other obligations consistent with its goal and its other
investment policies and restrictions; and (c) by engaging in repurchase
agreements with respect to portfolio securities.
(iv) No Fund may invest for the purpose of exercising control or
management of another issuer.
(v) No Fund may sell securities short (unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities
sold short) or purchase securities on margin, except that (1) this
policy does not prevent a Fund from entering into short positions in
foreign currency, futures contracts, options, forward contracts, swaps,
caps, collars, floors and other financial instruments, (2) a Fund may
obtain such short-term credits as are necessary for the clearance of
transactions, and (3) a Fund may make margin payments in connection
with futures contracts, options, forward contracts, swaps, caps,
collars, floors and other financial instruments.
(vi) No Fund may engage in the underwriting of securities of other
issuers, except to the extent that, in connection with the disposition
of portfolio securities, the Fund may be deemed an underwriter under
Federal securities laws.
(vii) No Fund may invest in a security if, as a result, it would own
more than 10% of the outstanding voting securities of an issuer, or if
more than 5% of the Fund's total assets would be invested in securities
of that issuer, provided that U.S. Government Securities are not
subject to this limitation and up to 25% of the Fund's total assets may
be invested without regard to these restrictions.
(viii) No Fund may buy a security if, as a result, 25% or more of the
Fund's total assets would then be invested in securities of issuers
having their principal business activities in the same industry, except
for municipal bonds (other than industrial development bonds) and U.S.
Government Securities.
(ix) Municipal Bond Fund may not purchase warrants.
(x) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond
Fund and International Growth Fund may not purchase or sell physical
commodities; however, this policy shall not prevent these Funds from
purchasing and selling foreign currency, futures contracts, options,
forward contracts, swaps, caps, collars, floors and other financial
instruments. Asset Strategy Fund may not purchase or sell physical
commodities, except that this Fund may purchase and sell precious
metals for temporary, defensive purposes; however, this policy shall
not prevent this Fund from purchasing and selling foreign currency,
futures contracts, options, forward contracts, swaps, caps, collars,
floors and other financial instruments.
(xi) Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal
Bond Fund and International Growth Fund may not issue senior
securities. Asset Strategy Fund may not issue bonds or any other class
of securities preferred over shares of the Fund in respect of the
Fund's assets or earnings, provided that this Fund may issue additional
series and classes of shares in accordance with its Articles of
Incorporation.
Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond Fund
and International Growth Fund may not borrow money, except that these
Funds may borrow money (and pledge assets in connection therewith) from
banks for temporary, extraordinary or emergency purposes but only up to
5% of their respective assets. Asset Strategy Fund may not borrow
money, except that this Fund may borrow money for emergency or
extraordinary purposes (not for leveraging or investment) in an amount
not exceeding 33 1/3% of the value of its total assets (less
liabilities other than borrowings). Any borrowings that come to exceed
33 1/3% of the value of Asset Strategy Fund's total assets by reason of
a decline in net assets will be reduced within three days to the extent
necessary to comply with the 33 1/3% limitation. For purposes of this
limitation, "three days" means three days, exclusive of Sundays and
holiday.
Total Return Fund, Growth Fund, Limited-Term Bond Fund, Municipal Bond Fund
and International Growth Fund may not invest in interests in oil, gas
or mineral leases or mineral development programs, including oil and
gas limited partnerships.
If the proposed changes to a Fund's fundamental investment restrictions are
approved, that Fund intends to implement the following new non-fundamental,
operating policy which would supersede and replace the Fund's current non-
fundamental restrictions and policies on these matters:
Generally, each Fund may purchase and sell any type of derivative
instrument (including, without limitation, futures contracts, options,
forward contracts, swaps, caps, collars, floors and indexed securities).
However, the Fund will only purchase or sell a particular derivative
instrument if the Fund is authorized to invest in the type of asset by
which the return on, or value of, the derivative instrument is primarily
measured or, with respect to foreign currency derivatives, if the Fund is
authorized to invest in foreign securities.
This Supplement is dated May 29, 1997.
