Prospectus
June 30, 2000
EQUITY, GROWTH AND INCOME
& ASSET ALLOCATION FUNDS
Asset Strategy Fund
International Growth Fund
Large Cap Growth Fund
Mid Cap Growth Fund
Science and Technology Fund
Small Cap Growth Fund
Tax-Managed Equity Fund
Total Return Fund
The Securities and Exchange Commission has not approved or disapproved the
Fund's securities, or determined whether this Prospectus is accurate or
adequate. It is a criminal offense to state otherwise.
Waddell & Reed, Inc.
CONTENTS
3 An Overview of the Funds
3 Asset Strategy Fund
10 International Growth Fund
16 Large Cap Growth Fund
20 Mid Cap Growth Fund
24 Science and Technology Fund
30 Small Cap Growth Fund
36 Tax-Managed Equity Fund
40 Total Return Fund
46 The Investment Principles of the Funds
55 Your Account
76 The Management of the Funds
80 Financial Highlights
AN OVERVIEW OF THE FUND
GOAL
W&R Asset Strategy Fund seeks high total return over the long term.
Principal Strategies
Asset Strategy Fund seeks to achieve its goal by allocating its assets among
stocks, bonds and short-term instruments.
_ The stock class includes equity securities of all types, although Waddell
& Reed Investment Management Company ("WRIMCO"), the Fund's investment
manager, typically emphasizes a blend of value and growth potential in
selecting stocks. Value stocks are those that WRIMCO believes are
currently selling below their true worth. Growth stocks are those whose
earnings WRIMCO believes are likely to grow faster than the economy. The
Fund may invest in the securities of any size company.
_ The bond class includes all varieties of fixed-income instruments, such as
corporate or U.S. Government debt securities, with remaining maturities of
more than three years. This asset class may include a significant amount
of junk bonds, up to 35% of the Fund's total assets, which are bonds rated
BB and below by Standard & Poor's ("S&P") and Ba and below by Moody's
Investors Service, Inc. ("MIS") or unrated bonds deemed by WRIMCO to be of
comparable quality.
_ The short-term class includes all types of short-term instruments with
remaining maturities of three years or less, including high-quality money
market instruments.
_ Within each of these classes, the Fund may invest in both domestic and
foreign securities.
The Fund selects a mix which represents the way the Fund's investments will
generally be allocated over the long term as indicated in the box below. This
mix will vary over shorter time periods as WRIMCO changes the Fund's holdings
based on its current outlook for the different markets. These changes may be
based on such factors as interest rate changes, security valuation levels and
a rise in the potential for growth stocks.
Mix
Stocks 70%
(can range from 0-100%)
Bonds 25%
(can range from 0-100%)
Short-term 5%
(can range from 0-100%)
Principal Risks of Investing in the Fund
Because Asset Strategy Fund owns different types of investments, a variety of
factors can affect its investment performance, such as:
_ the skill of WRIMCO in allocating the Fund's assets among different types
of investments;
_ the mix of securities in the Fund's portfolio, particularly the relative
weightings in, and exposure to, different sectors of the economy;
_ an increase in interest rates, which may cause the value of the Fund's
fixed-income securities, especially bonds with longer maturities, to
decline;
_ prepayment of higher-yielding bonds held by the Fund;
_ the earnings performance, credit quality and other conditions of the
companies whose securities the Fund holds; and
_ adverse stock and bond market conditions, sometimes in response to general
economic or industry news, that may cause the prices of the Fund's
holdings to fall as part of a broad market decline.
Market risk for small or medium sized companies may be greater than that for
large companies. Smaller companies are more likely to have limited financial
resources and inexperienced management. Additionally, stock of smaller
companies may experience volatile trading and price fluctuations.
Investments by the Fund in junk bonds are more susceptible to the risk of
non-payment or default, and their prices may be more volatile, than higher-
rated bonds.
As well, the Fund may invest a significant portion of its assets in foreign
securities. Foreign securities present additional risks such as currency
fluctuations and political or economic conditions affecting the foreign
countries.
As with any mutual fund, the value of the Fund's shares will change and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Who May Want to Invest
Asset allocation funds are designed for investors who want to diversify among
stocks, bonds and short-term instruments, in one fund. If you are looking for
an investment that uses this technique in pursuit of high total return, this
Fund may be appropriate for you. You should consider whether the Fund fits
your investment objectives.
PERFORMANCE
Asset Strategy Fund
The bar chart and performance table below provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual total returns
for the periods shown compare with those of a broad measure of market
performance and a peer group average.
_ The bar chart presents the average annual total returns for Class C and
shows how performance has varied from year to year.
_ The bar chart does not reflect any deferred sales charge that you may be
required to pay upon redemption of the Fund's Class C shares. If the
deferred sales charge was included, the returns would be less than those
shown.
_ The performance table shows Class C and Class Y average annual total
returns and compares them to the market indicators listed. No performance
information is provided for Class A or Class B shares since these classes
do not have annual returns for at least one calendar year.
_ The bar chart and the performance table assume payment of dividends and
other distributions in shares. As with all mutual funds, the Fund's past
performance does not necessarily indicate how it will perform in the
future.
Note that the performance information in the bar chart and performance table
is based on calendar-year periods, while the information shown in the
Financial Highlights section of this Prospectus and in the Fund's shareholder
reports is based on the Fund's fiscal year.
CHART OF YEAR-BY-YEAR RETURNS
as of December 31 each year (%)1
1996 3.92%
1997 10.84%
1998 8.64%
1999 21.22%
In the period shown in the chart, the highest quarterly return was 15.52%
(the fourth quarter of 1999) and the lowest quarterly return was -4.97% (the
first quarter of 1997). The Class C return for the year through March 31,
2000, was 15.58%.
1.
The returns shown are based on the performance of the Fund's prior Class
B. On March 24, 2000, that Class B was combined with and redesignated as
Class C, which had commenced operations on October 4, 1999.
Average Annual Total Returns
as of December 31, 1999 (%) 1 Year Life of Class2
Class C Shares of Asset Strategy Fund1 21.22% 10.05%
S&P 500 Index 21.09% 27.53%
Salomon Brothers Broad
Investment Grade Index -0.83% 6.86%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit 5.32% 5.62%
Lipper Flexible Portfolio Funds
Universe Average 12.50% 16.21%
Class Y Shares of Asset Strategy Fund 22.24% 11.90%
S&P 500 Index 21.09% 26.45%
Salomon Brothers Broad
Investment Grade Index -0.83% 5.20%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit 5.32% 5.55%
Lipper Flexible Portfolio
Funds Universe Average 12.50% 14.44%
The indexes shown are broad-based, securities market indexes that are
unmanaged. The Lipper average is a composite of mutual funds with goals
similar to the goal of the Fund.
1.
The returns shown for Class C are based on the performance of the Fund's
prior Class B. On March 24, 2000, that Class B was combined with and
redesignated as Class C, which had commenced operations on October 4,
1999. The prior Class B's performance has been adjusted to reflect the
current contingent deferred sales charge ("CDSC") structure applicable to
Class C.
2.
Since April 20, 1995, for Class C shares (based on the prior Class B
shares) and December 29, 1995 for Class Y shares. Because each class
commenced operations on a date other than at the end of a month, and
partial month calculations of the performance of the above indexes are not
available, index performance is calculated from April 30, 1995, and
December 31, 1995, respectively.
FEES AND EXPENSES
Asset Strategy Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
Shareholder Fees
(fees paid directly from Class A Class B Class C Class Y
your investment) Shares Shares Shares Shares
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) 5.75% None None None
Maximum Deferred
Sales Charge (Load)1
(as a percentage of lesser
of amount invested or
redemption value) None2 5% 1% None
Annual Fund Operating Expenses3
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees 0.70% 0.70% 0.70% 0.70%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses 0.51% 0.51% 0.51% 0.38%
Total Annual Fund
Operating Expenses 1.46% 2.21% 2.21% 1.33%
1.
The CDSC, which is imposed on the lesser of amount invested or redemption
value of Class B shares, declines from 5% for redemptions made within the
first year of purchase, to 4% for redemptions made within the second year,
to 3% for redemptions made within the third and fourth years, to 2% for
redemptions made within the fifth year, to 1% for redemptions made within
the sixth year and to 0% for redemptions made after the sixth year. For
Class C shares, a 1% CDSC applies to the lesser of amount invested or
redemption value of Class C shares redeemed within twelve months after
purchase. Solely for purposes of determining the number of months or years
from the time of any payment for the purchase of shares, all payments
during a month are totaled and deemed to have been made on the first day
of the month.
2.
A 1% CDSC may be imposed on purchases of $2 million or more of Class A
shares that are redeemed within twelve months of purchase.
3.
Management Fees and Total Annual Fund Operating Expenses have been
restated to reflect the change in management fees effective June 30, 1999;
otherwise, expense ratios are based on other Fund-level expenses for the
fiscal year ended March 31, 2000, and for Class A and Class B, the
expenses attributable to those classes that are anticipated for the
current year. Actual expenses may be greater or less than those shown.
Example
This example is intended to help you compare the cost of investing in the
shares of the Fund with the cost of investing in other mutual funds. The
example assumes that (a) you invest $10,000 in the particular Class A, Class
B, Class C or Class Y shares for each time period specified, (b) your
investment has a 5% return each year, and (c) the expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
If shares are redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $715 $1,010 $1,327 $2,221
Class B Shares $624 $ 991 $1,285 $2,353(1)
Class C Shares $324 $ 691 $1,185 $2,544
Class Y Shares $135 $ 421 $ 729 $1,601
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $715 $1,010 $1,327 $2,221
Class B Shares $224 $ 691 $1,185 $2,353(1)
Class C Shares $224 $ 691 $1,185 $2,544
Class Y Shares $135 $ 421 $ 729 $1,601
(1) Reflects annual operating expenses of Class A after conversion of Class B
shares into Class A shares 8 years after the month in which the shares
were purchased.
AN OVERVIEW OF THE FUND
GOALS
W&R International Growth Fund
seeks, as a primary goal, long-term appreciation of capital. As a secondary
goal, the Fund seeks current income.
Principal Strategies
International Growth Fund seeks to achieve its goals by investing primarily
in common stocks of foreign companies that WRIMCO believes have the potential
for long-term growth represented by economic expansion within a country or
region and/or are represented by the privatization and/or restructuring of
particular industries. The Fund emphasizes growth stocks, which are
securities of companies whose earnings WRIMCO believes are likely to grow
faster than the economy. The Fund primarily invests in issuers of developed
countries, and the Fund may invest in companies of any size.
WRIMCO may look at a number of factors in selecting securities for the Fund's
portfolio. These include the issuer's:
_ growth potential;
_ earnings potential;
_ management;
_ industry position; and
_ applicable economic and market conditions.
Generally, in determining whether to sell a security, WRIMCO uses the same
type of analysis that it uses in buying securities of that type. For example,
WRIMCO may sell a security if it believes the security has ceased to offer
significant growth potential. WRIMCO may also sell a security to take
advantage of more attractive investment opportunities or to raise cash.
Principal Risks of Investing in the Fund
Because International Growth Fund owns different types of investments, a
variety of factors can affect its investment performance, such as:
_ changes in foreign exchange rates, which may affect the value of the
securities the Fund holds;
_ adverse stock and bond market conditions, sometimes in response to general
economic or industry news, that may cause the prices of the Fund's
holdings to fall as part of a broad market decline;
_ the earnings performance, credit quality and other conditions of the
issuers whose securities the Fund holds; and
_ WRIMCO's skill in evaluating and selecting securities for the Fund.
Investing in foreign securities presents additional risks, such as currency
fluctuations and political or economic conditions affecting the foreign
country. Accounting and disclosure standards also differ from country to
country, which makes obtaining reliable research information more difficult.
There is the possibility that, under unusual international monetary or
political conditions, the Fund's assets might be more volatile than would be
the case with other investments.
Market risk for small or medium sized companies may be greater than that for
large companies. For example, smaller companies are more likely to have
limited financial resources, limited product lines or inexperienced
management.
As with any mutual fund, the value of the Fund's shares will change and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Who May Want to Invest
International Growth Fund is designed for investors seeking long-term
appreciation of capital by investing primarily in securities issued by
foreign companies. You should consider whether the Fund fits your investment
objectives.
PERFORMANCE
International Growth Fund
The bar chart and performance table below provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual total returns
for the periods shown compare with those of a broad measure of market
performance and a peer group average.
_ The bar chart presents the average annual total returns for Class C and
shows how performance has varied from year to year.
_ The bar chart does not reflect any deferred sales charge that you may be
required to pay upon redemption of the Fund's Class C shares. If the
deferred sales charge was included, the returns would be less than those
shown.
_ The performance table shows Class C and Class Y average annual total
returns and compares them to the market indicators listed. No performance
information is provided for Class A and Class B shares since these classes
do not have annual returns for at least one calendar year.
_ The bar chart and the performance table assume payment of dividends and
other distributions in shares. As with all mutual funds, the Fund's past
performance does not necessarily indicate how it will perform in the
future.
Note that the performance information in the bar chart and performance table
is based on calendar-year periods, while the information shown in the
Financial Highlights section of this Prospectus and in the Fund's shareholder
reports is based on the Fund's fiscal year.
CHART OF YEAR-BY-YEAR RETURNS
as of December 31 each year (%)1
1993 3.62%
1994 0.12%
1995 8.34%
1996 19.11%
1997 16.89%
1998 31.72%
1999 88.66%
In the period shown in the chart, the highest quarterly return was 67.07%
(the fourth quarter of 1999) and the lowest quarterly return was -18.21% (the
third quarter of 1998). The Class C return for the year through March 31,
2000, was 8.88%.
1.
The returns shown are based on the performance of the Fund's prior Class
B. On March 24, 2000, that Class B was combined with and redesignated as
Class C, which had commenced operations on October 4, 1999.
Average Annual Total Returns
as of December 31, 1999 (%) 1 Year 5 Years Life of Class2
Class C Shares of
International Growth Fund1 88.66% 30.25% 19.91%
Morgan Stanley Capital
International E.A.FE. Index 26.96% 12.83% 13.55%
Lipper International
Funds Universe Average 40.80% 15.05% 14.91%
Class Y Shares of
International Growth Fund 90.62% 37.56%
Morgan Stanley Capital
International E.A.FE. Index 26.96% 12.83% 13.24%
Lipper International
Funds Universe Average 40.80% 15.05% 16.81%
The index shown is a broad-based, securities market index that is unmanaged.
The Lipper average is a composite of mutual funds with goals similar to the
goals of the Fund.
1.
The returns shown for Class C are based on the performance of the Fund's
prior Class B. On March 24, 2000, that Class B was combined with and
redesignated as Class C, which had commenced operations on October 4,
1999. The prior Class B's performance has been adjusted to reflect the
current CDSC structure applicable to Class C.
2.
Since September 21, 1992, for Class C shares (based on the prior Class B
shares) and December 29, 1995, for Class Y shares. Because each class
commenced operations on a date other than at the end of a month, and
partial month calculations of the performance of the above index are not
available, index performance is calculated from September 30, 1992, and
December 31, 1995, respectively.
FEES AND EXPENSES
International Growth Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
Shareholder Fees
(fees paid directly from Class A Class B Class C Class Y
your investment) Shares Shares Shares Shares
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) 5.75% None None None
Maximum Deferred
Sales Charge (Load)1
(as a percentage of lesser
of amount invested or
redemption value) None2 5% 1% None
Annual Fund Operating Expenses3
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees 0.85% 0.85% 0.85% 0.85%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses 0.52% 0.52% 0.52% 0.35%
Total Annual Fund
Operating Expenses 1.62% 2.37% 2.37% 1.45%
1.
The CDSC, which is imposed on the lesser of amount invested or redemption
value of Class B shares, declines from 5% for redemptions made within the
first year of purchase, to 4% for redemptions made within the second year,
to 3% for redemptions made within the third and fourth years, to 2% for
redemptions made within the fifth year, to 1% for redemptions made within
the sixth year and to 0% for redemptions made after the sixth year. For
Class C shares, a 1% CDSC applies to the lesser of amount invested or
redemption value of Class C shares redeemed within twelve months after
purchase. Solely for purposes of determining the number of months or years
from the time of any payment for the purchase of shares, all payments
during a month are totaled and deemed to have been made on the first day
of the month.
2.
A 1% CDSC may be imposed on purchases of $2 million or more of Class A
shares that are redeemed within twelve months of purchase.
3.
Management Fees and Total Annual Fund Operating Expenses have been
restated to reflect the change in management fees effective June 30, 1999;
otherwise, expense ratios are based on other Fund-level expenses for the
fiscal year ended March 31, 2000, and for Class A and Class B, the
expenses attributable to those classes that are anticipated for the
current year. Actual expenses may be greater or less than those shown.
Example
This example is intended to help you compare the cost of investing in the
shares of the Fund with the cost of investing in other mutual funds. The
example assumes that (a) you invest $10,000 in the particular Class A, Class
B, Class C or Class Y shares for each time period specified, (b) your
investment has a 5% return each year, and (c) the expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
If shares are redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $730 $1,057 $1,406 $2,386
Class B Shares $640 $1,039 $1,365 $2,517(1)
Class C Shares $340 $ 739 $1,265 $2,706
Class Y Shares $148 $ 459 $ 792 $1,735
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $730 $1,057 $1,406 $2,386
Class B Shares $240 $ 739 $1,265 $2,517(1)
Class C Shares $240 $ 739 $1,265 $2,706
Class Y Shares $148 $ 459 $ 792 $1,735
(1) Reflects annual operating expenses of Class A after conversion of Class B
shares into Class A shares 8 years after the month in which the shares
were purchased.
AN OVERVIEW OF THE FUND
GOAL
W&R Large Cap Growth Fund
seeks the appreciation of your investment.
Principal Strategies
Large Cap Growth Fund seeks to achieve its goal by investing primarily in a
diversified portfolio of common stock issued by growth-oriented large to
medium sized U.S. and foreign companies that WRIMCO believes have
appreciation possibilities. Growth stocks are those whose earnings WRIMCO
believes are likely to grow faster than the economy. The Fund may invest in
companies of any size.
WRIMCO attempts to select securities with appreciation possibilities by
looking at many factors. These include:
_ changes in economic and political conditions;
_ the short-term and long-term outlook for the industry being analyzed;
_ the management capability of the company being considered; and
_ the company's market position, product line, technological position and
prospects for increased earnings.
WRIMCO may also analyze the demands of investors for the security relative to
its price. Securities may be chosen when WRIMCO anticipates a development
that might have an effect on the value of a security.
Generally, in determining whether to sell a security, WRIMCO uses the same
type of analysis that it uses in buying securities. For example, WRIMCO may
sell a security if it determines that the security no longer presents
sufficient appreciation potential. WRIMCO may also sell a security to take
advantage of more attractive investment opportunities or to raise cash.
Principal Risks of Investing in the Fund
Because Large Cap Growth Fund owns different types of investments, a variety
of factors can affect its investment performance, such as:
_ the earnings performance, credit quality and other conditions of the
companies whose securities the Fund holds;
_ the mix of securities in the Fund's portfolio, particularly the relative
weightings in, and exposure to, different sectors of the economy;
_ adverse stock and bond market conditions, sometimes in response to general
economic or industry news, that may cause the prices of the Fund's
holdings to fall as part of a broad market decline; and
_ the skill of WRIMCO in evaluating and selecting securities for the Fund.
Market risk for medium sized companies may be greater than the market risk
for large companies. Such companies are more likely to have limited financial
resources and inexperienced management. As well, stock of these companies may
experience volatile trading and price fluctuations.
As well, the Fund may invest a portion of its assets in foreign securities.
Foreign securities present additional risks such as currency fluctuations and
political or economic conditions affecting the foreign countries.
As with any mutual fund, the value of the Fund's shares will change and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Who May Want to Invest
Large Cap Growth Fund is designed for investors seeking long-term investment
growth. You should consider whether the Fund fits your particular investment
objectives.
PERFORMANCE
Large Cap Growth Fund
The Fund has not been in operation for a full calendar year, therefore it
does not have performance information of at least one calendar year to
include a bar chart or performance table.
FEES AND EXPENSES
Large Cap Growth Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
Shareholder Fees
(fees paid directly from Class A Class B Class C Class Y
your investment) Shares Shares Shares Shares
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) 5.75% None None None
Maximum Deferred
Sales Charge (Load)1
(as a percentage of lesser
of amount invested or
redemption value) None2 5% 1% None
Annual Fund Operating Expenses3
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees 0.70% 0.70% 0.70% 0.70%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses 0.18% 0.18% 0.18% 0.18%
Total Annual Fund
Operating Expenses 1.13% 1.88% 1.88% 1.13%
1.
The CDSC, which is imposed on the lesser of amount invested or redemption
value of Class B shares, declines from 5% for redemptions made within the
first year of purchase, to 4% for redemptions made within the second year,
to 3% for redemptions made within the third and fourth years, to 2% for
redemptions made within the fifth year, to 1% for redemptions made within
the sixth year and to 0% for redemptions made after the sixth year. For
Class C shares, a 1% CDSC applies to the lesser of amount invested or
redemption value of Class C shares redeemed within twelve months after
purchase. Solely for purposes of determining the number of months or years
from the time of any payment for the purchase of shares, all payments
during a month are totaled and deemed to have been made on the first day
of the month.
2.
A 1% CDSC may be imposed on purchases of $2 million or more of Class A
shares that are redeemed within twelve months of purchase.
3.
The expenses shown for Management Fees reflect the maximum annual fee
payable; however, WRIMCO has voluntarily agreed to waive its investment
management fee on any day if the Fund's net assets are less than $25
million, subject to WRIMCO's right to change or terminate this waiver. The
expense ratios for Other Expenses are based on estimated amounts for the
current fiscal year. Actual expenses may be greater or less than those
shown.
Example
This example is intended to help you compare the cost of investing in the
shares of the Fund with the cost of investing in other mutual funds. The
example assumes that (a) you invest $10,000 in the particular Class A, Class
B, Class C or Class Y shares for each time period specified, (b) your
investment has a 5% return each year, and (c) the expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
If shares are redeemed at end of period: 1 Year 3 Years
Class A Shares $684 $913
Class B Shares $591 $891
Class C Shares $291 $591
Class Y Shares $115 $359
If shares are not redeemed at end of period: 1 Year 3 Years
Class A Shares $684 $913
Class B Shares $191 $591
Class C Shares $191 $591
Class Y Shares $115 $359
AN OVERVIEW OF THE FUND
GOAL
W&R Mid Cap Growth Fund
seeks the growth of your investment.
Principal Strategies
Mid Cap Growth Fund seeks to achieve its goal by investing primarily in
common stocks of U.S. and foreign companies whose market capitalizations are
within the range of capitalizations of companies comprising the Russell Mid-
Cap Growth Index ("Russell Mid-Cap") and that WRIMCO believes offer above-
average growth potential.
In selecting companies, WRIMCO may look at a number of factors, such as:
_ new or innovative products or services;
_ adaptive or creative management;
_ strong financial and operational capabilities to sustain growth;
_ market potential; and
_ profit potential.
Generally, in determining whether to sell a stock, WRIMCO uses the same type
of analysis that it uses when buying stocks. For example, WRIMCO may sell a
holding if the company no longer meets the desired capitalization range or if
the company position weakens in the industry or market. WRIMCO may also sell
a security to take advantage of more attractive investment opportunities or
to raise cash.
Principal Risks of Investing in the Fund
Because Mid Cap Growth Fund owns different types of investments, a variety of
factors can affect its investment performance, such as:
_ the earnings performance, credit quality and other conditions of the
companies whose securities the Fund holds;
_ adverse stock and bond market conditions, sometimes in response to general
economic or industry news, that may cause the prices of the Fund's
holdings to fall as part of a broad market decline;
_ the mix of securities in the Fund's portfolio, particularly the relative
weightings in, and exposure to, different sectors of the economy; and
_ the skill of WRIMCO in evaluating and selecting securities for the Fund.
Market risk for medium sized companies may be greater than that for large
companies. Medium sized companies may have limited financial resources and
less experienced management compared to large companies. Stocks of medium
sized companies may experience volatile trading and price fluctuations.
Also, the Fund may invest, to a lesser extent, in foreign securities, which
present additional risks such as currency fluctuations and political or
economic conditions affecting the foreign country.
As with any mutual fund, the value of the Fund's shares will change and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Who May Want to Invest
Mid Cap Growth Fund is designed for investors who are willing to accept
greater risks than are present with many other mutual funds. The Fund is not
intended for investors who desire assured income and conservation of capital.
You should consider whether the Fund fits your particular investment
objectives.
PERFORMANCE
Mid Cap Growth Fund
The Fund has not been in operation for a full calendar year, therefore it
does not have performance information of at least one calendar year to
include a bar chart or performance table.
FEES AND EXPENSES
Mid Cap Growth Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
Shareholder Fees
(fees paid directly from Class A Class B Class C Class Y
your investment) Shares Shares Shares Shares
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) 5.75% None None None
Maximum Deferred
Sales Charge (Load)1
(as a percentage of lesser
of amount invested or
redemption value) None2 5% 1% None
Annual Fund Operating Expenses3
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets)
Management Fees 0.85% 0.85% 0.85% 0.85%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses 0.26% 0.56% 0.47% 0.20%
Total Annual Fund
Operating Expenses 1.36% 2.41% 2.32% 1.30%
1.
The CDSC, which is imposed on the lesser of amount invested or redemption
value of Class B shares, declines from 5% for redemptions made within the
first year of purchase, to 4% for redemptions made within the second year,
to 3% for redemptions made within the third and fourth years, to 2% for
redemptions made within the fifth year, to 1% for redemptions made within
the sixth year and to 0% for redemptions made after the sixth year. For
Class C shares, a 1% CDSC applies to the lesser of amount invested or
redemption value of Class C shares redeemed within twelve months after
purchase. Solely for purposes of determining the number of months or years
from the time of any payment for the purchase of shares, all payments
during a month are totaled and deemed to have been made on the first day
of the month.
2.
A 1% CDSC may be imposed on purchases of $2 million or more of Class A
shares that are redeemed within twelve months of purchase.
3.
The expenses shown for Management Fees reflect the maximum annual fee
payable; however, WRIMCO has voluntarily agreed to waive its investment
management fee on any day if the Fund's net assets are less than $25
million, subject to WRIMCO's right to change or terminate this waiver. The
expense ratios for Other Expenses are based on estimated amounts for the
current fiscal year. Actual expenses may be greater or less than those
shown.
Example
This example is intended to help you compare the cost of investing in the
shares of the Fund with the cost of investing in other mutual funds. The
example assumes that (a) you invest $10,000 in the particular Class A, Class
B, Class C or Class Y shares for each time period specified, (b) your
investment has a 5% return each year, and (c) the expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
If shares are redeemed at end of period: 1 Year 3 Years
Class A Shares $706 $ 981
Class B Shares $644 $1,051
Class C Shares $335 $ 724
Class Y Shares $132 $ 412
If shares are not redeemed at end of period: 1 Year 3 Years
Class A Shares $706 $ 981
Class B Shares $244 $ 751
Class C Shares $235 $ 724
Class Y Shares $132 $ 412
AN OVERVIEW OF THE FUND
GOAL
W&R Science and Technology Fund
seeks long-term capital growth.
Principal Strategies
Science and Technology Fund seeks to achieve its goal of growth by
concentrating its investments primarily in the equity securities of U.S. and
foreign science and technology companies. Science and technology companies
are companies whose products, processes or services, in the opinion of
WRIMCO, are being or are expected to be significantly benefited by the use or
commercial application of scientific or technological developments or
discoveries. The Fund may invest in companies of any size. The Fund
emphasizes growth potential in selecting stocks; that is, WRIMCO seeks
companies in which earnings are likely to grow faster than the economy.
WRIMCO may look at a number of factors in selecting securities for the Fund's
portfolio. These include the issuer's:
_ growth potential;
_ earnings potential;
_ management;
_ industry position; and
_ applicable economic and market conditions.
Generally, in determining whether to sell a stock, WRIMCO uses the same type
of analysis that it uses in buying stocks in order to determine whether the
security has ceased to offer significant growth potential. WRIMCO may also
sell a security to take advantage of more attractive investment opportunities
or to raise cash.
Principal Risks of Investing in the Fund
Because Science and Technology Fund owns different types of investments, a
variety of factors can affect its investment performance, such as:
_ the mix of securities in the Fund's portfolio, particularly the relative
weightings in, and exposure to, different sectors of the science and
technology industries;
_ rapid obsolescence of products or processes of companies in which the Fund
invests;
_ government regulation in the science and technology industry;
_ the earnings performance, credit quality and other conditions of the
companies whose securities the Fund holds;
_ adverse stock and bond market conditions, sometimes in response to general
economic or industry news, that may cause the prices of the Fund's
holdings to fall as part of a broad market decline; and
_ WRIMCO's skill in evaluating and selecting securities for the Fund.
Market risk for small to medium sized companies may be greater than that for
large companies. Smaller companies are more likely to have limited financial
resources and inexperienced management. As well, stocks of smaller companies
may experience volatile trading and price fluctuations.
The Fund may invest, to a lesser extent, in foreign securities. Investments
in foreign securities present additional risks such as currency fluctuations
and political or economic conditions affecting the foreign country.
As with any mutual fund, the value of the Fund's shares will change and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Who May Want to Invest
Science and Technology Fund is designed for investors who seek long-term
capital growth by investing in an actively managed Fund concentrating in
securities of science and technology companies. This Fund is not suitable for
all investors. You should consider whether the Fund fits your investment
objectives.
PERFORMANCE
Science and Technology Fund
The bar chart and performance table below provide some indication of the
risks of investing in the Fund by showing the Fund's performance and by
showing how the Fund's average annual total returns for the periods shown
compare with those of a broad measure of market performance and a peer group
average.
_ The bar chart presents the average annual total returns for Class C and
shows how performance has varied from year to year.
_ The bar chart does not reflect any deferred sales charge that you may be
required to pay upon redemption of the Fund's Class C shares. If the
deferred sales charge was included, the returns would be less than those
shown.
_ The performance table shows the Class C and Class Y average annual total
returns and compares them to the market indicators listed. No performance
information is provided for Class A and Class B shares since these classes
do not have annual returns for a full calendar year.
_ The bar chart and the performance table assume payment of dividends and
other distributions in shares. As with all mutual funds, the Fund's past
performance does not necessarily indicate how it will perform in the
future.
Note that the performance information in the bar chart and performance table
is based on calendar-year periods, while the information shown in the
Financial Highlights section of this Prospectus and in the Fund's shareholder
reports is based on the Fund's fiscal year.
CHART OF RETURNS
as of December 31 each year (%)1
1998 44.03%
1999 177.01%2
In the period shown in the chart, the highest quarterly return was 82.61%
(the fourth quarter of 1999) and the lowest quarterly return was -12.63% (the
third quarter of 1998). The Class C return for the year through March 31,
2000, was 11.16%.
1.
The returns shown are based on the performance of the Fund's prior Class
B. On March 24, 2000, that Class B was combined with and redesignated as
Class C, which had commenced operations on October 4, 1999.
2.
A substantial portion of the Fund's returns during recent periods is
attributable to investments in initial public offerings (IPOs). No
assurance can be given that the Fund will continue to be able to invest in
IPOs to the same extent as it has in the past or that future IPOs in which
the Fund invests will have as equally benefical an impact on performance.
Average Annual Total Returns
as of December 31, 1999 (%) 1 Year Life of Class2
Class C Shares of
Science and Technology Fund1 177.01% 78.78%
Goldman Sachs Technology
Industry Composite Index 88.86% 53.80%
S&P 400 Industrials Index 26.05% 24.64%
Lipper Science and Technology
Funds Universe Average 134.77% 59.78%
Class Y Shares of
Science and Technology Fund 175.81% 117.27%
Goldman Sachs Technology
Industry Composite Index 88.86% 84.62%
S&P 400 Industrials Index 26.05% 26.27%
Lipper Science and Technology
Funds Universe Average 134.77% 99.09%
The indexes shown are broad-based, securities market indexes that are
unmanaged. The Goldman Sachs Technology Industry Composite Index will replace
the S&P 400 Industrials Index. WRIMCO believes that the Goldman Sachs
Technology Industry Composite Index provides a more accurate basis for
comparing the Fund's performance to the types of securities in which the
Fund invests. Both indexes are presented for comparison purposes. The Lipper
average is a composite of mutual funds with goals similar to the goal of the
Fund.
1.
The returns shown for Class C are based on the performance of the Fund's
prior Class B. On March 24, 2000, that Class B was combined with and
redesignated as Class C, which had commenced operations on October 4,
1999. The prior Class B's performance has been adjusted to reflect the
current CDSC structure applicable to Class C.
2.
Since July 31, 1997, for Class C shares (based on the prior Class B
shares) and June 9, 1998, for Class Y shares. Because Class Y commenced
operations on a date other than at the end of a month, and partial month
calculations of the performance of the above indexes are not available,
index performance is calculated from June 30, 1998.
FEES AND EXPENSES
Science and Technology Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
Shareholder Fees
(fees paid directly from Class A Class B Class C Class Y
your investment) Shares Shares Shares Shares
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) 5.75% None None None
Maximum Deferred
Sales Charge (Load)1
(as a percentage of lesser
of amount invested or
redemption value) None2 5% 1% None
Annual Fund Operating Expenses3
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees 0.85% 0.85% 0.85% 0.85%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 0.99% 0.25%
Other Expenses 0.38% 0.38% 0.38% 0.30%
Total Annual Fund
Operating Expenses 1.48% 2.23% 2.22% 1.40%
1.
The CDSC, which is imposed on the lesser of amount invested or redemption
value of Class B shares, declines from 5% for redemptions made within the
first year of purchase, to 4% for redemptions made within the second year,
to 3% for redemptions made within the third and fourth years, to 2% for
redemptions made within the fifth year, to 1% for redemptions made within
the sixth year and to 0% for redemptions made after the sixth year. For
Class C shares, a 1% CDSC applies to the lesser of amount invested or
redemption value of Class C shares redeemed within twelve months after
purchase. Solely for purposes of determining the number of months or years
from the time of any payment for the purchase of shares, all payments
during a month are totaled and deemed to have been made on the first day
of the month.
2.
A 1% CDSC may be imposed on purchases of $2 million or more of Class A
shares that are redeemed within twelve months of purchase.
3.
Management Fees and Total Annual Fund Operating Expenses have been
restated to reflect the change in management fees effective June 30, 1999;
otherwise, expense ratios are based on other Fund-level expenses for the
fiscal year ended March 31, 2000, and for Class A and Class B, the
expenses attributable to those classes that are anticipated for the
current year. Actual expenses may be greater or less than those shown.
Example
This example is intended to help you compare the cost of investing in the
shares of the Fund with the cost of investing in other mutual funds. The
example assumes that (a) you invest $10,000 in the particular Class A, Class
B, Class C or Class Y shares for each time period specified, (b) your
investment has a 5% return each year, and (c) the expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
If shares are redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $717 $1,016 $1,336 $2,242
Class B Shares $626 $ 997 $1,295 $2,373(1)
Class C Shares $325 $ 694 $1,190 $2,554
Class Y Shares $143 $ 443 $ 766 $1,680
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $717 $1,016 $1,336 $2,242
Class B Shares $226 $ 697 $1,195 $2,373(1)
Class C Shares $225 $ 694 $1,190 $2,554
Class Y Shares $143 $ 443 $ 766 $1,680
1.
Reflects annual operating expenses of Class A after conversion of Class B
shares into Class A shares 8 years after the month in which the shares
were purchased.
AN OVERVIEW OF THE FUND
GOAL
W&R Small Cap Growth Fund
seeks growth of capital.
Principal Strategies
Small Cap Growth Fund (formerly, Growth Fund) seeks to achieve its goal by
investing primarily in common stocks of domestic and foreign companies whose
market capitalizations are within the range of capitalizations of companies
included in the Lipper, Inc. Small Cap Category ("small cap stocks").
The Fund emphasizes relatively new or unseasoned companies in their early
stages of development or smaller companies positioned in new or emerging
industries where there is opportunity for rapid growth.
In selecting companies, WRIMCO seeks companies whose earnings, it believes,
are likely to grow faster than the economy. WRIMCO may look at a number of
factors relating to a company, such as:
_ aggressive or creative management;
_ technological or specialized expertise;
_ new or unique products or services; and
_ entry into new or emerging industries.
In general, WRIMCO may sell a security if it determines that the stock no
longer offers significant growth potential, which may be due to a change in
the business or management of the company or a change in the industry of the
company. As well, WRIMCO may sell a security to take advantage of more
attractive investment opportunities or to raise cash.
Principal Risks of Investing in the Fund
Because Small Cap Growth Fund owns different types of securities, a variety
of factors can affect its investment performance, such as:
_ the earnings performance, credit quality and other conditions of the
companies whose securities the Fund holds;
_ the mix of securities in the Fund, particularly the relative weightings
in, and exposure to, different sectors and industries;
_ adverse stock and bond market conditions, sometimes in response to general
economic or industry news, that may cause the prices of the Fund's
holdings to fall as part of a broad market decline; and
_ WRIMCO's skill in evaluating and selecting securities for the Fund.
Market risk for small companies may be greater than that for medium and large
companies. Smaller companies are more likely to have limited financial
resources and inexperienced management. Stock of smaller companies may also
experience volatile trading and price fluctuations.
Due to the nature of the Fund's permitted investments, primarily the small
cap stocks of new and/or unseasoned companies, companies in their early
stages of development or smaller companies in new or emerging industries, the
Fund may be subject to the following additional risks:
_ products offered may fail to sell as anticipated;
_ a period of unprofitability may be experienced before a company develops
the expertise and clientele to succeed in an industry;
_ the company may never achieve profitability; and
_ economic, market and technological factors may cause the new industry
itself to lose favor with the public.
As with any mutual fund, the value of the Fund's shares will change and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Who May Want to Invest
Small Cap Growth Fund is designed for investors willing to accept greater
risks than are present with many other mutual funds. It is not intended for
those investors who desire assured income and conservation of capital. You
should consider whether the Fund fits your particular investment objectives.
PERFORMANCE
Small Cap Growth Fund
The bar chart and performance table below provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual total returns
for the periods shown compare with those of a broad measure of market
performance and a peer group average.
- The bar chart presents the average annual total returns for Class C and
shows how performance has varied from year to year.
_ The bar chart does not reflect any deferred sales charge that you may be
required to pay upon redemption of the Fund's Class C shares. If the
deferred sales charge was included, the returns would be less than those
shown.
_ The performance table shows Class C and Class Y average annual total
returns and compares them to the market indicators listed. No performance
information is provided for Class A and Class B shares since these classes
do not have annual returns for at least one calendar year.
_ The bar chart and the performance table assume payment of dividends and
other distributions in shares. As with all mutual funds, the Fund's past
performance does not necessarily indicate how it will perform in the
future.
Note that the performance information in the bar chart and performance table
is based on calendar-year periods, while the information shown in the
Financial Highlights section of this Prospectus and in the Fund's shareholder
reports is based on the Fund's fiscal year.
CHART OF YEAR-BY-YEAR RETURNS
as of December 31 each year (%)1
1993 24.20%
1994 12.75%
1995 32.14%
1996 2.30%
1997 21.12%
1998 44.57%
1999 61.42%
In the period shown in the chart, the highest quarterly return was 40.97%
(the fourth quarter of 1999) and the lowest quarterly return was -13.74% (the
third quarter of 1998). The Class C return for the year through March 31,
2000, was 10.41%.
1.
The returns shown are based on the performance of the Fund's prior Class
B. On March 24, 2000, that Class B was combined with and redesignated as
Class C, which had commenced operations on October 4, 1999.
Average Annual Total Returns
as of December 31, 1999 (%) 1 Year 5 Years Life of Class2
Class C Shares of
Small Cap Growth Fund1 61.42% 30.75% 28.84%
Russell 2000 Growth Index 43.08% 18.95% 16.94%
Nasdaq Industrials Index 71.67% 24.33% 19.35%
Class Y Shares of
Small Cap Growth Fund 62.79% 31.67%
Russell 2000 Growth Index 43.08% 18.95% 16.12%
Nasdaq Industrials Index 71.67% 24.33% 23.43%
The indexes shown are broad-based, securities market indexes that are
unmanaged. The Russell 2000 Growth Index will replace the Nasdaq Industrials
Index. WRIMCO believes that the Russell 2000 Growth Index provides a more
accurate basis for comparing the Fund's performance to the types of
securities in which the Fund invests. Both indexes are presented for
comparison purposes.
1.
The returns shown for Class C are based on the performance of the Fund's
prior Class B. On March 24, 2000, that Class B was combined with and
redesignated as Class C, which had commenced operations on October 4,
1999. The prior Class B's performance has been adjusted to reflect the
current CDSC structure applicable to Class C.
2.
Since September 21, 1992 for Class C shares (based on the prior Class B
shares) and December 29, 1995 for Class Y shares. Because each class
commenced operations on a date other than at the end of a month, and
partial month calculations of the performance of the above indexes are not
available, index performance is calculated from September 30, 1992 and
December 31, 1995, respectively.
FEES AND EXPENSES
Small Cap Growth Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
Shareholder Fees
(fees paid directly from Class A Class B Class C Class Y
your investment) Shares Shares Shares Shares
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) 5.75% None None None
Maximum Deferred
Sales Charge (Load)1
(as a percentage of lesser
of amount invested or
redemption value) None2 5% 1% None
Annual Fund Operating Expenses3
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees 0.85% 0.85% 0.85% 0.85%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses 0.26% 0.26% 0.26% 0.26%
Total Annual Fund
Operating Expenses 1.36% 2.11% 2.11% 1.36%
1.
The CDSC, which is imposed on the lesser of amount invested or redemption
value of Class B shares, declines from 5% for redemptions made within the
first year of purchase, to 4% for redemptions made within the second year,
to 3% for redemptions made within the third and fourth years, to 2% for
redemptions made within the fifth year, to 1% for redemptions made within
the sixth year and to 0% for redemptions made after the sixth year. For
Class C shares, a 1% CDSC applies to the lesser of amount invested or
redemption value of Class C shares redeemed within twelve months after
purchase. Solely for purposes of determining the number of months or years
from the time of any payment for the purchase of shares, all payments
during a month are totaled and deemed to have been made on the first day
of the month.
2.
A 1% CDSC may be imposed on purchases of $2 million or more of Class A
shares that are redeemed within twelve months of purchase.
3.
Management Fees and Total Annual Fund Operating Expenses have been
restated to reflect the change in management fees effective June 30, 1999;
otherwise, expense ratios are based on other Fund-level expenses for the
fiscal year ended March 31, 2000, and for Class A and Class B, the
expenses attributable to those classes that are anticipated for the
current year. Actual expenses may be greater or less than those shown.
Example
This example is intended to help you compare the cost of investing in the
shares of the Fund with the cost of investing in other mutual funds. The
example assumes that (a) you invest $10,000 in the particular Class A, Class
B, Class C or Class Y shares for each time period specified, (b) your
investment has a 5% return each year, and (c) the expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
If shares are redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $706 $981 $1,277 $2,116
Class B Shares $614 $961 $1,234 $2,248(1)
Class C Shares $314 $661 $1,134 $2,441
Class Y Shares $138 $431 $ 745 $1,635
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $706 $981 $1,277 $2,116
Class B Shares $214 $661 $1,134 $2,248(1)
Class C Shares $214 $661 $1,134 $2,441
Class Y Shares $138 $431 $ 745 $1,635
(1) Reflects annual operating expenses of Class A after conversion of Class B
shares into Class A shares 8 years after the month in which the shares
were purchased.
AN OVERVIEW OF THE FUND
GOAL
W&R Tax-Managed Equity Fund
seeks long-term growth of capital while minimizing taxable gains and income
to shareholders.
Principal Strategies
Tax-Managed Equity Fund seeks to achieve its goal by investing primarily in a
diversified portfolio of common stocks of U.S. and foreign companies that
WRIMCO considers to be high in quality and attractive in their long-term
investment potential. The Fund seeks stocks that are favorably priced in
relation to their fundamental value and will likely grow over time. While the
Fund typically invests in the common stock of large to medium sized U.S.
companies, it may invest in companies of any size, any industry or any
country in order to achieve its goal.
WRIMCO manages the Fund using an investment strategy that is sensitive to the
potential impact of Federal income tax on shareholders' investment returns.
The Fund's tax-sensitive investment strategy is intended to lead to lower
distributions of income and realized capital gains than funds managed without
regard to Federal income tax consequences.
In selecting companies, WRIMCO typically invests for the long term and
chooses securities that it believes offer strong opportunities for long-term
growth of capital and that are attractively valued. While WRIMCO primarily
invests in growth stocks, it may also purchase value stocks. Value stocks are
those that WRIMCO believes are currently selling below their true worth.
When deciding to sell a security, WRIMCO considers the negative tax impact of
realized capital gains and, if applicable, the positive tax impact of
realizing capital losses. However, WRIMCO may sell a security at a realized
gain if it determines that the potential tax cost is outweighed by the risk
of owning the security, or if more attractive investment opportunities are
available. In addition, redemptions by shareholders may force the Fund to
sell securities at an inappropriate time, potentially resulting in realized
gains.
Principal Risks of Investing in the Fund
Because Tax-Managed Equity Fund owns different types of investments, a
variety of factors can affect its investment performance, such as:
_ the skill of WRIMCO in evaluating and selecting securities for the Fund;
_ the earnings performance, credit quality and other conditions of the
companies whose securities the Fund holds;
_ the mix of securities in the Fund, particularly the relative weightings
in, and exposure to, different sectors and industries that may result in
performance less favorable than another investment mix might have
produced;
_ adverse stock and bond market conditions, sometimes in response to general
economic or industry news, that may cause the prices of the Fund's
holdings to fall as part of a broad market decline; and
_ the Fund's tax-sensitive investment strategy not limiting taxable income
and realized capital gains as contemplated.
Market risk for small companies may be greater than that for medium and large
companies. Smaller companies are more likely to have limited financial
resources and inexperienced management. Stock of smaller companies, and
growth stock in general, may also experience volatile trading and price
fluctuations.
As with any mutual fund, the value of the Fund's shares will change and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Who May Want to Invest
Tax-Managed Equity Fund is designed for long-term taxable investors. If you
are investing for the short-term (less than one year), you may suffer
negative tax consequences. Market conditions may limit the Fund's ability to
generate tax losses or to avoid dividend income. While the Fund tries to
reduce the extent to which shareholders incur taxes on Fund distributions of
income and net realized gains, the Fund does expect to distribute taxable
income and/or capital gains from time to time. Investors may realize capital
gains when they sell their shares. You should consider whether the Fund fits
your particular investment objectives.
PERFORMANCE
Tax-Managed Equity Fund
The Fund has not been in operation for a full calendar year; therefore, it
does not have performance information of at least one calendar year to
include a bar chart or performance table.
FEES AND EXPENSES
Tax-Managed Equity Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
Shareholder Fees
(fees paid directly from Class A Class B Class C Class Y
your investment) Shares Shares Shares Shares
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) 5.75% None None None
Maximum Deferred
Sales Charge (Load)1
(as a percentage of lesser
of amount invested or
redemption value) None2 5% 1% None
1.
The CDSC, which is imposed on the lesser of amount invested or redemption
value of Class B shares, declines from 5% for redemptions made within the
first year of purchase, to 4% for redemptions made within the second year,
to 3% for redemptions made within the third and fourth years, to 2% for
redemptions made within the fifth year, to 1% for redemptions made within
the sixth year and to 0% for redemptions made after the sixth year. For
Class C shares, a 1% CDSC applies to the lesser of amount invested or
redemption value of Class C shares redeemed within twelve months after
purchase. Solely for purposes of determining the number of months or years
from the time of any payment for the purchase of shares, all payments
during a month are totaled and deemed to have been made on the first day
of the month.
2.
A 1% CDSC may be imposed on purchases of $2 million or more of Class A
shares that are redeemed within twelve months of purchase.
Annual Fund Operating Expenses3
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees 0.65% 0.65% 0.65% 0.65%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses 0.40% 0.40% 0.40% 0.20%
Total Annual Fund
Operating Expenses 1.30% 2.05% 2.05% 1.10%
3.
The expenses shown for Management Fees reflect the maximum annual fee
payable; however, WRIMCO has voluntarily agreed to waive its investment
management fee on any day if the Fund's net assets are less than $25
million, subject to WRIMCO's right to change or terminate this waiver. The
expense ratios for Other Expenses are based on estimated amounts for the
current fiscal year. Actual expenses may be greater or less than those
shown.
Example
This example is intended to help you compare the cost of investing in the
shares of the Fund with the cost of investing in other mutual funds. The
example assumes that (a) you invest $10,000 in the particular Class A, Class
B, Class C or Class Y shares for each time period specified, (b) your
investment has a 5% return each year, and (c) the expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
If shares are redeemed at end of period: 1 Year 3 Years
Class A Shares $700 $963
Class B Shares $608 $943
Class C Shares $308 $643
Class Y Shares $112 $350
If shares are not redeemed at end of period: 1 Year 3 Years
Class A Shares $700 $963
Class B Shares $208 $643
Class C Shares $208 $643
Class Y Shares $112 $350
AN OVERVIEW OF THE FUND
GOAL
W&R Total Return Fund
seeks to provide capital growth and income.
Principal Strategies
Total Return Fund seeks to achieve its goal by investing primarily in common
stocks of U.S. and foreign companies with dominant market positions in their
industries and with a record of paying regular dividends on common stock, or
that have the potential for capital appreciation. When WRIMCO believes that
stocks with high yields are less attractive than other common stocks, the
Fund may hold lower-yielding or non-dividend-paying common stocks because of
their prospects for capital appreciation.
WRIMCO attempts to select securities with growth and income possibilities by
looking at many factors including the company's:
_ profitability record;
_ history of improving sales and profits;
_ management;
_ leadership position in its industry;
_ stock price value; and
_ dividend payment history.
Generally, in determining whether to sell either an equity security or a debt
security, WRIMCO uses the same analysis used in order to determine if the
equity security offers opportunities for capital appreciation or if the debt
security continues to provide adequate income. WRIMCO may also sell a
security to take advantage of more attractive investment opportunities or to
raise cash.
Principal Risks of Investing in the Fund
Because Total Return Fund owns different types of investments, a variety of
factors can affect its investment performance, such as:
_ adverse stock and bond market conditions, sometimes in response to general
economic or industry news, that may cause the prices of the Fund's
holdings to fall as part of a broad market decline;
_ the earnings performance, credit quality and other conditions of the
companies whose securities the Fund holds;
_ an increase in interest rates, which may cause the value of the Fund's
fixed-income securities, especially bonds with longer maturities, to
decline; and
_ WRIMCO's skill in evaluating and selecting securities for the Fund.
Market risk for small or medium sized companies may be greater than that for
large companies. Stock of smaller companies, as well as stock of companies
with high-growth expectations reflected in their stock price, may experience
volatile trading and price fluctuations.
As with any mutual fund, the value of the Fund's shares will change and you
could lose money on your investment. An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Who May Want to Invest
Total Return Fund is designed for investors who seek capital growth and
income. You should consider whether the Fund fits your investment objectives.
PERFORMANCE
Total Return Fund
The bar chart and performance table below provide some indication of the
risks of investing in the Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual total returns
for the periods shown compare with those of a broad measure of market
performance and a peer group average.
. The bar chart presents the average annual total returns for Class C and
shows how performance has varied from year to year.
. The bar chart does not reflect any deferred sales charge that you may be
required to pay upon redemption of the Fund's Class C shares. If the
deferred sales charge was included, the returns would be less than those
shown.
. The performance table shows Class C and Class Y average annual total
returns and compares them to the market indicators listed. No performance
information is provided for Class A or Class B shares since these classes
do not have annual returns for at least one calendar year.
. The bar chart and the performance table assume payment of dividends and
other distributions in shares. As with all mutual funds, the Fund's past
performance does not necessarily indicate how it will perform in the
future.
Note that the performance information in the bar chart and performance table
is based on calendar-year periods, while the information shown in the
Financial Highlights section of this Prospectus and in the Fund's shareholder
reports is based on the Fund's fiscal year.
CHART OF YEAR-BY-YEAR RETURNS
as of December 31 each year (%)1
1993 14.03%
1994 -2.07%
1995 29.65%
1996 18.12%
1997 24.61%
1998 20.73%
1999 12.15%
In the period shown in the chart, the highest quarterly return was 17.05%
(the second quarter of 1997) and the lowest quarterly return was -7.12% (the
third quarter of 1998). The Class C return for the year through March 31,
2000, was 11.33%.
1.
The returns shown are based on the performance of the Fund's prior Class
B. On March 24, 2000, that Class B was combined with and redesignated as
Class C, which had commenced operations on October 4, 1999.
Average Annual Total Returns
as of December 31, 1999 (%) 1 Year 5 Years Life of Class2
Class C Shares of
Total Return Fund1 12.15% 20.91% 16.66%
S&P 500 Index 21.09% 28.59% 21.55%
Lipper Growth and Income
Funds Universe Average 13.76% 21.34% 16.80%
Class Y Shares of
Total Return Fund 12.96% 19.68%
S&P 500 Index 21.09% 28.59% 26.45%
Lipper Growth and Income
Funds Universe Average 13.76% 21.34% 19.03%
The index shown is a broad-based, securities market index that is unmanaged.
The Lipper average is a composite of mutual funds with goals similar to the
goal of the Fund.
1.
The returns shown for Class C are based on the performance of the Fund's
prior Class B. On March 24, 2000, that Class B was combined with and
redesignated as Class C, which had commenced operations on October 4,
1999. The prior Class B's performance has been adjusted to reflect the
current CDSC structure applicable to Class C.
2.
Since September 21, 1992 for Class C shares (based on the prior Class B
shares) and December 29, 1995 for Class Y shares. Because each class
commenced operations on a date other than at the end of a month, and
partial month calculations of the performance of the above index are not
available, index performance is calculated from September 30, 1992 and
December 31, 1995, respectively.
FEES AND EXPENSES
Total Return Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
Shareholder Fees
(fees paid directly from Class A Class B Class C Class Y
your investment) Shares Shares Shares Shares
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) 5.75% None None None
Maximum Deferred
Sales Charge (Load)1
(as a percentage of lesser
of amount invested or
redemption value) None2 5% 1% None
Annual Fund Operating Expenses3
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees 0.70% 0.70% 0.70% 0.70%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses 0.28% 0.28% 0.28% 0.22%
Total Annual Fund
Operating Expenses 1.23% 1.98% 1.98% 1.17%
1.
The CDSC, which is imposed on the lesser of amount invested or redemption
value of Class B shares, declines from 5% for redemptions made within the
first year of purchase, to 4% for redemptions made within the second year,
to 3% for redemptions made within the third and fourth years, to 2% for
redemptions made within the fifth year, to 1% for redemptions made within
the sixth year and to 0% for redemptions made after the sixth year. For
Class C shares, a 1% CDSC applies to the lesser of amount invested or
redemption value of Class C shares redeemed within twelve months after
purchase. Solely for purposes of determining the number of months or years
from the time of any payment for the purchase of shares, all payments
during a month are totaled and deemed to have been made on the first day
of the month.
2.
A 1% CDSC may be imposed on purchases of $2 million or more of Class A
shares that are redeemed within twelve months of purchase.
3.
Management Fees and Total Annual Fund Operating Expenses have been
restated to reflect the change in management fees effective June 30, 1999;
otherwise, expense ratios are based on other Fund-level expenses for the
fiscal year ended March 31, 2000, and for Class A and Class B, the
expenses attributable to those classes that are anticipated for the
current year. Actual expenses may be greater or less than those shown.
Example
This example is intended to help you compare the cost of investing in the
shares of the Fund with the cost of investing in other mutual funds. The
example assumes that (a) you invest $10,000 in the particular Class A, Class
B, Class C or Class Y shares for each time period specified, (b) your
investment has a 5% return each year, and (c) the expenses remain the same.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
If shares are redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $693 $943 $1,212 $1,978
Class B Shares $601 $921 $1,168 $2,111(1)
Class C Shares $301 $621 $1,068 $2,306
Class Y Shares $119 $372 $ 644 $1,420
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $693 $943 $1,212 $1,978
Class B Shares $201 $621 $1,068 $2,111(1)
Class C Shares $201 $621 $1,068 $2,306
Class Y Shares $119 $372 $ 644 $1,420
(1) Reflects annual operating expenses of Class A after conversion of Class B
shares into Class A shares 8 years after the month in which the shares
were purchased.
THE INVESTMENT PRINCIPLES OF THE FUNDS
Investment Goals, Principal Strategies and Other Investments
W&R Asset Strategy Fund
The goal of Asset Strategy Fund is to seek high total return over the long
term. The Fund seeks to achieve its goal by allocating its assets among a
diversified portfolio of stocks, bonds, and short-term instruments. There is
no guarantee that the Fund will achieve its goal.
Allocating assets among different types of investments allows the Fund to
take advantage of opportunities wherever they may occur, but also subjects
the Fund to the risks of a given investment type. Stock values generally
fluctuate in response to the activities of individual companies and general
market and economic conditions. The values of bonds and short-term
instruments generally fluctuate based on changes in interest rates and in the
credit quality of the issuer.
WRIMCO regularly reviews the Fund's allocation of assets and makes changes to
favor investments that it believes provide the best opportunity to achieve
the Fund's goal. Although WRIMCO uses its expertise and resources in choosing
investments and in allocating assets, WRIMCO's decisions may not always be
beneficial to the Fund.
The mix of assets in the Fund will change from time to time depending on
WRIMCO's assessment of the market for each asset class in general. The
allowable range and approximate percentage of the mix for each asset class,
as a percentage of total assets of the Fund, are listed below. Some types of
investments, such as indexed securities, can fall into more than one asset
class.
Mix Range
--------- ------
Stock class 0-100%
70%
Bond class 0-100%
25%
Short-term class 0-100%
5%
WRIMCO tries to balance the Fund's investment risks against potentially
higher total returns by reducing the stock class allocation during stock
market down cycles and increasing the stock class allocation during periods
of strongly positive market performance. Typically, WRIMCO makes asset shifts
among classes gradually over time. WRIMCO considers various factors when it
decides to sell a security, such as an individual security's performance
and/or if it is an appropriate time to vary the Fund's mix.
As a defensive measure, the Fund may increase its holdings in the bond or
short-term classes when WRIMCO believes that there is a potential bear
market, prolonged downturn in stock prices or significant loss in stock
value. WRIMCO may also, as a temporary defensive measure, invest up to all of
the Fund's assets in:
_ money market instruments rated A-1 by S&P or Prime 1 by MIS, or unrated
securities judged by WRIMCO to be of equivalent quality; or
_ precious metals.
Although WRIMCO may seek to preserve appreciation in the Fund by taking a
defensive position, doing so may prevent the Fund from achieving its
investment objective.
W&R International Growth Fund
The primary goal of the International Growth Fund is long-term capital
appreciation, with current income as a secondary goal. The Fund seeks to
achieve these goals by investing primarily in a diversified portfolio of
common stocks of foreign issuers. There is no guarantee that the Fund will
achieve its goals.
The Fund may also invest, to a lesser extent, in preferred stocks and debt
securities. The debt securities may be of any maturity and will typically be
investment grade.
Under normal conditions, the Fund invests at least 80% of its total assets in
foreign securities and at least 65% of its total assets in issuers of at
least three foreign countries. The Fund generally limits its holdings so that
no more than 75% of its total assets are invested in issuers of a single
foreign country. As well, the Fund will invest at least 65% of its total
assets in growth securities (primarily in common stock) during normal market
conditions. Growth securities are those whose earnings, WRIMCO believes, are
likely to have strong growth over several years.
When WRIMCO believes that a temporary defensive position is desirable, WRIMCO
may invest up to all of the Fund's assets in debt securities (including
commercial paper or short-term U.S. Government securities) or preferred
stocks, or both, and may also invest up to all of the Fund's assets in U.S.
securities. By taking a temporary defensive position the Fund may not achieve
its investment objectives.
W&R Large Cap Growth Fund
The goal of the Large Cap Growth Fund is the appreciation of your investment.
The Fund seeks to achieve this goal through a diversified holding of
securities, primarily those issued by large to medium sized U.S. and foreign
companies that WRIMCO believes have appreciation possibilities. There is no
guarantee that the Fund will achieve its goal. The Fund will, under normal
market conditions, invest at least 65% of its total assets in large cap
growth securities.
The Fund invests primarily in common stock but may also own, to a limited
extent, preferred stock and debt securities, typically of investment grade
and of any maturity. The Fund may also own convertible securities. As well,
the Fund may invest, to a lesser extent, in foreign securities.
At times, as a temporary defensive measure, the Fund may invest up to all of
its assets in either debt securities (which may include money market
instruments held as cash reserves) or preferred stocks or both. By taking a
temporary defensive position in either or both of these ways the Fund may not
achieve its investment objective.
W&R Mid Cap Growth Fund
The goal of the Mid Cap Growth Fund is the growth of your investment. The
Fund seeks to achieve its goal by investing primarily in a diversified
portfolio of common stocks of U.S. and foreign companies whose market
capitalizations are within the range of capitalizations of companies
comprising the Russell Mid-Cap and that WRIMCO believes offer above-average
growth potential. For this purpose, the Fund considers a company's
capitalization at the time the Fund acquires the company's securities, and
the company need not be listed in the Russell Mid-Cap. Companies whose
capitalization falls outside the range of the Russell Mid-Cap after purchase
continue to be considered medium capitalization companies for purpose of the
Fund's investment policy. There is no guarantee that the Fund will achieve
its goal. The Fund will, under normal market conditions, invest at least 65%
of its total assets in mid cap securities.
In addition to common stocks, the Fund may invest in convertible securities,
preferred stocks and debt securities of any maturity and mostly of investment
grade. The Fund may also invest up to 25% of its total assets in foreign
securities.
When WRIMCO believes that a temporary defensive position is desirable, the
Fund may invest up to all of its assets in debt securities (including
commercial paper, short-term securities issued by the U.S. Government or its
agencies or instrumentalities and other money market instruments) and/or
preferred stocks. The Fund may also use options and futures contracts for
defensive purposes. By taking a defensive position the Fund may not achieve
its investment objective.
W&R Science and Technology Fund
The goal of Science and Technology Fund is long-term capital growth. The Fund
seeks to achieve this goal by investing primarily in a diversified portfolio
of science and technology securities. Science and technology securities are
securities of companies whose products, processes or services, in WRIMCO's
opinion, are being or are expected to be significantly benefited by the use
or commercial application of scientific or technological discoveries. There
is no guarantee that the Fund will achieve its goal.
The Fund invests in such areas as:
_ aerospace and defense electronics;
_ biotechnology;
_ business machines;
_ cable and broadband access;
_ communications and electronic equipment;
_ computer software and services;
_ computer systems;
_ electronics;
_ electronic media;
_ internet and internet-related services;
_ medical devices and drugs;
_ medical and hospital supplies and services; and
_ office equipment and supplies.
The Fund primarily owns common stock; however, it may invest, to a lesser
extent, in preferred stock, debt securities and convertible securities. The
Fund may invest a limited amount of its assets in foreign securities.
Under normal economic and market conditions, the Fund will not invest more
than 20% of its total assets in securities other than those of science or
technology companies. When WRIMCO believes that a temporary defensive
position is desirable, the Fund may invest up to all of its assets in U.S.
Government securities or other debt securities, mostly of investment grade.
By taking a temporary defensive position the Fund may not achieve its
investment objective.
W&R Small Cap Growth Fund
The goal of Small Cap Growth Fund is growth of capital. The Fund seeks to
achieve its goal by investing primarily in common stocks of small
capitalization companies that are relatively new or unseasoned, companies in
their early stages of development, or smaller companies positioned in new or
emerging industries where there is an opportunity for rapid growth. The Fund
considers a company's capitalization at the time the Fund acquires the
company's common stock. Common stock of a company whose capitalization
exceeds the range of the Lipper, Inc. Small Cap Category after purchase will
not be sold solely because of its increased capitalization. There is no
guarantee that the Fund will achieve its goal.
The Fund will, under normal market conditions, invest at least 65% of its
total assets in small cap stocks. In addition to common stocks, the Fund may
also invest in securities convertible into common stocks, preferred stocks
and debt securities that are mostly of investment grade. The Fund may also
buy foreign securities; however, it may not invest more than 10% of its total
assets in foreign securities.
When WRIMCO believes that a temporary defensive position is desirable, the
Fund may invest up to all of its assets in debt securities (including
commercial paper or short-term U.S. Government securities) or preferred
stocks, or both. By taking a temporary defensive position, the Fund may not
achieve its investment objective.
W&R Tax-Managed Equity Fund
The goal of Tax-Managed Equity Fund is long-term growth of capital while
minimizing taxable gains and income to shareholders. The Fund seeks to
achieve its goal by investing primarily in a diversified portfolio of common
stocks of U.S. and foreign companies that WRIMCO considers to be high in
quality and attractive in their long-term investment potential. The Fund
seeks stocks that are favorably priced in relation to their fundamental value
and will likely grow over time.
The Fund attempts to achieve high after-tax returns for its shareholders by
balancing investment considerations and tax considerations. The Fund seeks to
minimize income distributions and distributions of realized short-term gains
(taxed as ordinary income), as well as distributions of realized long-term
gains. The Fund seeks to achieve returns primarily in the form of price
appreciation (not subject to current tax until shares are redeemed). There is
no guarantee that the Fund will achieve its goal.
WRIMCO ordinarily uses one or more of the following strategies in its
management of the Fund:
_ a long-term, low turnover approach to investing;
_ an emphasis on lower-yielding securities to require distribution of
little, if any, taxable income;
_ an attempt to avoid net realized short-term gains;
_ in the sale of portfolio securities, selection of the most tax-favored
lots; and
_ selective tax-advantaged hedging techniques as an alternative to taxable
sales.
The Fund will, under normal market conditions, invest at least 65% of its
total assets in equity securities, primarily common stocks. The Fund
emphasizes growth stocks; however, it may also invest in value stocks. In
addition to common stocks, the Fund may also invest in securities convertible
into common stocks, preferred stocks and debt securities that are mostly of
investment grade. The Fund may also buy foreign securities; however, it may
not invest more than 25% of its total assets in foreign securities.
When WRIMCO believes that a temporary defensive position is desirable, the
Fund may invest up to all of its assets in debt securities (including
commercial paper or short-term U.S. Government securities) or preferred
stocks, or both. By taking a temporary defensive position, the Fund may not
achieve its investment objective.
W&R Total Return Fund
The goal of Total Return Fund is to provide capital growth and income. The
Fund seeks to achieve its goal by investing primarily in a diversified
portfolio of common stocks, or securities convertible into common stocks, of
U.S. and foreign companies that have a record of paying regular dividends or
have the potential for capital appreciation. The Fund may invest a limited
amount of its assets in foreign securities. There is no guarantee that the
Fund will achieve its goals.
When WRIMCO believes that a temporary defensive position is desirable, WRIMCO
may take certain steps with respect to up to all of the Fund's assets,
including any one or more of the following:
_ hold cash, commercial paper, certificates of deposit or other short-term
investments;
_ invest in debt securities (including commercial paper or short-term U.S.
Government securities); or
_ invest in convertible preferred stock.
By taking a temporary defensive position the Fund may not achieve its
investment objective.
All Funds
Each Fund may also invest in and use certain other types of instruments in
seeking to achieve its goal(s). For example, each Fund is permitted to invest
in options, futures contracts, asset-backed securities and other derivative
instruments if it is permitted to invest in the type of asset by which the
return on, or value of, the derivative is measured. At this time, each Fund
has limited exposure to derivative investments.
You will find more information about each Fund's permitted investments and
strategies, as well as the restrictions that apply to them, in the Statement
of Additional Information ("SAI").
Risk Considerations of Principal Strategies and Other Investments
Risks exist in any investment. Each Fund is subject to equity and market risk
and financial risk.
_ Market risk is the possibility of a change in the price of the security.
The prices of common stocks and other equity securities generally
fluctuate more than those of other investments. A Fund may lose a
substantial part, or even all, of its investment in a company's stock.
Growth stocks may experience greater price volatility than value stocks.
To the extent a Fund invests in fixed income securities, the price of a
fixed income security may be affected by changes in interest rates. Bonds
with longer maturities are more interest-rate sensitive. For example, if
interest rates increase, the value of a bond with a longer maturity is
more likely to decrease. Because of market risk, the share price of each
Fund will likely change as well.
_ Financial risk is based on the financial situation of the issuer of the
security. The financial risk of a Fund may depend, for example, on the
earnings performance of the issuer of stock held by the Fund. To the
extent a Fund invests in debt securities, the financial risk of the Fund
may also depend on the credit quality of the securities in which it
invests.
Notwithstanding Tax-Managed Equity Fund's use of tax management investment
strategies, the Fund may have taxable income and may realize taxable capital
gains from time to time. In addition, investors purchasing Fund shares when
the Fund has large accumulated capital gains could receive a significant part
of the purchase price of their shares back as a taxable capital gain
distribution. Over time, securities with unrealized gains may comprise a
substantial portion of the Fund's assets. As well, state or Federal tax laws
or regulations may be amended at any time which could include adverse changes
to applicable tax rates or capital gains holding periods.
Certain types of each Fund's authorized investments and strategies, such as
foreign securities, junk bonds and derivative instruments, involve special
risks. Depending on how much a Fund invests or uses these strategies, these
special risks may become significant. For example, foreign investments may
subject a Fund to restrictions on receiving the investment proceeds from a
foreign country, to foreign taxes, and to potential difficulties in enforcing
contractual obligations, as well as fluctuations in foreign currency values
and other developments that may adversely affect a foreign country. Junk
bonds pose a greater risk of nonpayment of interest or principal than higher-
rated bonds. Derivative instruments may expose a Fund to greater volatility
than an investment in a more traditional stock, bond or other security.
Because each Fund owns different types of investments, its performance will
be affected by a variety of factors. The value of a Fund's investments and
the income it generates will vary from day to day, generally reflecting
changes in interest rates, market conditions, and other company and economic
news. Performance will also depend on WRIMCO's skill in selecting investments
and, with respect to Asset Strategy Fund, on WRIMCO's skill in allocating
assets.
Asset Strategy Fund and International Growth Fund may each actively trade
securities in seeking to achieve its goals. Doing so may increase transaction
costs (which may reduce performance) and increase distributions paid by the
Fund, which may increase your taxable income.
YOUR ACCOUNT
Choosing a Share Class
Each Fund offers four classes of shares: Class A, Class B, Class C and Class
Y. Each class has its own sales charge, if any, and expense structure. The
decision as to which class of shares is best suited to your needs depends on
a number of factors that you should discuss with your financial advisor. Some
factors to consider are how much you plan to invest and how long you plan to
hold your investment. If you are investing a substantial amount and plan to
hold your shares for a long time, Class A shares may be the most appropriate
for you. Class B and Class C shares are not available for investments of $2
million or more. If you are investing a lesser amount, you may want to
consider Class B shares (if investing for at least seven years) or Class C
shares (if investing for less than seven years). Class Y shares are designed
for institutional investors and others investing through certain
intermediaries, as described below.
Since your objectives may change over time, you may want to consider another
class when you buy additional Fund shares. All of your future investments in
a Fund will be made in the class you select when you open your account,
unless you inform the Fund otherwise, in writing, when you make a future
investment.
General Comparison of Class A, Class B and Class C Shares
Class A Class B Class C
Initial sales charge No initial sales charge No initial sales charge
No deferred sales Deferred sales charge on A 1% deferred sales
charge1 shares you sell within six charge on shares you
years after purchase sell within twelve
months after purchase
Maximum distribution Maximum distribution Maximum distribution
and service (12b-1) and service (12b-1) and service (12b-1)
fees of 0.25% fees of 1.00% fees of 1.00%
For an investment of Converts to Class A shares Does not convert to
$2 million or more, 8 years after the month in Class A shares, so
only Class A shares which the shares were annual expenses do
are available purchased, thus reducing not decrease
future annual expenses
For an investment of $300,000
or more, financial advisors may
recommend purchase of Class A
shares due to a reduced sales
charge and lower annual expenses
1.
A 1% CDSC may be imposed on purchases of $2 million or more of Class A
shares that are redeemed within twelve months of purchase.
Each Fund has adopted a Distribution and Service Plan ("Plan") pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, ("Rule 12b-
1") for each of its Class A, Class B, Class C and Class Y shares. Under the
Class A Plan, each Fund may pay Waddell & Reed, Inc. (the "Distributor") a
fee of up to 0.25%, on an annual basis, of the average daily net assets of
the Class A shares. This fee is to compensate the Distributor for the amounts
it spends for, either directly or through third parties, distributing the
Fund's Class A shares, providing personal service to Class A shareholders
and/or maintaining Class A shareholder accounts. Under the Class B Plan and
the Class C Plan, each Fund may pay Waddell & Reed, Inc. a fee of up to
0.75%, on an annual basis, of the average daily net assets of the shares of
the class to compensate the Distributor for, either directly or through third
parties, distributing the shares of that class and a fee of up to 0.25%, on
an annual basis, of the average daily net assets of the shares of that class
to compensate the Distributor for, either directly or through third parties,
providing personal service to shareholders of that class and/or maintaining
shareholder accounts for that class. No payment of the distribution fee will
be made, and no deferred sales charge will be paid, to the Distributor by any
Fund if, and to the extent that, the aggregate of the distribution fees paid
by the Fund and the deferred sales charges received by the Distributor with
respect to the Fund's Class B or Class C shares would exceed the maximum
amount of such charges that the Distributor is permitted to receive under
NASD rules as then in effect.
Under the Class Y Plan, each Fund may pay the Distributor a fee of up to
0.25%, on an annual basis, of the average daily net assets of the Fund's
Class Y shares to compensate the Distributor for, either directly or through
third parties, distributing the Class Y shares of that Fund, providing
personal service to Class Y shareholders and/or maintaining Class Y
shareholder accounts.
Because the Plan fees are paid out of the assets of the applicable class on
an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
Class A shares are subject to an initial sales charge when you buy them,
based on the amount of your investment, according to the table below. Class A
shares pay an annual 12b-1 fee of up to 0.25% of average Class A net assets.
The ongoing expenses of this class are lower than those for Class B or Class
C shares.
Size of Purchase
Sales Charge Reallowance
as Approx. to Dealers as
Sales Charge Percent of Percent of
as Percent of Amount Offering
Offering Price Invested Price
Under $100,000 5.75% 6.10% 5.00%
$100,000 to less than $200,000 4.75 4.99 4.00
$200,000 to less than $300,000 3.50 3.63 2.80
$300,000 to less than $500,000 2.50 2.56 2.00
$500,000 to less than $1,000,000 1.50 1.52 1.20
$1,000,000 to less than $2,000,000 1.00 1.01 0.75
$2,000,000 and over 0.001 0.001 0.50
1.
No sales charge is payable at the time of purchase on investments of $2
million or more, although for such investments a Fund may impose a CDSC of
1% on redemptions made within twelve months of the purchase. The CDSC is
assessed on an amount equal to the lesser of the then current market value
or the cost of the shares being redeemed. Accordingly, no sales charge is
imposed on increases in net asset value ("NAV") above the initial purchase
price.
Waddell & Reed, Inc. or its affilate(s) may pay additional compensation from
its own resources to securities dealers based upon the value of shares of a
Fund owned by the dealer for its own account or for its customers. Waddell &
Reed, Inc. or its affiliate(s) may also provide compensation from its own
resources to securities dealers with respect to shares of the Funds purchased
by customers of such dealers without payment of a sales charge.
Sales Charge Reductions and Waivers
Lower sales charges are available by:
_ Combining additional purchases of Class A shares of any of the Funds in
the W&R Funds, except Class A shares of Money Market Fund unless acquired
by exchange for Class A shares on which a sales charge was paid (or as a
dividend or distribution on such acquired shares), with the NAV of Class A
shares already held ("Rights of Accumulation");
_ Grouping all purchases of Class A shares of W&R Funds, except shares of
Money Market Fund, made during a thirteen-month period ("Letter of
Intent"); and
_ Grouping purchases by certain related persons.
Additional information and applicable forms are available from Waddell &
Reed, Inc.
Waivers for Certain Investors
Class A shares may be purchased at NAV by:
_ Certain clients investing through a qualified fee-based program offered by
a third-party that has made arrangements to sell shares of the Funds.
Contingent Deferred Sales Charge. A CDSC may be assessed against your
redemption amount of Class B, Class C or certain Class A shares and paid to
the Distributor, as further described below. The purpose of the CDSC is to
compensate the Distributor for the costs incurred by it in connection with
the sale of the Fund's Class B or Class C shares or with Class A investments
of $2 million or more at NAV. The CDSC will not be imposed on shares
representing payment of dividends or other distributions or on amounts which
represent an increase in the value of a shareholder's account resulting from
capital appreciation above the amount paid for the shares purchased during
the CDSC period. Solely for purposes of determining the number of months or
years from the time of any payment for the purchase of shares, all payments
during a month are totaled and deemed to have been made on the first day of
the month. The CDSC is applied to the lesser of amount invested or redemption
value.
To keep your CDSC as low as possible, each time you place a request to redeem
shares, the Fund assumes that a redemption is made first of shares not
subject to a deferred sales charge (including shares which represent
appreciation on shares held, reinvested dividends and distributions), and
then of shares that represent the lowest sales charge.
Unless instructed otherwise, a Fund, when requested to redeem a specific
dollar amount, will redeem additional shares of the applicable class that are
equal in value to the CDSC. For example, should you request a $1,000
redemption and the applicable CDSC is $27, the Fund will redeem shares having
an aggregate NAV of $1,027, absent different instructions.
Class B shares are not subject to an initial sales charge when you buy them.
However, you may pay a CDSC if you sell your Class B shares within six years
of their purchase, based on the table below. Class B shares pay an annual
12b-1 service fee of up to 0.25% of average net assets and a distribution fee
of up to 0.75% of average net assets. Over time, these fees will increase the
cost of your investment and may cost you more than if you had purchased Class
A shares. Class B shares and any dividends and distributions paid on such
shares automatically convert to Class A shares eight years after the end of
the month in which the shares were purchased. Such conversion will be on the
basis of the relative net asset values per share, without the imposition of
any sales load, fee or other charge. The Class A shares have lower ongoing
expenses.
The Fund will redeem your Class B shares at their NAV next calculated after
receipt of a written request for redemption in good order, subject to the
CDSC discussed below.
Contingent Deferred Sales Charge As % of Amount
on Shares Sold within Year Subject to Charge
1 5.0%
2 4.0%
3 3.0%
4 3.0%
5 2.0%
6 1.0%
7+ 0.0%
In the table, a "year" is a 12-month period. In applying the sales charge,
all purchases are considered to have been made on the first day of the month
in which the purchase was made.
For example, if a shareholder opens an account on July 14, 2000, then redeems
all Class B shares on July 12, 2001, the shareholder will pay a CDSC of 4%,
the rate applicable to redemptions made within the second year of purchase.
Class C shares are not subject to an initial sales charge when you buy them,
but if you sell your Class C shares within twelve months after purchase, you
will pay a 1% CDSC. For purposes of the CDSC, purchases of Class C shares
within a month will be considered as being purchased on the first day of the
month. Class C shares pay an annual 12b-1 service fee of up to 0.25% of
average net assets and an annual distribution fee of up to 0.75% of average
net assets. Over time, these fees will increase the cost of your investment
and may cost you more than if you had purchased Class A shares. Class C
shares do not convert to any other class.
For Class C shares, the CDSC will be applied to the lesser of the amount
invested or redemption value of shares that have been held for twelve months
or less.
The CDSC will not apply in the following circumstances:
_ redemptions of shares by certain clients investing through a qualified
fee-based program offered by a third-party that has made arrangements to
sell shares of the Funds.
_ redemptions of shares requested within one year of the shareholder's death
or disability, provided the Fund is notified of the death or disability at
the time of the request and furnished proof of such event satisfactory to
the Distributor.
_ redemptions of shares made to satisfy required minimum distributions after
age 70 1/2 from a qualified retirement plan, a required minimum
distribution from an individual retirement account, Keogh plan or
custodial account under section 403(b)(7) of the Internal Revenue Code of
1986, as amended ("Code"), a tax-free return of an excess contribution, or
that otherwise results from the death or disability of the employee, as
well as in connection with redemptions by any tax-exempt employee benefit
plan for which, as a result of a subsequent law or legislation, the
continuation of its investment would be improper.
_ redemptions of shares made pursuant to a shareholder's participation in
any systematic withdrawal service adopted for a Fund. (The service and
this exclusion from the CDSC do not apply to a one-time withdrawal.)
_ redemptions of which the proceeds are reinvested in shares (must be
reinvested in the same class as that which was redeemed) of the Fund
within forty-five days after such redemption.
_ the exercise of certain exchange privileges.
_ redemptions effected pursuant to the Fund's right to liquidate a
shareholder's shares if the aggregate NAV of those shares is less than
$500.
_ redemptions effected by another registered investment company by virtue of
a merger or other reorganization with a Fund or by a former shareholder of
such investment company of shares of the Fund acquired pursuant to such
reorganization.
These exceptions may be modified or eliminated by the Fund at any time
without prior notice to shareholders, except with respect to redemptions
effected pursuant to the Fund's right to liquidate a shareholder's shares,
which requires certain notice.
Class Y shares are not subject to a sales charge. Class Y shares pay an
annual 12b-1 distribution and/or service fee of up to 0.25% of average net
assets.
Class Y shares are only available for purchase by:
_ participants of employee benefit plans established under section 403(b) or
section 457, or qualified under section 401 of the Code, including 401(k)
plans, when the plan has 100 or more eligible employees and holds the
shares in an omnibus account on the Fund's records, and an unaffiliated
third party provides administrative, distribution and/or other support
services to the plan;
_ banks, trust institutions, investment fund administrators and other third
parties investing for their own accounts or for the accounts of their
customers where such investments for customer accounts are held in an
omnibus account on the Fund's records, and to which entity an unaffiliated
third party provides administrative, distribution and/or other support
services; and
_ government entities or authorities and corporations whose investment is
$10 million or more and to which entity an unaffiliated third party
provides certain administrative, distribution and/or other support
services.
Ways to Set Up Your Account
The different ways to set up (register) your account are listed below.
Individual or Joint Tenants
For your general investment needs
Individual accounts are owned by one person. Joint accounts have two or more
owners (tenants).
Business or Organization
For investment needs of corporations, associations, partnerships,
institutions or other groups
Retirement Plans
To shelter your retirement savings from income taxes
Retirement plans allow individuals to shelter investment income and capital
gains from current income taxes. In addition, contributions to these accounts
(other than Roth IRAs and Education IRAs) may be tax-deductible.
_ Individual Retirement Accounts (IRAs) allow a certain individual under age
70 1/2, with earned income, to invest up to $2,000 per tax year. The
maximum for an investor and his or her spouse is $4,000 ($2,000 for each
spouse) or, if less, the couple's combined earned income for the taxable
year.
_ IRA Rollovers retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
_ Roth IRAs allow certain individuals to make nondeductible contributions up
to $2,000 per year. The maximum annual contribution for an investor and
his or her spouse is $4,000 ($2,000 for each spouse) or, if less, the
couple's combined earned income for the taxable year. Withdrawals of
earnings may be tax free if the account is at least five years old and
certain other requirements are met.
_ Education IRAs are established for the benefit of a minor, with
nondeductible contributions, up to $500 per year, and permit tax-free
withdrawals to pay the higher education expenses of the beneficiary.
_ Simplified Employee Pension Plans (SEP-IRAs) provide business owners or
those with self-employed income (and their eligible employees) with many
of the same advantages as a Profit Sharing Plan, but with fewer
administrative requirements.
_ Savings Incentive Match Plans for Employees (SIMPLE Plans) can be
established by small employers to contribute to and allow their employees
to contribute a portion of their wages pre-tax to retirement accounts.
This plan-type generally involves fewer administrative requirements than
401(k) or other qualified plans.
_ Keogh Plans allow self-employed individuals to make tax-deductible
contributions for themselves of up to 25% of their annual earned income,
with a maximum of $30,000 per year.
_ Pension and Profit-Sharing Plans, including 401(k) Plans, allow
corporations and nongovernmental tax-exempt organizations of all sizes
and/or their employees to contribute a percentage of the employees' wages
or other amounts on a tax-deferred basis. These accounts need to be
established by the administrator or trustee of the plan.
_ 403(b) Custodial Accounts are available to employees of public school
systems, churches and certain types of charitable organizations.
_ 457 Accounts allow employees of state and local governments and certain
charitable organizations to contribute a portion of their compensation on
a tax-deferred basis.
Gifts or Transfers to a Minor
To invest for a child's education or other future needs
These custodial accounts provide a way to give money to a child and obtain
tax benefits. An individual can give up to $10,000 a year per child free of
Federal transfer tax consequences. Depending on state laws, you can set up a
custodial account under the Uniform Transfers to Minors Act ("UTMA") or the
Uniform Gifts to Minors Act ("UGMA").
Trust
For money being invested by a trust
The trust must be established before an account can be opened, or you may use
a trust form made available by Waddell & Reed.
Buying Shares
You may buy shares of each of the Funds through a financial advisor and
through other broker-dealers and banks that have selling agreements with the
Distributor. Some of these firms may charge you a fee and may have additional
requirements regarding the purchase of shares. To open your account you must
complete and sign an application.
To purchase any class of shares by check, make your check payable to Waddell
& Reed, Inc. Mail the check, along with your completed application, to:
Waddell & Reed, Inc.
P.O. Box 29217
Shawnee Mission, Kansas
66201-9217
To purchase Class Y shares by wire, you must first obtain an account number
by calling 800-366-2520, then mail a completed application to Waddell & Reed,
Inc., at the address above, or fax it to 913-236-5044. Instruct your bank to
wire the amount you wish to invest, along with the account number and
registration, to UMB Bank, n.a., ABA Number 101000695, for the account of
Waddell & Reed Number 9800007978, Special Account for Exclusive Benefit of
Customers FBO Customer Name and Account Number.
The price to buy a share of a Fund, called the offering price, is calculated
every business day.
The offering price of a share (the price to buy one share of a particular
class) is the next NAV calculated per share of that class plus, for Class A
shares, the sales charge shown in the table.
In the calculation of a Fund's NAV:
_ The securities in a Fund's portfolio that are listed or traded on an
exchange are valued primarily using market prices.
_ Bonds are generally valued according to prices quoted by an independent
pricing service.
_ Short-term debt securities are valued at amortized cost, which
approximates market value.
_ Other investment assets for which market prices are unavailable are valued
at their fair value by or at the direction of the Board of Directors.
The Funds are open for business each day the New York Stock Exchange (the
"NYSE") is open. Each Fund normally calculates its NAVs as of the close of
business of the NYSE, normally 4 p.m. Eastern time, except that an option or
futures contract held by a Fund may be priced at the close of the regular
session of any other securities or commodities exchange on which that
instrument is traded.
Certain of the Funds may invest in securities listed on foreign exchanges
which may trade on Saturdays or on U.S. national business holidays when the
NYSE is closed. Consequently, the NAV of such Fund shares may be
significantly affected on days when the Fund does not price its shares and
when you are not able to purchase or redeem the Fund's shares. Similarly, if
an event materially affecting the value of foreign investments or foreign
currency exchange rates occurs prior to the close of business of the NYSE but
after the time their values are otherwise determined, such investments or
exchange rates may be valued at their fair value as determined in good faith
by or under the direction of the Board of Directors.
When you place an order to buy shares, your order will be processed at the
next NAV calculated after your order is received and accepted. Note the
following:
_ All of your purchases must be made in U.S. dollars.
_ If you buy shares by check, and then sell those shares by any method other
than by exchange to another fund, the payment may be delayed for up to ten
days to ensure that your previous investment has cleared.
_ The Fund will be deemed to have received your purchase order when a third
party (or its designee) has received your order. Your order will receive
the offering price next calculated after the order has been received in
proper form by the authorized third party (or its designee). You should
consult that firm to determine the time by which it must receive your
order for you to purchase shares of the Fund at that day's price.
When you sign your account application, you will be asked to certify that
your Social Security or other taxpayer identification number is correct and
whether you are subject to backup withholding for failing to report income to
the Internal Revenue Service.
Waddell & Reed, Inc. reserves the right to reject any purchase orders,
including purchases by exchange, and it and the Funds reserve the right to
discontinue offering shares of the Funds for purchase.
Minimum Investments
For Class A, Class B and Class C:
To Open an Account $500 (per Fund)
For certain exchanges $100 (per Fund)
For certain retirement accounts and accounts
opened with Automatic Investment Service $50 (per Fund)
To Add to an Account Any amount
For certain exchanges $100 (per Fund)
For Automatic Investment Service $25 (per Fund)
For Class Y:
To Open an Account
For a government entity or authority $10 million
or for a corporation (within first twelve months)
For other investors Any amount
To Add to an Account Any amount
Adding to Your Account
Subject to the minimums described under "Minimum Investments," you can make
additional investments of any amount at any time.
To add to your account, make your check payable to Waddell & Reed, Inc. Mail
the check to Waddell & Reed, Inc., along with:
_ the detachable form that accompanies the confirmation of a prior purchase
or your year-to-date statement; or
_ a letter stating your account number, the account registration, the Fund,
and the class of shares that you wish to purchase.
To add to your Class Y account by wire: Instruct your bank to wire the amount
you wish to invest, along with the account number and registration, to UMB
Bank, n.a., ABA Number 101000695, for the account of Waddell & Reed Number
9800007978, Special Account for Exclusive Benefit of Customers FBO Customer
Name and Account Number.
Selling Shares
You can arrange to take money out of your account at any time by selling
(redeeming) some or all of your shares.
The redemption price (price to sell one share of a particular class of a
Fund) is the NAV per share of that Fund class, subject to any CDSC applicable
to Class B, Class C shares or certain Class A shares.
To sell shares by written request: Complete an Account Service Request form
or write a letter of instruction with:
_ the name on the account registration;
_ the Fund's name;
_ the Fund account number;
_ the dollar amount or number, and the class, of shares to be redeemed; and
_ any other applicable requirements listed in the table below.
Deliver the form or your letter to your financial advisor, or mail it to:
Waddell & Reed Services Company
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
Unless otherwise instructed, Waddell & Reed Services Company will send a
check to the address on the account.
To sell Class Y shares by telephone or fax: If you have elected this method
in your application or by subsequent authorization, call 888-WADDELL, or fax
your request to 913-236-1599, and give your instructions to redeem Class Y
shares and make payment by wire to your predesignated bank account or by
check to you at the address on the account.
When you place an order to sell shares, your shares will be sold at the next
NAV calculated, subject to any applicable CDSC, after receipt of a written
request for redemption in good order by Waddell & Reed Services Company at
the address listed above. Note the following:
_ If more than one person owns the shares, each owner must sign the written
request.
_ If you recently purchased the shares by check, the Fund may delay payment
of redemption proceeds. You may arrange for the bank upon which the
purchase check was drawn to provide to the Fund telephone or written
assurance, satisfactory to the Fund, that the check has cleared and been
honored. If you do not, payment of the redemption proceeds on these shares
will be delayed until the earlier of 10 days or the date the Fund is able
to verify that your purchase check has cleared and been honored.
_ Redemptions may be suspended or payment dates postponed on days when the
NYSE is closed (other than weekends or holidays), when trading on the NYSE
is restricted, or as permitted by the Securities and Exchange Commission.
_ Payment is normally made in cash, although under extraordinary conditions
redemptions may be made in portfolio securities when the Fund's Board of
Directors determines that conditions exist making cash payments
undesirable. A Fund is obligated to redeem shares solely in cash up to the
lesser of $250,000 or 1% of its NAV during any 90-day period for any one
shareholder.
_ The Fund will be deemed to have received your order to sell shares when
the firm through which you purchased the shares (or its designee) has
received your order. Your order will receive the NAV next calculated after
the order has been received in proper form by the authorized firm (or its
designee). You should consult that firm to determine the time by which it
must receive your order for you to sell shares at that day's price.
Special Requirements for Selling Shares
Account Type Special Requirements
Individual or The written instructions must be signed by all
Joint Tenant persons required to sign for transactions, exactly
as their names appear on the account.
Sole Proprietorship The written instructions must be signed by the
individual owner of the business.
UGMA, UTMA The custodian must sign the written instructions
indicating capacity as custodian.
Retirement Account The written instructions must be signed by a
properly authorized person.
Trust The trustee must sign the written instructions
indicating capacity as trustee. If the trustee's
name
is not in the account registration, provide a
currently certified copy of the trust document.
Business or At least one person authorized by corporate
Organization resolution to act on the account must sign the
written instructions.
Conservator, Guardian The written instructions must be signed by the
or Other Fiduciary person properly authorized by court order to act
in the particular fiduciary capacity.
The Fund may require a signature guarantee in certain situations such as:
_ a redemption request made by a corporation, partnership or fiduciary;
_ a redemption request made by someone other than the owner of record; or
_ the check is made payable to someone other than the owner of record.
This requirement is intended to protect you and Waddell & Reed from fraud.
You can obtain a signature guarantee from most banks and securities dealers,
but not from a notary public.
The Funds reserve the right to redeem at NAV all shares of a Fund owned by
you having an aggregate NAV of less than $500. The Fund will give you notice
of its intention to redeem your shares and a 60-day opportunity to purchase a
sufficient number of additional shares to bring the aggregate NAV of your
shares of that Fund to $500. For Class B or Class C shares, these redemptions
are not subject to the deferred sales charge. The Fund will not apply its
redemption right to individual retirement plan accounts or accounts which
have an aggregate NAV of less than $500 due to market forces.
You may reinvest in any one of the Funds, without charge, all or part of the
amount of Class A shares you redeemed by sending to the applicable Fund the
amount you want to reinvest. The reinvested amounts must be received by the
Fund within forty-five days after the date of your redemption.
The CDSC will not apply to the proceeds of Class B, Class C or, where
otherwise applicable to certain Class A shares of a Fund which are redeemed
and then reinvested in shares of the same class of the Fund, as applicable,
within forty-five days after such redemption. The Distributor will, with your
reinvestment, restore an amount equal to the deferred sales charge
attributable to the amount reinvested by adding the deferred sales charge
amount to your reinvestment. For purposes of determining future deferred
sales charges, the reinvestment will be treated as a new investment. You may
do this only once as to Class B shares, Class C shares and certain Class A
shares of a Fund. This privilege may be eliminated or modified at any time
without prior notice to shareholders.
Payments of principal and interest on loans made pursuant to a 401(a)
qualified plan (if such loans are permitted by the plan) may be reinvested in
shares of any of the Funds in which the plan may invest.
Telephone Transactions
The Fund and its agents will not be liable for following instructions
communicated by telephone that they reasonably believe to be genuine. The
Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If the Fund fails to do so, the Fund
may be liable for losses due to unauthorized or fraudulent instructions.
Current procedures relating to instructions communicated by telephone include
tape recording instructions, requiring personal identification and providing
written confirmations of transactions effected pursuant to such instructions.
Shareholder Services
Personal Service
A toll-free call, 888-WADDELL, connects you to a Client Services
Representative or our automated customer telephone service. During normal
business hours, our Client Services staff is available to answer your
questions. At almost any time of the day or night, you may access our web
site, www.waddell.com, to obtain price information about other funds in
W&R Funds.
Exchanges
You may sell your shares and buy shares of the same class of any of the funds
within the W&R Funds without the payment of an additional sales charge if you
buy Class A shares or payment of a CDSC when you exchange Class B shares or
Class C shares or Class A shares to which the CDSC would otherwise apply. For
Class B and Class C shares and Class A shares to which the CDSC would
otherwise apply, the time period for the CDSC will continue to run. You may
sell your Class Y shares of any of the Funds and buy Class Y shares of
another Fund or Class A shares of Money Market Fund.
Exchanges may only be made into funds which are legally permitted for sale in
the state of residence of the investor. Note that exchanges out of the Funds
may have tax consequences for you. Before exchanging into a fund, read its
prospectus.
The Fund reserves the right to terminate or modify these exchange privileges
at any time, upon notice in certain instances.
Automatic Transactions for Class A, Class B and Class C Shareholders
Flexible Withdrawal Service lets you set up ongoing monthly, quarterly,
semiannual or annual redemptions from your account.
Regular Investment Plans allow you to transfer money into your Fund account,
or between Fund accounts, automatically. While Regular Investment Plans do
not guarantee a profit and will not protect you against loss in a declining
market, they can be an excellent way to invest for retirement, a home,
educational expenses and other long-term financial goals.
Certain restrictions and fees imposed by the plan custodian may also apply
for retirement accounts. Speak with your financial advisor for more
information.
Regular Investment Plans
Automatic Investment Service
To move money from your bank account to an existing Fund account with W&R
Funds
Minimum Amount Minimum Frequency
$25 (per Fund) Monthly
Funds Plus Service
To move money from Money Market Fund to another Fund in W&R Funds whether in
the same or a different account
Minimum Amount Minimum Frequency
$100 (per Fund) Monthly
Distributions and Taxes
Distributions
Each Fund distributes substantially all of its net investment income and net
capital gains to its shareholders each year.
Usually, a Fund distributes net investment income at the following times:
Total Return Fund, Mid Cap Growth Fund, Tax-Managed Equity Fund, Small Cap
Growth Fund, International Growth Fund, Large Cap Growth Fund, and Science
and Technology Fund, annually in December; and Asset Strategy Fund, quarterly
in March, June, September and December. Dividends declared for a particular
day are paid to shareholders of record on the prior business day. However,
dividends declared for Saturday and Sunday are paid to shareholders of record
on the preceding Thursday. Net capital gains (and any net gains from foreign
currency transactions) ordinarily are distributed by each Fund in December.
Distribution Options. When you open an account, specify on your application
how you want to receive your distributions. Each Fund offers two options:
1.Share Payment Option. Your dividends, capital gains and other
distributions with respect to a class will be automatically paid in
additional shares of the same class of the distributing Fund. If you do
not indicate a choice on your application, you will be assigned this
option.
2.Cash Option. You will be sent a check for your dividends, capital gains
and other distributions if the total distribution is five dollars or
greater. If the distribution total is less than five dollars, the total
distribution will be automatically paid in additional shares of the same
class of the distributing Fund.
For retirement accounts, all distributions are automatically paid in
additional shares of the same class of the distributing Fund.
Taxes
As with any investment, you should consider how your investment in a Fund
will be taxed. If your account is not a tax-deferred retirement account (or
you are not otherwise exempt from income tax), you should be aware of the
following tax implications:
Taxes on distributions. Dividends from a Fund's investment company taxable
income (which includes net short-term gains), if any, generally are taxable
to you as ordinary income, whether received in cash or paid in additional
Fund shares. Distributions of a Fund's net capital gains, when designated as
such, are taxable to you as long-term capital gains, whether received in cash
or paid in additional Fund shares and regardless of the length of time you
have owned your shares. For Federal income tax purposes, your long-term
capital gains generally are taxed at a maximum rate of 20%.
Each Fund notifies you after each calendar year-end as to the amounts of
dividends and other distributions paid (or deemed paid) to you for that year.
A portion of the dividends paid by a Fund, whether received in cash or paid
in additional Fund shares, may be eligible for the dividends received
deduction allowed to corporations. The eligible portion may not exceed the
aggregate dividends received by a Fund from U.S. corporations. However,
dividends received by a corporate shareholder and deducted by it pursuant to
the dividends received deduction are subject indirectly to the Federal
alternative minimum tax.
Taxes on transactions. Your redemption of Fund shares will result in a
taxable gain or loss to you, depending on whether the redemption proceeds are
more or less than what you paid for the redeemed shares (which normally
includes any sales charge paid). An exchange of Fund shares for shares of any
other fund in the W&R Funds generally will have similar tax consequences.
However, special rules apply when you dispose of a Fund's Class A shares
through a redemption or exchange within ninety days after your purchase and
then reacquire Class A shares of that Fund or acquire Class A shares of
another Fund in the W&R Funds without paying a sales charge due to the forty-
five day reinvestment privilege or exchange privilege. See "Your Account." In
these cases, any gain on the disposition of the original Class A Fund shares
will be increased, or loss decreased, by the amount of the sales charge you
paid when those shares were acquired, and that amount will increase the
adjusted basis of the shares subsequently acquired. In addition, if you
purchase shares of a Fund within thirty days before or after redeeming other
shares of that Fund (regardless of class) at a loss, part or all of that loss
will not be deductible and will increase the basis of the newly purchased
shares.
Withholding. Each Fund must withhold 31% of all taxable dividends, capital
gains and other distributions and redemption proceeds payable to individuals
and certain other noncorporate shareholders who do not furnish the Fund with
a correct taxpayer identification number. Withholding at that rate from
taxable dividends, capital gains and other distributions also is required for
shareholders subject to backup withholding.
State and local income taxes. The portion of the dividends paid by a Fund
attributable to interest earned on U.S. Government securities generally is
not subject to state and local income taxes, although distributions by any
Fund to its shareholders of net realized gains on the sale of those
securities are fully subject to those taxes. You should consult your tax
adviser to determine the taxability of dividends and other distributions by
the Funds in your state and locality.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Funds and their shareholders; you will
find more information in the SAI. There may be other Federal, state or local
tax considerations applicable to a particular investor. You are urged to
consult your own tax adviser.
THE MANAGEMENT OF THE FUNDS
Portfolio Management
The Funds are managed by WRIMCO, subject to the authority of the Funds' Board
of Directors. WRIMCO provides investment advice to each of the Funds and
supervises each Fund's investments. WRIMCO has served as investment manager
to W&R Funds since its inception. WRIMCO is located at 6300 Lamar Avenue,
P.O. Box 29217, Shawnee Mission, Kansas 66201-9217.
Michael L. Avery is primarily responsible for the management of the equity
portion of the Asset Strategy Fund. Mr. Avery has held his Fund
responsibilities since January 1997. He is Senior Vice President of WRIMCO,
Vice President of the Fund and Vice President of other investment companies
for which WRIMCO serves as investment manager. From March 1995 to March 1998,
Mr. Avery was Vice President of, and Director of Research for, Waddell & Reed
Asset Management Company, a former affiliate of WRIMCO. Mr. Avery has served
as the portfolio manager for investment companies managed by WRIMCO since
February 1, 1994, has served as the Director of Research for WRIMCO since
August 1987, and has been an employee of such since June 1981.
Daniel J. Vrabac is primarily responsible for the management of the fixed-
income portion of the Asset Strategy Fund. Mr. Vrabac has held his Fund
responsibilities since January 1997. He is Vice President of the Fund and
Vice President of other investment companies for which WRIMCO serves as
investment manager. From May 1994 to March 1998, Mr. Vrabac was Vice
President of, and a portfolio manager for, Waddell & Reed Asset Management
Company. Mr. Vrabac has served as an investment analyst with WRIMCO since May
1994 and has been an employee of such since May 1994.
Mark G. Seferovich and Grant P. Sarris are primarily responsible for the
management of the Small Cap Growth Fund. Mr. Seferovich has held his Fund
responsibilities since September 1992. He is Senior Vice President of WRIMCO,
Vice President of the Fund and Vice President of other investment companies
for which WRIMCO serves as investment manager. Mr. Seferovich has served as
the portfolio manager of investment companies managed by WRIMCO since
February 1989 and has been an employee of such since February 1989. From
March 1996 to March 1998, Mr. Seferovich was Vice President of, and a
portfolio manager for, Waddell & Reed Asset Management Company.
Mr. Sarris has held his Fund responsibilities since May 1998. He is Vice
President of WRIMCO and Vice President of other investment companies for
which WRIMCO serves as investment manager. Mr. Sarris has served as an
investment analyst with WRIMCO since October 1, 1991 and had served as
Assistant Portfolio Manager of Small Cap Growth Fund from January 1, 1996
until May 1998. He has been an employee of WRIMCO since October 1, 1991.
Thomas A. Mengel is primarily responsible for the management of the
International Growth Fund. Mr. Mengel has held his Fund responsibilities
since joining WRIMCO on May 1, 1996. Mr. Mengel is Vice President of WRIMCO,
Vice President of the Fund and Vice President of other investment companies
for which WRIMCO serves as investment manager. From 1993 to 1996, Mr. Mengel
was the President of Sal. Oppenheim jr. & Cie. Securities, Inc.
Daniel P. Becker is primarily responsible for the management of the Large Cap
Growth Fund. Mr. Becker has held his Fund responsibilities since the
inception of the Fund. He is Vice President of WRIMCO, Vice President of the
Fund and Vice President of other investment companies for which WRIMCO serves
as investment manager. From January 1995 to March 1998, Mr. Becker was Vice
President of, and a portfolio manager for, Waddell & Reed Asset Management
Company. Mr. Becker has been an employee of WRIMCO and its predecessors since
October 1989, initially serving as an investment analyst, and has served as a
portfolio manager for WRIMCO since January 1997.
Zachary H. Shafran is primarily responsible for the management of the Mid Cap
Growth Fund. Mr. Shafran has held his responsibilities since the inception of
the Fund. He is Vice President of WRIMCO, Vice President of the Fund and Vice
President of another investment company for which WRIMCO serves as investment
manager. Mr. Shafran served as an investment analyst with WRIMCO from June
1990 to January 1996 and has served as a portfolio manager since January
1996.
Henry J. Herrmann is primarily responsible for the management of the Science
and Technology Fund. Mr. Herrmann has held his Fund responsibilities since
April 17, 2000. He is Vice President and Director of each of the Funds in the
Waddell & Reed Advisors Funds, W&R Funds and Target/United Funds; President,
Chief Investment Officer, and Director of Waddell & Reed Financial, Inc.;
Vice President, Chief Investment Officer and Director of Waddell & Reed
Financial Services, Inc.; Director of Waddell & Reed, Inc.; President, Chief
Executive Officer, Chief Investment Officer and Director of WRIMCO. Mr.
Herrmann has been an employee of Waddell & Reed, Inc. and its successor,
WRIMCO, since March 15, 1971.
Cynthia P. Prince-Fox is primarily responsible for the management of the Tax-
Managed Equity Fund. Ms. Prince-Fox has held her Fund responsibilities since
the inception of the Fund. She is Vice President of WRIMCO, Vice President of
the Fund and Vice President of other investment companies for which WRIMCO
serves as investment manager. From January 1993 to March 1998, Ms. Prince-Fox
was Vice President of, and a portfolio manager for, Waddell & Reed Asset
Management Company. Ms. Prince-Fox is a Vice President and Portfolio Manager
for Austin, Calvert & Flavin, Inc., an affiliate of WRIMCO. She has served as
the portfolio manager for investment companies managed by WRIMCO since
January 1993. From 1983 to January, 1993 Ms. Prince-Fox served as an
investment analyst for WRIMCO.
James D. Wineland is primarily responsible for the management of the Total
Return Fund. Mr. Wineland has held his Fund responsibilities since July 1,
1997. He is Vice President of WRIMCO, Vice President of the Fund and Vice
President of other investment companies for which WRIMCO serves as investment
manager. From March 1995 to March 1998 Mr. Wineland was Vice President of,
and a portfolio manager for, Waddell & Reed Asset Management Company. Mr.
Wineland has served as the portfolio manager for investment companies managed
by WRIMCO since January 1988 and has been an employee of such since November
1984.
Other members of WRIMCO's investment management department provide input on
market outlook, economic conditions, investment research and other
considerations relating to the Funds' investments.
Management Fee
Like all mutual funds, the Funds pay fees related to their daily operations.
Expenses paid out of each Fund's assets are reflected in the share price or
dividends of that Fund; they are neither billed directly to shareholders nor
deducted from shareholder accounts.
Each Fund pays a management fee to WRIMCO for providing investment advice and
supervising its investments. Each Fund also pays other expenses, which are
explained in the SAI.
The management fee is payable by a Fund at the annual rates of:
for Asset Strategy Fund, 0.70% of net assets up to $1 billion, 0.65% of net
assets over $1 billion and up to $2 billion, 0.60% of net assets over $2
billion and up to $3 billion, and 0.55% of net assets over $3 billion.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal year ended March 31, 2000 were 0.72%;
for International Growth Fund, 0.85% of net assets up to $1 billion, 0.83% of
net assets over $1 billion and up to $2 billion, 0.80% of net assets over $2
billion and up to $3 billion, and 0.76% of net assets over $3 billion.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal year ended March 31, 2000 were 0.84%;
for Large Cap Growth Fund, 0.70% of net assets up to $1 billion, 0.65% of net
assets over $1 billion and up to $2 billion, 0.60% of net assets over $2
billion and up to $3 billion, and 0.55% of net assets over $3 billion;
for Mid Cap Growth Fund, 0.85% of net assets up to $1 billion; 0.83% of net
assets over $1 billion and up to $2 billion; 0.80% of net assets over $2
billion and up to $3 billion; and 0.76% of net assets over $3 billion;
for Science and Technology Fund, 0.85% of net assets up to $1 billion, 0.83%
of net assets over $1 billion and up to $2 billion, 0.80% of net assets over
$2 billion and up to $3 billion, and 0.76% of net assets over $3 billion.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal year ended March 31, 2000 were 0.83%;
for Small Cap Growth Fund, 0.85% of net assets up to $1 billion, 0.83% of net
assets over $1 billion and up to $2 billion, 0.80% of net assets over $2
billion and up to $3 billion, and 0.76% of net assets over $3 billion.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal year ended March 31, 2000 were 0.84%;
for Tax-Managed Equity Fund, 0.65% of net assets up to $1 billion, 0.60% of
net assets over $1 billion and up to $2 billion, 0.55% of net assets over $2
billion and up to $3 billion, and 0.50% of net assets over $3 billion; and
for Total Return Fund, 0.70% of net assets up to $1 billion, 0.65% of net
assets over $1 billion and up to $2 billion, 0.60% of net assets over $2
billion and up to $3 billion and 0.55% of net assets over $3 billion.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal year ended March 31, 2000 were 0.70%.
WRIMCO has voluntarily agreed to waive its management fee for any day that a
Fund's net assets are less than $25 million, subject to WRIMCO's right to
change or modify this waiver.
FINANCIAL HIGHLIGHTS
The following information is to help you understand the financial performance
of each Fund's Class C and Class Y shares for the fiscal periods shown.
Certain information reflects financial results for a single Fund share.
"Total return" shows how much your investment would have increased (or
decreased) during each period, assuming reinvestment of all dividends and
distributions. This information has been audited by Deloitte & Touche llp,
whose independent auditors' report, along with the Fund's financial
statements for the fiscal year ended March 31, 2000, is included in the SAI,
which is available upon request.
ASSET STRATEGY FUND
For a Class C share outstanding throughout each period(1):
For the
period from
For the fiscal year ended March 31, 4/20/95(2) to
2000 1999 1998 1997 3/31/96
Class C Per-Share Data
Net asset value,
beginning of period $11.20 $11.42 $9.73 $10.15 $10.00
Income from investment operations:
Net investment
income 0.03 0.15 0.21 0.23 0.16
Net realized and
unrealized gain
(loss) on investments 4.33 0.05 2.16 (0.30) 0.14
Total from investment
operations 4.36 0.20 2.37 (0.07) 0.30
Less distributions:
From net investment
income (0.05) (0.16) (0.22) (0.21) (0.15)
From capital gains (0.30) (0.26) (0.46) (0.14) (0.00)
Total distributions (0.35) (0.42) (0.68) (0.35) (0.15)
Net asset value,
end of period $15.21 $11.20 $11.42 $9.73 $10.15
Class C Ratios/Supplemental Data
Total return 39.60% 1.79% 24.94% -0.86% 3.00%
Net assets, end of
period (in thousands) $52,208 $30,473 $19,415 $13,398 $13,221
Ratio of expenses
to average net assets 2.24% 2.32% 2.44% 2.52% 2.54%(3)
Ratio of net investment
income to average
net assets 0.24% 1.38% 2.02% 2.21% 2.14%(3)
Portfolio turnover rate 204.12% 168.17% 220.67% 109.92% 75.02%
(1) The financial data shown for a Class C share are based on the financial
data for a share of the Fund's prior Class B. On March 24, 2000, that
Class B was combined with and redesignated as Class C, which had commenced
operations on October 4, 1999. On December 2, 1995, Fund shares then
outstanding were designated Class B shares.
(2) Commencement of operations.
(3) Annualized.
ASSET STRATEGY FUND
For a Class Y share outstanding throughout each period:
For the
period from
For the fiscal year ended March 31, 12/29/95(1)
2000 1999 1998 1997 to 3/31/96
Class Y Per-Share Data
Net asset value,
beginning of period $11.21 $11.43 $9.73 $10.16 $10.23
Income from investment operations:
Net investment
income 0.15 0.26 0.31 0.27 0.07
Net realized and
unrealized gain
(loss) on investments 4.33 0.05 2.16 (0.26) (0.08)
Total from investment
operations 4.48 0.31 2.47 0.01 (0.01)
Less distributions:
From net investment
income (0.13) (0.27) (0.31) (0.30) (0.06)
From capital gains (0.30) (0.26) (0.46) (0.14) (0.00)
Total distributions (0.43) (0.53) (0.77) (0.44) (0.06)
Net asset value,
end of period $15.26 $11.21 $11.43 $9.73 $10.16
Class Y Ratios/Supplemental Data
Total return 40.85% 2.75% 26.06% 0.05% -0.25%
Net assets, end of
period (in thousands) $508 $307 $225 $116 $1
Ratio of expenses
to average net assets 1.33% 1.45% 1.58% 1.61% 1.95%(2)
Ratio of net investment
income to average
net assets 1.14% 2.25% 2.90% 2.97% 2.34%(2)
Portfolio turnover rate 204.12% 168.17% 220.67% 109.92% 75.02%(3)
(1) Commencement of operations.
(2) Annualized.
(3) Portfolio turnover is for the period from April 20, 1995 to March 31,
1996.
INTERNATIONAL GROWTH FUND
For a Class C share outstanding throughout each period(1):
For the fiscal year ended March 31,
2000 1999 1998 1997 1996
Class C Per-Share Data
Net asset value,
beginning of period $15.58 $15.04 $12.40 $9.94 $9.36
Income from investment operations:
Net investment
income (loss) (0.34) (0.07) (0.10) (0.03) 0.08
Net realized and
unrealized gain
on investments 15.14 1.55 4.12 2.50 0.63
Total from investment
operations 14.80 1.48 4.02 2.47 0.71
Less distributions:
From net investment
income (0.00) (0.00) (0.00) (0.01) (0.11)
In excess of net
investment income (0.00) (0.00) (0.00) (0.00) (0.02)
From capital gains (1.80) (0.94) (1.38) (0.00) (0.00)
Total distributions (1.80) (0.94) (1.38) (0.01) (0.13)
Net asset value,
end of period $28.58 $15.58 $15.04 $12.40 $9.94
Class C Ratios/Supplemental Data
Total return 97.89% 10.36% 35.24% 24.85% 7.64%
Net assets, end of
period (in thousands) $233,280 $99,764 $87,041 $50,472 $20,874
Ratio of expenses
to average net assets 2.37% 2.35% 2.35% 2.46% 2.50%
Ratio of net investment
income (loss) to average
net assets -1.48% -0.53% -0.82% -0.52% 0.63%
Portfolio turnover rate 125.71% 116.25% 105.11% 94.76% 88.55%
(1) The financial data shown for a Class C share are based on the financial
data for a share of the Fund's prior Class B. On March 24, 2000, that
Class B was combined with and redesignated as Class C, which had commenced
operations on October 4, 1999. On December 2, 1995, Fund shares then
outstanding were designated Class B shares.
INTERNATIONAL GROWTH FUND
For a Class Y share outstanding throughout each period:
For the
period from
For the fiscal year ended March 31, 12/29/95(1) to
2000 1999 1998 1997 3/31/96
Class Y Per-Share Data
Net asset value,
beginning of period $16.08 $15.35 $12.52 $9.95 $9.70
Income from investment operations:
Net investment
income (loss) (1.41) 0.05 0.01 0.02 0.02
Net realized and
unrealized gain
on investments 16.99 1.62 4.20 2.56 0.23
Total from investment
operations 15.58 1.67 4.21 2.58 0.25
Less distributions:
From net investment
income (0.00) (0.00) (0.00) (0.01) (0.00)
From capital gains (1.80) (0.94) (1.38) (0.00) (0.00)
Total distributions (1.80) (0.94) (1.38) (0.01) (0.00)
Net asset value,
end of period $29.86 $16.08 $15.35 $12.52 $9.95
Class Y Ratios/Supplemental Data
Total return 99.74% 11.41% 36.45% 25.93% 2.58%
Net assets, end of
period (in thousands) $5,296 $629 $419 $227 $7
Ratio of expenses
to average net assets 1.48% 1.44% 1.51% 1.59% 1.84%(2)
Ratio of net investment
income (loss) to average
net assets -0.80% 0.36% 0.07% 0.05% 1.07%(2)
Portfolio turnover rate 125.71% 116.25% 105.11% 94.76% 88.55%(2)
(1) Commencement of operations.
(2) Annualized.
SCIENCE AND TECHNOLOGY FUND
For a Class C share outstanding throughout each period(1):
For the For the
fiscal year period from
ended March 31, 7/31/97(2) to
2000 1999 3/31/98
Class C Per-Share Data
Net asset value, beginning of period $17.45 $12.01
$10.00
Income from investment operations:
Net investment loss (0.95) (0.09) (0.07)
Net realized and unrealized gain
on investments 28.77 5.53 2.08
Total from investment operations 27.82 5.44 2.01
Less distributions from capital gains (0.24) (0.00)
(0.00)
Net asset value, end of period $45.03 $17.45 $12.01
Class C Ratios/Supplemental Data
Total return 159.75% 45.30% 20.10%
Net assets, end of period (in thousands) $282,873 $44,371 $7,615
Ratio of expenses to average net assets 2.20% 2.57% 3.20%3
Ratio of net investment loss to
average net assets -1.68% -1.26% -1.66%3
Portfolio turnover rate 44.19% 51.00% 26.64%
(1) The financial data shown for a Class C share are based on the financial
data for a share of the Fund's prior Class B. On March 24, 2000, that
Class B was combined with and redesignated as Class C, which had commenced
operations on October 4, 1999.
(2) Commencement of operations.
(3) Annualized.
SCIENCE AND TECHNOLOGY FUND
For a Class Y share outstanding throughout the period:
For the For the
fiscal year period from
ended 6/9/98(1) to
3/31/00 3/31/99
Class Y Per-Share Data
Net asset value, beginning of period $17.65
$12.20
Income from investment operations:
Net investment income (loss) (6.09) 0.01
Net realized and unrealized gain
on investments 34.04 5.44
Total from investment operations 27.95 5.45
Less distributions from capital gains (0.24)
(0.00)
Net asset value, end of period $45.36 $17.65
Class Y Ratios/Supplemental Data
Total return 158.67% 44.67%
Net assets, end of period (in thousands) $2,108 $53
Ratio of expenses to average net assets 1.36% 0.62%(2)
Ratio of net investment income to
average net assets -0.96% 0.54%(2)
Portfolio turnover rate 44.19% 51.00%(2)
(1) Commencement of operations.
(2) Annualized.
SMALL CAP GROWTH FUND (formerly, Growth Fund)
For a Class C share outstanding throughout each period(1):
For the fiscal year ended March 31,
2000 1999 1998 1997 1996
Class C Per-Share Data
Net asset value,
beginning of period $14.74 $14.29 $9.08 $10.50 $8.45
Income from investment
operations:
Net investment loss (0.18) (0.11) (0.13) (0.03) (0.01)
Net realized and
unrealized gain (loss)
on investments 10.22 2.91 5.91 (1.09) 2.25
Total from investment
operations 10.04 2.80 5.78 (1.12) 2.24
Less distribution
from capital gains (3.14) (2.35) (0.57) (0.30) (0.19)
Net asset value,
end of period $21.64 $14.74 $14.29 $9.08 $10.50
Class C Ratios/Supplemental Data
Total return 73.38% 21.61% 65.37% -10.97% 26.57%
Net assets, end of
period (in thousands) $800,576 $424,612 $329,514 $198,088$202,557
Ratio of expenses to
average net assets 2.11% 2.10% 2.13% 2.12% 2.14%
Ratio of net investment
loss to average net assets -0.90% -0.90% -1.12% -0.27% -0.25%
Portfolio turnover rate 82.24% 51.41% 33.46% 37.20% 31.84%
(1) The financial data shown for a Class C share are based on the financial
data for a share of the Fund's prior Class B. On March 24, 2000 that Class
B was combined with and redesignated as Class C, which had commenced
operations on October 4, 1999. Per-share amounts have been adjusted
retroactively to reflect the 100% stock dividend effected June 26, 1998.
SMALL CAP GROWTH FUND (formerly, Growth Fund)
For a Class Y share outstanding throughout each period(1):
For the
period from
For the fiscal year ended March 31, 12/29/95(2) to
2000 1999 1998 1997 3/31/96
Class Y Per-Share Data
Net asset value,
beginning of period $15.21 $14.55 $9.16 $10.52 $10.11
Income from investment
operations:
Net investment
income (loss) (0.15) 0.00 (0.03) 0.01 0.02
Net realized and unrealized
gain (loss) on investments 10.73 3.01 5.99 (1.07) 0.39
Total from investment
operations 10.58 3.01 5.96 (1.06) 0.41
Less distribution from
capital gains (3.14) (2.35) (0.57) (0.30) (0.00)
Net asset value,
end of period $22.65 $15.21 $14.55 $9.16 $10.52
Class Y Ratios/Supplemental Data
Total return 74.71% 22.73% 66.78% -10.37% 4.11%
Net assets, end of
period (in thousands) $16,770 $7,942 $633 $264 $1
Ratio of expenses to
average net assets 1.30% 1.18% 1.30% 1.17% 1.17%(3)
Ratio of net investment
income (loss) to average
net assets -0.09% 0.08% -0.30% 0.31% 0.78%(3)
Portfolio turnover rate 82.24% 51.41% 33.46% 37.20% 31.84%(3)
(1) Per-share amounts have been adjusted retroactively to reflect the 100%
stock dividend effected June 26, 1998.
(2) Commencement of operations.
(3) Annualized.
TOTAL RETURN FUND
For a Class C share outstanding throughout each period(1):
For the fiscal year ended March 31,
2000 1999 1998 1997 1996
Class C Per-Share Data
Net asset value,
beginning of period $11.52 $12.24 $9.09 $8.17 $6.37
Income from investment
operations:
Net investment
income (loss) (0.01) 0.03 (0.02) (0.01) (0.01)
Net realized and unrealized
gain on investments 2.71 0.82 3.56 0.98 1.84
Total from investment
operations 2.70 0.85 3.54 0.97 1.83
Less distributions:
From net investment income (0.03) (0.01) (0.00) (0.00) (0.00)
From capital gains (0.43) (1.56) (0.39) (0.05) (0.03)
Total distributions (0.46) (1.57) (0.39) (0.05) (0.03)
Net asset value,
end of period $13.76 $11.52 $12.24 $9.09 $8.17
Class C Ratios/Supplemental Data
Total return 23.98% 7.47% 39.57% 11.93% 28.75%
Net assets, end of
period (in thousands) $585,293 $508,210 $472,970$317,453 $208,233
Ratio of expenses to
average net assets 1.98% 1.93% 1.92% 1.95% 1.99%
Ratio of net investment
income (loss) to average
net assets -0.12% 0.30% -0.23% -0.17% -0.11%
Portfolio turnover rate 75.64% 54.73% 36.94% 26.23% 16.78%
(1) The financial data shown for a Class C share are based on the financial
data for a share of the Fund's prior Class B. On March 24, 2000, that
Class B was combined with and redesignated as Class C, which had commenced
operations on October 4, 1999. On December 2, 1995, Fund shares then
outstanding were designated Class B shares. Per-share amounts have been
adjusted retroactively to reflect the 100% stock dividend effected June
26, 1998.
TOTAL RETURN FUND
For a Class Y share outstanding throughout each period(1):
For the
period from
For the fiscal year ended March 31, 12/29/95(2) to
2000 1999 1998 1997 3/31/96
Class Y Per-Share Data
Net asset value,
beginning of period $11.78 $12.46 $9.18 $8.19 $7.66
Income from investment
operations:
Net investment income 0.06 0.12 0.05 0.02 0.02
Net realized and unrealized
gain on investments 2.80 0.84 3.62 1.02 0.51
Total from investment
operations 2.86 0.96 3.67 1.04 0.53
Less distributions:
From net investment income (0.13) (0.08) (0.00) (0.00) (0.00)
From capital gains (0.43) (1.56) (0.39) (0.05) (0.00)
Total distributions (0.56) (1.64) (0.39) (0.05) (0.00)
Net asset value,
end of period $14.08 $11.78 $12.46 $9.18 $8.19
Class Y Ratios/Supplemental Data
Total return 24.96% 8.37% 40.63% 12.69% 6.92%
Net assets, end of
period (in thousands) $2,152 $1,381 $943 $504 $87
Ratio of expenses to
average net assets 1.16% 1.15% 1.20% 1.18% 0.96%(3)
Ratio of net investment
income to average
net assets 0.67% 1.10% 0.50% 0.65% 1.04%(3)
Portfolio turnover rate 75.64% 54.73% 36.94% 26.23% 16.78%(3)
(1) Per-share amounts have been adjusted retroactively to reflect the 100%
stock dividend effected June 26, 1998.
(2) Commencement of operations.
(3) Annualized.
This space is intended for your notes and calculations.
W&R FUNDS
Custodian
UMB Bank, n.a.
928 Grand Boulevard
Kansas City, Missouri 64141
Legal Counsel
Kirkpatrick & Lockhart llp
1800 Massachusetts Avenue, N. W.
Washington, D. C. 20036
Independent Auditors
Deloitte & Touche llp
1010 Grand Boulevard
Kansas City, Missouri
64106-2232
Investment Manager
Waddell & Reed Investment
Management Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
888-WADDELL
Underwriter
Waddell & Reed, Inc.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
888-WADDELL
Shareholder Servicing Agent
Waddell & Reed
Services Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
888-WADDELL
Accounting Services Agent
Waddell & Reed
Services Company
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000
888-WADDELL
W&R FUNDS
You can get more information about each Fund in the --
_ Statement of Additional Information (SAI), which contains detailed
information about the Fund, particularly the investment policies and
practices. You may not be aware of important information about a Fund
unless you read both the Prospectus and the SAI. The current SAI is on
file with the Securities and Exchange Commission (SEC) and it is
incorporated into this Prospectus by reference (that is, the SAI is
legally part of the Prospectus).
_ Annual and Semiannual Reports to Shareholders, which detail each Fund's
actual investments and include financial statements as of the close of the
particular annual or semiannual period. The annual report also contains a
discussion of the market conditions and investment strategies that
significantly affected the Funds' performance during the year covered by
the report.
To request a copy of the Funds' current SAI or copies of the most recent
Annual and Semiannual reports, without charge, or for other inquiries,
contact the Fund or Waddell & Reed, Inc. at the address and telephone number
below. Copies of the SAI, Annual and/or Semiannual reports may also be
requested via e-mail at [email protected].
Information about the Funds (including the current SAI and most recent Annual
and Semiannual Reports) is available from the SEC's web site at
http://www.sec.gov and may also be obtained, after paying a duplicating fee,
by electronic request at [email protected] or from the SEC's Public
Reference Room in Washington, D.C. You can find out about the operation of
the Public Reference Room and applicable copying charges by calling 202-942-
8090.
The Funds' SEC file number is: 811-6569.
Waddell & Reed, Inc.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
913-236-2000
888-WADDELL
WRP3210(6-00)
