File No. 33-45961
File No. 811-6569
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ____
Post-Effective Amendment No. 17
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No. 17
W&R FUNDS, INC.
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(Exact Name as Specified in Charter)
6300 Lamar Avenue, Shawnee Mission, Kansas 66202-4200
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(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (913) 236-2000
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Kristen A. Richards, P. O. Box 29217, Shawnee Mission, Kansas 66201-9217
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective
_____ immediately upon filing pursuant to paragraph (b)
__X__ on June 28, 2001 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of Rule 485
_____ this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
==================================================================
DECLARATION REQUIRED BY RULE 24f-2 (a) (1)
The issuer has registered an indefinite amount of its securities under
the Securities Act of 1933 pursuant to Rule 24f-2(a)(1). Notice for the
Registrant's fiscal year ended March 31, 2001 will be filed on or about
June 28, 2001.
W&R Funds, Inc.
EQUITY, GROWTH & INCOME AND ASSET ALLOCATION FUNDS
Asset Strategy Fund
Core Equity Fund
International Growth Fund
Large Cap Growth Fund
Mid Cap Growth Fund
Science and Technology Fund
Small Cap Growth Fund
Tax-Managed Equity 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.
Prospectus
June 28, 2001
CONTENTS
3 An Overview of the Funds
3 Asset Strategy Fund
10 Core Equity Fund
16 International Growth Fund
22 Large Cap Growth Fund
26 Mid Cap Growth Fund
30 Science and Technology Fund
36 Small Cap Growth Fund
42 Tax-Managed Equity Fund
46 The Investment Principles of the Funds
55 Your Account
76 The Management of the Funds
81 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 include bonds rated
BB and below by Standard & Poor's (S&P) and Ba and below by Moody's
Corporation (Moody's) 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.
Portfolio 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:
* WRIMCO's skill 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
* 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 particular 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. Cumulative return
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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
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%
2000 20.66%
In the period shown in the chart, the highest quarterly return was 15.58%
(the first quarter of 2000) and the lowest quarterly return was -4.97% (the
first quarter of 1997). The Class C return for the year through March 31,
2001 was -8.25%.
[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, 2000 (%) 1 Year 5 Years Life of Class[2]
Class A Shares of Asset Strategy Fund -0.98%
S&P 500 Index -7.29%
Salomon Brothers Broad
Investment Grade Index 6.41%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit 2.79%
Lipper Flexible Portfolio Funds
Universe Average -0.74%
Class B Shares of Asset Strategy Fund 0.30%
S&P 500 Index -7.29%
Salomon Brothers Broad
Investment Grade Index 6.41%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit 2.79%
Lipper Flexible Portfolio Funds
Universe Average -0.74%
Class C Shares of Asset Strategy Fund[1] 20.66% 12.85% 11.72%
S&P 500 Index -9.18% 18.35% 20.12%
Salomon Brothers Broad
Investment Grade Index 11.59% 6.45% 7.68%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit 6.53% 5.75% 5.78%
Lipper Flexible Portfolio Funds
Universe Average 0.29% 11.54% 13.13%
Class Y Shares of Asset Strategy Fund 21.75% 13.84% 13.80%
S&P 500 Index -9.18% 18.35% 18.35%
Salomon Brothers Broad
Investment Grade Index 11.59% 6.45% 6.45%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit 6.53% 5.75% 5.75%
Lipper Flexible Portfolio Funds
Universe Average 0.29% 11.54% 11.54%
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.
Accordingly, these returns reflect no CDSC since it only applies to Class C
shares held for twelve months or less.
[2]Since July 10, 2000 for Class A shares, July 3, 2000 for Class B shares,
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 for Class A shares, Class B shares, Class C shares and
Class Y shares is calculated from July 31, 2000, July 31, 2000, 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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.43% 0.53% 0.45% 0.38%
Total Annual Fund
Operating Expenses 1.38% 2.23% 2.15% 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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of
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 $707 $986 $1,285 $2,134
Class B Shares $626 $998 $1,295 $2,348[1]
Class C Shares $218 $673 $1,154 $2,483
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 $707 $986 $1,285 $2,134
Class B Shares $226 $698 $1,195 $2,348[1]
Class C Shares $218 $673 $1,154 $2,483
Class Y Shares $135 $421 $ 729 $1,601
[1]Reflects annual operating expenses of Class A shares 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 Core Equity Fund
(formerly, W&R Total Return Fund) seeks to provide
capital growth and income.Principal Strategies
Core Equity Fund seeks to achieve its goals by investing primarily in common
stocks of large U.S. and foreign companies with dominant market positions in
their industries. In order to achieve its goals, the Fund invests in
securities that have the potential for capital appreciation or that WRIMCO
expects to resist market decline. Although the Fund typically invests in
large companies, it may invest in securities of any size company.
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
* dividend payment history
Generally, in determining whether to sell a security WRIMCO uses the same
type of analysis that it uses in buying securities in order to determine
whether the security has ceased to offer the prospect of significant growth
potential and/or the prospect of continued dividend payments. 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 Core Equity Fund owns different types of securities, 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
* 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.
An investment in foreign securities presents 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
Core Equity Fund is designed for investors who seek capital growth and
income. You should consider whether the Fund fits your particular investment
objectives.
PERFORMANCE
Core Equity 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. Cumulative return
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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
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%
2000 8.54%
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, 2001 was -14.25%.
[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, 2000 (%) 1 Year 5 Years Life of Class[2]
Class A Shares of
Core Equity Fund -7.64%
S&P 500 Index -7.29%
Lipper Large-Cap Core Funds
Universe Average -6.59%
Class B Shares of
Core Equity Fund -6.46%
S&P 500 Index -7.29%
Lipper Large-Cap Core Funds
Universe Average -6.59%
Class C Shares of
Core Equity Fund[1] 8.54% 16.69% 15.53%
S&P 500 Index -9.18% 18.35% 17.33%
Lipper Large-Cap Core Funds
Universe Average -8.96% 16.62% 15.72%
Class Y Shares of
Core Equity Fund 9.48% 17.91% 17.58%
S&P 500 Index -9.18% 18.35% 18.35%
Lipper Large-Cap Core Funds
Universe Average -8.96% 16.62% 16.62%
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. Accordingly, these returns reflect no
CDSC since it only applies to Class C shares held for twelve months or less.
[2]Since July 3, 2000 for Class A shares, July 11, 2000 for Class B shares,
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 of Class A shares, Class B shares, Class C shares and Class Y
shares is calculated from July 31, 2000, July 31, 2000, September 30, 1992
and December 31, 1995, respectively.
FEES AND EXPENSES
Core 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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.29% 0.41% 0.27% 0.21%
Total Annual Fund
Operating Expenses 1.24% 2.11% 1.97% 1.16%
[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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of
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 $694 $946 $1,217 $1,989
Class B Shares $614 $960 $1,232 $2,215[1]
Class C Shares $200 $618 $1,062 $2,296
Class Y Shares $118 $368 $ 638 $1,409
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $694 $946 $1,217 $1,989
Class B Shares $214 $660 $1,132 $2,215[1]
Class C Shares $200 $618 $1,062 $2,296
Class Y Shares $118 $368 $ 638 $1,409
[1]Reflects annual operating expenses of Class A shares 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, 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:
* a company's growth and earnings potential
* management of the company
* industry position of the company
* strength of the industry
* applicable economic, market and political conditions of the country in
which the company is located
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, if it believes the management of the
company has weakened, and/or there exists political or economic instability
in the issuer's country. 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 securities, 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
* 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 particular
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. Cumulative return
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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
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%
2000 -24.49%
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, 2001 was -14.14%.
[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, 2000 (%) 1 Year 5 Years Life of Class[2]
Class A Shares of
International Growth Fund -22.05%
Morgan Stanley Capital
International E.A.FE. Index -6.62%
Lipper International
Funds Universe Average -8.51%
Class B Shares of
International Growth Fund -20.48%
Morgan Stanley Capital
International E.A.FE. Index -6.62%
Lipper International
Funds Universe Average -8.51%
Class C Shares of
International Growth Fund[1] -24.49% 21.18% 13.30%
Morgan Stanley Capital
International E.A.FE. Index -14.17% 7.13% 9.76%
Lipper International
Funds Universe Average -15.60% 9.09% 10.62%
Class Y Shares of
International Growth Fund -23.83% 22.25% 22.28%
Morgan Stanley Capital
International E.A.FE. Index -14.17% 7.13% 7.13%
Lipper International
Funds Universe Average -15.60% 9.09% 9.09%
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. Accordingly, these returns reflect no
CDSC since it only applies to Class C shares held for twelve months or less.
[2]Since July 3, 2000 for Class A shares, July 10, 2000 for Class B shares,
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 for Class A shares, Class B shares, Class C shares and Class Y
shares is calculated from July 31, 2000, July 31, 2000, 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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.66% 0.77% 0.52% 0.38%
Total Annual Fund
Operating Expenses 1.76% 2.62% 2.37% 1.48%
[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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of
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 $744 $1,098 $1,476 $2,532
Class B Shares $665 $1,114 $1,490 $2,742[1]
Class C Shares $240 $ 739 $1,265 $2,706
Class Y Shares $151 $ 468 $ 808 $1,768
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $744 $1,098 $1,476 $2,532
Class B Shares $265 $ 814 $1,390 $2,742[1]
Class C Shares $240 $ 739 $1,265 $2,706
Class Y Shares $151 $ 468 $ 808 $1,768
[1]Reflects annual operating expenses of Class A shares 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:
* the company's market position, product line, technological position and
prospects for increased earnings
* the management capability of the company being considered
* the short-term and long-term outlook for the industry being analyzed
* changes in economic and political conditions
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.
In general, WRIMCO may sell a security if it determines that the security no
longer presents sufficient appreciation potential; this may be caused by, or
be an effect of, changes in the industry of the issuer, loss by the company
of its competitive position, and/or poor use of resources. 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 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'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
* 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.
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) None[2] 5% 1% None
Annual Fund Operating Expenses
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees[3] 0.70% 0.70% 0.70% 0.70%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses[4] 0.56% 1.08% 0.67% 0.55%
Total Annual Fund
Operating Expenses[4] 1.51% 2.78% 2.37% 1.50%
[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.
[4]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal period ended March 31, 2001. 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 of
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 $720 $1,024
Class B Shares $681 $1,162
Class C Shares $240 $ 739
Class Y Shares $152 $ 474
If shares are not redeemed at end of period: 1 Year 3 Years
Class A Shares $720 $1,024
Class B Shares $281 $ 862
Class C Shares $240 $ 739
Class Y Shares $152 $ 474
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
* 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
* 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) None[2] 5% 1% None
Annual Fund Operating Expenses
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees[3] 0.85% 0.85% 0.85% 0.85%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses[4] 0.90% 1.45% 1.06% 0.83%
Total Annual Fund
Operating Expenses[4] 2.00% 3.30% 2.91% 1.93%
[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.
[4]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal period ended March 31, 2001. 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 of
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 $767 $1,167
Class B Shares $733 $1,317
Class C Shares $294 $ 899
Class Y Shares $196 $ 606
If shares are not redeemed at end of period: 1 Year 3 Years
Class A Shares $767 $1,167
Class B Shares $333 $1,017
Class C Shares $294 $ 899
Class Y Shares $196 $ 606
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. WRIMCO typically
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
* 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, has become
overvalued and/or whether the company prospects of the issuer have
deteriorated. 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
A variety of factors can affect the investment performance of the Science
and Technology Fund. These include:
* 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
* the volatility of securities of science and technology companies due, in
part, to the competitiveness of the industry
* 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
* 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 that concentrates in
securities of science and technology companies. This Fund is not suitable
for all investors. You should consider whether the Fund fits your particular
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. Cumulative return
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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
CHART OF RETURNS
as of December 31 each year (%)[1]
1998 44.03%
1999 177.01%
2000 -26.31%
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 -23.25%
(the second quarter of 2000). The Class C return for the year through March
31, 2001 was -20.79%.
[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 this period 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 beneficial an impact on performance.
Average Annual Total Returns
as of December 31, 2000 (%) 1 Year Life of Class[2]
Class A Shares of
Science and Technology Fund -18.34%
Goldman Sachs Technology
Industry Composite Index -38.28%
Lipper Science & Technology
Funds Universe Average -33.36%
Class B Shares of
Science and Technology Fund -16.94%
Goldman Sachs Technology
Industry Composite Index -38.28%
Lipper Science & Technology
Funds Universe Average -33.36%
Class C Shares of
Science and Technology Fund[1] -26.31% 36.85%
Goldman Sachs Technology
Industry Composite Index -37.84% 18.14%
Lipper Science & Technology
Funds Universe Average -33.81% 24.19%
Class Y Shares of
Science and Technology Fund -25.66% 42.89%
Goldman Sachs Technology
Industry Composite Index -37.84% 19.62%
Lipper Science & Technology
Funds Universe Average -33.81% 29.17%
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. Accordingly, these returns reflect no
CDSC since it only applies to Class C shares held for twelve months or less.
[2]Since July 3, 2000 for Class A and Class B shares, July 31, 1997 for Class
C shares (based on the prior Class B shares) and June 9, 1998 for Class Y
shares. Because Class A shares, Class B shares and Class Y shares 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 July 31, 2000, July 31, 2000 and June 30,
1998, respectively.
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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.62% 0.69% 0.43% 0.28%
Total Annual Fund
Operating Expenses 1.72% 2.54% 2.28% 1.38%
[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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of
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 $740 $1,087 $1,457 $2,492
Class B Shares $657 $1,091 $1,451 $2,674[1]
Class C Shares $231 $ 712 $1,220 $2,615
Class Y Shares $140 $ 437 $ 755 $1,657
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $740 $1,087 $1,457 $2,492
Class B Shares $257 $ 791 $1,351 $2,674[1]
Class C Shares $231 $ 712 $1,220 $2,615
Class Y Shares $140 $ 437 $ 755 $1,657
[1]Reflects annual operating expenses of Class A shares 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 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
* 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. 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
A variety of factors can affect the investment performance of Small Cap
Growth Fund. These include:
* 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
* 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. 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
* 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. Cumulative return
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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
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%
2000 -16.22%
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, 2001 was -14.57%.
[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, 2000 (%) 1 Year 5 Years Life of Class[2]
Class A Shares of
Small Cap Growth Fund -20.47%
Russell 2000 Growth Index -16.17%
Lipper Small-Cap Growth
Funds Universe Average -9.18%
Class B Shares of
Small Cap Growth Fund -18.73%
Russell 2000 Growth Index -16.17%
Lipper Small-Cap Growth
Funds Universe Average -9.18%
Class C Shares of
Small Cap Growth Fund[1] -16.22% 19.36% 22.14%
Russell 2000 Growth Index -22.36% 7.14% 11.12%
Lipper Small-Cap Growth
Funds Universe Average -4.95% 14.40% 16.55%
Class Y Shares of
Small Cap Growth Fund - 15.56% 20.32% 20.52%
Russell 2000 Growth Index -22.36% 7.14% 7.14%
Lipper Small-Cap Growth
Funds Universe Average -4.95% 14.40% 14.40%
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. Accordingly, these returns reflect no
CDSC since it only applies to Class C shares held for twelve months or less.
[2]Since July 3, 2000 for Class A shares, July 6, 2000 for Class B shares,
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 for Class A shares, Class B shares, Class C shares and Class Y
shares is calculated from July 31, 2000, July 31, 2000, 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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.44% 0.47% 0.27% 0.21%
Total Annual Fund
Operating Expenses 1.54% 2.32% 2.12% 1.31%
[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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of
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 $723 $1,033 $1,365 $2,302
Class B Shares $635 $1,024 $1,340 $2,457[1]
Class C Shares $215 $ 664 $1,139 $2,452
Class Y Shares $133 $ 415 $ 718 $1,579
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $723 $1,033 $1,365 $2,302
Class B Shares $235 $ 724 $1,240 $2,457[1]
Class C Shares $215 $ 664 $1,139 $2,452
Class Y Shares $133 $ 415 $ 718 $1,579
[1]Reflects annual operating expenses of Class A shares 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 Fundseeks 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 realizing 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 securities, 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
* the Fund's tax-sensitive investment strategy not limiting distributions of
taxable income and net 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
realize capital 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 net 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) None[2] 5% 1% None
Annual Fund Operating Expenses
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees[3] 0.65% 0.65% 0.65% 0.65%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses[4] 1.35% 1.65% 1.46% 1.44%
Total Annual Fund
Operating Expenses[4] 2.25% 3.30% 3.11% 2.34%
[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.
[4]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal period ended March 31, 2001. 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 of
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 $790 $1,239
Class B Shares $733 $1,316
Class C Shares $314 $ 961
Class Y Shares $237 $ 730
If shares are not redeemed at end of period: 1 Year 3 Years
Class A Shares $790 $1,239
Class B Shares $333 $1,016
Class C Shares $314 $ 961
Class Y Shares $237 $ 730
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. 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.
Portfolio Mix
Stocks 70% (can range from 0-100%)
Bonds 25% (can range from 0-100%)
Short-term 5% (can range from 0-100%)
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. The Fund may use options and futures contracts for defensive
purposes. 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 Moody's, or
unrated securities judged by WRIMCO to be of equivalent quality
* 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 Core Equity Fund
The goal of Core Equity Fund is to provide capital growth and income. The
Fund seeks to achieve its goals by investing, during normal market
conditions, primarily in a diversified portfolio of securities, typically
the stocks of large, high quality U.S. and foreign companies that are
well-known and have been consistently profitable. 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 some or all of the Fund's
assets, including any one or more of the following:
* hold cash, commercial paper or other short-term investments
* invest in debt securities (including commercial paper or short-term U.S.
Government securities)
* invest in convertible preferred stock
By taking a temporary defensive position the Fund may not achieve its
investment objective.
W&R International Growth Fund
The primary goal of 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, may avoid investment in volatile emerging markets
and increase investments in more stable, developed countries and industries,
may use forward currency contracts to hedge specific foreign currencies, 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 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. The Fund
will, under normal market conditions, invest at least 65% of its total
assets in large cap growth securities. There is no guarantee that the Fund
will achieve its goal.
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 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 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 Russell Mid-Cap. Companies whose capitalization falls outside the range
of Russell Mid-Cap after purchase continue to be considered medium
capitalization companies for purpose of the Fund's investment policy. The
Fund will, under normal market conditions, invest at least 65% of its total
assets in mid cap securities. There is no guarantee that the Fund will
achieve its goal.
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 companies. Science and technology
companies are 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
* 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.
The Fund may also use options and futures contracts for hedging purposes. 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 small cap common stocks of
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 may
occasionally invest in securities of larger companies that, in WRIMCO's
opinion, are being fundamentally changed or revitalized, have a position
that is considered strong relative to the market as a whole or otherwise
offer unusual opportunities for above average 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. The Fund will,
under normal market conditions, invest at least 65% of its net assets in
small cap stocks. There is no guarantee that the Fund will achieve its goal.
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 net
short-term gains (taxed as ordinary income), as well as distributions of
realized net
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
* 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 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 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.
Notwithstanding the 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 undistributed realized 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 that could include adverse changes
to applicable tax rates or capital gains holding periods.
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.
You will find more information about each Fund's permitted investments and
strategies, as well as the restrictions that apply to them, in each Fund's
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 other
market risk, financial risk and, in some cases, prepayment 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.
* Prepayment risk is the possibility that, during periods of falling
interest rates, a debt security with a high stated interest rate will be
prepaid before its expected maturity date.
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 would 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.
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
charge[1] 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) fees and service (12b-1) fees and service (12b-1)
of 0.25% 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 Class A shares, so
only Class A shares in 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, your financial advisor
typically will recommend
purchase of Class A shares due
to a reduced sales charge and
lower annual expenses
[1]A 1% CDSC may apply to 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 (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. (Waddell & Reed) 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 Waddell & Reed for the amounts it spends
for, either directly or through third parties, distributing the Fund's Class
A shares, providing 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 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 Waddell &
Reed 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 Waddell & Reed
for, either directly or through third parties, providing 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 Waddell & Reed 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 Waddell & Reed with respect to the Fund's
Class B or Class C shares would exceed the maximum amount of such charges
that Waddell & Reed is permitted to receive under NASD rules as then in
effect.
Under the Class Y Plan, each Fund may pay Waddell & Reed 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 Waddell & Reed for, either directly or through
third parties, distributing the Class Y shares of that Fund, providing
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 and typically higher than those for Class Y shares.
Size of Purchase
Sales Charge Reallowance
as Approx. to Dealers
Sales Charge Percent of as Percent
as Percent of Amount of 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 0.00[1] 0.00[1] 0.50
[1]No sales charge is payable at the time of purchase on investments of $2
million or more, although for such investments the Fund may impose a 1% CDSC
on certain 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 above the initial purchase price.
Waddell & Reed and its affiliates 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
and its affiliates 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
W&R Funds, Inc. and/or Waddell & Reed Advisors Funds, except Class A shares
of W&R Money Market Fund, Waddell & Reed Advisors Cash Management or Waddell
& Reed Advisors Municipal 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 net asset value (NAV) of
Class A shares already held (Rights of Accumulation)
* Grouping all purchases of Class A shares of W&R Funds, Inc. and/or Class A
shares of Waddell & Reed Advisors Funds, except shares of W&R Money Market
Fund, Waddell & Reed Advisors Cash Management or Waddell & Reed Advisors
Municipal Money Market Fund, made during a thirteen-month period (Letter of
Intent)
* Grouping purchases by certain related persons
Additional information and applicable forms are available from your
financial advisor.
Waivers for Certain Investors
Class A shares may be purchased at NAV by:
* The Directors and officers of the Fund or of any affiliated entity of
Waddell & Reed, employees of Waddell & Reed, employees of its affiliates,
financial advisors of Waddell & Reed and its affiliates and the spouse,
children, parents, children's spouses and spouse's parents of each,
including purchases into certain retirement plans and certain trusts for
these individuals
* Until December 31, 2001, clients of Legend Equities Corporation (Legend)
if the purchase is made with the proceeds of the redemption of shares of a
mutual fund which is not within the Waddell & Reed Advisors or W&R Funds,
Inc. and the purchase is made within 60 days of such redemption
* Retirement plan accounts held in the Waddell & Reed Advisors Retirement
Plan, offered and distributed by Nationwide Investment Services Corporation
through Nationwide Trust Company, FSB retirement programs
* Direct Rollovers from the Waddell & Reed Advisors Retirement Plan
* Participants in a 401(k) plan or a 457 plan having 100 or more eligible
employees, and the shares are held in individual plan participant accounts
on the Fund's records
You will find more information in the SAI about sales charge reductions and
waivers.
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
Waddell & Reed, as further described below. The purpose of the CDSC is to
compensate Waddell & Reed for the costs incurred by it in connection with
the sale of the Fund's Class B or Class C shares or with certain Class A
investments. The CDSC will not be imposed on shares representing payment of
dividends or other distributions and will be 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 will be imposed on increases in net
asset value above the initial purchase price. 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.
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
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 (which have lower ongoing expenses). Class B shares
automatically convert to Class A shares eight years after the end of the
calendar month in which the shares were purchased, including all shares
acquired by reinvested dividends and distributions during this period. 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 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 indicated below.
Contingent Deferred Sales Charge
on Shares Sold Within Year As % of Amount 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, 2001, then
redeems all Class B shares on July 12, 2002, 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.
The CDSC will not apply in the following circumstances:
* 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
Waddell & Reed
* 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 purchased by current or retired Directors of the
Fund, Directors of affiliated companies, current or retired officers or
employees of the Fund, WRIMCO, Waddell & Reed or their affiliated companies,
financial advisors of Waddell & Reed and its affiliates, and by members of
the immediate families of such persons
* 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
45 days after such redemption
* the exercise of certain exchange privileges
* redemptions effected pursuant to the Fund's right to liquidate a
shareholder's account 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 account,
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
* 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
* certain retirement plans and trusts for employees and financial advisors
of Waddell & Reed and its affiliates
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 and other Tax-Advantaged Savings Plans
To shelter your savings from income taxes
Retirement and other tax-advantaged savings 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 certain individuals under age
70 1/2, with earned income, to invest up to $2,000* per taxable year. The
maximum annual contribution for an individual and his or her spouse is
$4,000* ($2,000 for each spouse) or, if less, the couple's combined earned
income for the tax 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 taxable year. The maximum annual contribution for an
individual 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 taxable year, and permit
tax-free withdrawals to pay the higher education expenses of the
beneficiary.
* Simplified Employee Pension Plans (SEP-IRAs) provide small business owners
or those with self-employed income (and their eligible employees) with many
of the same advantages as a 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 on a pre-tax basis 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.
*Note: These limits will increase for years after 2001.
* 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. Contact your financial
advisor for the form.
Buying Shares
You may buy shares of each of the Funds through Waddell & Reed and its
financial advisors or through advisors of Legend. To open your account you
must complete and sign an application. Your financial advisor can help you
with any questions you might have.
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 (and Class A shares of W&R Money Market Fund) by
wire, you must first obtain an account number by calling 800-532-2783, then
mail a completed application to Waddell & Reed at the above address, or fax
it to 800-532-2784. 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.
You may also buy Class Y shares of a Fund indirectly through certain
broker-dealers, banks and other third parties, some of which may charge you
a fee. These firms may have additional requirements regarding the purchase
of Class Y shares.
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 the 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 (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.
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 offering price calculated after your order is received and accepted.
Note the following:
* All of your purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks.
* If you buy shares by check, and then sell those shares by any method other
than by exchange to another fund in Waddell & Reed Advisors Funds and/or W&R
Funds, Inc., the payment may be delayed for up to ten days to ensure that
your previous investment has cleared.
* If you purchase shares of a Fund from certain broker-dealers, banks or
other authorized third parties, the Fund will be deemed to have received
your purchase order when that 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 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)
For certain retirement accounts and accounts opened
through payroll deductions for or by employees of
WRIMCO, Waddell & Reed and their affiliates $25 (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, 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 (or Class A account of W&R Money Market Fund)
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.
If you purchase shares of the Funds from certain broker-dealers, banks or
other authorized third parties, additional purchases may be made through
those firms.
Selling Shares
You can arrange to take money out of your Fund 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 A, Class B or Class C shares.
To sell shares by written request: Complete an Account Service Request form,
available from your financial advisor, 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
* 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 (and Class A shares of W&R Money Market Fund)
by telephone or fax: If you have elected this method in your application
or by subsequent authorization, call 800-532-2783, or fax your request to
800-532-2784, and give your instructions to redeem your 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.
* If you purchased shares of a Fund from certain broker-dealers, banks or
other authorized third parties, you may sell those shares through those
firms, some of which may charge you a fee and may have additional
requirements to sell Fund shares. The Fund will be deemed to have received
your order to sell shares when that firm (or its designee) has received your
order. Your order will receive the NAV of the applicable class subject to
any applicable CDSC 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 The written instructions must be signed by the
Proprietorship 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, The written instructions must be signed by the
Guardian or Other person properly authorized by court order to act
Fiduciary in the particular fiduciary capacity.
A 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
* the check is made payable to someone other than the owner of record
This requirement is 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 account
having an aggregate NAV of less than $500. The Fund will provide 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 to
accounts which have an aggregate NAV of less than $500 due to market forces.
You may reinvest in a Fund, without charge, all or part of the amount of
Class A shares you redeemed by sending to that Fund the amount you want to
reinvest. The reinvested amounts must be received by the Fund within 45 days
after the date of your redemption. You may do this only once with Class A
shares of a Fund.
The CDSC will not apply to the proceeds of Class A (if applicable), Class B
or Class C shares of a Fund which are redeemed and then reinvested in shares
of the same class of the Fund within 45 days after such redemption. Waddell
& Reed 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 A, Class B and Class C
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
Waddell & Reed provides a variety of services to help you manage your
account.
Personal Service
Your local financial advisor is available to provide personal service.
Additionally, 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 or update your account records. At almost any time of the day or
night, you may access your account information from a touch-tone phone, or
you may access our web site, www.waddell.com, to:
* obtain information about your accounts
* obtain price information about other funds in W&R Funds, Inc. or Waddell &
Reed Advisors Funds
* obtain a Fund's current prospectus
* request duplicate statements
Reports
Statements and reports sent to you include the following:
* confirmation statements (after every purchase, other than those purchases
made through Automatic Investment Service, and after every exchange,
transfer or redemption)
* year-to-date statements (quarterly)
* annual and semiannual reports to shareholders (every six months)
To reduce expenses, only one copy of the most recent annual and semiannual
reports of the Funds may be mailed to your household, even if you have more
than one account with a Fund. Call the telephone number listed for Client
Services if you need additional copies of annual or semiannual reports or
account information.
Exchanges
Except as otherwise noted, you may sell your shares and buy shares of the
same class of any of the Funds within W&R Funds, Inc. or of the same class
of any of the Funds within Waddell & Reed Advisors 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. 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 W&R 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 Funds reserve the right to terminate or modify these exchange privileges
at any time as discussed in the SAI.
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
Minimum Amount Minimum Frequency
$25 (per Fund) Monthly
Funds Plus Service
To move money from W&R Money Market Fund to another Fund in W&R Funds, Inc.
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:
Core Equity 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. Net capital gains (and any
net gains from foreign currency transactions) ordinarily are distributed by
each Fund in December. Ordinarily, dividends are paid on shares starting on
the day after they are issued and through the day they are redeemed.
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 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 equal to or greater
than five dollars. If the distribution is less than five dollars, it will be
automatically paid in additional shares of the same class of the Fund.
For retirement accounts, all distributions are automatically paid in
additional shares.
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 and net gains from certain
foreign currency transactions), 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 (the excess of net long-term
capital gains over net short-term capital loss), 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, a non-corporate
shareholder's 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 (AMT).
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 W&R Funds, Inc. or Waddell & Reed Advisors 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
90 days after your purchase and then reacquire Class A shares of that Fund
or acquire Class A shares of another fund in W&R Funds, Inc. or Waddell &
Reed Advisors Funds without paying a sales charge due to the 45 day
reinvestment privilege or exchange privilege. See Your Account -- Selling
Shares. 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 30 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 at a specified rate (31% through August
5, 2001; 30.5% from August 6, 2001 through the end of 2001; 30.0% for 2002)
of all dividends and capital gains distributions and redemption proceeds
payable to individuals and certain other noncorporate shareholders who do
not furnish the Fund with a correct taxpayer identification number.
Withholding at that rate also is required from taxable dividends and capital
gains distributions payable to shareholders who are otherwise subject to
backup withholding.
State and local income taxes. The portion of the dividends paid by each Fund
attributable to interest earned on U.S. Government securities generally is
not subject to state and local income taxes, although distributions by a
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 Board of
Directors. WRIMCO provides investment advice to each of the Funds and
supervises each Fund's investments. WRIMCO and/or its predecessor have
served as investment manager to each of the registered investment companies
in W&R Funds, Inc., Waddell & Reed Advisors Funds and W&R Target Funds, Inc.
since the inception of each company.
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 1994, has served as the Director of Research for WRIMCO and
its predecessor 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 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 May 1994 to
March 1998, Mr. Vrabac was Vice President of, and a portfolio manager for,
Waddell & Reed Asset Management Company. Mr. Vrabac has been an employee of
WRIMCO since May 1994.
James D. Wineland is primarily responsible for the management of the Core
Equity Fund. Mr. Wineland has held his Fund responsibilities since July
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. 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 and its predecessor since January 1988 and has
been an employee of such since November 1984.
Thomas A. Mengel is primarily responsible for the management of the
International Growth Fund. Mr. Mengel has held his Fund responsibilities
since May 1996. Mr. Mengel 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 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 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 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
predecessor since October 1989, initially serving as an investment analyst,
and has served as a portfolio manager for WRIMCO since January 1997.
Kimberly A. Scott is primarily responsible for the management of the Mid Cap
Growth Fund. Ms. Scott has held her Fund responsibilities since February
2001. She is Vice President of WRIMCO, Vice President of the Fund and Vice
President of another investment company managed by WRIMCO. Ms. Scott served
as an investment analyst with WRIMCO from April 1999 to February 2001. From
1994 to 1999, she was an equity analyst for Bartlett & Company.
Zachary H. Shafran is primarily responsible for the management of the
Science and Technology Fund. Mr. Shafran has held his responsibilities since
February 2001. 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. Shafran served as an investment analyst
with WRIMCO and its predecessor from June 1990 to January 1996 and has
served as a portfolio manager since January 1996.
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
and its predecessor 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 Senior
Vice President of WRIMCO and Vice President of other investment companies
for which WRIMCO serves as investment manager. Mr. Sarris had served as an
investment analyst with WRIMCO from October 1991 until January 1996 and had
served as Assistant Portfolio Manager of Small Cap Growth Fund from January
1996 until May 1998.
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 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 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 and its predecessor.
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 its share price or
dividends; 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, 2001 were 0.70%;
for Core Equity 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, 2001 were 0.70%;
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, 2001 were 0.85%;
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.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal period ended March 31, 2001 were 0.32% with the voluntary waiver, by
WRIMCO, of management fee expenses; 0.52% without the voluntary waiver, by
WRIMCO, of management fee expenses;
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.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal period ended March 31, 2001 were 0.00% with the voluntary waiver, by
WRIMCO, of management fee expenses; 0.64% without the voluntary waiver, by
WRIMCO, of management fee expenses;
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, 2001 were 0.85%;
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, 2001 were 0.85%; and
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.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal year ended March 31, 2001 were 0.00% with the voluntary waiver, by
WRIMCO, of management fee expenses; 0.49% without the voluntary waiver, by
WRIMCO, of management fee expenses.
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 A, Class B, 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 each Fund's
financial statements for the fiscal year ended March 31, 2001, is included
in the SAI, which is available upon request.
ASSET STRATEGY FUND
For a Class A share outstanding throughout the period:
For the
period from
7/10/00[1]
to
3/31/01
--------
Class A Per-Share Data
Net asset value, beginning of period $15.22
------
Income (loss) from investment operations:
Net investment income 0.15
Net realized and unrealized loss on investments (0.60)
------
Total from investment operations (0.45)
------
Less distributions:
From net investment income (0.13)
From capital gains (2.66)
------
Total distributions (2.79)
------
Net asset value, end of period $11.98
======
Class A Ratios/Supplemental Data
Total return[2] -3.77%
Net assets, end of period (in millions) $2
Ratio of expenses to average net assets 1.26%[3]
Ratio of net investment income to average net assets 2.26%[3]
Portfolio turnover rate 214.77%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load deducted
on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
ASSET STRATEGY FUND
For a Class B share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
Class B Per-Share Data
Net asset value, beginning of period $15.21
------
Income (loss) from investment operations:
Net investment income 0.07
Net realized and unrealized loss on investments (0.60)
------
Total from investment operations (0.53)
------
Less distributions:
From net investment income (0.05)
From capital gains (2.66)
------
Total distributions (2.71)
------
Net asset value, end of period $11.97
======
Class B Ratios/Supplemental Data
Total return -4.35%
Net assets, end of period (in millions) $2
Ratio of expenses to average net assets 2.15%[2]
Ratio of net investment income to average net assets 1.37%[2]
Portfolio turnover rate 214.77%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
ASSET STRATEGY FUND
For a Class C share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class C Per-Share Data
Net asset value,
beginning of period $15.21 $11.20 $11.42 $ 9.73 $10.15
------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment income 0.11 0.03 0.15 0.21 0.23
Net realized and
unrealized gain (loss)
on investments (0.62) 4.33 0.05 2.16 (0.30)
------ ------ ------ ------ ------
Total from investment
operations (0.51) 4.36 0.20 2.37 (0.07)
------ ------ ------ ------ ------
Less distributions:
From net investment income (0.07) (0.05) (0.16) (0.22) (0.21)
From capital gains (2.66) (0.30) (0.26) (0.46) (0.14)
------ ------ ------ ------ ------
Total distributions (2.73) (0.35) (0.42) (0.68) (0.35)
------ ------ ------ ------ ------
Net asset value,
end of period $11.97 $15.21 $11.20 $11.42 $ 9.73
====== ====== ====== ====== ======
Class C Ratios/Supplemental Data
Total return -4.22% 39.60% 1.79% 24.94% -0.86%
Net assets, end of
period (in millions) $54 $52 $30 $19 $13
Ratio of expenses to average
net assets 2.15% 2.24% 2.32% 2.44% 2.52%
Ratio of net investment income
to average net assets 0.86% 0.24% 1.38% 2.02% 2.21%
Portfolio turnover rate 214.77% 204.12% 168.17% 220.67% 109.92%
[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.
ASSET STRATEGY FUND
For a Class Y share outstanding throughout each period:
For the fiscal year
ended March 31,
------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class Y Per-Share Data
Net asset value,
beginning of period $15.26 $11.21 $11.43 $ 9.73 $10.16
------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment income 0.24 0.15 0.26 0.31 0.27
Net realized and
unrealized gain (loss)
on investments (0.63) 4.33 0.05 2.16 (0.26)
------ ------ ------ ------ ------
Total from investment
operations (0.39) 4.48 0.31 2.47 0.01
------ ------ ------ ------ ------
Less distributions:
From net investment
income (0.23) (0.13) (0.27) (0.31) (0.30)
From capital gains (2.66) (0.30) (0.26) (0.46) (0.14)
------ ------ ------ ------ ------
Total distributions (2.89) (0.43) (0.53) (0.77) (0.44)
------ ------ ------ ------ ------
Net asset value,
end of period $11.98 $15.26 $11.21 $11.43 $ 9.73
====== ====== ====== ====== ======
Class Y Ratios/Supplemental Data
Total return -3.39% 40.85% 2.75% 26.06% 0.05%
Net assets, end of
period (in thousands) $550 $508 $307 $225 $116
Ratio of expenses to average
net assets 1.32% 1.33% 1.45% 1.58% 1.61%
Ratio of net investment income
to average net assets 1.71% 1.14% 2.25% 2.90% 2.97%
Portfolio turnover rate 214.77% 204.12% 168.17% 220.67% 109.92%
CORE EQUITY FUND (formerly, Total Return Fund)
For a Class A share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
------
Class A Per-Share Data
Net asset value, beginning of period $13.89
------
Loss from investment operations:
Net investment loss (0.00)
Net realized and unrealized loss on investments (2.00)
------
Total from investment operations (2.00)
------
Less distributions:
From net investment income (0.00)
From capital gains (2.38)
------
Total distributions (2.38)
------
Net asset value, end of period $ 9.51
======
Class A Ratios/Supplemental Data
Total return[2] -16.72%
Net assets, end of period (in millions) $4
Ratio of expenses to average net assets 1.18%[3]
Ratio of net investment loss to average net assets -0.11%[3]
Portfolio turnover rate 39.02%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load deducted
on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
CORE EQUITY FUND (formerly, Total Return Fund)
For a Class B share outstanding throughout the period:
For the
period from
7/11/00[1]
to
3/31/01
---------
Class B Per-Share Data
Net asset value, beginning of period $14.10
------
Income from investment operations:
Net investment loss (0.05)
Net realized and unrealized loss on investments (2.23)
------
Total from investment operations (2.28)
------
Less distributions:
From net investment income (0.00)
From capital gains (2.38)
------
Total distributions (2.38)
------
Net asset value, end of period $ 9.44
======
Class B Ratios/Supplemental Data
Total return -18.50%
Net assets, end of period (in millions) $5
Ratio of expenses to average net assets 2.11%[2]
Ratio of net investment loss to average net assets -1.02%[2]
Portfolio turnover rate 39.02%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
CORE EQUITY FUND (formerly, Total Return Fund)
For a Class C share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class C Per-Share Data
Net asset value,
beginning of period $13.76 $11.52 $12.24 $ 9.09 $8.17
------ ------ ------ ------ -----
Income (loss) from
investment operations:
Net investment income
(loss) (0.11) (0.01) 0.03 (0.02) (0.01)
Net realized and
unrealized gain (loss)
on investments (1.82) 2.71 0.82 3.56 0.98
------ ------ ------ ------ -----
Total from investment
operations (1.93) 2.70 0.85 3.54 0.97
------ ------ ------ ------ -----
Less distributions:
From net investment income (0.00) (0.03) (0.01) (0.00) (0.00)
From capital gains (2.38) (0.43) (1.56) (0.39) (0.05)
------ ------ ------ ------ -----
Total distributions (2.38) (0.46) (1.57) (0.39) (0.05)
------ ------ ------ ------ -----
Net asset value,
end of period $ 9.45 $13.76 $11.52 $12.24 $9.09
====== ====== ====== ====== =====
Class C Ratios/Supplemental Data
Total return -16.40% 23.98% 7.47% 39.57% 11.93%
Net assets, end
of period (in millions) $440 $585 $508 $473 $317
Ratio of expenses to average
net assets 1.97% 1.98% 1.93% 1.92% 1.95%
Ratio of net investment
income (loss) to average
net assets -0.93% -0.12% 0.30% -0.23% -0.17%
Portfolio turnover rate 39.02% 75.64% 54.73% 36.94% 26.23%
[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.
CORE EQUITY FUND (formerly, Total Return Fund)
For a Class Y share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class Y Per-Share Data
Net asset value,
beginning of period $14.08 $11.78 $12.46 $ 9.18 $8.19
------ ------ ------ ------ -----
Income (loss) from
investment operations:
Net investment income
(loss) (0.04) 0.06 0.12 0.05 0.02
Net realized and
unrealized gain (loss)
on investments (1.84) 2.80 0.84 3.62 1.02
------ ------ ------ ------ -----
Total from investment
operations (1.88) 2.86 0.96 3.67 1.04
------ ------ ------ ------ -----
Less distributions:
From net investment
income (0.00) (0.13) (0.08) (0.00) (0.00)
From capital gains (2.38) (0.43) (1.56) (0.39) (0.05)
------ ------ ------ ------ -----
Total distributions (2.38) (0.56) (1.64) (0.39) (0.05)
------ ------ ------ ------ -----
Net asset value,
end of period $ 9.82 $14.08 $11.78 $12.46 $9.18
====== ====== ====== ====== =====
Class Y Ratios/Supplemental Data
Total return -15.62% 24.96% 8.37% 40.63% 12.69%
Net assets, end of
period (in millions) $2 $2 $1 $1 $1
Ratio of expenses to average
net assets 1.15% 1.16% 1.15% 1.20% 1.18%
Ratio of net investment
income (loss) to average
net assets -0.11% 0.67% 1.10% 0.50% 0.65%
Portfolio turnover rate 39.02% 75.64% 54.73% 36.94% 26.23%
[1]Per-share amounts have been adjusted retroactively to reflect the 100%
stock dividend effected June 26, 1998.
INTERNATIONAL GROWTH FUND
For a Class A share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
--------
Class A Per-Share Data
Net asset value, beginning of period $24.33
------
Loss from investment operations:
Net investment loss (0.02)
Net realized and unrealized loss on investments (6.46)
------
Total from investment operations (6.48)
------
Less distributions:
From net investment income (0.00)
From capital gains (5.82)
------
Total distributions (5.82)
------
Net asset value, end of period $12.03
======
Class A Ratios/Supplemental Data
Total return[2] -29.73%
Net assets, end of period (in millions) $5
Ratio of expenses to average net assets 1.72%[3]
Ratio of net investment loss to average net assets -0.31%[3]
Portfolio turnover rate 103.03%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load deducted
on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
INTERNATIONAL GROWTH FUND
For a Class B share outstanding throughout the period:
For the
period from
7/10/00[1]
to
3/31/01
---------
Class B Per-Share Data
Net asset value, beginning of period $24.59
-----
Loss from investment operations:
Net investment loss (0.09)
Net realized and unrealized loss on investments (6.74)
-----
Total from investment operations (6.83)
-----
Less distributions:
From net investment income (0.00)
From capital gains (5.82)
-----
Total distributions (5.82)
-----
Net asset value, end of period $11.94
======
Class B Ratios/Supplemental Data
Total return -30.89%
Net assets, end of period (in millions) $2
Ratio of expenses to average net assets 2.61%[2]
Ratio of net investment loss to average net assets -1.30%[2]
Portfolio turnover rate 103.03%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
INTERNATIONAL GROWTH FUND
For a Class C share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class C Per-Share Data
Net asset value,
beginning of period $28.58 $15.58 $15.04 $12.40 $ 9.94
------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment loss (0.17) (0.34) (0.07) (0.10) (0.03)
Net realized and
unrealized gain (loss)
on investments (10.63) 15.14 1.55 4.12 2.50
------ ------ ------ ------ ------
Total from investment
operations (10.80) 14.80 1.48 4.02 2.47
------ ------ ------ ------ ------
Less distributions:
From net investment
income (0.00) (0.00) (0.00) (0.00) (0.01)
From capital gains (5.82) (1.80) (0.94) (1.38) (0.00)
------ ------ ------ ------ ------
Total distributions (5.82) (1.80) (0.94) (1.38) (0.01)
------ ------ ------ ------ ------
Net asset value,
end of period $11.96 $28.58 $15.58 $15.04 $12.40
====== ====== ====== ====== ======
Class C Ratios/Supplemental Data
Total return -40.45% 97.89% 10.36% 35.24% 24.85%
Net assets, end of
period (in millions) $123 $223 $100 $87 $50
Ratio of expenses to average
net assets 2.36% 2.37% 2.35% 2.35% 2.46%
Ratio of net investment loss
to average net assets -1.03% -1.48% -0.53% -0.82% -0.52%
Portfolio turnover rate 103.03% 125.71% 116.25% 105.11% 94.76%
[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.
INTERNATIONAL GROWTH FUND
For a Class Y share outstanding throughout each period:
For the fiscal year
ended March 31,
------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class Y Per-Share Data
Net asset value,
beginning of period $29.86 $16.08 $15.35 $12.52 $ 9.95
------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment income
(loss) (0.17) (1.41) 0.05 0.01 0.02
Net realized and
unrealized gain (loss)
on investments (11.00) 16.99 1.62 4.20 2.56
------ ------ ------ ------ ------
Total from investment
operations (11.17) 15.58 1.67 4.21 2.58
------ ------ ------ ------ ------
Less distributions:
From net investment
income (0.00) (0.00) (0.00) (0.00) (0.01)
From capital gains (5.82) (1.80) (0.94) (1.38) (0.00)
------ ------ ------ ------ ------
Total distributions (5.82) (1.80) (0.94) (1.38) (0.01)
------ ------ ------ ------ ------
Net asset value,
end of period $12.87 $29.86 $16.08 $15.35 $12.52
====== ====== ====== ====== ======
Class Y Ratios/Supplemental Data
Total return -39.91% 99.74% 11.41% 36.45% 25.93%
Net assets, end of
period (in thousands) $6,594 $5,296 $629 $419 $227
Ratio of expenses to average
net assets 1.44% 1.48% 1.44% 1.51% 1.59%
Ratio of net investment
income (loss) to
average net assets -0.02% -0.80% 0.36% 0.07% 0.05%
Portfolio turnover rate 103.03% 125.71% 116.25% 105.11% 94.76%
LARGE CAP GROWTH FUND
For a Class A share outstanding throughout the period:
For the
period from
6/30/00[1]
to
3/31/01
---------
Class A Per-Share Data
Net asset value, beginning of period $10.00
------
Income (loss) from investment operations:
Net investment income 0.05
Net realized and unrealized loss on investments (0.45)
------
Total from investment operations (0.40)
------
Less distributions:
From net investment income (0.06)
From capital gains (0.06)
------
Total distributions (0.12)
------
Net asset value, end of period $ 9.48
======
Class A Ratios/Supplemental Data
Total return[2] -4.27%
Net assets, end of period (in millions) $19
Ratio of expenses to average net assets
including voluntary expense waiver 1.13%[3]
Ratio of net investment income to average
net assets including voluntary expense waiver 0.89%[3]
Ratio of expenses to average net assets
excluding voluntary expense waiver 1.34%[3]
Ratio of net investment income to average
net assets excluding voluntary expense waiver 0.68%[3]
Portfolio turnover rate 75.42%
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load deducted
on an initial purchase.
[3]Annualized.
LARGE CAP GROWTH FUND
For a Class B share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
---------
Class B Per-Share Data
Net asset value, beginning of period $10.02
------
Loss from investment operations:
Net investment loss (0.03)
Net realized and unrealized loss on investments (0.49)
------
Total from investment operations (0.52)
------
Less distributions:
From net investment income (0.00)
From capital gains (0.06)
------
Total distributions (0.06)
------
Net asset value, end of period $ 9.44
======
Class B Ratios/Supplemental Data
Total return -5.32%
Net assets, end of period (in millions) $2
Ratio of expenses to average net assets
including voluntary expense waiver 2.53%[2]
Ratio of net investment loss to average
net assets including voluntary expense waiver -0.60%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver 3.00%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver -1.07%[2]
Portfolio turnover rate 75.42%
[1]Commencement of operations.
[2]Annualized.
LARGE CAP GROWTH FUND
For a Class C share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
--------
Class C Per-Share Data
Net asset value, beginning of period $10.00
------
Loss from investment operations:
Net investment loss (0.00)
Net realized and unrealized loss on investments (0.48)
------
Total from investment operations (0.48)
------
Less distributions:
From net investment income (0.01)
From capital gains (0.06)
------
Total distributions (0.07)
------
Net asset value, end of period $ 9.45
======
Class C Ratios/Supplemental Data
Total return -4.93%
Net assets, end of period (in millions) $7
Ratio of expenses to average net assets
including voluntary expense waiver 2.06%[2]
Ratio of net investment loss to average
net assets including voluntary expense waiver -0.08%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver 2.44%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver -0.46%[2]
Portfolio turnover rate 75.42%
[1]Commencement of operations.
[2]Annualized.
LARGE CAP GROWTH FUND
For a Class Y share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
--------
Class Y Per-Share Data
Net asset value, beginning of period $10.02
------
Income (loss) from investment operations:
Net investment income 0.09
Net realized and unrealized loss on investments (0.50)
------
Total from investment operations (0.41)
------
Less distributions:
From net investment income (0.07)
From capital gains (0.06)
------
Total distributions (0.13)
------
Net asset value, end of period $ 9.48
======
Class Y Ratios/Supplemental Data
Total return -4.38%
Net assets, end of period (in thousands) $279
Ratio of expenses to average net assets
including voluntary expense waiver 1.13%[2]
Ratio of net investment income to average
net assets including voluntary expense waiver 1.11%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver 1.34%[2]
Ratio of net investment income to average
net assets excluding voluntary expense waiver 0.90%[2]
Portfolio turnover rate 75.42%
[1]Commencement of operations.
[2]Annualized.
MID CAP GROWTH FUND
For a Class A share outstanding throughout the period:
For the
period from
6/30/00[1]
to
3/31/01
---------
Class A Per-Share Data
Net asset value, beginning of period $10.00
------
Income (loss) from investment operations:
Net investment income 0.11
Net realized and unrealized loss on investments (0.65)
------
Total from investment operations (0.54)
------
Less distributions:
From net investment income (0.06)
From capital gains (0.29)
------
Total distributions (0.35)
------
Net asset value, end of period $ 9.11
======
Class A Ratios/Supplemental Data
Total return[2] -5.88%
Net assets, end of period (in millions) $11
Ratio of expenses to average net assets
including voluntary expense waiver 1.01%[3]
Ratio of net investment income to average
net assets including voluntary expense waiver 1.85%[3]
Ratio of expenses to average net assets
excluding voluntary expense waiver 1.65%[3]
Ratio of net investment income to average
net assets excluding voluntary expense waiver 1.21%[3]
Portfolio turnover rate 110.18%
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load deducted
on an initial purchase.
[3]Annualized.
MID CAP GROWTH FUND
For a Class B share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
---------
Class B Per-Share Data
Net asset value, beginning of period $10.01
------
Income (loss) from investment operations:
Net investment income 0.02
Net realized and unrealized loss on investments (0.66)
------
Total from investment operations (0.64)
------
Less distributions:
From net investment income (0.01)
From capital gains (0.29)
------
Total distributions (0.30)
------
Net asset value, end of period $ 9.07
======
Class B Ratios/Supplemental Data
Total return -6.85%
Net assets, end of period (in millions) $2
Ratio of expenses to average net assets
including voluntary expense waiver 2.40%[2]
Ratio of net investment income to average
net assets including voluntary expense waiver 0.44%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver 3.93%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver -1.09%[2]
Portfolio turnover rate 110.18%
[1]Commencement of operations.
[2]Annualized.
MID CAP GROWTH FUND
For a Class C share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
---------
Class C Per-Share Data
Net asset value, beginning of period $10.00
------
Income (loss) from investment operations:
Net investment income 0.04
Net realized and unrealized loss on investments (0.66)
------
Total from investment operations (0.62)
------
Less distributions:
From net investment income (0.01)
From capital gains (0.29)
------
Total distributions (0.30)
------
Net asset value, end of period $ 9.08
======
Class C Ratios/Supplemental Data
Total return -6.58%
Net assets, end of period (in millions) $4
Ratio of expenses to average net assets
including voluntary expense waiver 1.99%[2]
Ratio of net investment income to average
net assets including voluntary expense waiver 0.84%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver 3.26%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver -0.43%[2]
Portfolio turnover rate 110.18%
[1]Commencement of operations.
[2]Annualized.
MID CAP GROWTH FUND
For a Class Y share outstanding throughout the period:
For the
period from
7/10/00[1]
to
3/31/01
---------
Class Y Per-Share Data
Net asset value, beginning of period $10.23
------
Income (loss) from investment operations:
Net investment income 0.11
Net realized and unrealized loss on investments (0.88)
------
Total from investment operations (0.77)
------
Less distributions:
From net investment income (0.06)
From capital gains (0.29)
------
Total distributions (0.35)
------
Net asset value, end of period $ 9.11
======
Class Y Ratios/Supplemental Data
Total return -7.97%
Net assets, end of period (in thousands) $184
Ratio of expenses to average net assets
including voluntary expense waiver 1.03%[2]
Ratio of net investment income to average
net assets including voluntary expense waiver 1.77%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver 1.68%[2]
Ratio of net investment income to average
net assets excluding voluntary expense waiver 1.11%[2]
Portfolio turnover rate 110.18%
[1]Commencement of operations.
[2]Annualized.
SCIENCE AND TECHNOLOGY FUND
For a Class A share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
----------
Class A Per-Share Data
Net asset value, beginning of period $34.91
------
Income (loss) from investment operations:
Net investment income 0.02
Net realized and unrealized loss on investments (9.35)
------
Total from investment operations (9.33)
------
Less distributions from capital gains (7.65)
------
Net asset value, end of period $17.93
======
Class A Ratios/Supplemental Data
Total return[2] -31.95%
Net assets, end of period (in millions) $6
Ratio of expenses to average net assets 1.70%[3]
Ratio of net investment income to average net assets 0.26%[3]
Portfolio turnover rate 111.25%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load deducted
on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
SCIENCE AND TECHNOLOGY FUND
For a Class B share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
---------
Class B Per-Share Data
Net asset value, beginning of period $34.91
------
Loss from investment operations:
Net investment loss (0.06)
Net realized and unrealized loss on investments (9.40)
------
Total from investment operations (9.46)
------
Less distributions from capital gains (7.65)
------
Net asset value, end of period $17.80
======
Class B Ratios/Supplemental Data
Total return -32.37%
Net assets, end of period (in millions) $3
Ratio of expenses to average net assets 2.53%[2]
Ratio of net investment loss to average net assets -0.55%[2]
Portfolio turnover rate 111.25%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
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
2001 2000 1999 3/31/98
------ ------ ------ ------
Class C Per-Share Data
Net asset value,
beginning of period $45.03 $17.45 $12.01 $10.00
------ ------ ------ ------
Income (loss) from
investment operations:
Net investment loss (0.12) (0.95) (0.09) (0.07)
Net realized and
unrealized gain (loss)
on investments (19.43) 28.77 5.53 2.08
------ ------ ------ ------
Total from investment operations (19.55) 27.82 5.44 2.01
------ ------ ------ ------
Less distributions from capital gains (7.65) (0.24) (0.00) (0.00)
------ ------ ------ ------
Net asset value, end of period $17.83 $45.03 $17.45 $12.01
====== ====== ====== ======
Class C Ratios/Supplemental Data
Total return -47.49% 159.75% 45.30% 20.10%
Net assets, end of period
(in millions) $134 $283 $44 $8
Ratio of expenses to average
net assets 2.27% 2.20% 2.57% 3.20%[3]
Ratio of net investment loss
to average net assets -0.44% -1.68% -1.26% -1.66%[3]
Portfolio turnover rate 111.25% 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 each period:
For the For the
fiscal year period from
ended March 31, 6/9/98[1]
-------------- to
2001 2000 3/31/99
------ ------ --------
Class Y Per-Share Data
Net asset value, beginning of period $45.36 $17.65 $12.20
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) (0.01) (6.09) 0.01
Net realized and unrealized gain (loss)
on investments (19.49) 34.04 5.44
------ ------ ------
Total from investment operations (19.50) 27.95 5.45
------ ------ ------
Less distributions from capital gains (7.65) (0.24) (0.00)
------ ------ ------
Net asset value, end of period $18.21 $45.36 $17.65
====== ====== ======
Class Y Ratios/Supplemental Data
Total return -47.00% 158.67% 44.67%
Net assets, end of period (in thousands) $1,466 $2,108 $53
Ratio of expenses to average net assets 1.35% 1.36% 0.62%[2]
Ratio of net investment income
(loss) to average net assets 0.47% -0.96% 0.54%[2]
Portfolio turnover rate 111.25% 44.19% 51.00%[2]
[1]Commencement of operations.
[2]Annualized.
SMALL CAP GROWTH FUND
For a Class A share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
Class A Per-Share Data
Net asset value, beginning of period $19.64
------
Loss from investment operations:
Net investment loss (0.02)
Net realized and unrealized loss on investments (4.74)
------
Total from investment operations (4.76)
------
Less distribution from capital gains (5.45)
------
Net asset value, end of period $ 9.43
======
Class A Ratios/Supplemental Data
Total return[2] -28.30%
Net assets, end of period (in millions) $4
Ratio of expenses to average net assets 1.49%[3]
Ratio of net investment loss to average net assets -0.39%[3]
Portfolio turnover rate 47.85%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load deducted
on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
SMALL CAP GROWTH FUND
For a Class B share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
---------
Class B Per-Share Data
Net asset value, beginning of period $19.26
------
Loss from investment operations:
Net investment loss (0.06)
Net realized and unrealized loss on investments (4.39)
------
Total from investment operations (4.45)
------
Less distribution from capital gains (5.45)
------
Net asset value, end of period $ 9.36
======
Class B Ratios/Supplemental Data
Total return -27.29%
Net assets, end of period (in millions) $5
Ratio of expenses to average net assets 2.31%[2]
Ratio of net investment loss to average net assets -1.18%[2]
Portfolio turnover rate 47.85%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
SMALL CAP GROWTH FUND
For a Class C share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class C Per-Share Data
Net asset value,
beginning of period $21.64 $14.74 $14.29 $ 9.08 $10.50
------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment loss (0.10) (0.18) (0.11) (0.13) (0.03)
Net realized and
unrealized gain (loss)
on investments (6.71) 10.22 2.91 5.91 (1.09)
------ ------ ------ ------ ------
Total from investment
operations (6.81) 10.04 2.80 5.78 (1.12)
------ ------ ------ ------ ------
Less distribution from
capital gains (5.45) (3.14) (2.35) (0.57) (0.30)
------ ------ ------ ------ ------
Net asset value,
end of period $ 9.38 $21.64 $14.74 $14.29 $ 9.08
====== ====== ====== ====== ======
Class C Ratios/Supplemental Data
Total return -35.17% 73.38% 21.61% 65.37% -10.97%
Net assets, end of
period (in millions) $459 $801 $425 $330 $198
Ratio of expenses to average
net assets 2.12% 2.11% 2.10% 2.13% 2.12%
Ratio of net
investment loss
to average net assets -0.81% -0.90% -0.90% -1.12% -0.27%
Portfolio turnover rate 47.85% 82.24% 51.41% 33.46% 37.20%
[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
For a Class Y share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class Y Per-Share Data
Net asset value,
beginning of period $22.65 $15.21 $14.55 $ 9.16 $10.52
------ ------ ------ ------ ------
Income (loss) from
investment operations:
Net investment income
(loss) (0.20) (0.15) 0.00 (0.03) 0.01
Net realized and
unrealized gain (loss)
on investments (6.86) 10.73 3.01 5.99 (1.07)
------ ------ ------ ------ ------
Total from investment
operations (7.06) 10.58 3.01 5.96 (1.06)
------ ------ ------ ------ ------
Less distribution from
capital gains (5.45) (3.14) (2.35) (0.57) (0.30)
------ ------ ------ ------ ------
Net asset value,
end of period $10.14 $22.65 $15.21 $14.55 $ 9.16
======= ====== ====== ====== ======
Class Y Ratios/Supplemental Data
Total return -34.67% 74.71% 22.73% 66.78% -10.37%
Net assets, end of
period (in thousands) $21,027 $16,770 $7,942 $633 $264
Ratio of expenses to average
net assets 1.30% 1.30% 1.18% 1.30% 1.17%
Ratio of net investment
income (loss) to average
net assets -0.02% -0.09% 0.08% -0.30% 0.31%
Portfolio turnover rate 47.85% 82.24% 51.41% 33.46% 37.20%
[1]Per-share amounts have been adjusted retroactively to reflect the 100%
stock dividend effected June 26, 1998.
TAX-MANAGED EQUITY FUND
For a Class A share outstanding throughout the period:
For the
period from
6/30/00[1]
to
3/31/01
---------
Class A Per-Share Data
Net asset value, beginning of period $10.00
------
Loss from investment operations:
Net investment loss (0.00)
Net realized and unrealized loss on investments (2.81)
------
Total from investment operations (2.81)
------
Less distributions:
From net investment income (0.00)
From capital gains (0.00)
------
Total distributions (0.00)
------
Net asset value, end of period $ 7.19
======
Class A Ratios/Supplemental Data
Total return[2] -28.10%
Net assets, end of period (in millions) $4
Ratio of expenses to average net assets
including voluntary expense waiver 1.27%[3]
Ratio of net investment loss to average
net assets including voluntary expense waiver -0.09%[3]
Ratio of expenses to average net assets
excluding voluntary expense waiver 1.80%[3]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver -0.62%[3]
Portfolio turnover rate 73.46%
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load deducted
on an initial purchase.
[3]Annualized.
TAX-MANAGED EQUITY FUND
For a Class B share outstanding throughout the period:
For the
period from
7/13/00[1]
to
3/31/01
----------
Class B Per-Share Data
Net asset value, beginning of period $10.06
------
Loss from investment operations:
Net investment loss (0.05)
Net realized and unrealized loss on investments (2.89)
------
Total from investment operations (2.94)
------
Less distributions:
From net investment income (0.00)
From capital gains (0.00)
------
Total distributions (0.00)
------
Net asset value, end of period $ 7.12
======
Class B Ratios/Supplemental Data
Total return -29.22%
Net assets, end of period (in thousands) $296
Ratio of expenses to average net assets
including voluntary expense waiver 2.45%[2]
Ratio of net investment loss to average
net assets including voluntary expense waiver -1.74%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver 3.48%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver -2.77%[2]
Portfolio turnover rate 73.46%
[1]Commencement of operations.
[2]Annualized.
TAX-MANAGED EQUITY FUND
For a Class C share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
----------
Class C Per-Share Data
Net asset value, beginning of period $10.01
------
Loss from investment operations:
Net investment loss (0.06)
Net realized and unrealized loss on investments (2.82)
------
Total from investment operations (2.88)
------
Less distributions:
From net investment income (0.00)
From capital gains (0.00)
------
Total distributions (0.00)
------
Net asset value, end of period $ 7.13
======
Class C Ratios/Supplemental Data
Total return -28.77%
Net assets, end of period (in millions) $2
Ratio of expenses to average net assets
including voluntary expense waiver 2.35%[2]
Ratio of net investment loss to average
net assets including voluntary expense waiver -1.52%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver 3.34%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver -2.50%[2]
Portfolio turnover rate 73.46%
[1]Commencement of operations.
[2]Annualized.
This space is intended for your notes and calculations.
This space is intended for your notes and calculations.
W&R FUNDS, INC.
Custodian
UMB Bank, n.a.
928 Grand Boulevard
Kansas City, Missouri 64106
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, INC.
You can get more information about each Fund in the --
* Statement of Additional Information (SAI), which contains detailed
information about a 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 a 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 a Fund's 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 request@waddell.com.
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 publicinfo@sec.gov 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
WRP4200(6-01)
W&R Funds, Inc.
EQUITY, GROWTH & INCOME
AND ASSET ALLOCATION FUNDS
Asset Strategy Fund
Core Equity Fund
International Growth Fund
Large Cap Growth Fund
Mid Cap Growth Fund
Science and Technology Fund
Small Cap Growth Fund
Tax-Managed Equity 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.
Prospectus
June 28, 2001
Waddell & Reed, Inc.
CONTENTS
3 An Overview of the Funds
3 Asset Strategy Fund
10 Core Equity Fund
16 International Growth Fund
22 Large Cap Growth Fund
26 Mid Cap Growth Fund
30 Science and Technology Fund
36 Small Cap Growth Fund
42 Tax-Managed Equity Fund
46 The Investment Principles of the Funds
55 Your Account
76 The Management of the Funds
81 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 include bonds
rated BB and below by Standard & Poor's (S&P) and Ba and below by Moody's
Corporation (Moody's) 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.
Portfolio 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:
* WRIMCO's skill 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
* 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 particular 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. Cumulative
return 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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
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%
2000 20.66%
In the period shown in the chart, the highest quarterly return was 15.58%
(the first quarter of 2000) and the lowest quarterly return was -4.97%
(the first quarter of 1997). The Class C return for the year through March
31, 2001 was -8.25%.
[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, 2000 (%)
1 Year 5 Years Life of Class[2]
Class A Shares of Asset Strategy Fund.... -0.98%
S&P 500 Index............................ -7.29%
Salomon Brothers Broad
Investment Grade Index................... 6.41%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit...... 2.79%
Lipper Flexible Portfolio Funds
Universe Average......................... -0.74%
Class B Shares of Asset Strategy Fund.... 0.30%
S&P 500 Index............................ -7.29%
Salomon Brothers Broad
Investment Grade Index................... 6.41%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit...... 2.79%
Lipper Flexible Portfolio Funds
Universe Average......................... -0.74%
Class C Shares of Asset Strategy Fund[1]. 20.66% 12.85% 11.72%
S&P 500 Index............................ -9.18% 18.35% 20.12%
Salomon Brothers Broad
Investment Grade Index................... 11.59% 6.45% 7.68%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit...... 6.53% 5.75% 5.78%
Lipper Flexible Portfolio Funds
Universe Average......................... 0.29% 11.54% 13.13%
Class Y Shares of Asset Strategy Fund.... 21.75% 13.84% 13.80%
S&P 500 Index............................ -9.18% 18.35% 18.35%
Salomon Brothers Broad
Investment Grade Index................... 11.59% 6.45% 6.45%
Salomon Brothers Short-Term Index
for 1 Month Certificates of Deposit...... 6.53% 5.75% 5.75%
Lipper Flexible Portfolio Funds
Universe Average......................... 0.29% 11.54% 11.54%
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. Accordingly, these returns reflect no CDSC since it only applies
to Class C shares held for twelve months or less.
[2]Since July 10, 2000 for Class A shares, July 3, 2000 for Class B shares,
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 for Class A shares, Class B shares, Class C shares and
Class Y shares is calculated from July 31, 2000, July 31, 2000, 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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.43% 0.53% 0.45% 0.38%
Total Annual Fund
Operating Expenses 1.38% 2.23% 2.15% 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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of 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 $707 $986 $1,285 $2,134
Class B Shares $626 $998 $1,295 $2,348[1]
Class C Shares $218 $673 $1,154 $2,483
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 $707 $986 $1,285 $2,134
Class B Shares $226 $698 $1,195 $2,348[1]
Class C Shares $218 $673 $1,154 $2,483
Class Y Shares $135 $421 $ 729 $1,601
[1]Reflects annual operating expenses of Class A shares 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 Core Equity Fund (formerly, W&R Total Return Fund) seeks to provide
capital growth and income.
Principal Strategies
Core Equity Fund seeks to achieve its goals by investing primarily in common
stocks of large U.S. and foreign companies with dominant market positions in
their industries. In order to achieve its goals, the Fund invests in
securities that have the potential for capital appreciation or that WRIMCO
expects to resist market decline. Although the Fund typically invests in
large companies, it may invest in securities of any size company.
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
* dividend payment history
Generally, in determining whether to sell a security WRIMCO uses the same
type of analysis that it uses in buying securities in order to determine
whether the security has ceased to offer the prospect of significant growth
potential and/or the prospect of continued dividend payments. 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 Core Equity Fund owns different types of securities, 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
* 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.
An investment in foreign securities presents 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
Core Equity Fund is designed for investors who seek capital growth and
income. You should consider whether the Fund fits your particular investment
objectives.
PERFORMANCE
Core Equity 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. Cumulative
return 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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
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%
2000 8.54%
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, 2001 was -14.25%.
[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, 2000 (%)
Year 5 Years Life of Class[2]
Class A Shares of
Core Equity Fund........................ -7.64%
S&P 500 Index........................... -7.29%
Lipper Large-Cap Core Funds
Universe Average........................ -6.59%
Class B Shares of
Core Equity Fund........................ -6.46%
S&P 500 Index........................... -7.29%
Lipper Large-Cap Core Funds
Universe Average........................ -6.59%
Class C Shares of
Core Equity Fund[1]..................... 8.54% 16.69% 15.53%
S&P 500 Index........................... -9.18% 18.35% 17.33%
Lipper Large-Cap Core Funds
Universe Average........................ -8.96% 16.62% 15.72%
Class Y Shares of Core Equity Fund..... 9.48% 17.91% 17.58%
S&P 500 Index........................... -9.18% 18.35% 18.35%
Lipper Large-Cap Core Funds
Universe Average........................ -8.96% 16.62% 16.62%
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. Accordingly, these returns
reflect no CDSC since it only applies to Class C shares held for twelve
months or less.
[2]Since July 3, 2000 for Class A shares, July 11, 2000 for Class B shares,
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 of Class A shares, Class B shares, Class C shares and
Class Y shares is calculated from July 31, 2000, July 31, 2000, September
30, 1992 and December 31, 1995, respectively.
FEES AND EXPENSES
Core 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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.29% 0.41% 0.27% 0.21%
Total Annual Fund
Operating Expenses 1.24% 2.11% 1.97% 1.16%
[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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of 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 $694 $946 $1,217 $1,989
Class B Shares $614 $960 $1,232 $2,215[1]
Class C Shares $200 $618 $1,062 $2,296
Class Y Shares $118 $368 $ 638 $1,409
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $694 $946 $1,217 $1,989
Class B Shares $214 $660 $1,132 $2,215[1]
Class C Shares $200 $618 $1,062 $2,296
Class Y Shares $118 $368 $ 638 $1,409
[1]Reflects annual operating expenses of Class A shares 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, 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:
* a company's growth and earnings potential
* management of the company
* industry position of the company
* strength of the industry
* applicable economic, market and political conditions of the country in
which the company is located
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, if it believes the management of the company
has weakened, and/or there exists political or economic instability in the
issuer's country. 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 securities, 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
* 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 particular
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. Cumulative
return 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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
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%
2000 -24.49%
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, 2001 was -14.14%.
[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, 2000 (%)
1 Year 5 Years Life of Class[2]
Class A Shares of
International Growth Fund.............. -22.05%
Morgan Stanley Capital
International E.A.FE. Index............ -6.62%
Lipper International
Funds Universe Average................. -8.51%
Class B Shares of
International Growth Fund.............. -20.48%
Morgan Stanley Capital
International E.A.FE. Index............ -6.62%
Lipper International
Funds Universe Average................. -8.51%
Class C Shares of
International Growth Fund[1]........... -24.49% 21.18% 13.30%
Morgan Stanley Capital
International E.A.FE. Index............ -14.17% 7.13% 9.76%
Lipper International
Funds Universe Average................. -15.60% 9.09% 10.62%
Class Y Shares of
International Growth Fund.............. -23.83% 22.25% 22.28%
Morgan Stanley Capital
International E.A.FE. Index............ -14.17% 7.13% 7.13%
Lipper International
Funds Universe Average................. -15.60% 9.09% 9.09%
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. Accordingly, these returns
reflect no CDSC since it only applies to Class C shares held for twelve
months or less.
[2]Since July 3, 2000 for Class A shares, July 10, 2000 for Class B shares,
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 for Class A shares, Class B shares, Class C shares and
Class Y shares is calculated from July 31, 2000, July 31, 2000, 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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.66% 0.77% 0.52% 0.38%
Total Annual Fund
Operating Expenses 1.76% 2.62% 2.37% 1.48%
[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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of 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 $744 $1,098 $1,476 $2,532
Class B Shares $665 $1,114 $1,490 $2,742[1]
Class C Shares $240 $ 739 $1,265 $2,706
Class Y Shares $151 $ 468 $ 808 $1,768
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $744 $1,098 $1,476 $2,532
Class B Shares $265 $ 814 $1,390 $2,742[1]
Class C Shares $240 $ 739 $1,265 $2,706
Class Y Shares $151 $ 468 $ 808 $1,768
[1]Reflects annual operating expenses of Class A shares 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:
* the company's market position, product line, technological position and
prospects for increased earnings
* the management capability of the company being considered
* the short-term and long-term outlook for the industry being analyzed
* changes in economic and political conditions
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.
In general, WRIMCO may sell a security if it determines that the security no
longer presents sufficient appreciation potential; this may be caused by, or
be an effect of, changes in the industry of the issuer, loss by the company
of its competitive position, and/or poor use of resources. 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 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'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
* 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.
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. See, Prior Performance of Related
Fund for information about the performance of a fund managed by WRIMCO with a
similar objective and strategy as Large Cap Growth Fund.
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) None[2] 5% 1% None
Annual Fund Operating Expenses
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees[3] 0.70% 0.70% 0.70% 0.70%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses[4] 0.56% 1.08% 0.67% 0.55%
Total Annual Fund
Operating Expenses[4] 1.51% 2.78% 2.37% 1.50%
[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.
[4]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal period ended March 31, 2001.
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 of 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.................................... $720 $1,024
Class B Shares.................................... $681 $1,162
Class C Shares.................................... $240 $ 739
Class Y Shares.................................... $152 $ 474
If shares are not redeemed at end of period: 1 Year 3 Years
Class A Shares.................................... $720 $1,024
Class B Shares.................................... $281 $ 862
Class C Shares.................................... $240 $ 739
Class Y Shares.................................... $152 $ 474
Prior Performance of Related Fund
Large Cap Growth Fund is modeled after another fund managed by WRIMCO,
Waddell & Reed Advisors Vanguard Fund, Inc. (the Related Fund). There may be
differences between Large Cap Growth Fund and the Related Fund, including
asset sizes and cash flows. However, Large Cap Growth Fund and the Related
Fund are substantially similar since the investment objective, strategies and
policies of Large Cap Growth Fund are substantially similar to those of the
Related Fund.
The chart below provides average annual returns of the Related Fund, not
Large Cap Growth Fund, for the period ended December 31, 2000. The
performance is net of management fees and other expenses incurred during the
2000 calendar year. The performance of the Related Fund is historical and
does not guarantee future performance of Large Cap Growth Fund.
Waddell & Reed Advisors Vanguard Fund, Inc.
1 Year 5 Years 10 Years Life of Class[1]
Class A.................. -6.76% 17.79% 16.28%
Class B.................. -5.40% 15.89%
Class C.................. -2.05% 18.94%
Class Y.................. -0.82% 19.45% 17.53%
[1]Since October 4, 1999 for Class B and Class C and September 8, 1995 for
Class Y.
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
* 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
* 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. See, Prior Performance of Related
Fund for information about the performance of a fund managed by WRIMCO with a
similar objective and strategy as Mid Cap Growth Fund.
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) None[2] 5% 1% None
Annual Fund Operating Expenses
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees[3] 0.85% 0.85% 0.85% 0.85%
Distribution and Service
(12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses[4] 0.90% 1.45% 1.06% 0.83%
Total Annual Fund
Operating Expenses[4] 2.00% 3.30% 2.91% 1.93%
[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.
[4]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal period ended March 31, 2001.
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 of 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.................................... $767 $1,167
Class B Shares.................................... $733 $1,317
Class C Shares.................................... $294 $ 899
Class Y Shares.................................... $196 $ 606
If shares are not redeemed at end of period:...... 1 Year 3 Years
Class A Shares.................................... $767 $1,167
Class B Shares.................................... $333 $1,017
Class C Shares.................................... $294 $ 899
Class Y Shares.................................... $196 $ 606
Prior Performance of Related Fund
Mid Cap Growth Fund is modeled after another fund managed by WRIMCO, Waddell
& Reed Advisors New Concepts Fund, Inc. (the Related Fund). There may be
differences between Mid Cap Growth Fund and the Related Fund, including asset
sizes and cash flows. However, Mid Cap Growth Fund and the Related Fund are
substantially similar since the investment objective, strategies and policies
of Mid Cap Growth Fund are substantially similar to those of the Related
Fund.
The chart below provides average annual returns of the Related Fund, not Mid
Cap Growth Fund, for the period ended December 31, 2000. The performance is
net of management fees and other expenses incurred during the 2000 calendar
year. The performance of the Related Fund is historical and does not
guarantee future performance of Mid Cap Growth Fund.
Waddell & Reed Advisors New Concepts Fund, Inc.
1 Year 5 Years 10 Years Life of Class[1]
Class A......... -19.86% 17.27% 21.83%
Class B......... -18.65% 14.29%
Class C......... -15.88% 17.12%
Class Y......... -14.67% 19.05% 18.11%
[1]Since October 4, 1999 for Class B and Class C and September 6, 1995 for
Class Y.
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. WRIMCO typically
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
* 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, has become
overvalued and/or whether the company prospects of the issuer have
deteriorated. 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
A variety of factors can affect the investment performance of the Science and
Technology Fund. These include:
* 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
* the volatility of securities of science and technology companies due, in
part, to the competitiveness of the industry
* 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
* 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 that concentrates in
securities of science and technology companies. This Fund is not suitable for
all investors. You should consider whether the Fund fits your particular
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. Cumulative
return 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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
CHART OF RETURNS
as of December 31 each year (%)[1]
1998 44.03%
1999 177.01%[2]
2000 -26.31%
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 -23.25%
(the second quarter of 2000). The Class C return for the year through
March 31, 2001 was -20.79%.
[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 this period 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 beneficial an impact on performance.
Average Annual Total Returns
as of December 31, 2000 (%)
1 Year Life of Class[2]
Class A Shares of
Science and Technology Fund....................... -18.34%
Goldman Sachs Technology
Industry Composite Index.......................... -38.28%
Lipper Science & Technology
Funds Universe Average............................ -33.36%
Class B Shares of
Science and Technology Fund....................... -16.94%
Goldman Sachs Technology
Industry Composite Index.......................... -38.28%
Lipper Science & Technology
Funds Universe Average............................ -33.36%
Class C Shares of
Science and Technology Fund[1].................... -26.31% 36.85%
Goldman Sachs Technology
Industry Composite Index.......................... -37.84% 18.14%
Lipper Science & Technology
Funds Universe Average............................ -33.81% 24.19%
Class Y Shares of
Science and Technology Fund....................... -25.66% 42.89%
Goldman Sachs Technology
Industry Composite Index.......................... -37.84% 19.62%
Lipper Science & Technology
Funds Universe Average............................ -33.81% 29.17%
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. Accordingly, these returns
reflect no CDSC since it only applies to Class C shares held for twelve
months or less.
[2]Since July 3, 2000 for Class A and Class B shares, July 31, 1997 for Class
C shares (based on the prior Class B shares) and June 9, 1998 for Class Y
shares. Because Class A shares, Class B shares and Class Y shares
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 July 31, 2000, July 31,
2000 and June 30, 1998, respectively.
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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.62% 0.69% 0.43% 0.28%
Total Annual Fund
Operating Expenses 1.72% 2.54% 2.28% 1.38%
[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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of 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 $740 $1,087 $1,457 $2,492
Class B Shares $657 $1,091 $1,451 $2,674[1]
Class C Shares $231 $ 712 $1,220 $2,615
Class Y Shares $140 $ 437 $ 755 $1,657
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $740 $1,087 $1,457 $2,492
Class B Shares $257 $ 791 $1,351 $2,674[1]
Class C Shares $231 $ 712 $1,220 $2,615
Class Y Shares $140 $ 437 $ 755 $1,657
[1]Reflects annual operating expenses of Class A shares 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 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
* 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. 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
A variety of factors can affect the investment performance of Small Cap
Growth Fund. These include:
* 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
* 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. 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
* 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. Cumulative
return 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.
Because of ongoing market volatility, the Fund's performance may be subject
to substantial short-term fluctuation and current performance may be less
than the results shown herein. Please check the Waddell & Reed web site at
www.waddell.com for more current performance information.
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 62.42%
2000 -16.22%
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, 2001 was -14.57%.
[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, 2000 (%)
1 Year 5 Years Life of Class[2]
Class A Shares of
Small Cap Growth Fund................ -20.47%
Russell 2000 Growth Index............ -16.17%
Lipper Small-Cap Growth
Funds Universe Average............... -9.18%
Class B Shares of
Small Cap Growth Fund................ -18.73%
Russell 2000 Growth Index............ -16.17%
Lipper Small-Cap Growth
Funds Universe Average............... -9.18%
Class C Shares of
Small Cap Growth Fund[1]............. -16.22% 19.36% 22.14%
Russell 2000 Growth Index............ -22.36% 7.14% 11.12%
Lipper Small-Cap Growth
Funds Universe Average............... -4.95% 14.40% 16.55%
Class Y Shares of
Small Cap Growth Fund................ -15.56% 20.32% 20.52%
Russell 2000 Growth Index............ -22.36% 7.14% 7.14%
Lipper Small-Cap Growth
Funds Universe Average............... -4.95% 14.40% 14.40%
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. Accordingly, these returns
reflect no CDSC since it only applies to Class C shares held for twelve
months or less.
[2]Since July 3, 2000 for Class A shares, July 6, 2000 for Class B shares,
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 for Class A shares, Class B shares, Class C shares and
Class Y shares is calculated from July 31, 2000, July 31, 2000, 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) None[2] 5% 1% None
Annual Fund Operating Expenses[3]
(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 0.44% 0.47% 0.27% 0.21%
Total Annual Fund
Operating Expenses 1.54% 2.32% 2.12% 1.31%
[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]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal year ended March 31, 2001. 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 of 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 $723 $1,033 $1,365 $2,302
Class B Shares $635 $1,024 $1,340 $2,457[1]
Class C Shares $215 $ 664 $1,139 $2,452
Class Y Shares $133 $ 415 $ 718 $1,579
If shares are not redeemed
at end of period: 1 Year 3 Years 5 Years 10 Years
Class A Shares $723 $1,033 $1,365 $2,302
Class B Shares $235 $ 724 $1,240 $2,457[1]
Class C Shares $215 $ 664 $1,139 $2,452
Class Y Shares $133 $ 415 $ 718 $1,579
[1]Reflects annual operating expenses of Class A shares 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
realizing 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 securities, 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
* the Fund's tax-sensitive investment strategy not limiting distributions of
taxable income and net 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
realize capital 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 net 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) None[2] 5% 1% None
Annual Fund Operating Expenses
(expenses that are deducted Class A Class B Class C Class Y
from Fund assets) Shares Shares Shares Shares
Management Fees[3] 0.65% 0.65% 0.65% 0.65%
Distribution and
Service (12b-1) Fees 0.25% 1.00% 1.00% 0.25%
Other Expenses[4] 1.35% 1.65% 1.46% 1.44%
Total Annual Fund
Operating Expenses[4] 2.25% 3.30% 3.11% 2.34%
[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.
[4]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal period ended March 31, 2001.
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 of 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....................................$790 $1,239
Class B Shares....................................$733 $1,316
Class C Shares....................................$314 $ 961
Class Y Shares....................................$237 $ 730
If shares are not redeemed at end of period: 1 Year 3 Years
Class A Shares....................................$790 $1,239
Class B Shares....................................$333 $1,016
Class C Shares....................................$314 $ 961
Class Y Shares....................................$237 $ 730
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. 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.
Portfolio Mix
Stocks 70% (can range from 0-100%)
Bonds 25% (can range from 0-100%)
Short-term 5% (can range from 0-100%)
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. The Fund may use options and futures contracts for defensive purposes.
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 Moody's, or
unrated securities judged by WRIMCO to be of equivalent quality
* 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 Core Equity Fund
The goal of Core Equity Fund is to provide capital growth and income. The
Fund seeks to achieve its goals by investing, during normal market
conditions, primarily in a diversified portfolio of securities, typically the
stocks of large, high quality U.S. and foreign companies that are well-known
and have been consistently profitable. 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 some or all of the Fund's assets,
including any one or more of the following:
* hold cash, commercial paper or other short-term investments
* invest in debt securities (including commercial paper or short-term U.S.
Government securities)
* invest in convertible preferred stock
By taking a temporary defensive position the Fund may not achieve its
investment objective.
W&R International Growth Fund
The primary goal of 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, may avoid investment in volatile emerging markets and
increase investments in more stable, developed countries and industries, may
use forward currency contracts to hedge specific foreign currencies, 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 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. The Fund will, under
normal market conditions, invest at least 65% of its total assets in large
cap growth securities. There is no guarantee that the Fund will achieve its
goal.
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 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 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
Russell Mid-Cap. Companies whose capitalization falls outside the range of
Russell Mid-Cap after purchase continue to be considered medium
capitalization companies for purpose of the Fund's investment policy. The
Fund will, under normal market conditions, invest at least 65% of its total
assets in mid cap securities. There is no guarantee that the Fund will
achieve its goal.
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 companies. Science and technology companies are
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
* 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.
The Fund may also use options and futures contracts for hedging purposes. 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 small cap common stocks of
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 may
occasionally invest in securities of larger companies that, in WRIMCO's
opinion, are being fundamentally changed or revitalized, have a position that
is considered strong relative to the market as a whole or otherwise offer
unusual opportunities for above average 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. The Fund will,
under normal market conditions, invest at least 65% of its net assets in
small cap stocks. There is no guarantee that the Fund will achieve its goal.
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 net short-term
gains (taxed as ordinary income), as well as distributions of realized net
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
* 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 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 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.
Notwithstanding the 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 undistributed realized 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 that could include adverse changes
to applicable tax rates or capital gains holding periods.
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.
You will find more information about each Fund's permitted investments and
strategies, as well as the restrictions that apply to them, in each Fund's
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 other
market risk, financial risk and, in some cases, prepayment 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.
* Prepayment risk is the possibility that, during periods of falling
interest rates, a debt security with a high stated interest rate will be
prepaid before its expected maturity date.
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 would 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.
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
charge[1] 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) fees and service (12b-1)
fees of 0.25% 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 Class A shares, so
only Class A shares in 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, your financial advisor
typically will recommend
purchase of Class A shares due
to a reduced sales charge and
lower annual expenses
[1]A 1% CDSC may apply to 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 (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. (Waddell & Reed) 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 Waddell & Reed for the amounts it spends for, either
directly or through third parties, distributing the Fund's Class A shares,
providing 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 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 Waddell &
Reed 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 Waddell & Reed
for, either directly or through third parties, providing 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 Waddell & Reed 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 Waddell & Reed with respect to the Fund's Class B
or Class C shares would exceed the maximum amount of such charges that
Waddell & Reed is permitted to receive under NASD rules as then in effect.
Under the Class Y Plan, each Fund may pay Waddell & Reed 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 Waddell & Reed for, either directly or through
third parties, distributing the Class Y shares of that Fund, providing
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 and typically higher than those for Class Y shares.
Size of Purchase
Sales Charge
Sales Charge as Approx.
as Percent of Percent of
Offering Price Amount Invested
Under $100,000............................ 5.75% 6.10%
$100,000 to less than $200,000............ 4.75 4.99
$200,000 to less than $300,000............ 3.50 3.63
$300,000 to less than $500,000............ 2.50 2.56
$500,000 to less than $1,000,000.......... 1.50 1.52
$1,000,000 to less than $2,000,000........ 1.00 1.01
$2,000,000 and over....................... 0.00[1] 0.00[1]
[1]No sales charge is payable at the time of purchase on investments of $2
million or more, although for such investments the Fund may impose a 1%
CDSC on certain 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 above the initial
purchase price.
Waddell & Reed and its affiliates 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
and its affiliates 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
W&R Funds, Inc. except Class A shares of W&R 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, except shares of W&R Money
Market Fund, made during a thirteen-month period (Letter of Intent)
* Grouping purchases by certain related persons
Additional information and applicable forms are available from Waddell &
Reed.
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
Waddell & Reed, as further described below. The purpose of the CDSC is to
compensate Waddell & Reed for the costs incurred by it in connection with the
sale of the Fund's Class B or Class C shares or with certain Class A
investments. The CDSC will not be imposed on shares representing payment of
dividends or other distributions and will be 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 will be imposed on increases in net
asset value above the initial purchase price. 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.
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
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 (which have lower ongoing expenses). Class B shares automatically
convert to Class A shares eight years after the end of the calendar month in
which the shares were purchased, including all shares acquired by reinvested
dividends and distributions during this period. 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 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 indicated below.
Contingent Deferred Sales Charge
on Shares Sold Within Year As % of Amount 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, 2001, then redeems
all Class B shares on July 12, 2002, 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.
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
Waddell & Reed
* 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 45 days after such redemption
* the exercise of certain exchange privileges
* redemptions effected pursuant to the Fund's right to liquidate a
shareholder's account 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
* for Class C shares, redemptions made by shareholders that have purchased
shares of the funds through certain group plans that have selling
agreements with Waddell & Reed and that are administered by a third party
and/or for which brokers not affiliated with Waddell & Reed provide
administrative or recordkeeping services
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 account,
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
* 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 and other Tax-Advantaged Savings Plans
To shelter your savings from income taxes
Retirement and other tax-advantaged savings 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 certain individuals under age
70 1/2, with earned income, to invest up to $2,000* per taxable year. The
maximum annual contribution for an individual and his or her spouse is
$4,000* ($2,000 for each spouse) or, if less, the couple's combined earned
income for the tax 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 taxable year. The maximum annual contribution for an
individual 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 taxable year, and permit tax-
free withdrawals to pay the higher education expenses of the beneficiary.
* Simplified Employee Pension Plans (SEP-IRAs) provide small business owners
or those with self-employed income (and their eligible employees) with
many of the same advantages as a 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 on a pre-tax basis 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.
*Note: These limits will increase for years after 2001.
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. Contact your financial advisor
for the form.
Buying Shares
You may buy shares of each of the Funds through your financial advisor and
through other broker-dealers and banks that have selling agreements with
Waddell & Reed. 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 (and Class A shares of W&R Money Market Fund) by
wire, you must first obtain an account number by calling 800-532-2783, then
mail a completed application to Waddell & Reed at the address above, or fax
it to 800-532-2784. 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 the 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 (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.
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 offering price calculated after your order is received and accepted.
Note the following:
* All of your purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks.
* If you buy shares by check, and then sell those shares by any method other
than by exchange to another fund in W&R Funds, Inc., the payment may be
delayed for up to ten days to ensure that your previous investment has
cleared.
* If you purchase shares of a Fund from certain broker-dealers, banks or
other authorized third parties, the Fund will be deemed to have received
your purchase order when that 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 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, 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 (or Class A account of W&R Money Market Fund)
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.
If you purchase shares of the Funds from certain broker-dealers, banks or
other authorized third parties, additional purchases may be made through
those firms.
Selling Shares
You can arrange to take money out of your Fund 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 A, Class B or Class C shares.
To sell shares by written request: Complete an Account Service Request form,
available from your financial advisor, 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
* 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 (and Class A shares of W&R Money Market Fund) by
telephone or fax: If you have elected this method in your application or by
subsequent authorization, call 800-532-2783, or fax your request to 800-532-
2784, and give your instructions to redeem your 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.
* If you purchased shares of a Fund from certain broker-dealers, banks or
other authorized third parties, you may sell those shares through those
firms, some of which may charge you a fee and may have additional
requirements to sell Fund shares. The Fund will be deemed to have received
your order to sell shares when that firm (or its designee) has received
your order. Your order will receive the NAV of the applicable class
subject to any CDSC 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 The written instructions must be signed by the
Proprietorship 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, The written instructions must be signed by the
Guardian or Other person properly authorized by court order to act
Fiduciary in the particular fiduciary capacity.
A 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
* the check is made payable to someone other than the owner of record
This requirement is 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 account
having an aggregate NAV of less than $500. The Fund will provide 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 to accounts which
have an aggregate NAV of less than $500 due to market forces.
You may reinvest in a Fund, without charge, all or part of the amount of
Class A shares you redeemed by sending to that Fund the amount you want to
reinvest. The reinvested amounts must be received by the Fund within 45 days
after the date of your redemption. You may do this only once with Class A
shares of a Fund.
The CDSC will not apply to the proceeds of Class A (if applicable), Class B
or Class C shares of a Fund which are redeemed and then reinvested in shares
of the same class of the Fund within 45 days after such redemption. Waddell &
Reed 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 A, Class B and Class C 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, Inc. and to obtain a current prospectus.
Exchanges
Except as otherwise noted, you may sell your shares and buy shares of the
same class of any of the Funds within W&R Funds, Inc. 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 certain
Class A shares, 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 W&R 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 the
prospectus.
The Funds reserve the right to terminate or modify these exchange privileges
at any time, as discussed in the SAI.
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
Minimum Amount Minimum Frequency
$25 (per Fund) Monthly
Funds Plus Service
To move money from W&R Money Market Fund to another Fund in W&R Funds, Inc.
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:
Core Equity 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. Net capital gains (and any net gains
from foreign currency transactions) ordinarily are distributed by each Fund
in December. Ordinarily, dividends are paid on shares starting on the day
after they are issued and through the day they are redeemed.
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 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 equal to or greater
than five dollars. If the distribution is less than five dollars, it will
be automatically paid in additional shares of the same class of the Fund.
For retirement accounts, all distributions are automatically paid in
additional shares.
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 and net gains from certain
foreign currency transactions), 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 (the excess of net long-term
capital gains over net short-term capital loss), 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, a non-corporate shareholder's
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 (AMT).
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 W&R Funds, Inc. 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 90 days after your purchase and then
reacquire Class A shares of that Fund or acquire Class A shares of another
fund in W&R Funds, Inc. without paying a sales charge due to the 45 day
reinvestment privilege or exchange privilege. See Your Account -- Selling
Shares. 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 30 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 at a specified rate (31% through August
5, 2001; 30.5% from August 6, 2001 through the end of 2001; 30.0% for 2002)
of all dividends and capital gains distributions and redemption proceeds
payable to individuals and certain other noncorporate shareholders who do not
furnish the Fund with a correct taxpayer identification number. Withholding
at that rate also is required from taxable dividends and capital gains
distributions payable to shareholders who are otherwise subject to backup
withholding.
State and local income taxes. The portion of the dividends paid by each Fund
attributable to interest earned on U.S. Government securities generally is
not subject to state and local income taxes, although distributions by a 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 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, Inc. since its inception.
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 1994, has served as the Director of Research for WRIMCO and its
predecessor 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 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 May 1994 to March 1998,
Mr. Vrabac was Vice President of, and a portfolio manager for, Waddell & Reed
Asset Management Company. Mr. Vrabac has been an employee of WRIMCO since May
1994.
James D. Wineland is primarily responsible for the management of the Core
Equity Fund. Mr. Wineland has held his Fund responsibilities since July 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. 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 and its predecessor since January 1988 and has been an employee of
such since November 1984.
Thomas A. Mengel is primarily responsible for the management of the
International Growth Fund. Mr. Mengel has held his Fund responsibilities
since May 1996. Mr. Mengel 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 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 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 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
predecessor since October 1989, initially serving as an investment analyst,
and has served as a portfolio manager for WRIMCO since January 1997.
Kimberly A. Scott is primarily responsible for the management of the Mid Cap
Growth Fund. Ms. Scott has held her Fund responsibilities since February
2001. She is Vice President of WRIMCO, Vice President of the Fund and Vice
President of another investment company managed by WRIMCO. Ms. Scott served
as an investment analyst with WRIMCO from April 1999 to February 2001. From
1994 to 1999, she was an equity analyst for Bartlett & Company.
Zachary H. Shafran is primarily responsible for the management of the Science
and Technology Fund. Mr. Shafran has held his responsibilities since February
2001. 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. Shafran served as an investment analyst with WRIMCO
and its predecessor from June 1990 to January 1996 and has served as a
portfolio manager since January 1996.
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 and its
predecessor 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 Senior
Vice President of WRIMCO and Vice President of other investment companies for
which WRIMCO serves as investment manager. Mr. Sarris had served as an
investment analyst with WRIMCO from October 1991 until January 1996 and had
served as Assistant Portfolio Manager of Small Cap Growth Fund from January
1996 until May 1998.
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 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 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 and its predecessor.
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 its share price or
dividends; 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, 2001 were 0.70%;
for Core Equity 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, 2001 were 0.70%;
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, 2001 were 0.85%;
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.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal period ended March 31, 2001 were 0.32% with the voluntary waiver, by
WRIMCO, of management fee expenses; 0.52% without the voluntary waiver, by
WRIMCO, of management fee expenses;
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.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal period ended March 31, 2001 were 0.00% with the voluntary waiver, by
WRIMCO, of management fee expenses; 0.64% without the voluntary waiver, by
WRIMCO, of management fee expenses;
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, 2001 were 0.85%;
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, 2001 were 0.85%; and
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.
Management fees for the Fund as a percent of the Fund's net assets for the
fiscal year ended March 31, 2001 were 0.00% with the voluntary waiver, by
WRIMCO, of management fee expenses; 0.49% without the voluntary waiver, by
WRIMCO, of management fee expenses.
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 A, Class B, 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 each Fund's financial
statements for the fiscal year ended March 31, 2001, is included in the SAI,
which is available upon request.
ASSET STRATEGY FUND
For a Class A share outstanding throughout the period:
For the
period from
7/10/00[1]
to
3/31/01
------------
Class A Per-Share Data
Net asset value, beginning of period ..................... $15.22
------
Income (loss) from investment operations:
Net investment income ................................. 0.15
Net realized and unrealized loss on investments ....... (0.60)
------
Total from investment operations ......................... (0.45)
------
Less distributions: .....................................
From net investment income ............................ (0.13)
From capital gains .................................... (2.66)
------
Total distributions ...................................... (2.79)
------
Net asset value, end of period ........................... $11.98
======
Class A Ratios/Supplemental Data
Total return[2] .......................................... -3.77%
Net assets, end of period (in millions) .................. $2
Ratio of expenses to average net assets .................. 1.26%[3]
Ratio of net investment income to average net assets ..... 2.26%[3]
Portfolio turnover rate .................................. 214.77%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load
deducted on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
ASSET STRATEGY FUND
For a Class B share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
-----------
Class B Per-Share Data
Net asset value, beginning of period ................. $15.21
------
Income (loss) from investment operations:
Net investment income ............................. 0.07
Net realized and unrealized loss on investments ... (0.60)
------
Total from investment operations ..................... (0.53)
------
Less distributions:
From net investment income ........................ (0.05)
From capital gains ................................ (2.66)
------
Total distributions .................................. (2.71)
------
Net asset value, end of period ....................... $11.97
======
Class B Ratios/Supplemental Data
Total return ......................................... -4.35%
Net assets, end of period (in millions) .............. $2
Ratio of expenses to average net assets .............. 2.15%[2]
Ratio of net investment income to average net assets . 1.37%[2]
Portfolio turnover rate .............................. 214.77%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
ASSET STRATEGY FUND
For a Class C share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
---------------------------------------------
2001 2000 1999 1998 1997
----- ----- ----- ----- -----
Class C Per-Share Data
Net asset value, beginning
of period ............. $15.21 $11.20 $11.42 $ 9.73 $10.15
-----------------------------------------------
Income (loss) from
investment operations:
Net investment income 0.11 0.03 0.15 0.21 0.23
Net realized and ..
unrealized gain (loss)
on investments ..... (0.62) 4.33 0.05 2.16 (0.30)
-----------------------------------------------
Total from investment
operations (0.51) 4.36 0.20 2.37 (0.07)
-----------------------------------------------
Less distributions:
From net investment
income (0.07) (0.05) (0.16) (0.22) (0.21)
From capital gains . (2.66) (0.30) (0.26) (0.46) (0.14)
-----------------------------------------------
Total distributions ... (2.73) (0.35) (0.42) (0.68) (0.35)
-----------------------------------------------
Net asset value,
end of period $11.97 $15.21 $11.20 $11.42 $ 9.73
===============================================
Class C Ratios/Supplemental Data
Total return .......... -4.22% 39.60% 1.79% 24.94% -0.86%
Net assets, end of
period (in millions) .. $54 $52 $30 $19 $13
Ratio of expenses to
average net assets .. 2.15% 2.24% 2.32% 2.44% 2.52%
Ratio of net investment
income to average
net assets .......... 0.86% 0.24% 1.38% 2.02% 2.21%
Portfolio turnover rate 214.77% 204.12% 168.17% 220.67% 109.92%
[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.
ASSET STRATEGY FUND
For a Class Y share outstanding throughout each period:
For the fiscal year
ended March 31,
-----------------------------------------------
2001 2000 1999 1998 1997
----- ------ ------ ------ ------
Class Y Per-Share Data
Net asset value, beginning
of period .......... $15.26 $11.21 $11.43 $ 9.73 $10.16
-----------------------------------------------
Income (loss) from
investment operations:
Net investment income 0.24 0.15 0.26 0.31 0.27
Net realized and
unrealized gain (loss)
on investments .. (0.63) 4.33 0.05 2.16 (0.26)
-----------------------------------------------
Total from investment
operations.......... (0.39) 4.48 0.31 2.47 0.01
-----------------------------------------------
Less distributions:
From net investment
income (0.23) (0.13) (0.27) (0.31) (0.30)
From capital gains . (2.66) (0.30) (0.26) (0.46) (0.14)
-----------------------------------------------
Total distributions (2.89) (0.43) (0.53) (0.77) (0.44)
-----------------------------------------------
Net asset value,
end of period $11.98 $15.26 $11.21 $11.43 $ 9.73
================================================
Class Y Ratios/Supplemental Data
Total return .......... -3.39% 40.85% 2.75% 26.06% 0.05%
Net assets, end of
period (in thousands) . $550 $508 $307 $225 $116
Ratio of expenses to average
net assets ............ 1.32% 1.33% 1.45% 1.58% 1.61%
Ratio of net investment income
to average net assets . 1.71% 1.14% 2.25% 2.90% 2.97%
Portfolio turnover rate 214.77% 204.12% 168.17% 220.67% 109.92%
CORE EQUITY FUND (formerly, Total Return Fund)
For a Class A share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
-------------
Class A Per-Share Data
Net asset value, beginning of period ..................... $13.89
------
Loss from investment operations:
Net investment loss ................................... (0.00)
Net realized and unrealized loss on investments ....... (2.00)
------
Total from investment operations ......................... (2.00)
------
Less distributions:
From net investment income ............................ (0.00)
From capital gains .................................... (2.38)
------
Total distributions ................................... (2.38)
------
Net asset value, end of period ........................... $ 9.51
======
Class A Ratios/Supplemental Data
Total return[2] .......................................... -16.72%
Net assets, end of period (in millions) .................. $4
Ratio of expenses to average net assets .................. 1.18%[3]
Ratio of net investment loss to average net assets ....... -0.11%[3]
Portfolio turnover rate .................................. 39.02%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load
deducted on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
CORE EQUITY FUND (formerly, Total Return Fund)
For a Class B share outstanding throughout the period:
For the
period from
7/11/00[1]
to
3/31/01
---------
Class B Per-Share Data
Net asset value, beginning of period .................. $14.10
------
Income from investment operations:
Net investment loss ................................ (0.05)
Net realized and unrealized loss on investments .... (2.23)
------
Total from investment operations ...................... (2.28)
------
Less distributions:
From net investment income ......................... (0.00)
From capital gains ................................. (2.38)
------
Total distributions ................................ (2.38)
------
Net asset value, end of period ........................ $ 9.44
======
Class B Ratios/Supplemental Data
Total return .......................................... -18.50%
Net assets, end of period (in millions) ............... $5
Ratio of expenses to average net assets ............... 2.11%[2]
Ratio of net investment loss to average net assets .... -1.02%[2]
Portfolio turnover rate ............................... 39.02%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
CORE EQUITY FUND (formerly, Total Return Fund)
For a Class C share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
-----------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class C Per-Share Data
Net asset value, beginning
of period ............. $13.76 $11.52 $12.24 $ 9.09 $8.17
-----------------------------------------------
Income (loss) from
investment operations:
Net investment
income (loss)...... (0.11) (0.01) 0.03 (0.02) (0.01)
Net realized and
unrealized gain (loss)
on investments ..... (1.82) 2.71 0.82 3.56 0.98
-----------------------------------------------
Total from investment
operations (1.93) 2.70 0.85 3.54 0.97
-----------------------------------------------
Less distributions:
From net investment
income (0.00) (0.03) (0.01) (0.00) (0.00)
From capital gains . (2.38) (0.43) (1.56) (0.39) (0.05)
-----------------------------------------------
Total distributions ... (2.38) (0.46) (1.57) (0.39) (0.05)
-----------------------------------------------
Net asset value,
end of period $ 9.45 $13.76 $11.52 $12.24 $9.09
===============================================
Class C Ratios/Supplemental Data
Total return .......... -16.40% 23.98% 7.47% 39.57% 11.93%
Net assets, end
of period (in millions) $440 $585 $508 $473 $317
Ratio of expenses to average
net assets ............ 1.97% 1.98% 1.93% 1.92% 1.95%
Ratio of net investment
income (loss) to average
net assets ............ -0.93% -0.12% 0.30% -0.23% -0.17%
Portfolio turnover rate 39.02% 75.64% 54.73% 36.94% 26.23%
[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.
CORE EQUITY FUND (formerly, Total Return Fund)
For a Class Y share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
-----------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class Y Per-Share Data
Net asset value, beginning
of period ............. $14.08 $11.78 $12.46 $ 9.18 $8.19
-----------------------------------------------
Income (loss) from
investment operations:
Net investment
income (loss) (0.04) 0.06 0.12 0.05 0.02
Net realized and
unrealized gain (loss)
on investments ..... (1.84) 2.80 0.84 3.62 1.02
-----------------------------------------------
Total from investment
operations ........... (1.88) 2.86 0.96 3.67 1.04
-----------------------------------------------
Less distributions:
From net investment
income (0.00) (0.13) (0.08) (0.00) (0.00)
From capital gains . (2.38) (0.43) (1.56) (0.39) (0.05)
-----------------------------------------------
Total distributions ... (2.38) (0.56) (1.64) (0.39) (0.05)
-----------------------------------------------
Net asset value,
end of period $ 9.82 $14.08 $11.78 $12.46 $9.18
===============================================
Class Y Ratios/Supplemental Data
Total return .......... 15.62% 24.96% 8.37% 40.63% 12.69%
Net assets, end of
period (in millions) $2 $2 $1 $1 $1
Ratio of expenses to
average net assets .. 1.15% 1.16% 1.15% 1.20% 1.18%
Ratio of net investment
income (loss) to
average net assets -0.11% 0.67% 1.10% 0.50% 0.65%
Portfolio turnover rate 39.02% 75.64% 54.73% 36.94% 26.23%
[1]Per-share amounts have been adjusted retroactively to reflect the 100%
stock dividend effected June 26, 1998.
INTERNATIONAL GROWTH FUND
For a Class A share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
--------------
Class A Per-Share Data
Net asset value, beginning of period ............. $24.33
------
Loss from investment operations:
Net investment loss ........................... (0.02)
Net realized and unrealized loss on investments (6.46)
-----
Total from investment operations ................. (6.48)
------
Less distributions:
From net investment income .................... (0.00)
From capital gains ............................ (5.82)
------
Total distributions .............................. (5.82)
------
Net asset value, end of period ................... $12.03
======
Class A Ratios/Supplemental Data
Total return[2] .................................. -29.73%
Net assets, end of period (in millions) .......... $5
Ratio of expenses to average net assets .......... 1.72%[3]
Ratio of net investment loss to average net assets 0.31%[3]
Portfolio turnover rate .......................... 103.03%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load
deducted on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
INTERNATIONAL GROWTH FUND
For a Class B share outstanding throughout the period:
For the
period from
7/10/00[1]
to
3/31/01
--------------
Class B Per-Share Data
Net asset value, beginning of period ............. $24.59
------
Loss from investment operations:
Net investment loss ........................... (0.09)
Net realized and unrealized loss on investments (6.74)
------
Total from investment operations ................. (6.83)
------
Less distributions:
From net investment income .................... (0.00)
From capital gains ............................ (5.82)
------
Total distributions .............................. (5.82)
------
Net asset value, end of period ................... $11.94
======
Class B Ratios/Supplemental Data
Total return ..................................... -30.89%
Net assets, end of period (in millions) .......... $2
Ratio of expenses to average net assets .......... 2.61%[2]
Ratio of net investment loss to average net assets -1.30%[2]
Portfolio turnover rate .......................... 103.03%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
INTERNATIONAL GROWTH FUND
For a Class C share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
-----------------------------------------------
2001 2000 1999 1998 1997
------ ------ ------ ------ ------
Class C Per-Share Data
Net asset value, beginning
of period ............. $28.58 $15.58 $15.04 $12.40 $ 9.94
-----------------------------------------------
Income (loss) from
investment operations:
Net investment loss (0.17) (0.34) (0.07) (0.10) (0.03)
Net realized and
unrealized gain (loss)
on investments ..... (10.63) 15.14 1.55 4.12 2.50
-----------------------------------------------
Total from investment
operations (10.80) 14.80 1.48 4.02 2.47
-----------------------------------------------
Less distributions:
From net investment
income (0.00) (0.00) (0.00) (0.00) (0.01)
From capital gains . (5.82) (1.80) (0.94) (1.38) (0.00)
-----------------------------------------------
Total distributions ... (5.82) (1.80) (0.94) (1.38) (0.01)
-----------------------------------------------
Net asset value,
end of period $11.96 $28.58 $15.58 $15.04 $12.40
===============================================
Class C Ratios/Supplemental Data
Total return .......... -40.45% 97.89% 10.36% 35.24% 24.85%
Net assets, end of
period (in millions) $123 $223 $100 $87 $50
Ratio of expenses to
average net assets .. 2.36% 2.37% 2.35% 2.35% 2.46%
Ratio of net investment
loss to average
net assets .......... -1.03% -1.48% -0.53% -0.82% -0.52%
Portfolio turnover rate 103.03% 125.71% 116.25% 105.11% 94.76%
[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.
INTERNATIONAL GROWTH FUND
For a Class Y share outstanding throughout each period:
For the fiscal year
ended March 31,
-----------------------------------------------
2001 2000 1999 1998 1997
----- ----- ----- ----- -----
Class Y Per-Share Data
Net asset value, beginning
of period ............. $29.86 $16.08 $15.35 $12.52 $ 9.95
-----------------------------------------------
Income (loss) from
investment operations:
Net investment income
(loss) (0.17) (1.41) 0.05 0.01 0.02
Net realized and
unrealized gain (loss)
on investments ..... (11.00) 16.99 1.62 4.20 2.56
-----------------------------------------------
Total from investment
operations (11.17) 15.58 1.67 4.21 2.58
-----------------------------------------------
Less distributions:
From net investment
income............ (0.00) (0.00) (0.00) (0.00) (0.01)
From capital gains . (5.82) (1.80) (0.94) (1.38) (0.00)
-----------------------------------------------
Total distributions ... (5.82) (1.80) (0.94) (1.38) (0.01)
-----------------------------------------------
Net asset value,
end of period ....... $12.87 $29.86 $16.08 $15.35 $12.52
===============================================
Class Y Ratios/Supplemental Data
Total return .......... -39.91% 99.74% 11.41% 36.45% 25.93%
Net assets, end of
period (in thousands) $6,594 $5,296 $629 $419 $227
Ratio of expenses to average
net assets ............ 1.44% 1.48% 1.44% 1.51% 1.59%
Ratio of net investment
income (loss) to
average net assets .. -0.02% -0.80% 0.36% 0.07% 0.05%
Portfolio turnover rate 103.03% 125.71% 116.25% 105.11% 94.76%
LARGE CAP GROWTH FUND
For a Class A share outstanding throughout the period:
For the
period from
6/30/00[1]
to
3/31/01
-------------
Class A Per-Share Data
Net asset value, beginning of period ............. $10.00
------
Income (loss) from investment operations:
Net investment income ......................... 0.05
Net realized and unrealized loss on investments (0.45)
------
Total from investment operations ................. (0.40)
------
Less distributions:
From net investment income .................... (0.06)
From capital gains ............................ (0.06)
------
Total distributions .............................. (0.12)
------
Net asset value, end of period ................... $ 9.48
======
Class A Ratios/Supplemental Data
Total return[2] .................................. -4.27%
Net assets, end of period (in millions) .......... $19
Ratio of expenses to average net assets
including voluntary expense waiver ............. 1.13%[3]
Ratio of net investment income to average
net assets including voluntary expense waiver... 0.89%[3]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 1.34%[3]
Ratio of net investment income to average
net assets excluding voluntary expense waiver... 0.68%[3]
Portfolio turnover rate .......................... 75.42%
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load
deducted on an initial purchase.
[3]Annualized.
LARGE CAP GROWTH FUND
For a Class B share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
--------------
Class B Per-Share Data
Net asset value, beginning of period ............. $10.02
------
Loss from investment operations:
Net investment loss ........................... (0.03)
Net realized and unrealized loss on investments (0.49)
------
Total from investment operations ................. (0.52)
------
Less distributions:
From net investment income .................... (0.00)
From capital gains ............................ (0.06)
------
Total distributions .............................. (0.06)
------
Net asset value, end of period ................... $ 9.44
======
Class B Ratios/Supplemental Data
Total return ..................................... -5.32%
Net assets, end of period (in millions) .......... $2
Ratio of expenses to average net assets
including voluntary expense waiver ............. 2.53%[2]
Ratio of net investment loss to average
net assets including voluntary expense waiver... -0.60%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 3.00%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver... -1.07%[2]
Portfolio turnover rate .......................... 75.42%
[1]Commencement of operations.
[2]Annualized.
LARGE CAP GROWTH FUND
For a Class C share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
------------
Class C Per-Share Data
Net asset value, beginning of period ............. $10.00
------
Loss from investment operations:
Net investment loss ........................... (0.00)
Net realized and unrealized loss on investments (0.48)
------
Total from investment operations ................. (0.48)
------
Less distributions:
From net investment income .................... (0.01)
From capital gains ............................ (0.06)
------
Total distributions .............................. (0.07)
------
Net asset value, end of period ................... $ 9.45
======
Class C Ratios/Supplemental Data
Total return ..................................... -4.93%
Net assets, end of period (in millions) .......... $7
Ratio of expenses to average net assets
including voluntary expense waiver ............. 2.06%[2]
Ratio of net investment loss to average
net assets including voluntary expense waiver... -0.08%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 2.44%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver... -0.46%[2]
Portfolio turnover rate .......................... 75.42%
[1]Commencement of operations.
[2]Annualized.
LARGE CAP GROWTH FUND
For a Class Y share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
-------------
Class Y Per-Share Data
Net asset value, beginning of period ............. $10.02
------
Income (loss) from investment operations:
Net investment income ......................... 0.09
Net realized and unrealized loss on investments (0.50)
------
Total from investment operations ................. (0.41)
------
Less distributions:
From net investment income .................... (0.07)
From capital gains ............................ (0.06)
------
Total distributions .............................. (0.13)
------
Net asset value, end of period ................... $ 9.48
======
Class Y Ratios/Supplemental Data
Total return ..................................... -4.38%
Net assets, end of period (in thousands) ......... $279
Ratio of expenses to average net assets
including voluntary expense waiver ............. 1.13%[2]
Ratio of net investment income to average
net assets including voluntary expense waiver... 1.11%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 1.34%[2]
Ratio of net investment income to average
net assets excluding voluntary expense waiver... 0.90%[2]
Portfolio turnover rate .......................... 75.42%
[1]Commencement of operations.
[2]Annualized.
MID CAP GROWTH FUND
For a Class A share outstanding throughout the period:
For the
period from
6/30/00[1]
to
3/31/01
------------
Class A Per-Share Data
Net asset value, beginning of period ............. $10.00
------
Income (loss) from investment operations:
Net investment income ......................... 0.11
Net realized and unrealized loss on investments (0.65)
------
Total from investment operations ................. (0.54)
------
Less distributions:
From net investment income .................... (0.06)
From capital gains ............................ (0.29)
------
Total distributions .............................. (0.35)
------
Net asset value, end of period ................... $ 9.11
======
Class A Ratios/Supplemental Data
Total return[2] .................................. -5.88%
Net assets, end of period (in millions) .......... $11
Ratio of expenses to average net assets
including voluntary expense waiver ............. 1.01%[3]
Ratio of net investment income to average
net assets including voluntary expense waiver... 1.85%[3]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 1.65%[3]
Ratio of net investment income to average
net assets excluding voluntary expense waiver... 1.21%[3]
Portfolio turnover rate .......................... 110.18%
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load
deducted on an initial purchase.
[3]Annualized.
MID CAP GROWTH FUND
For a Class B share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
--------
Class B Per-Share Data
Net asset value, beginning of period ............. $10.01
------
Income (loss) from investment operations:
Net investment income ......................... 0.02
Net realized and unrealized loss on investments (0.66)
------
Total from investment operations ................. (0.64)
------
Less distributions:
From net investment income .................... (0.01)
From capital gains ............................ (0.29)
------
Total distributions .............................. (0.30)
------
Net asset value, end of period ................... $ 9.07
======
Class B Ratios/Supplemental Data
Total return ..................................... -6.85%
Net assets, end of period (in millions) .......... $2
Ratio of expenses to average net assets
including voluntary expense waiver ............. 2.40%[2]
Ratio of net investment income to average
net assets including voluntary expense waiver... 0.44%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 3.93%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver... -1.09%[2]
Portfolio turnover rate .......................... 110.18%
[1]Commencement of operations.
[2]Annualized.
MID CAP GROWTH FUND
For a Class C share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
-----------
Class C Per-Share Data
Net asset value, beginning of period ............. $10.00
------
Income (loss) from investment operations:
Net investment income ......................... 0.04
Net realized and unrealized loss on investments (0.66)
------
Total from investment operations ................. (0.62)
------
Less distributions:
From net investment income .................... (0.01)
From capital gains ............................ (0.29)
------
Total distributions .............................. (0.30)
------
Net asset value, end of period ................... $ 9.08
======
Class C Ratios/Supplemental Data
Total return ..................................... -6.58%
Net assets, end of period (in millions) .......... $4
Ratio of expenses to average net assets
including voluntary expense waiver ............. 1.99%[2]
Ratio of net investment income to average
net assets including voluntary expense waiver... 0.84%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 3.26%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver... -0.43%[2]
Portfolio turnover rate .......................... 110.18%
[1]Commencement of operations.
[2]Annualized.
MID CAP GROWTH FUND
For a Class Y share outstanding throughout the period:
For the
period from
7/10/00[1]
to
3/31/01
-----------
Class Y Per-Share Data
Net asset value, beginning of period ............. $10.23
------
Income (loss) from investment operations:
Net investment income ......................... 0.11
Net realized and unrealized loss on investments (0.88)
------
Total from investment operations ................. (0.77)
------
Less distributions:
From net investment income .................... (0.06)
From capital gains ............................ (0.29)
------
Total distributions .............................. (0.35)
------
Net asset value, end of period ................... $ 9.11
======
Class Y Ratios/Supplemental Data
Total return ..................................... -7.97%
Net assets, end of period (in thousands) ......... $184
Ratio of expenses to average net assets
including voluntary expense waiver ............. 1.03%[2]
Ratio of net investment income to average
net assets including voluntary expense waiver... 1.77%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 1.68%[2]
Ratio of net investment income to average
net assets excluding voluntary expense waiver... 1.11%[2]
Portfolio turnover rate .......................... 110.18%
[1]Commencement of operations.
[2]Annualized.
SCIENCE AND TECHNOLOGY FUND
For a Class A share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
-----------
Class A Per-Share Data
Net asset value, beginning of period ............. $34.91
------
Income (loss) from investment operations:
Net investment income ......................... 0.02
Net realized and unrealized loss on investments (9.35)
------
Total from investment operations ................. (9.33)
------
Less distributions from capital gains ............ (7.65)
------
Net asset value, end of period ................... $17.93
======
Class A Ratios/Supplemental Data
Total return[2] .................................. -31.95%
Net assets, end of period (in millions) .......... $6
Ratio of expenses to average net assets .......... 1.70%[3]
Ratio of net investment income to average
net assets...................................... 0.26%[3]
Portfolio turnover rate .......................... 111.25%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load
deducted on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
SCIENCE AND TECHNOLOGY FUND
For a Class B share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
-----------
Class B Per-Share Data
Net asset value, beginning of period ............. $34.91
------
Loss from investment operations:
Net investment loss ........................... (0.06)
Net realized and unrealized loss on investments (9.40)
------
Total from investment operations ................. (9.46)
------
Less distributions from capital gains ............ (7.65)
------
Net asset value, end of period ................... $17.80
======
Class B Ratios/Supplemental Data
Total return ..................................... -32.37%
Net assets, end of period (in millions) .......... $3
Ratio of expenses to average net assets .......... 2.53%[2]
Ratio of net investment loss to average
net assets...................................... -0.55%[2]
Portfolio turnover rate .......................... 111.25%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
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
2001 2000 1999 3/31/98
-------------------------------
Class C Per-Share Data
Net asset value, beginning of period ...... $45.03 $17.45 $12.01 $10.00
-------------------------------
Income (loss) from investment operations:
Net investment loss .................... (0.12) (0.95) (0.09) (0.07)
Net realized and unrealized gain (loss)
on investments ....................... (19.43) 28.77 5.53 2.08
-------------------------------
Total from investment operations .......... (19.55) 27.82 5.44 2.01
-------------------------------
Less distributions from capital gains ..... (7.65) (0.24) (0.00) (0.00)
-------------------------------
Net asset value, end of period ............ $17.83 $45.03 $17.45 $12.01
================================
Class C Ratios/Supplemental Data
Total return .............................. -47.49% 159.75% 45.30% 20.10%
Net assets, end of period (in millions) ... $134 $283 $44 $8
Ratio of expenses to average net assets ... 2.27% 2.20% 2.57% 3.20%[3]
Ratio of net investment loss
to average net assets ................... -0.44% -1.68% -1.26% -1.66%[3]
Portfolio turnover rate ................... 111.25% 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 each period:
For the
For the period from
fiscal year 6/9/98[1]
ended March 31, to
2001 2000 3/31/99
---- ---- ---------
Class Y Per-Share Data
Net asset value, beginning of period ......... $45.36 $17.65 $12.20
----------------------------
Income (loss) from investment operations:
Net investment income (loss) .............. (0.01) (6.09) 0.01
Net realized and unrealized gain (loss)
on investments ............................ (19.49) 34.04 5.44
----------------------------
Total from investment operations ............. (19.50) 27.95 5.45
----------------------------
Less distributions from capital gains ........ (7.65) (0.24) (0.00)
----------------------------
Net asset value, end of period ............... $18.21 $45.36 $17.65
============================
Class Y Ratios/Supplemental Data
Total return ................................. -47.00% 158.67% 44.67%
Net assets, end of period (in thousands) ..... $1,466 $2,108 $53
Ratio of expenses to average net assets ...... 1.35% 1.36% 0.62%[2]
Ratio of net investment income
(loss) to average net assets ............... 0.47% -0.96% 0.54%[2]
Portfolio turnover rate ...................... 111.25% 44.19% 51.00%[2]
[1]Commencement of operations.
[2]Annualized.
SMALL CAP GROWTH FUND
For a Class A share outstanding throughout the period:
For the
period from
7/3/00[1]
to
3/31/01
-------------
Class A Per-Share Data
Net asset value, beginning of period ............. $19.64
------
Loss from investment operations:
Net investment loss ........................... (0.02)
Net realized and unrealized loss on investments (4.74)
------
Total from investment operations ................. (4.76)
------
Less distribution from capital gains ............. (5.45)
------
Net asset value, end of period ................... $ 9.43
======
Class A Ratios/Supplemental Data
Total return[2] .................................. -28.30%
Net assets, end of period (in millions) .......... $4
Ratio of expenses to average net assets .......... 1.49%[3]
Ratio of net investment loss to average net assets -0.39%[3]
Portfolio turnover rate .......................... 47.85%[4]
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load
deducted on an initial purchase.
[3]Annualized.
[4]For the fiscal year ended March 31, 2001.
SMALL CAP GROWTH FUND
For a Class B share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
--------------
Class B Per-Share Data
Net asset value, beginning of period ............. $19.26
------
Loss from investment operations:
Net investment loss ........................... (0.06)
Net realized and unrealized loss on investments (4.39)
------
Total from investment operations ................. (4.45)
------
Less distribution from capital gains ............. (5.45)
------
Net asset value, end of period ................... $ 9.36
======
Class B Ratios/Supplemental Data
Total return ..................................... -27.29%
Net assets, end of period (in millions) .......... $5
Ratio of expenses to average net assets .......... 2.31%[2]
Ratio of net investment loss to average net assets -1.18%[2]
Portfolio turnover rate .......................... 47.85%[3]
[1]Commencement of operations.
[2]Annualized.
[3]For the fiscal year ended March 31, 2001.
SMALL CAP GROWTH FUND
For a Class C share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
----------------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------------
Class C Per-Share Data
Net asset value, beginning
of period .......... $21.64 $14.74 $14.29 $ 9.08 $10.50
-----------------------------------------------
Income (loss) from
investment operations:
Net investment loss (0.10) (0.18) (0.11) (0.13) (0.03)
Net realized and
unrealized gain (loss)
on investments ..... (6.71) 10.22 2.91 5.91 (1.09)
-----------------------------------------------
Total from investment
operations......... (6.81) 10.04 2.80 5.78 (1.12)
-----------------------------------------------
Less distribution from
capital gains...... (5.45) (3.14) (2.35) (0.57) (0.30)
-----------------------------------------------
Net asset value,
end of period..... $ 9.38 $21.64 $14.74 $14.29 $ 9.08
===============================================
Class C Ratios/Supplemental Data
Total return .......... -35.17% 73.38% 21.61% 65.37% -10.97%
Net assets, end of
period (in millions) .. $459 $801 $425 $330 $198
Ratio of expenses to average
net assets ........... 2.12% 2.11% 2.10% 2.13% 2.12%
Ratio of net investment loss
to average net assets . -0.81% -0.90% -0.90% -1.12% -0.27%
Portfolio turnover rate 47.85% 82.24% 51.41% 33.46% 37.20%
[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
For a Class Y share outstanding throughout each period[1]:
For the fiscal year
ended March 31,
-----------------------------------------------
2001 2000 1999 1998 1997
-----------------------------------------------
Class Y Per-Share Data
Net asset value,
beginning of period .. $22.65 $15.21 $14.55 $ 9.16 $10.52
----------------------------------------------
Income (loss) from
investment operations:
Net investment income
(loss)............. (0.20) (0.15) 0.00 (0.03) 0.01
Net realized and
unrealized gain (loss)
on investments .... (6.86) 10.73 3.01 5.99 (1.07)
----------------------------------------------
Total from investment
operations .......... (7.06) 10.58 3.01 5.96 (1.06)
----------------------------------------------
Less distribution from
capital gains ....... (5.45) (3.14) (2.35) (0.57) (0.30)
----------------------------------------------
Net asset value,
end of period ....... $10.14 $22.65 $15.21 $14.55 $ 9.16
==============================================
Class Y Ratios/Supplemental Data
Total return .......... -34.67% 74.71% 22.73% 66.78% -10.37%
Net assets, end of
period (in thousands) $21,027 $16,770 $7,942 $633 $264
Ratio of expenses to average
net assets .......... 1.30% 1.30% 1.18% 1.30% 1.17%
Ratio of net investment
income (loss) to
average net assets... -0.02% -0.09% 0.08% -0.30% 0.31%
Portfolio turnover rate 47.85% 82.24% 51.41% 33.46% 37.20%
[1]Per-share amounts have been adjusted retroactively to reflect the 100%
stock dividend effected June 26, 1998.
TAX-MANAGED EQUITY FUND
For a Class A share outstanding throughout the period:
For the
period from
6/30/00[1]
to
3/31/01
-----------
Class A Per-Share Data
Net asset value, beginning of period ............. $10.00
------
Loss from investment operations:
Net investment loss ........................... (0.00)
Net realized and unrealized loss on investments (2.81)
------
Total from investment operations ................. (2.81)
------
Less distributions:
From net investment income .................... (0.00)
From capital gains ............................ (0.00)
------
Total distributions .............................. (0.00)
------
Net asset value, end of period ................... $ 7.19
======
Class A Ratios/Supplemental Data
Total return[2] .................................. -28.10%
Net assets, end of period (in millions) .......... $4
Ratio of expenses to average net assets
including voluntary expense waiver ............. 1.27%[3]
Ratio of net investment loss to average
net assets including voluntary expense waiver... -0.09%[3]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 1.80%[3]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver... -0.62%[3]
Portfolio turnover rate .......................... 73.46%
[1]Commencement of operations.
[2]Total return calculated without taking into account the sales load
deducted on an initial purchase.
[3]Annualized.
TAX-MANAGED EQUITY FUND
For a Class B share outstanding throughout the period:
For the
period from
7/13/00[1]
to
3/31/01
-----------
Class B Per-Share Data
Net asset value, beginning of period ............. $10.06
------
Loss from investment operations:
Net investment loss ........................... (0.05)
Net realized and unrealized loss on investments (2.89)
------
Total from investment operations ................. (2.94)
------
Less distributions:
From net investment income .................... (0.00)
From capital gains ............................ (0.00)
------
Total distributions ........................... (0.00)
------
Net asset value, end of period ................... $ 7.12
======
Class B Ratios/Supplemental Data
Total return ..................................... -29.22%
Net assets, end of period (in thousands) ......... $296
Ratio of expenses to average net assets
including voluntary expense waiver ............. 2.45%[2]
Ratio of net investment loss to average
net assets including voluntary expense waiver... -1.74%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 3.48%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver... -2.77%[2]
Portfolio turnover rate .......................... 73.46%
[1]Commencement of operations.
[2]Annualized.
TAX-MANAGED EQUITY FUND
For a Class C share outstanding throughout the period:
For the
period from
7/6/00[1]
to
3/31/01
-----------
Class C Per-Share Data
Net asset value, beginning of period ............. $10.01
------
Loss from investment operations:
Net investment loss ........................... (0.06)
Net realized and unrealized loss on investments (2.82)
------
Total from investment operations ................. (2.88)
------
Less distributions:
From net investment income .................... (0.00)
From capital gains ............................ (0.00)
------
Total distributions ........................... (0.00)
------
Net asset value, end of period ................... $ 7.13
======
Class C Ratios/Supplemental Data
Total return ..................................... -28.77%
Net assets, end of period (in millions) .......... $2
Ratio of expenses to average net assets
including voluntary expense waiver ............. 2.35%[2]
Ratio of net investment loss to average
net assets including voluntary expense waiver... -1.52%[2]
Ratio of expenses to average net assets
excluding voluntary expense waiver ............. 3.34%[2]
Ratio of net investment loss to average
net assets excluding voluntary expense waiver... -2.50%[2]
Portfolio turnover rate .......................... 73.46%
[1]Commencement of operations.
[2]Annualized.
W&R FUNDS, INC.
Custodian
UMB Bank, n.a.
928 Grand Boulevard
Kansas City, Missouri 64106
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, INC.
You can get more information about each Fund in the --
* Statement of Additional Information (SAI), which contains detailed
information about a 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 a 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 a Fund's 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 request@waddell.com.
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 publicinfo@sec.gov 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
[W&R Logo]
Waddell & Reed, Inc.
6300 Lamar Avenue, P. O. Box 29217
Shawnee Mission, Kansas 66201-9217
913-236-2000
888-WADDELL
WRP4210(6-01)
Prospectus
June 28, 2001
W&R Funds, Inc.
FIXED INCOME AND MONEY MARKET FUNDS
High Income Fund
Limited-Term Bond Fund
Municipal Bond Fund
Money Market 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 Logo]
CONTENTS
3 An Overview of the Funds
3 High Income Fund
10 Limited-Term Bond Fund
16 Municipal Bond Fund
22 Money Market Fund
26 The Investment Principles of the Funds
32 Your Account
56 The Management of the Funds
59 Financial Highlights
AN OVERVIEW OF THE FUND
GOALS
W&R High Income Fund
seeks, as a primary goal, high current income. As a secondary goal, the Fund
seeks capital growth when consistent with its primary goal.
Principal Strategies
High Income Fund seeks to achieve its goals by investing primarily in high-
yield, high-risk, fixed-income securities of U.S. and foreign issuers, the
risks of which are, in the judgment of Waddell & Reed Investment Management
Company (WRIMCO), the Fund's investment manager, consistent with the Fund's
goals. The Fund invests primarily in lower quality bonds, commonly called junk
bonds, which include bonds rated BB and below by Standard & Poor's (S&P) and Ba
and below by Moody's Corporation (Moody's) or, if unrated, deemed by WRIMCO to
be of comparable quality. The Fund may invest an unlimited amount of its total
assets in junk bonds. As well, the Fund may invest in bonds of any maturity and
in companies of any size.
The Fund may invest up to 20% of its total assets in common stock in order to
seek capital growth. The Fund will emphasize a blend of value and growth in its
selection of common stock. Value stocks are those whose earnings 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.
WRIMCO may look at a number of factors in selecting securities for the Fund.
These include an issuer's past, current and estimated future:
* financial strength
* cash flow
* management
* borrowing requirements
* responsiveness to changes in interest rates and business conditions
Generally, in determining whether to sell a debt security, WRIMCO uses the same
type of analysis that it uses in buying debt securities. For example, WRIMCO
may sell a holding if the issuer's financial strength declines, or is
anticipated to decline, to an unacceptable level, or if management of the
company weakens. As well, WRIMCO may choose to sell an equity security if the
issuer's growth potential has diminished. WRIMCO may sell a security if the
competitive conditions of a particular industry have increased and it believes
the Fund should, therefore, reduce its exposure to such industry. WRIMCO may
also sell a security if, in its opinion, the price of the security has risen to
fully reflect the company's improved creditworthiness and other investments
with greater potential exist. 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 High Income Fund owns different types of securities, a variety of
factors can affect its investment performance, such as:
* the credit quality, earnings performance and other conditions of the
companies whose securities the Fund holds
* the susceptibility of junk bonds to the risk of non-payment or default,
price volatility and lack of liquidity compared to higher-rated bonds
* an increase in interest rates, which may cause the value of bonds held by
the Fund, especially bonds with longer maturities, to decline
* the mix of securities in the Fund, particularly the relative weightings in,
and exposure to, different sectors and industries
* changes in the maturities of bonds owned by the Fund
* adverse bond and stock 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 skill of WRIMCO in evaluating and managing the interest rate and credit
risks of the Fund's portfolio
Market risk for small or medium sized companies may be greater than that for
large companies. For example, smaller companies may 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
High Income Fund is designed for investors who primarily seek a level of
current income that is higher than is normally available with securities in the
higher rated categories and, secondarily, seek capital growth when consistent
with the goal of income. The Fund is not suitable for all investors. You should
consider whether the Fund fits your particular investment objectives.
PERFORMANCE
High Income 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 Class C and Class Y average annual total returns
and compares them to the market indicators listed. Cumulative return
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 YEAR-BY-YEAR RETURNS
as of December 31 each year (%)[1]
1998 3.64%
1999 4.83%
2000 -7.41%
In the period shown in the chart, the highest quarterly return was 6.82% (the
first quarter of 1998) and the lowest quarterly return was -6.62% (the third
quarter of 1998). The Class C return for the year through March 31, 2001 was
4.75%.
[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, 2000 (%)............. 1 Year Life of Class[2]
Class A Shares of
High Income Fund........................ -9.41%
Salomon Brothers High
Yield Market Index...................... -5.35%
Lipper High Current Yield
Funds Universe Average.................. -7.08%
Class B Shares of
High Income Fund........................ -9.37%
Salomon Brothers High
Yield Market Index...................... -5.35%
Lipper High Current Yield
Funds Universe Average.................. -7.08%
Class C Shares of
High Income Fund[1]..................... -7.41% 1.47%
Salomon Brothers High
Yield Market Index...................... -5.68% 1.10%
Lipper High Current Yield
Funds Universe Average.................. -8.38% -0.95%
Class Y Shares of
High Income Fund........................ -6.84% -0.32%
Salomon Brothers High
Yield Market Index...................... -5.68% -2.04%
Lipper High Current Yield
Funds Universe Average.................. -8.38% -2.56%
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
contingent deferred sales charge (CDSC) structure applicable to Class C.
Accordingly, these returns reflect no CDSC since it only applies to Class C
shares held for twelve months or less.
[2]Since July 3, 2000 for Class A shares, July 18, 2000 for Class B shares,
July 31, 1997 for Class C shares (based on the prior Class B shares) and
December 30, 1998 for Class Y shares. Because Class A, Class B and 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 index are not available,
index performance is calculated from July 31, 2000, July 31, 2000, and
December 31, 1998, respectively.
FEES AND EXPENSES
High Income 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).......... None[2] 5% 1% None
Annual Fund Operating Expenses
(expenses that are deducted... Class A Class B Class C Class Y
from Fund assets)............. Shares Shares Shares Shares
Management Fees[3]............ 0.63% 0.63% 0.63% 0.63%
Distribution and Service
(12b-1) Fees.................. 0.25% 1.00% 1.00% 0.25%
Other Expenses[4]............. 0.66% 0.72% 0.78% 0.72%
Total Annual Fund
Operating Expenses[4]......... 1.54% 2.35% 2.41% 1.60%
[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.
[4]Other Expenses and Total Annual Fund Operating Expenses have been restated
to reflect the change in accounting service fees and shareholder servicing
fees effective September 1, 2000; otherwise, expense ratios are based on
other Fund-level expenses for the fiscal period ended March 31, 2001. 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 of shares
for each time period specified, (b) your investment has a 5% return each year,
and (c) the exp