485APOS

                                                          File No. 811-5017
                                                          File No. 33-11466

                    SECURITIES AND EXCHANGE COMMISSION

                         Washington, D. C.  20549

                                 Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933     X

                      Post-Effective Amendment No. 31

                                  and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940                                                     X

                             Amendment No. 31

W&R TARGET 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

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)
         _____  on (date) pursuant to paragraph (b)
         _____  60 days after filing pursuant to paragraph (a)(1)
         __X__  on July 18, 2003 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 December 31, 2002 was filed on March 7,
2003.















                           W&R TARGET FUNDS, INC.

                             6300 Lamar Avenue

                              P. O. Box 29217

                    Shawnee Mission, Kansas  66201-9217

                               913-236-2000
                               888-WADDELL
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                              _______ , 2003

                                 PROSPECTUS

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     W&R Target Funds, Inc. (Fund) is a management investment company,
commonly known as a mutual fund. This Prospectus offers three separate
Portfolios of the Fund, each with a separate goal and investment policies.

International II Portfolio seeks long-term capital growth.

Micro Cap Growth Portfolio seeks long-term capital appreciation.

Small Company Value Portfolio seeks long-term accumulation of capital.

    Portfolio shares are not sold to you directly but rather are
available to you only through certain variable life insurance policies and
variable annuity contracts (Policies) offered by Participating Insurance
Companies. This Prospectus contains concise information about the
Portfolios of which you should be aware before applying for a Policy. This
Prospectus should be read together with the Prospectus for the particular
Policy.

The Securities and Exchange Commission has not approved or disapproved the
Fund's securities, or determined whether this Prospectus is accurate or
complete. It is a criminal offense to state otherwise.


An Overview of the Portfolios

                          International II Portfolio

Goal

International II Portfolio seeks long-term capital growth.

Principal Strategy

International II Portfolio seeks to achieve its goal by investing
primarily in equity securities of small, mid and large capitalization
foreign companies. The Portfolio primarily invests in common stock but may
also invest in foreign investment-grade debt securities.

In selecting equity securities for the Portfolio, Templeton Investment
Counsel, LLC, the Portfolio's investment sub-advisor (Sub-Advisor),
performs a company-by-company analysis, rather than focusing on a specific
industry or economic sector. The Sub-Advisor concentrates on the market
price of a company relative to its view regarding the company's long-term
earnings potential.

Generally, in determining whether to sell a security, the Sub-Advisor uses
the same type of analysis that it uses in buying securities. For example,
the Sub-Advisor may sell a security if it determines that the issuer's
growth and/or profitability characteristics are deteriorating or the
issuer no longer maintains a competitive advantage, more attractive
investment opportunities arise, or to raise cash.

Principal Risks of Investing in the Portfolio

A variety of factors can affect the investment performance of
International II Portfolio. These include:

* changes in foreign exchange rates, which may affect the value of the
  securities the Portfolio holds

* the earnings performance, credit quality and other conditions of the
  companies whose securities the Portfolio holds

* adverse stock and bond market conditions, sometimes in response to
  general economic or industry news, that may cause the prices of the
  Portfolio's holdings to fall as part of a broad market decline

* the Sub-Advisor's skill in evaluating and selecting securities for the
  Portfolio

Investing in foreign securities presents additional risks, such as
currency fluctuations and political or economic conditions affecting the
foreign country. Accounting and disclosure standards differ from country
to country, which makes obtaining reliable research information more
difficult. There is the possibility that, due to certain international
monetary or political conditions, the Portfolio's assets may be more
volatile than other investment choices.

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 Portfolio's shares will change
and you could lose money on your investment. An investment in the
Portfolio 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 II Portfolio is designed for investors seeking long-term
capital growth by investing primarily in securities issued by foreign
companies. You should consider whether the Portfolio fits your particular
investment objectives.

Performance

International II Portfolio has not been in operation for a full calendar
year; therefore, no performance information is provided in this section.

Fees and Expenses

The following table describes the fees and expenses that you may pay if
you buy and hold shares of International II Portfolio. The table and the
example below do not reflect any fees and expenses imposed under the
Policies through which the Portfolio is offered. See the Prospectus for
the particular Policy for a description of those fees and expenses.
There are no fees or charges to buy and sell shares of International II
Portfolio, reinvest dividends or exchange into other Portfolios of the
Fund.

Annual Portfolio Operating Expenses

(expenses that are deducted from Portfolio assets)

Management Fees                          0.85%

Distribution and Service                    0.25%
(12b-1) Fees 

Other Expenses                              0.09%

Total Annual Portfolio                      1.19%
Operating Expenses

Example

This example is intended to help you compare the cost of
investing in the shares of International II Portfolio with the
cost of investing in other portfolios. The example assumes that
(a) you invest $10,000 in the shares of the Portfolio for each
time period specified, (b) your investment has a 5% return each
year, and (c) the expenses remain the same. The costs in this
example would be the same whether or not you redeemed all of
your shares at the end of these periods. Although your actual
costs may be higher or lower, based on these assumptions, your
costs would be:

     1 Year          3 Years
     $121            $378



                     Micro Cap Growth Portfolio 
Goal

Micro Cap Growth Portfolio seeks long-term capital appreciation.

Principal Strategy

Micro Cap Growth Portfolio seeks to achieve its goal by investing
primarily in equity securities of domestic and foreign companies whose
market capitalizations are within the range of capitalizations of
companies included in the Russell 2000 Growth Index (micro cap companies)
at the time of purchase. The Portfolio primarily invests in common stock
but may also invest in preferred stock and securities convertible into
equity securities.

In selecting equity securities for the Portfolio, Wall Street Associates,
the Portfolio's investment sub-advisor (Sub-Advisor), seeks to invest in
securities of companies that it believes show sustainable earnings growth
potential and improving profitability.

Generally, in determining whether to sell a security, the Sub-Advisor uses
the same type of analysis that it uses in buying securities. For example,
the Sub-Advisor may sell a security if it determines that the issuer's
growth and/or profitability characteristics are deteriorating or the
issuer no longer maintains a competitive advantage, more attractive
investment opportunities arise, or to raise cash.

Principal Risks of Investing in the Portfolio

A variety of factors can affect the investment performance of Micro Cap
Growth Portfolio. These include:

* potentially greater price volatility of the equity securities of micro
  cap companies held by the Portfolio

* adverse stock and bond market conditions, sometimes in response to
  general economic or industry news, that may cause the prices of the
  Portfolio'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 Portfolio holds

* the mix of securities in the Portfolio, particularly the relative
  weightings in, and exposure to, different sectors and industries

* the impact of the Portfolio's investments in initial public offerings
  (IPOs)

* the Sub-Advisor's skill in evaluating and selecting securities for the
  Portfolio

Market risk for small-sized companies may be greater than that for medium
or large companies due to, among other factors, such companies' small
size, limited product lines, limited access to financing sources and
limited management depth. Stocks of smaller companies, as well as stocks
of companies with high-growth expectations reflected in their stock price,
may experience volatile trading and price fluctuations.

As with any mutual fund, the value of the Portfolio's shares will change
and you could lose money on your investment. An investment in the
Portfolio 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

Micro Cap Growth Portfolio is designed for investors seeking long-term
capital appreciation from investment in faster-growing companies. You
should consider whether the Portfolio fits your particular investment
objectives.

Performance

Micro Cap Growth Portfolio has not been in operation for a full calendar
year; therefore, no performance information is provided in this section.

Fees and Expenses

The following table describes the fees and expenses that you may pay if
you buy and hold shares of Micro Cap Growth Portfolio. The table and the
example below do not reflect any fees and expenses imposed under the
Policies through which this Portfolio is offered. See the Prospectus for
the particular Policy for a description of those fees and expenses.

There are no fees or charges to buy and sell shares of Micro Cap Growth
Portfolio, reinvest dividends or exchange into other Portfolios.

Annual Portfolio Operating Expenses

(expenses that are deducted from Portfolio assets)

Management Fees                             0.95%

Distribution and Service                    0.25%
(12b-1) Fees

Other Expenses                              0.14%

Total Annual Portfolio                      1.34%
Operating Expenses

Example

This example is intended to help you compare the cost of
investing in the shares of Micro Cap Growth Portfolio with the
cost of investing in other portfolios. The example assumes that
(a) you invest $10,000 in the shares of the Portfolio for each
time period specified, (b) your investment has a 5% return each
year, and (c) the expenses remain the same. The costs in this
example would be the same whether or not you redeemed all of
your shares at the end of these periods. Although your actual
costs may be higher or lower, based on these assumptions, your
costs would be:

    1 Year           3 Years
    $136             $425



                       Small Company Value Portfolio

Goal

Small Company Value Portfolio seeks long-term accumulation of capital.

Principal Strategy

Small Company Value Portfolio seeks to achieve its goal by investing
primarily in various types of equity securities 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 companies). These equity securities will consist
primarily of common stocks but may also include preferred stock and
securities convertible into equity securities.

In selecting equity securities for the Portfolio, State Street Research &
Management Company, the Portfolio's investment sub-advisor (Sub-Advisor),
searches for those companies that appear to be undervalued or trading
below their true worth and examines such features as the company's
financial condition, business prospects, competitive position and business
strategy. The Sub-Advisor looks for companies that appear likely to come
back into favor with investors, for reasons that may include, for example,
good prospective earnings, strong management teams or new products or
services. The Portfolio may also invest in growth stocks that are, in the
Sub-Advisor's opinion, temporarily undervalued.

The Portfolio will typically sell a stock when it reaches an acceptable
price, its fundamental factors have changed or it has performed below the
Sub-Advisor's expectations. The Sub-Advisor may also sell a security to
take advantage of more attractive investment opportunities or to raise
cash.

Principal Risks of Investing in the Portfolio

A variety of factors can affect the investment performance of Small
Company Value Portfolio. These include:

* potentially greater price volatility of the equity securities of small
  companies held by the Portfolio

* adverse stock and bond market conditions, sometimes in response to
  general economic or industry news, that may cause the prices of the
  Portfolio'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 Portfolio holds

* the mix of securities in the Portfolio, particularly the relative
  weightings in, and exposure to, different sectors and industries

* the impact of the Portfolio's investments in initial public offerings
  (IPOs)

* the Sub-Advisor's skill in evaluating and selecting securities for the
  Portfolio

Market risk for small-sized companies may be greater than that for medium
or large companies due to, among other factors, such companies' small
size, limited product lines, limited access to financing sources and
limited management depth. Stocks of smaller companies, as well as stocks
of companies with high-growth expectations reflected in their stock price,
may experience volatile trading and price fluctuations.

As with any mutual fund, the value of the Portfolio's shares will change
and you could lose money on your investment. An investment in the
Portfolio 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 Company Value Portfolio is designed for investors seeking long-term
accumulation of capital. You should consider whether the Portfolio fits
your particular investment objectives.

Performance

Small Company Value Portfolio has not been in operation for a full
calendar year; therefore, no performance information is provided in this
section.

Fees and Expenses

The following table describes the fees and expenses that you may pay if
you buy and hold shares of Small Company Value Portfolio. The table and
the example below do not reflect any fees and expenses imposed under the
Policies through which this Portfolio is offered. See the Prospectus for
the particular Policy for a description of those fees and expenses.
There are no fees or charges to buy and sell shares of Small Company Value
Portfolio, reinvest dividends or exchange into other Portfolios.


Annual Portfolio Operating Expenses

(expenses that are deducted from Portfolio assets)

Management Fees                              0.85%

Distribution and Service                     0.25%
(12b-1) Fees

Other Expenses                               0.17%

Total Annual Portfolio                       1.27%
Operating Expenses

Example

This example is intended to help you compare the cost of
investing in the shares of Small Company Value Portfolio with
the cost of investing in other portfolios. The example assumes
that (a) you invest $10,000 in the shares of the Portfolio for
each time period specified, (b) your investment has a 5% return
each year, and (c) the expenses remain the same. The costs in
this example would be the same whether or not you redeemed all
of your shares at the end of these periods. Although your actual
costs may be higher or lower, based on these assumptions, your
costs would be:

    1 Year          3 Years
    $129            $403


The Investment Principles of the Portfolios

Investment Goals, Principal Strategies and Other Investments

International II Portfolio 

The goal of International II Portfolio is long-term capital growth. The
Portfolio seeks to achieve this goal by investing primarily in equity
securities of small, mid and large capitalization foreign companies. The
Portfolio may invest in securities of companies or governments in
developed foreign markets or in developing or emerging markets. Under
normal market conditions, the Portfolio will invest at least 65% of its
total assets in issuers of at least three foreign countries.

Equity securities generally entitle the holder to participate in a
company's general operating results and include common stock, preferred
stock, warrants or rights to purchase such securities. Under normal market
conditions, the Portfolio invests at least 80% of its net assets
(exclusive of collateral received in connection with securities lending)
in equity securities. There is no guarantee, however, that the Portfolio
will achieve its goal.

In selecting equity securities for the Portfolio, the Sub-Advisor performs
a company-by-company analysis, rather than focusing on a specific industry
or economic sector. The Sub-Advisor concentrates primarily on the market
price of a company's securities relative to its view regarding the
company's long-term earnings potential. The Sub-Advisor typically also
considers a company's historical value measures, including price/earnings
ratios, profit margins and liquidation value.

When the Sub-Advisor believes that a temporary defensive position is
desirable, it may invest up to all of the Portfolio's assets in debt
securities including commercial paper or short-term U.S. Government
securities and/or preferred stocks; it may avoid investment in volatile
emerging markets and increase investments in more stable, developed
countries and industries; it may use forward currency contracts to hedge
specific foreign currencies; and it may also invest up to all of the
Portfolio's assets in domestic securities. By taking a defensive position,
the Portfolio may not achieve its investment objective.

Micro Cap Growth Portfolio

The goal of Micro Cap Growth Portfolio is to seek long-term capital
appreciation. The Portfolio seeks to achieve this goal by investing
primarily in various types of equity securities of micro cap companies.
The Portfolio may occasionally invest in equity securities of larger
companies.

The Portfolio considers a company's capitalization at the time the
Portfolio acquires the company's equity securities. Equity securities of a
company whose capitalization exceeds the range of the Russell 2000 Growth
Index after purchase will not be sold solely because of its increased
capitalization. The Portfolio will, under normal market conditions, invest
at least 80% of its net assets in micro cap companies. There is no
guarantee, however, that the Portfolio will achieve its goal.

In selecting equity securities for the Portfolio, the Sub-Advisor primarily
looks to a company's potential for sustainable earnings growth and
improving profitability. In selecting securities with earnings growth
potential, the Sub-Advisor considers such factors as a company's
competitive market position, quality of management, growth strategy,
internal operating trends (such as profit margins, cash flows and earnings
and revenue growth), overall financial condition, and ability to sustain
current rate of growth. In seeking to achieve its investment objective, the
Portfolio may also invest in equity securities of companies that the Sub-
Advisor believes are temporarily undervalued or show promise of improved
results due to new management, products, markets or other factors.

The Portfolio's investment in equity securities may include common stocks
that are part of IPOs. In addition to common stocks, the Portfolio may
invest, to a lesser extent, in preferred stocks and securities convertible
into equity securities.

When the Sub-Advisor believes that a temporary defensive position is
desirable, the Portfolio may invest up to all of its assets in various
short-term cash and cash equivalent items. By taking a defensive position,
the Portfolio may not achieve its investment objective.

Small Company Value Portfolio

The goal of Small Company Value Portfolio is to seek long-term
accumulation of capital. The Portfolio seeks to achieve this goal by
investing primarily in various types of equity securities of small cap
companies. The Portfolio may occasionally invest in equity securities of
mid and large cap companies, companies which fall outside the
capitalization range of companies within the Lipper, Inc. Small Cap
Category.

The Portfolio considers a company's capitalization at the time the
Portfolio acquires the company's equity securities. Equity securities 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 Portfolio will, under normal market
conditions, invest at least 80% of its net assets in small cap companies.
There is no guarantee, however, that the Portfolio will achieve its goal.

The Sub-Advisor uses both a "top-down" (assess the market environment) and
a "bottom-up" (research individual issuers) analysis of issuers and
securities, including the following:

* intrinsic value of the company not reflected in the stock price

* historical earnings growth

* future expected earnings growth

* company's position in its respective industry

* industry conditions

* competitive strategy

* management capabilities

* free cash flow potential

The Portfolio's purchases of equity securities may include common stocks
that are part of IPOs. In addition to common stocks, the Portfolio may
also invest, to a lesser extent, in preferred stocks and securities
convertible into equity securities.

When the Sub-Advisor believes that a temporary defensive position is
desirable, the Portfolio may invest up to all of its assets in various
short-term cash and cash equivalent items. By taking a defensive position,
the Portfolio may not achieve its investment objective.

Additional Investment Considerations

The goal and investment policies of each Portfolio may be changed by the
Board of Directors of the Fund without a vote of the Portfolio's
shareholders, unless a policy or restriction is otherwise described.

Each Portfolio may also invest in other types of securities and use
certain other instruments in seeking to achieve its goal. For example, a
Portfolio may 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 in the Statement of Additional Information
(SAI) about each Portfolio's permitted investments and strategies, as well
as the restrictions that apply to them.

Risk Considerations of Principal Strategies and Other Investments

Risks exist in any investment. Each Portfolio is subject to equity risk
and other market risk, financial risk, sector risk, mid size company risk,
and small cap company risk. The Portfolios are also subject to risks
specific to their respective investment strategies that include, for
International II Portfolio particularly, large company risk, foreign
securities risk, emerging market risk, and currency risk, and for Micro
Cap Growth Portfolio and Small Company Value Portfolio particularly, IPO
risk and micro cap company risk.

* Market risk is the possibility of a change in the price of the
  security because of market factors, including changes in interest
  rates. The prices of common stocks and other equity securities
  generally fluctuate more than those of other investments. A Portfolio
  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. 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 Portfolio will likely
  change as well.

* Financial risk is based on the financial situation of the issuer of
  the security. For an equity investment, a Portfolio's financial risk
  may depend, for example, on the earnings performance of the company
  issuing the stock. To the extent a Portfolio invests in debt
  securities, the Portfolio's financial risk depends on the credit
  quality of the securities in which it invests.

* Sector risk is the possibility that securities of companies in
  specific industries or sectors of the economy perform differently
  than the overall market. Such different performance may, at times, be
  due to changes in the regulatory or competitive environment or in
  investor perception of a company or sector.

* IPO risk is the risk that a Portfolio will not be able to sustain the
  positive effect on performance that may result from investments in
  IPOs. Investments in IPOs can have a significant positive impact on
  the Portfolio's performance. The positive effect of investments of
  IPOs may not be sustainable because of a number of factors. The
  Portfolio may not be able to buy shares in some IPOs, or may be able
  to buy only a small number of shares. Also, the Portfolio may not be
  able to buy the shares at the commencement of the offering, and the
  general availability and performance of IPOs are dependent on market
  psychology and economic conditions. The relative performance impact
  of IPOs is also likely to decline as a Portfolio grows.

* Large company risk is the risk that a portfolio of large
  capitalization company securities may underperform the market as a
  whole.

* Mid size company risk is the risk that equity securities of mid
  capitalization companies may be more vulnerable to adverse
  developments than those of larger companies due to such companies'
  limited product lines, limited markets and financial resources and
  dependence upon a relatively small management group.

* Small and micro cap company risk is the risk that equity securities
  of small and micro cap companies, respectively, are more susceptible
  to market volatility than larger companies due to more limited
  management, resources, product lines and available markets.  Such
  securities are also less frequently traded and more likely to
  experience wider price fluctuations, which could make them more
  difficult to sell.

* Currency risk is the risk that changes in foreign currency exchange
  rates will increase or decrease the value of foreign securities or
  the amount of income or gain received on such securities. A strong
  U.S. dollar relative to these other currencies will adversely affect
  the value of the Portfolio. Attempts by the Portfolio to minimize the
  effects of currency fluctuations through the use of foreign currency
  hedging transactions may not be successful or the Portfolio's hedging
  strategies may cause the Portfolio to be unable to take advantage of
  a favorable change in the value of foreign currencies.

* Foreign securities risk is the risk that the value of foreign
  companies or foreign government securities held by the Portfolio may
  be subject to greater volatility than domestic securities. Risks of
  foreign securities include, among other things:

    Political and Economic Risks. Investing in foreign
    securities is subject to the risk of political, social or
    economic instability in the country of the issuer of the
    security, the difficulty of predicting international trade
    patterns, the possibility of exchange controls,
    expropriation, limits on currency removal or
    nationalization of assets.

    Foreign Tax Risk. The Portfolio's income from foreign
    issuers may be subject to non-U.S. withholding taxes. In
    some countries, the Portfolio may be subject to taxes on
    trading profits and, on certain securities transactions,
    transfer or stamp duties. To the extent foreign income
    taxes are paid by the Portfolio, U.S. shareholders may be
    entitled to a credit or deduction for U.S. tax purposes.

    Foreign Investment Restriction Risk. Some countries,
    particularly emerging market countries, restrict to varying
    degrees foreign investment in their securities markets. In
    some circumstances, these restrictions may limit or
    preclude investment in certain countries or may increase
    the cost of investing in securities of particular
    companies.

    Foreign Securities Market Risk. Securities of many foreign
    companies may be less liquid and their prices more volatile
    than securities of domestic companies. Securities of
    companies traded outside the U.S. may be subject to further
    risks due to the inexperience of local brokers and
    financial institutions, the possibility of permanent or
    temporary termination of trading, and greater spreads
    between bid and asked prices for securities. Foreign stock
    exchanges and brokers are subject to less governmental
    regulation, and commissions may be higher than in the U.S.
    In addition, there may be delays in the settlement of
    foreign stock exchange transactions.

* Emerging markets risk is the risk that the value of securities issued
  by companies located in emerging market countries may be subject to
  greater volatility than foreign securities issued by companies in
  developed markets. Risks of investing in foreign securities issued by
  companies in emerging market countries include, among other things,
  greater social, political and economic instability, lack of liquidity
  and greater price volatility due to small market size and low trading
  volume, certain national policies that restrict investment
  opportunities and the lack of legal structures governing private and
  foreign investments and private property.

Certain types of each Portfolio's authorized investments and strategies,
such as foreign securities, junk bonds and derivative instruments, involve
special risks. Depending on how much a Portfolio invests or uses these
strategies, these special risks may become significant. For example,
foreign investments may subject a Portfolio 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 Portfolio to greater volatility than an
investment in a more traditional stock, bond or other security.

Because each Portfolio owns different types of investments, its
performance will be affected by a variety of factors. The value of each
Portfolio's investments and the income it may generate will vary from day
to day, generally reflecting changes in market conditions, interest rates
and other company and economic news. Performance will also depend on the
Sub-Advisor's skill in selecting investments.

                      The Management of the Portfolios

Portfolio Management

The Portfolios are managed by Waddell & Reed Investment Management Company
(WRIMCO), subject to the authority of the Fund's Board of Directors.
WRIMCO and/or its predecessor have served as investment manager to the
Fund since its inception and to each of the registered investment
companies in the Waddell & Reed Advisors Funds and Waddell & Reed InvestEd
Portfolios, Inc. since their inception. WRIMCO is located at 6300 Lamar
Avenue, P.O. Box 29217, Shawnee Mission, Kansas 66201-9217. Prior to
June 30, 2003, WRIMCO managed the Ivy Funds, Inc., which is currently
managed by an affiliate of WRIMCO.

The investment sub-advisor of International II Portfolio is Templeton
Investment Counsel, LLC (Templeton Counsel), 500 East Broward Boulevard,
Fort Lauderdale, Florida  33394. Templeton Counsel provides investment
advice to, and generally conducts the investment management program for,
International II Portfolio. Edgerton Tucker Scott III is primarily
responsible for the management of International II Portfolio and has held
his responsibilities for the Portfolio since its inception. Mr. Scott is
Vice President and Research Analyst, Templeton Counsel, and serves as
the portfolio manager for International Stock Portfolio of Advantus
Series Fund, Inc. (Advantus).

The investment sub-advisor of Micro Cap Growth Portfolio is Wall Street
Associates (WSA), La Jolla Financial Building, Suite 100, 1200 Prospect
Street, La Jolla, California  92037. WSA provides investment advice to,
and generally conducts the investment management program for, Micro Cap
Growth Portfolio. William Jeffery, III, Kenneth F. McCain and David A.
Baratta are primarily responsible for the management of Micro Cap Growth
Portfolio and have held their responsibilities for the Portfolio since its
inception. Messrs. Jeffery and McCain are Principals and Portfolio
Managers, WSA, and Mr. Baratta has been Principal and Portfolio Manager,
WSA, since June 1999 and, prior to that, Portfolio Manager and Executive
Vice President, Morgan Grenfell, Inc., New York, New York, from October
1994 to June 1999. Messrs. Jeffery, McCain and Baratta serves as the
portfolio managers for Micro Cap Growth Portfolio of Advantus.

The investment sub-advisor of Small Company Value Portfolio is State
Street Research & Management Company (State Street Research), One
Financial Center, Boston, Massachusetts  02111. The Sub-Advisor provides
investment advice to, and generally conducts the investment management
program for, Small Company Value Portfolio. John Burbank, Paul Haagensen
and Caroline Evascu are primarily responsible for the management of Small
Company Value Portfolio and have held their responsibilities for the
Portfolio since its inception. Mr. Burbank is Senior Vice President, State
Street Research. Mr. Haagensen has been Senior Vice President, State
Street Research, since 2002 and, prior to that, Portfolio Manager and
Senior Analyst, Putnam Investments. Ms. Evascu has been Vice President,
State Street Research, since 2001 and, prior to that, Vice President and
Senior Analyst, SG Cowen Asset Management, and research associate at
Donaldson, Lufkin & Jenrette. Messrs. Burbank and Haagensen serves as the
portfolio managers, and Ms. Evascu serves as the associate portfolio
manager, of Small Company Value Portfolio of Advantus.

Management and Other Fees

Like all mutual funds, the Portfolios pay fees related to their daily
operations. Expenses paid out of each Portfolio's assets are reflected in
its share price or dividends; they are neither billed directly to
shareholders nor deducted from shareholder accounts.

Each Portfolio pays a management fee to WRIMCO for providing investment
advice and supervising its investments. Each Portfolio also pays other
expenses, which are explained in the SAI.

The management fee is payable at the annual rates of:

for International II Portfolio, 0.85% of net assets up to $1 billion,
0.83% of net assets over $1 billion and up to $2 billion, 0.80% of net
assets over $2 billion and up to $3 billion, and 0.76% of net assets over
$3 billion;

for Micro Cap Growth Portfolio, 0.95% of net assets up to $1 billion,
0.93% of net assets over $1 billion and up to $2 billion, 0.90% of net
assets over $2 billion and up to $3 billion, and 0.86% of net assets over
$3 billion; and

for Small Company Value Portfolio, 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.

WRIMCO uses a portion of the management fees it receives from a Portfolio
to pay that Portfolio's Sub-Advisor.

The Fund has adopted a Service Plan (Plan) pursuant to Rule 12b-1 of the
Investment Company Act of 1940, as amended. Under the Plan, each Portfolio
may pay daily a fee to Waddell & Reed, Inc., an affiliate of WRIMCO and
the Distributor of the Policies for which the Fund is the underlying
investment vehicle, in an amount not to exceed 0.25% of the Portfolio's
average annual net assets. The fee is to be paid to compensate Waddell &
Reed, Inc. for amounts it expends in connection with the provision of
personal services to Policyowners.

                         PURCHASES AND REDEMPTIONS

The separate accounts of the Participating Insurance Companies place
orders to purchase and redeem shares of each Portfolio based on, among
other things, the amount of premium payments to be invested and the number
of surrender and transfer requests to be effected on any day according to
the terms of the Policies. Shares of a Portfolio are sold at their net
asset value (NAV) per share next determined after receipt of the order to
purchase from the Participating Insurance Company. No sales charge is
required to be paid by the Participating Insurance Company for purchase of
shares.

Redemptions are made at the NAV per share of the Portfolio next determined
after receipt of the request to redeem from the Participating Insurance
Company. Payment is generally made within seven days after receipt of a
proper request to redeem. No fee is charged to shareholders upon
redemption of Portfolio shares. The Fund may suspend the right of
redemption of shares of any Portfolio and may postpone payment for any
period if any of the following conditions exist:

* the New York Stock Exchange (NYSE) is closed other than customary
  weekend and holiday closings or trading on the NYSE is restricted

* the Securities and Exchange Commission has determined that a state
  of emergency exists which may make payment or transfer not
  reasonably practicable

* the Securities and Exchange Commission has permitted suspension of
  the right of redemption of shares for the protection of the
  security holders of the Fund

* applicable laws and regulations otherwise permit the Fund to suspend
  payment on the redemption of shares

Redemptions are ordinarily made in cash.

Should any conflict between Policyowners arise which would require that a
substantial amount of net assets be withdrawn from the Fund, orderly
management of portfolio securities could be disrupted to the potential
detriment of Policyowners.

                              NET ASSET VALUE

In the calculation of the NAV per share of each Portfolio:

* The securities in the 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 NAV per share of each Portfolio is normally computed daily as of the
close of business of the NYSE, typically 4 p.m. Eastern time, except that
an option or futures contract held by a Portfolio may be priced at the
close of the regular session of any other securities or commodities
exchange on which that instrument is traded.

Each Portfolio 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 a Portfolio's shares may be
significantly affected on days when the Portfolio does not price its
shares and when you are not able to purchase or redeem the Portfolio's
shares. When market quotations are not readily available, securities,
options, futures contracts and other assets are valued at fair value in a
manner determined in good faith under procedures established by and under
the general supervision and responsibility of the Board of Directors.
Similarly, if events materially affecting the value of foreign investments
occur prior to the close of the regular session of trading on the NYSE,
but after the time their values are otherwise determined, such investments
will be valued at their fair value as determined in good faith by or under
the direction of the Board of Directors.

                        DIVIDENDS AND DISTRIBUTIONS

Each Portfolio distributes substantially all of its net investment income
and net capital gains each year.

Dividends from investment income for each of International II Portfolio,
Micro Cap Growth Portfolio and Small Company Value Portfolio will usually
be declared and paid annually in December. Dividends declared for a
particular day are paid to shareholders of record on the prior business
day. However, dividends declared for Saturday and Sunday are paid to
shareholders of record on the preceding Thursday. Dividends from the
Portfolios usually are declared and paid annually in December in additional
full and fractional shares of that Portfolio. Ordinarily, dividends are
paid on shares starting on the day after they are issued and through the
day they are redeemed.

All distributions from net realized long-term or short-term capital gains
of a Portfolio, if any, are declared and paid annually in December in
additional full and fractional shares of the Portfolio.

You will find information in the SAI about Federal income tax
considerations generally affecting the Portfolios.

Because the only shareholders of the Portfolios are the Participating
Insurance Companies and their separate accounts, no discussion is included
here as to the Federal income tax consequences to the Portfolios'
shareholders. For information concerning the Federal tax consequences to
Policyowners, see the applicable prospectus for the Policy. Prospective
investors are urged to consult with their tax advisers.

Financial Highlights

None of the Portfolios has been in operation prior to the date of this
Prospectus; therefore, no financial highlights are provided in this
section.

W&R TARGET FUNDS, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas  66201-9217

PROSPECTUS

Custodian
 UMB Bank, n. a.
 928 Grand Boulevard
 Kansas City, Missouri 64106

Legal Counsel
 Kirkpatrick & Lockhart LLP
 1800 Massachusetts Avenue NW
 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

Investment Sub-Advisors
 Templeton Investment Counsel, LLC
 500 East Broward Boulevard
 Fort Lauderdale, Florida  33394

 Wall Street Associates
 La Jolla Financial Building, Suite 100
 1200 Prospect Street
 La Jolla, California  92037

 State Street Research & Management Company
 One Financial Center
 Boston, Massachusetts  02111

Accounting Services Agent
 Waddell & Reed Services Company
 6300 Lamar Avenue
 P. O. Box 29217
 Shawnee Mission, Kansas 66201-9217
 913-236-2000
 888-WADDELL

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

W&R Target Funds, Inc.
PROSPECTUS

You can get more information about the Portfolios in--

    * the  Statement of Additional Information (SAI), which contains
      detailed information about each Portfolio, particularly its
      investment policies and practices. You may not be aware of
      important information about a Portfolio unless you read both the
      Prospectus and the SAI. The Portfolios' 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).

To request a copy of the current SAI, without charge, or for other
inquiries, contact the Fund or Waddell & Reed, Inc. at the address and
telephone number below. Copies of the Portfolios' SAI may also be
requested at request@waddell.com.

Information about the Portfolios and the Fund (including the current SAIs
and the Fund's 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, by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102, 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 Fund's SEC file number is:  811-5017.

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

W&R TARGET FUNDS, INC.

International II Portfolio

Micro Cap Growth Portfolio

Small Company Value Portfolio

6300 Lamar Avenue

P. O. Box 29217

Shawnee Mission, Kansas 66201-9217

913-236-2000

888-WADDELL

_____________, 2003

STATEMENT OF ADDITIONAL INFORMATION

               This Statement of Additional Information (SAI) is not a prospectus. Investors should read this SAI in conjunction with the prospectus (Prospectus) for International II Portfolio, Micro Cap Growth Portfolio and Small Company Value Portfolio (each, a Portfolio) of W&R Target Funds, Inc. (Fund) dated _____, 2003, which may be obtained by request to the Fund or Waddell & Reed, Inc. at the address or telephone number shown above.

TABLE OF CONTENTS

 Performance Information

Investment Strategies, Policies and Practices

Investment Management and Other Services

Net Asset Value

Directors and Officers

Purchases and Redemptions

Shareholder Communications

Taxes

Dividends and Distributions

Portfolio Transactions and Brokerage

Other Information

Appendix A

THE FUND AND ITS HISTORY

               W&R Target Funds, Inc. (Fund) was organized as a Maryland corporation on December 2, 1986. Prior to August 31, 1998, the Fund was known as TMK/United Funds, Inc.; prior to October 16, 2000, it was known as Target/United Funds, Inc. Each of the Portfolios, a series of the Fund, is a mutual fund, an investment that pools shareholders' money and invests it toward a specified goal. In technical terms, each Portfolio is an open-end, diversified management company. The Fund sells its shares only to the separate accounts of Participating Insurance Companies to fund certain variable life insurance policies and variable annuity contracts (Policies).

PERFORMANCE INFORMATION

               From time to time, advertisements and sales materials for one or more of the Portfolios may include total return information and/or performance rankings. Performance data will be accompanied by or used in calculating performance data for the respective separate accounts that invest in the Portfolio.

Total Return

               The following relates to each Portfolio. Total return is the overall change in the value of an investment over a given period of time. An average annual total return quotation is computed by finding the average annual compounded rates of return over the one-, five-, and ten-year periods that would equate the initial amount invested to the ending redeemable value. Total return is calculated by assuming an initial $1,000 investment. No sales charge is required to be paid by the Participating Insurance Companies for purchase of shares. All dividends and distributions are assumed to be paid in shares at their net asset value (NAV) as of the day the dividend or distribution is paid. The formula used to calculate the total return is:

P(1 + T)n =	ERV
Where : P =	$1,000 initial payment
T =	Average annual total return
n =	Number of years
ERV =	Ending redeemable value of the $1,000 investment for the periods shown.

               None of the Portfolios has been in operation prior to the date of this SAI; therefore, no average annual total return information is provided.

               Unaveraged or cumulative total return may also be quoted. Such total return data reflects the change in value of an investment over a stated period of time. Cumulative total returns will be calculated according to the formula indicated above but without averaging the rate for the number of years in the period. The Fund may also provide non-standardized performance information.

Performance Rankings and Other Information

               From time to time, advertisements and information furnished to present or prospective Policyholders may include a Portfolio's performance rankings as published by recognized independent mutual fund statistical services such as Lipper Analytical Services, Inc., or by publications of general interest such as The Wall Street Journal, Business Week, Barron's, Fortune, Morningstar, etc. A Portfolio's performance may also be compared to that of other selected mutual funds or recognized market indicators including the Standard & Poor's 500 Composite Stock Price Index and the Dow Jones Industrial Average. Performance information may be quoted numerically or presented in a table, graph or other illustration. In connection with a ranking, the Fund may provide additional information, such as the particular category to which it related, the number of funds in the category, the criteria upon which the ranking is based, and the effect of sales charges, fee waivers and/or expense reimbursements.

               Performance information for a Portfolio may be accompanied by information about market conditions and other factors that affected the Portfolio's performance for the period(s) shown.

               All performance information included in advertisements or sales material is historical in nature and is not intended to represent or guarantee future results. The value of a Portfolio's shares when redeemed may be more or less than their original cost.

INVESTMENT STRATEGIES, POLICIES AND PRACTICES

               This SAI supplements the information contained in the Portfolios' Prospectus and contains more detailed information about the investment strategies and policies the investment manager, Waddell & Reed Investment Management Company (WRIMCO), or a Portfolio's investment sub-advisor (Sub-Advisor), may employ, and the types of instruments in which a Portfolio may invest, in pursuit of the Portfolio's goal. A summary of the risks associated with these instrument types and investment practices is included as well.

               A Portfolio's Sub-Advisor might not buy all of these instruments or use all of these techniques, or use them to the full extent permitted by the Portfolio's investment policies and restrictions. A Sub-Advisor buys an instrument or uses a technique only if it believes that doing so will help the Portfolio achieve its goal. See Investment Restrictions and Limitations for a listing of the fundamental and non-fundamental, or operating, investment restrictions and policies of the Portfolios.

Securities - General

               The main types of securities in which the Portfolios may invest include common stock, preferred stock, debt securities and convertible securities. Although common stocks and other equity securities have a history of long-term growth in value, their prices tend to fluctuate in the short term, particularly those of smaller companies. The equity securities in which a Portfolio invests may include preferred stock that converts into common stock. Each Portfolio may invest in preferred stock rated in any rating category of the established rating services or, if unrated, judged by its Sub-Advisor to be of equivalent quality. Debt securities have varying levels of sensitivity to changes in interest rates and varying degrees of quality. As a general matter, however, when interest rates rise, the values of fixed-rate securities fall and, conversely, when interest rates fall, the values of fixed-rate debt securities ri se. Similarly, long-term bonds are generally more sensitive to interest rate changes than short-term bonds.

               Lower quality debt securities, or junk bonds, are considered to be speculative and involve greater risk of default or price changes due to changes in the issuer's creditworthiness. The market prices of these securities may fluctuate more than high-quality securities and may decline significantly in periods of general economic difficulty. The market for lower-rated debt securities may be thinner and less active than that for higher-rated debt securities, which can adversely affect the prices at which the former are sold. Adverse publicity and changing investor perceptions may decrease the values and liquidity of lower-rated debt securities, especially in a thinly traded market. Valuation becomes more difficult and judgment plays a greater role in valuing lower-rated debt securities than with respect to securities for which more external sources of quotations and last sale information are available. Since the risk of default is higher for lower-rated debt securities, the Sub-Advisor's research and credit analysis are an especially important part of managing securities of this type held by the Portfolio. The Sub-Advisor continuously monitors the issuers of lower-rated debt securities in the Portfolio in an attempt to determine if the issuers will have sufficient cash flow and profits to meet required principal and interest payments. The Fund may choose, at its expense or in conjunction with others, to pursue litigation or otherwise exercise its rights as a security holder to seek to protect the interests of security holders if it determines this to be in the best interest of the shareholders of the affected Portfolio(s).

               Subject to its investment restrictions, a Portfolio may invest in debt securities rated in any rating category of the established rating services, including securities rated in the lowest category (securities rated D by Standard & Poor's (S&P) and D by Moody's Corporation (Moody's)). Debt securities rated D by S&P or D by Moody's are in payment default or are regarded as having extremely poor prospects of ever attaining any real investment standing. Debt securities rated at least BBB by S&P or Baa by Moody's are considered to be investment grade debt securities; however, securities rated BBB or Baa may have speculative characteristics. However, International II Portfolio invests, for the most part, in investment-grade debt securities. As an operating policy, International II Portfolio will not invest more than 5% of its net assets in securities (including convertible securities) valid at least BBB by S&P or Baa by Moody's and may not invest in securities below those ratings. Each Portfolio will treat unrated securities judged by its Sub-Advisor to be of equivalent quality to a rated security as having that rating.

               While credit ratings are only one factor a Sub-Advisor relies on in evaluating high-yield debt securities, certain risks are associated with credit ratings. Credit ratings evaluate the safety of principal and interest payments, not market value risk. Credit ratings for individual securities may change from time to time, and a Portfolio may retain the Portfolio security whose rating has been changed.

               Micro Cap Growth Portfolio and Small Company Value Portfolio may purchase debt securities whose principal amount at maturity is dependent upon the performance of a specified equity security. The issuer of such debt securities, typically an investment banking firm, is unaffiliated with the issuer of the equity security to whose performance the debt security is linked. Equity-linked debt securities differ from ordinary debt securities in that the principal amount received at maturity is not fixed, but is based on the price of the linked equity security at the time the debt security matures. The performance of equity-linked debt securities depends primarily on the performance of the linked equity security and may also be influenced by interest rate changes. In addition, although the debt securities are typically adjusted for diluting events such as stock splits, stock dividends and certain other events affecting the market value of the linked equity security, the debt securities are not adjusted for subsequent issuances of the linked equity security for cash. Such an issuance could adversely affect the price of the debt security. In addition to the equity risk relating to the linked equity security, such debt securities are also subject to credit risk with regard to the issuer of the debt security. In general, however, such debt securities are less volatile than the equity securities to which they are linked.

               The Portfolios may invest in convertible securities. A convertible security is a bond, debenture, note, preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock of the same or different issuer within a particular period of time at a specified price or formula. Convertible securities generally have higher yields than common stocks of the same or similar issuers, but lower yields than comparable nonconvertible securities, are less subject to fluctuation in value than the underlying stock because they have fixed income characteristics, and provide the potential for capital appreciation if the market price of the underlying common stock increases.

               The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security's investment value.

               The Portfolios may also invest in a type of convertible preferred stock that pays a cumulative, fixed dividend that is senior to, and expected to be in excess of, the dividends paid on the common stock of the issuer. At the mandatory conversion date, the preferred stock is converted into not more than one share of the issuer's common stock at the call price that was established at the time the preferred stock was issued. If the price per share of the related common stock on the mandatory conversion date is less than the call price, the holder of the preferred stock will nonetheless receive only one share of common stock for each share of preferred stock (plus cash in the amount of any accrued but unpaid dividends). At any time prior to the mandatory conversion date, the issuer may redeem the preferred stock upon issuing to the holder a number of shares of common stock equal to the call price of the preferred stock in effect on the date of redemption divided by the market value of the common stock, with such market value typically determined one or two trading days prior to the date notice of redemption is given. The issuer must also pay the holder of the preferred stock cash in an amount equal to any accrued but unpaid dividends on the preferred stock. This convertible preferred stock is subject to the same market risk as the common stock of the issuer, except to the extent that such risk is mitigated by the higher dividend paid on the preferred stock. The opportunity for equity appreciation afforded by an investment in such convertible preferred stock, however, is limited, because in the event the market value of the issuer's common stock increases to or above the call price of the preferred stock, the issuer may (and would be expected to) call the preferred stock for redemption at the call price. This convertible preferred stock is also subject to credit risk with regard to the ability of the issuer to pay the dividend established upon issuance of the preferred stock. Generally, convertible preferred stock is less volatile than the related common stock of the issuer.

Specific Securities and Investment Practices

Bank Deposits

               Among the other debt securities in which the Portfolios may invest are deposits in banks (represented by certificates of deposit or other evidence of deposit issued by such banks) of varying maturities. The Federal Deposit Insurance Corporation insures the principal of certain such deposits, currently to the extent of $100,000 per bank. Bank deposits are not marketable, and a Portfolio may invest in them only within the 15% limit mentioned below under Investment Restrictions and Limitations regarding illiquid securities unless such obligations are payable at principal amount plus accrued interest on demand or within seven days after demand.

Borrowing

               Each Portfolio may borrow money only for temporary, emergency or extraordinary purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of the value of its total assets less liabilities (other than borrowings). See Investment Restrictions and Limitations.

Foreign Securities and Currencies

               Micro Cap Growth Portfolio and Small Company Value Portfolio may each invest up to 10% of its total assets in the securities of foreign issuers, including depository receipts. International II Portfolio may invest in the securities of foreign issuers, including depository receipts, without limitation. See Investment Restrictions and Limitations.

               In general, depository receipts are securities convertible into and evidencing ownership of securities of foreign corporate issuers, although depository receipts may not necessarily be denominated in the same currency as the securities into which they may be converted. American Depository Receipts (ADRs), in registered form, are dollar-denominated receipts typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities. International depository receipts and European depository receipts, in bearer form, are foreign receipts evidencing a similar arrangement and are designed for use by non-U.S. investors and traders in non-U.S. markets. Global depository receipts are more recently developed receipts designed to facilitate the trading of foreign issuers by U.S. and non-U.S. investors and traders.

               The Sub-Advisors believe that there are investment opportunities as well as risks in investing in foreign securities. Individual foreign economies may differ favorably or unfavorably from the U.S. economy or each other in such matters as gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Individual foreign companies may also differ favorably or unfavorably from domestic companies in the same industry. Foreign currencies may be stronger or weaker than the U.S. dollar or than each other. Thus, the value of securities denominated in or indexed to foreign currencies, and of dividends and interest from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. The Sub-Advisors each believe that a Portfolio's ability to invest assets abroad might enable it to take advantage of these differ ences and strengths where they are favorable.

               However, foreign securities and foreign currencies involve additional significant risks, apart from the risks inherent in U.S. investments. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices on some foreign markets can be highly volatile. Many foreign countries lack uniform accounting and disclosure standards comparable to those applicable to U.S. companies, and it may be more difficult to obtain reliable information regarding an issuer's financial conditions and operations. In addition, the costs of foreign investing, including withholding taxes, brokerage commissions and custodial costs, are generally higher than for U.S. investments.

               Foreign markets may offer less protection to investors than U.S. markets. Foreign issuers, brokers and securities markets may be subject to less government supervision. Foreign security trading practices, including those involving the release of assets in advance of payment, may involve increased risks in the event of a failed trade or the insolvency of a broker-dealer, and may involve substantial delays. It may also be difficult to enforce legal rights in foreign countries.

               Investing abroad also involves different political and economic risks. Foreign investments may be affected by actions of foreign governments adverse to the interests of U.S. investors, including the possibility of expropriation or nationalization of assets, confiscatory taxation, restrictions on U.S. investment or on the ability to repatriate assets or convert currency into U.S. dollars, or other government intervention. There may be greater possibility of default by foreign governments or government-sponsored enterprises. Investments in foreign countries also involve a risk of local political, economic, or social instability, military action or unrest, or adverse diplomatic developments. These considerations generally are intensified with respect to developing market countries (as described below). There is no assurance that a Sub-Advisor will be able to anticipate these potential events or counter their effect s.

               In particular, International II Portfolio may invest in securities issued by governments, governmental agencies and companies located in developing market countries. International II Portfolio's Sub-Advisor considers countries having developing markets to be all countries that are generally considered to be developing or emerging countries by the International Bank for Reconstruction and Development (more commonly referred to as the World Bank) and the International Finance Corporation, as well as countries that are classified by the United Nations or otherwise regarded by their authorities as developing. Currently, the countries not included in this category are Ireland, Spain, New Zealand, Australia, the United Kingdom, Italy, the Netherlands, Belgium, Austria, France, Canada, Germany, Denmark, the United States, Sweden, Finland, Norway, Japan and Switzerland. In addition, developing market securities means (i) securities of companies the principal securities trading market for which is a developing market country, as defined above, (ii) securities, traded in any market, of companies that derive 50% or more of their total revenue from either goods or services produced in such developing market countries or sales made in such developing market countries or (iii) securities of companies organized under the laws of, and with a principal office in, a developing market country. International II Portfolio will at all times, except during temporary defensive periods, maintain investments in at least three countries having developing markets.

               Certain foreign securities impose restrictions on transfer within the United States or to U.S. persons. Although securities subject to transfer restrictions may be marketable abroad, they may be less liquid than foreign securities of the same class that are not subject to such restrictions.

               Investments in obligations of domestic branches of foreign banks will not be considered to be foreign securities if WRIMCO has determined that the nature and extent of federal and state regulation and supervision of the branch in question is substantially equivalent to federal or state chartered domestic banks doing business in the same jurisdiction.

Illiquid Investments

               Illiquid investments are investments that cannot be sold or disposed of in the ordinary course of business within seven days at approximately the price at which they are valued. Investments currently considered to be illiquid include:

(1)	repurchase agreements not terminable within seven days;
(2)	securities for which market quotations are not readily available;
(3)	over-the-counter (OTC) options and their underlying collateral;
(4)	bank deposits, unless they are payable at principal amount plus accrued interest on demand or within seven days after demand;
(5)	restricted securities not determined to be liquid pursuant to guidelines established by or under the direction of the Fund's Board of Directors;
(6)	non-government stripped fixed-rate mortgage-backed securities;
(7)	securities involved in swap, cap, floor and collar transactions; and
(8)	direct debt instruments.

               The assets used as cover for OTC options written by a Portfolio will be considered illiquid unless the OTC options are sold to qualified dealers who agree that the Portfolio may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC option written subject to this procedure would be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option.

               If, through a change in values, net assets, or other circumstances, a Portfolio were in a position where more than 15% of its net assets were invested in illiquid securities, it would seek to take appropriate steps to protect liquidity.

Index Depositary Receipts

               Micro Cap Growth Portfolio and Small Company Value Portfolio each may invest up to 5% of its total assets in one or more types of depositary receipts (DRs) as a means of tracking the performance of a designated stock index while maintaining liquidity. Micro Cap Growth Portfolio and Small Company Value Portfolio each may invest in S&P 500 Depositary Receipts (SPDRs), which track the S&P 500 Index; S&P MidCap 400 Depositary Receipts (MidCap SPDRs), which track the S&P MidCap 400 Index; and "Dow Industrial Diamonds," which track the Dow Jones Industrial Average, or in other DRs which track indexes, provided that such investments are consistent with the Portfolio's investment objective as determined by its Sub-Advisor. Each of these securities represents shares of ownership of a long-term unit investment trust (a type of investment company) that holds all of the stock included in the relev ant underlying index.

               DRs carry a price that equals a specified fraction of the value of the designated index and are exchange traded. As with other equity transactions, brokers charge a commission in connection with the purchase of DRs. In addition, an asset management fee is charged in connection with the underlying unit investment trust (which is in addition to the asset management fee paid by a Portfolio).

               Trading costs for DRs are somewhat higher than those for stock index futures contracts, but, because DRs trade like other exchange-listed equities, they represent a quick and convenient method of maximizing the use of a Portfolio's assets to track the return of a particular stock index. DRs share in the same market risks as other equity investments.

Indexed Securities

               Each Portfolio may purchase securities whose prices are indexed to the prices of other securities, securities indexes, currencies, or other financial indicators, subject to the Portfolio's operating policy regarding derivative instruments. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or whose coupon rate is determined by reference to a specific instrument or statistic. The performance of indexed securities depends to a great extent on the performance of the security, currency or other instrument to which they are indexed and may also be influenced by interest rate changes in the United States and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security and their values may decline substantially if the issuer's creditworthiness deteriorates. Indexed securities may be more volatile than the underl ying investments.

               Recent issuers of indexed securities have included banks, corporations, and certain U.S. government agencies. The Portfolio's Sub-Advisor will use its judgment in determining whether indexed securities should be treated as short-term instruments, bonds, stocks, depending on the individual characteristics of the securities. Certain indexed securities that are not traded on an established market may be deemed illiquid.

Investment Company Securities

               Each Portfolio may purchase shares of another investment company subject to the restrictions and limitations of the 1940 Act. As a shareholder in an investment company, a Portfolio would bear its pro rata share of that investment company's expenses, which could result in duplication of certain fees, including management and administrative fees.

               Closed-End Investment Companies. Some countries, such as South Korea, Chile and India, have authorized the formation of closed-end investment companies to facilitate indirect foreign investment in their capital markets. In accordance with the 1940 Act, International II Portfolio may invest up to 10% of its total assets in securities of closed-end investment companies. This restriction on investments in securities of closed-end investment companies may limit opportunities for International II Portfolio to invest indirectly in certain developing markets. Shares of certain closed-end investment companies may at times be acquired only at market prices representing premiums to their net asset values.

Lending Securities

               Securities loans may be made on a short-term or long-term basis for the purpose of increasing a Portfolio's income. If a Portfolio lends securities, the borrower pays the Portfolio an amount equal to the dividends or interest on the securities that the Portfolio would have received if it had not lent the securities. The Portfolio also receives additional compensation. Under the Portfolios' current securities lending procedures, the Portfolios may lend securities only to broker-dealers and financial institutions deemed creditworthy by WRIMCO.

               Any securities loans that a Portfolio makes must be collateralized in accordance with applicable regulatory requirements (Guidelines). At the time of each of its loan, a Portfolio must receive collateral equal to no less than 100% of the market value of the securities lent. Under the present Guidelines, the collateral must consist of cash or U.S. Government securities or bank letters of credit, at least equal in value to the market value of the securities lent on each day that the loan is outstanding. If the market value of the lent securities exceeds the value of the collateral, the borrower must add more collateral so that it at least equals the market value of the securities lent. If the market value of the securities decreases, the borrower is entitled to return of the excess collateral.

               There are two methods of receiving compensation for making loans. The first is to receive a negotiated loan fee from the borrower. This method is available for all three types of collateral. The second method, which is not available when letters of credit are used as collateral, is for the Portfolio to receive interest on the investment of the cash collateral or to receive interest on the U.S. Government securities used as collateral. Part of the interest received in either case may be shared with the borrower.

               The letters of credit that a Portfolio may accept as collateral are agreements by banks (other than the borrowers of the Portfolio's securities), entered into at the request of the borrower and for its account and risk, under which the banks are obligated to pay to the Portfolio, while the letter is in effect, amounts demanded by the Portfolio if the demand meets the terms of the letter. The Portfolio's right to make this demand secures the borrower's obligations to it. The terms of any such letters and the creditworthiness of the banks providing them (which might include the Portfolio's custodian bank) must be satisfactory to WRIMCO.

               The Portfolios will make loans only under rules of the New York Stock Exchange (NYSE), which presently require the borrower to give the securities back to the Portfolio within five business days after the Portfolio gives notice to do so. If a Portfolio loses its voting rights with respect to securities on loan, it will have the securities returned to it in time to vote them if a material event affecting the investment is to be voted on. A Portfolio may pay reasonable finder's, administrative and custodian fees in connection with loans of securities.

               Some, but not all, of these rules are necessary to meet requirements of certain laws relating to securities loans. These rules will not be changed unless the change is permitted under these requirements. These requirements do not cover the present rules, which may be changed without shareholder vote, as to: (1) whom securities may be lent; (2) the investment of cash collateral; or (3) voting rights.

               There may be risks of delay in receiving additional collateral from the borrower if the market value of the securities on loan increases, as well as risks of delay in recovering the securities on loan or even loss of rights in the collateral should the borrower fail financially.

Options, Futures and Other Strategies

               General. A Portfolio’s Sub-Advisor may use certain options, futures contracts (sometimes referred to as futures), options on futures contracts, forward currency contracts, swaps, caps, floors, collars, indexed securities and other derivative instruments (collectively, Financial Instruments) to attempt to enhance income or yield or to attempt to hedge the Portfolio’s investments. The strategies described below may be used in an attempt to manage the risks of a Portfolio’s investments that can affect fluctuation in its NAV.

               Generally, a Portfolio may purchase and sell any type of Financial Instrument. However, as an operating policy, a Portfolio will only purchase or sell a particular Financial Instrument if the Portfolio is authorized to invest in the type of asset by which the return on, or value of, the Financial Instrument is primarily measured. Since each Portfolio is authorized to invest in foreign securities, each Portfolio may purchase and sell foreign currency derivatives.

               Hedging strategies can be broadly categorized as short hedges and long hedges. A short hedge is a purchase or sale of a Financial Instrument intended partially or fully to offset potential declines in the value of one or more investments held in a Portfolio's portfolio. Thus, in a short hedge, the Portfolio takes a position in a Financial Instrument whose price is expected to move in the opposite direction of the price of the investment being hedged.

               Conversely, a long hedge is a purchase or sale of a Financial Instrument intended partially or fully to offset potential increases in the acquisition cost of one or more investments that the Portfolio intends to acquire. Thus, in a long hedge, the Portfolio takes a position in a Financial Instrument whose price is expected to move in the same direction as the price of the prospective investment being hedged. A long hedge is sometimes referred to as an anticipatory hedge. In an anticipatory hedge transaction, the Portfolio does not own a corresponding security and, therefore, the transaction does not relate to a security the Portfolio owns. Rather, it relates to a security that the Portfolio intends to acquire. If the Portfolio does not complete the hedge by purchasing the security it anticipated purchasing, the effect on the Portfolio's holdings is the same as if the transaction were entered into for speculative purposes.

               Financial Instruments on securities generally are used to attempt to hedge against price movements in one or more particular securities positions that a Portfolio owns or intends to acquire. Financial Instruments on indexes, in contrast, generally are used to attempt to hedge against price movements in market sectors in which a Portfolio has invested or expects to invest. Financial Instruments on debt securities may be used to hedge either individual securities or broad debt market sectors.

               The use of Financial Instruments is subject to applicable regulations of the SEC, the several exchanges upon which they are traded and the Commodity Futures Trading Commission (CFTC). In addition, a Portfolio's ability to use Financial Instruments is limited by tax considerations. See Taxes.

               In addition to the instruments, strategies and risks described below, the Sub-Advisors expect to discover additional opportunities in connection with Financial Instruments and other similar or related techniques. These new opportunities may become available as the particular Sub-Advisor develops new techniques, as regulatory authorities broaden the range of permitted transactions and as new Financial Instruments or other techniques are developed. The Sub-Advisor may utilize these opportunities to the extent that they are consistent with the applicable Portfolio's goal and permitted by that Portfolio's investment limitations and applicable regulatory authorities. A Portfolio might not use any of these strategies, and there can be no assurance that any strategy used will succeed. The Portfolios' Prospectus and/or SAI will be supplemented to the extent that new products or techniques involve materially different r isks than those described below or in the Prospectus.

               Special Risks. The use of Financial Instruments involves special considerations and risks, certain of which are described below. In general, these techniques may increase the volatility of a Portfolio and may involve a small investment of cash relative to the magnitude of the risk assumed. Risks pertaining to particular Financial Instruments are described in the sections that follow:

               (1)               Successful use of most Financial Instruments depends upon the applicable Sub-Advisor's ability to predict movements of the overall securities, currency and interest rate markets, which requires different skills than predicting changes in the prices of individual securities. There can be no assurance that any particular strategy will succeed, and use of Financial Instruments could result in a loss, regardless of whether the intent was to reduce risk or increase return.

               (2)               There might be imperfect correlation, or even no correlation, between price movements of a Financial Instrument and price movements of the investments being hedged. For example, if the value of a Financial Instrument used in a short hedge increased by less than the decline in value of the hedged investment, the hedge would not be fully successful. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as speculation or other pressures on the markets in which Financial Instruments are traded. The effectiveness of hedges using Financial Instruments on indexes will depend on the degree of correlation between price movements in the index and price movements in the securities being hedged.

               Because there are a limited number of types of exchange-traded options and futures contracts, it is likely that the standardized contracts available will not match a Portfolio's current or anticipated investments exactly. A Portfolio may invest in options and futures contracts based on securities with different issuers, maturities, or other characteristics from the securities in which it typically invests, which involves a risk that the options or futures position will not track the performance of the Portfolio's other investments.

               Options and futures prices can also diverge from the prices of their underlying instruments, even if the underlying instruments match a Portfolio's investments well. Options and futures prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument, and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect correlation may also result from differing levels of demand in the options and futures markets and the securities markets, from structural differences in how options and futures and securities are traded, or from imposition of daily price fluctuation limits or trading halts. A Portfolio may purchase or sell options and futures contracts with a greater or lesser value than the securities it wishes to hedge or intends to purchase in order to attempt to compensate for differences in volatility between the contract and the securities, although this may not be successful in all cases. If price changes in a Portfolio's options or futures positions are poorly correlated with its other investments, the positions may fail to produce anticipated gains or result in losses that are not offset by gains in other investments.

               (3)               If successful, the above-discussed strategies can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements. However, such strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements. For example, if a Portfolio entered into a short hedge because its Sub-Advisor projected a decline in the price of a security in the Portfolio's holdings, and the price of that security increased instead, the gain from that increase might be wholly or partially offset by a decline in the price of the Financial Instrument. Moreover, if the price of the Financial Instrument declined by more than the increase in the price of the security, the Portfolio could suffer a loss. In either such case, the Portfolio would have been in a better position had it not attempted to hedge at all.

               (4)               As described below, a Portfolio might be required to maintain assets as cover, maintain segregated accounts or make margin payments when it takes positions in Financial Instruments involving obligations to third parties (i.e., Financial Instruments other than purchased options). If the Portfolio were unable to close out its positions in such Financial Instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. These requirements might impair the Portfolio's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Portfolio sell a portfolio security at a disadvantageous time.

               (5)               A Portfolio's ability to close out a position in a Financial Instrument prior to expiration or maturity depends on the existence of a liquid secondary market or, in the absence of such a market, the ability and willingness of the other party to the transaction (counterparty) to enter into a transaction closing out the position. Therefore, there is no assurance that any position can be closed out at a time and price that is favorable to the Portfolio.

               Cover. Transactions using Financial Instruments, other than purchased options, expose a Portfolio to an obligation to another party. Each Portfolio will comply with SEC guidelines regarding cover for these instruments and will, if the guidelines so require, set aside cash or liquid assets in an account with its custodian in the prescribed amount as determined daily. A Portfolio will not enter into any such transactions unless it owns either (1) an offsetting (covered) position in securities, currencies or other options, futures contracts or forward contracts, or (2) cash and liquid assets with a value, marked-to-market daily, sufficient to cover its potential obligations to the extent not covered as provided in (1) above.

               Assets used as cover or held in an account cannot be sold while the position in the corresponding Financial Instrument is open, unless they are replaced with other appropriate assets. As a result, the commitment of a large portion of a Portfolio's assets to cover or to segregated accounts could impede portfolio management or the Portfolio's ability to meet redemption requests or other current obligations.

               Options. A call option gives the purchaser the right to buy, and obligates the writer to sell, the underlying investment at the agreed-upon price during the option period. A put option gives the purchaser the right to sell, and obligates the writer to buy, the underlying investment at the agreed-upon price during the option period. Purchasers of options pay an amount, known as a premium, to the option writer in exchange for the right under the option contract.

               The purchase of call options can serve as a long hedge, and the purchase of put options can serve as a short hedge. Writing put or call options can enable a Portfolio to enhance income or yield by reason of the premiums paid by the purchasers of such options. However, if the market price of the security underlying a put option declines to less than the exercise price of the option, minus the premium received, the Portfolio would expect to suffer a loss.

               Writing call options can serve as a limited short hedge, because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security or currency appreciates to a price higher than the exercise price of the call option, it can be expected that the option will be exercised and the Portfolio will be obligated to sell the security or currency at less than its market value. If the call option is an OTC option, the securities or other assets used as cover would be considered illiquid to the extent described under Illiquid Investments.

               Writing put options can serve as a limited long hedge because increases in the value of the hedged investment would be offset to the extent of the premium received for writing the option. However, if the security or currency depreciates to a price lower than the exercise price of the put option, it can be expected that the put option will be exercised and the Portfolio will be obligated to purchase the security or currency at more than its market value. If the put option is an OTC option, the securities or other assets used as cover would be considered illiquid to the extent described under Illiquid Investments.

               The value of an option position will reflect, among other things, the current market value of the underlying investment, the time remaining until expiration, the relationship of the exercise price to the market price of the underlying investment, the historical price volatility of the underlying investment and general market conditions. Options that expire unexercised have no value.

               A Portfolio may effectively terminate its right or obligation under an option by entering into a closing transaction. For example, the Portfolio may terminate its obligation under a call or put option that it had written by purchasing an identical call or put option; this is known as a closing purchase transaction. Conversely, the Portfolio may terminate a position in a put or call option it had purchased by writing an identical put or call option; this is known as a closing sale transaction. Closing transactions permit the Portfolio to realize profits or limit losses on an option position prior to its exercise or expiration.

               A type of put that a Portfolio may purchase is an optional delivery standby commitment, which is entered into by parties selling debt securities to the Portfolio. An optional delivery standby commitment gives the Portfolio the right to sell the security back to the seller on specified terms. This right is provided as an inducement to purchase the security.

               Risks of Options on Securities. Options offer large amounts of leverage, which will result in a Portfolio’s NAV being more sensitive to changes in the value of the related instrument. Each Portfolio may purchase or write both exchange-traded and OTC options. Exchange-traded options in the United States are issued by a clearing organization affiliated with the exchange on which the option is listed that, in effect, guarantees completion of every exchange-traded option transaction. In contrast, OTC options are contracts between a Portfolio and its counterparty (usually a securities dealer or a bank) with no clearing organization guarantee. Thus, when a Portfolio purchases an OTC option, it relies on the counterparty from whom it purchased the option to make or take delivery of the underlying investment upon exercise of the option. Failure by the counterparty to do so would result in the loss of any premiu m paid by the Portfolio as well as the loss of any expected benefit of the transaction.

               A Portfolio's ability to establish and close out positions in exchange-listed options depends on the existence of a liquid market. However, there can be no assurance that such a market will exist at any particular time. Closing transactions can be made for OTC options only by negotiating directly with the counterparty, or by a transaction in the secondary market if any such market exists. There can be no assurance that a Portfolio will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the counterparty, the Portfolio might be unable to close out an OTC option position at any time prior to its expiration.

               If a Portfolio were unable to effect a closing transaction for an option it had purchased, it would have to exercise the option to realize any profit. The inability to enter into a closing purchase transaction for a covered call option written by a Portfolio could cause material losses because the Portfolio would be unable to sell the investment used as cover for the written option until the option expires or is exercised.

               Options on Indexes. Puts and calls on indexes are similar to puts and calls on securities or futures contracts except that all settlements are in cash and gain or loss depends on changes in the index in question rather than on price movements in individual securities or futures contracts. When a Portfolio writes a call on an index, it receives a premium and agrees that, prior to the expiration date, the purchaser of the call, upon exercise of the call, will receive from the Portfolio an amount of cash if the closing level of the index upon which the call is based is greater than the exercise price of the call. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call times a specified multiple (multiplier), which determines the total dollar value for each point of such difference. When a Portfolio buys a call on an index, it pays a premium and has the same rights as to such call as are indicated above. When a Portfolio buys a put on an index, it pays a premium and has the right, prior to the expiration date, to require the seller of the put, upon the Portfolio’s exercise of the put, to deliver to the Portfolio an amount of cash if the closing level of the index upon which the put is based is less than the exercise price of the put, which amount of cash is determined by the multiplier, as described above for calls. When a Portfolio writes a put on an index, it receives a premium and the purchaser of the put has the right, prior to the expiration date, to require the Portfolio to deliver to it an amount of cash equal to the difference between the closing level of the index and the exercise price times the multiplier if the closing level is less than the exercise price.

               Risks of Options on Indexes. The risks of investment in options on indexes may be greater than options on securities. Because index options are settled in cash, when a Portfolio writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Portfolio can offset some of the risk of writing a call index option by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, a Portfolio cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will vary from the value of the index.

               Even if a Portfolio could assemble a portfolio that exactly reproduced the composition of the underlying index, it still would not be fully covered from a risk standpoint because of the timing risk inherent in writing index options. When an index option is exercised, the amount of cash that the holder is entitled to receive is determined by the difference between the exercise price and the closing index level on the date when the option is exercised. As with other kinds of options, a Portfolio as the call writer will not learn that the portfolio has been assigned until the next business day at the earliest. The time lag between exercise and notice of assignment poses no risk for the writer of a covered call on a specific underlying security, such as a common stock, because there the writer's obligation is to deliver the underlying security, not to pay its value as of a fixed time in the past. So long as the wri ter already owns the underlying security, it can satisfy its settlement obligations by simply delivering it, and the risk that its value may have declined since the exercise date is borne by the exercising holder. In contrast, even if the writer of an index call holds securities that exactly match the composition of the underlying index, it will not be able to satisfy its assignment obligations by delivering those securities against payment of the exercise price. Instead, it will be required to pay cash in an amount based on the closing index value on the exercise date. By the time it learns that it has been assigned, the index may have declined, with a corresponding decline in the value of its portfolio. This timing risk is an inherent limitation on the ability of index call writers to cover their risk exposure by holding securities positions.

               If a Portfolio has purchased an index option and exercises it before the closing index value for that day is available, it runs the risk that the level of the underlying index may subsequently change. If such a change causes the exercised option to fall out-of-the-money, the Portfolio will be required to pay the difference between the closing index value and the exercise price of the option (times the applicable multiplier) to the assigned writer.

               OTC Options. Unlike exchange-traded options, which are standardized with respect to the underlying instrument, expiration date, contract size and strike price, the terms of OTC options (options not traded on an exchange) generally are established through negotiation with the other party to the option contract. While this type of arrangement allows a Portfolio great flexibility to tailor the option to its needs, OTC options generally involve greater risk than exchange-traded options, which are guaranteed by the clearing organization of the exchanges where they are traded.

               Generally, OTC foreign currency options used by the Portfolios are European-style options. This means that the option is only exercisable immediately prior to its expiration. This is in contrast to American-style options, which are exercisable at any time prior to the expiration date of the option.

               Futures Contracts and Options on Futures Contracts. The purchase of futures contracts or call options on futures contracts can serve as a long hedge, and the sale of futures contracts or the purchase of put options on a futures contract can serve as a short hedge. Writing call options on futures contracts can serve as a limited short hedge, using a strategy similar to that used for writing call options on securities or indexes. Similarly, writing put options on futures contracts can serve as a limited long hedge. Futures contracts and options on futures contracts can also be purchased and sold to attempt to enhance income or yield.

               In addition, futures contract strategies can be used to manage the average duration of a Portfolio's fixed-income portfolio. If a Portfolio's Sub-Advisor wishes to shorten the average duration of the Portfolio's fixed-income portfolio, the Portfolio may sell a debt futures contract or a call option thereon, or purchase a put option on that futures contract. If the Sub-Advisor wishes to lengthen the average duration of the Portfolio's fixed-income portfolio, the Portfolio may buy a debt futures contract or a call option thereon, or sell a put option thereon.

               No price is paid upon entering into a futures contract. Instead, at the inception of a futures contract the Portfolio is required to deposit initial margin in an amount generally equal to 10% or less of the contract value. Margin must also be deposited when writing a call or put option on a futures contract, in accordance with applicable exchange rules. Unlike margin in securities transactions, initial margin on futures contracts does not represent a borrowing, but rather is in the nature of a performance bond or good-faith deposit that is returned to the Portfolio at the termination of the transaction if all contractual obligations have been satisfied. Under certain circumstances, such as periods of high volatility, the Portfolio may be required by an exchange to increase the level of its initial margin payment, and initial margin requirements might be increased generally in the future by regulatory action.

               Subsequent variation margin payments are made to and from the futures broker daily as the value of the futures position varies, a process known as marking-to-market. Variation margin does not involve borrowing, but rather represents a daily settlement of the Portfolio's obligations to or from a futures broker. When a Portfolio purchases an option on a futures contract, the premium paid plus transaction costs is all that is at risk. In contrast, when a Portfolio purchases or sells a futures contract or writes a call or put option thereon, it is subject to daily variation margin calls that could be substantial in the event of adverse price movements. If the Portfolio has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a time when such sales are disadvantageous.

               Purchasers and sellers of futures contracts and options on futures contracts can enter into offsetting closing transactions, similar to closing transactions on options, by selling or purchasing, respectively, an instrument identical to the instrument purchased or sold. Positions in futures contracts and options on futures contracts may be closed only on an exchange or board of trade that provides a secondary market. However, there can be no assurance that a liquid secondary market will exist for a particular contract at a particular time. In such event, it may not be possible to close a futures contract or options position.

               Under certain circumstances, futures contracts exchanges may establish daily limits on the amount that the price of a futures contract or an option on a futures contract can vary from the previous day's settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions.

               If a Portfolio were unable to liquidate a futures contract or an option on a futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Portfolio would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Portfolio would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the futures contract or option or to maintain cash or liquid assets in an account.

               Risks of Futures Contracts and Options Thereon. The ordinary spreads between prices in the cash and futures markets (including the options on futures market), due to differences in the natures of those markets, are subject to the following factors which may create distortions. First, all participants in the futures market are subject to margin deposit and maintenance requirements. Rather than meeting additional margin deposit requirements, investors may close futures contracts through offsetting transactions, which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced, thus producing distortion. Third, from the point of view of speculato rs, the deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may cause temporary price distortions. Due to the possibility of distortion, a correct forecast of general interest rate, currency exchange rate or stock market trends by the Portfolio’s Sub-Advisor may still not result in a successful transaction. The Sub-Advisor may be incorrect in its expectations as to the extent of various interest rate, currency exchange rate or stock market movements or the time span within which the movements take place.

               Index Futures. The risk of imperfect correlation between movements in the price of an index futures contract and movements in the price of the securities that are the subject of the hedge increases as the composition of a Portfolio’s holdings diverges from the securities included in the applicable index. The price of the index futures contract may move more than or less than the price of the securities being hedged. If the price of the index futures contract moves less than the price of the securities that are the subject of the hedge, the hedge will not be fully effective but, if the price of the securities being hedged has moved in an unfavorable direction, the Portfolio would be in a better position than if it had not hedged at all. If the price of the securities being hedged has moved in a favorable direction, this advantage will be partially offset by the futures contract. If the price of the futur es contract moves more than the price of the securities, the Portfolio will experience either a loss or a gain on the futures contract that will not be completely offset by movements in the price of the securities that are the subject of the hedge. To compensate for the imperfect correlation of movements in the price of the securities being hedged and movements in the price of the index futures contract, a Portfolio may buy or sell index futures contracts in a greater dollar amount than the dollar amount of the securities being hedged if the historical volatility of the prices of the securities being hedged is more than the historical volatility of the prices of the securities included in the index. It is also possible that, where a Portfolio has sold index futures contracts to hedge against decline in the market, the market may advance and the value of the securities held in the portfolio may decline. If this occurred, the Portfolio would lose money on the futures contract and also experience a decline in v alue of its portfolio securities. However, while this could occur for a very brief period or to a very small degree, over time the value of a diversified portfolio of securities will tend to move in the same direction as the market indexes on which the futures contracts are based.

               Where index futures contracts are purchased to hedge against a possible increase in the price of securities before a Portfolio is able to invest in them in an orderly fashion, it is possible that the market may decline instead. If the Portfolio then concludes not to invest in them at that time because of concern as to possible further market decline or for other reasons, it will realize a loss on the futures contract that is not offset by a reduction in the price of the securities it had anticipated purchasing.

               To the extent that a Portfolio enters into futures contracts, options on futures contracts or options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are in-the-money at the time of purchase) will not exceed 5% of the liquidation value of the Portfolio's holdings, after taking into account unrealized profits and unrealized losses on any contracts the Portfolio has entered into. (In general, a call option on a futures contract is in-the-money if the value of the underlying futures contract exceeds the strike, i.e., exercise, price of the call; a put option on a futures contract is in-the-money if the value of the underlying futures contract is exceeded by the strike price of the put.) This policy doe s not limit to 5% the percentage of the Portfolio's total assets that are at risk in futures contracts, options on futures contracts and currency options.

               Foreign Currency Hedging Strategies -- Special Considerations. International II Portfolio may use options and futures contracts on foreign currencies (including the euro), as described above, and forward foreign currency contracts (forward currency contracts), as described below, to attempt to hedge against movements in the values of the foreign currencies in which the Portfolio’s securities are denominated or to attempt to enhance income or yield. Currency hedges can protect against price movements in a security that the Portfolio owns or intends to acquire that are attributable to changes in the value of the currency in which it is denominated. Such hedges do not, however, protect against price movements in the securities that are attributable to other causes.

               International II Portfolio might seek to hedge against changes in the value of a particular currency when no Financial Instruments on that currency are available or such Financial Instruments are more expensive than certain other Financial Instruments. In such cases, the Portfolio may seek to hedge against price movements in that currency by entering into transactions using Financial Instruments on another currency or a basket of currencies, the values of which its Sub-Advisor believes will have a high degree of positive correlation to the value of the currency being hedged. The risk that movements in the price of the Financial Instrument will not correlate perfectly with movements in the price of the currency subject to the hedging transaction is magnified when this strategy is used.

               The value of Financial Instruments on foreign currencies depends on the value of the underlying currency relative to the U.S. dollar. Because foreign currency transactions occurring in the interbank market might involve substantially larger amounts than those involved in the use of such Financial Instruments, International Stock Value Portfolio could be disadvantaged by having to deal in the odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign currencies at prices that are less favorable than for round lots.

               There is no systematic reporting of last sale information for foreign currencies or any regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Quotation information generally is representative of very large transactions in the interbank market and thus might not reflect odd-lot transactions where rates might be less favorable. The interbank market in foreign currencies is a global, round-the-clock market. To the extent the U.S. options or futures markets are closed while the markets for the underlying currencies remain open, significant price and rate movements might take place in the underlying markets that cannot be reflected in the markets for the Financial Instruments until they reopen.

               Settlement of transactions involving foreign currencies might be required to take place within the country issuing the underlying currency. Thus, the Portfolio might be required to accept or make delivery of the underlying foreign currency in accordance with any U.S. or foreign regulations regarding the maintenance of foreign banking arrangements by U.S. residents and might be required to pay any fees, taxes and charges associated with such delivery assessed in the issuing country.

               Forward Currency Contracts. International II Portfolio may enter into forward currency contracts to purchase or sell foreign currencies for a fixed amount of U.S. dollars or another foreign currency. A forward currency contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days (term) from the date of the forward currency contract agreed upon by the parties, at a price set at the time of the forward currency contract. These forward currency contracts are traded directly between currency traders (usually large commercial banks) and their customers.

               Such transactions may serve as long hedges; for example, International II Portfolio may purchase a forward currency contract to lock in the U.S. dollar price of a security denominated in a foreign currency that the Portfolio intends to acquire. Forward currency contract transactions may also serve as short hedges; for example, the Portfolio may sell a forward currency contract to lock in the U.S. dollar equivalent of the proceeds from the anticipated sale of a security or a dividend or interest payment denominated in a foreign currency.

               International II Portfolio may also use forward currency contracts to hedge against a decline in the value of existing investments denominated in foreign currency. For example, if the Portfolio owned securities denominated in euros, it could enter into a forward currency contract to sell euros in return for U.S. dollars to hedge against possible declines in the euro's value. Such a hedge, sometimes referred to as a position hedge, would tend to offset both positive and negative currency fluctuations, but would not offset changes in security values caused by other factors. The Portfolio could also hedge the position by selling another currency expected to perform similarly to the euro. This type of hedge, sometimes referred to as a proxy hedge, could offer advantages in terms of cost, yield or efficiency, but generally would not hedge currency exposure as effectively as a simple hedge into U.S. dollars. Proxy hedg es may result in losses if the currency used to hedge does not perform similarly to the currency in which the hedged securities are denominated.

               International II Portfolio also may use forward currency contracts to attempt to enhance income or yield. The Portfolio could use forward currency contracts to increase its exposure to foreign currencies that its Sub-Adviser believes might rise in value relative to the U.S. dollar, or shift its exposure to foreign currency fluctuations from one country to another. For example, if the Portfolio owned securities denominated in a foreign currency and its Sub-Adviser believed that currency would decline relative to another currency, it might enter into a forward currency contract to sell an appropriate amount of the first foreign currency, with payment to be made in the second foreign currency.

               The cost to International II Portfolio of engaging in forward currency contracts varies with factors such as the currency involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. When the Portfolio enters into a forward currency contract, it relies on the counterparty to make or take delivery of the underlying currency at the maturity of the contract. Failure by the counterparty to do so would result in the loss of any expected benefit of the transaction.

               As is the case with futures contracts, purchasers and sellers of forward currency contracts can enter into offsetting closing transactions by selling or purchasing, respectively, an instrument identical to the instrument purchased or sold. Secondary markets generally do not exist for forward currency contracts, with the result that closing transactions generally can be made for forward currency contracts only by negotiating directly with the counterparty. Thus, there can be no assurance that the Portfolio will in fact be able to close out a forward currency contract at a favorable price prior to maturity. In addition, in the event of insolvency of the counterparty, the Portfolio might be unable to close out a forward currency contract at any time prior to maturity. In either event, the Portfolio would continue to be subject to market risk with respect to the position, and would continue to be required to maintain a position in securities denominated in the foreign currency or to maintain cash or liquid assets in an account.

               The precise matching of forward currency contract amounts and the value of the securities involved generally will not be possible because the value of such securities, measured in the foreign currency, will change after the forward currency contract has been established. Thus, the Portfolio might need to purchase or sell foreign currencies in the spot (cash) market to the extent such foreign currencies are not covered by forward currency contracts. The projection of short-term currency market movements is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain.

               Normally, consideration of the prospect for currency parities will be incorporated into the longer term investment decisions made with regard to overall diversification strategies. However, International II Portfolio's Sub-Advisor believes that it is important to have the flexibility to enter into such forward currency contracts when it determines that the best interests of the Portfolio will be served.

               Successful use of forward currency contracts depends on the skill of International II Portfolio's Sub-Advisor in analyzing and predicting currency values. Forward currency contracts may substantially change the Portfolio's exposure to changes in currency exchange rates and could result in losses to the Portfolio if currencies do not perform as the Sub-Advisor anticipates. There is no assurance that the Sub-Advisor's use of forward currency contracts will be advantageous to the Portfolio or that the Sub-Advisor will hedge at an appropriate time.

               Combined Positions. A Portfolio may purchase and write options in combination with each other, or in combination with futures contracts or forward contracts, to adjust the risk and return characteristics of its overall position. For example, a Portfolio may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.

               Turnover. A Portfolio’s options and futures contracts activities may affect its turnover rate and brokerage commission payments. The exercise of calls or puts written by a Portfolio, and the sale or purchase of futures contracts, may cause it to sell or purchase related investments, thus increasing its turnover rate. Once a Portfolio has received an exercise notice on an option it has written, it cannot effect a closing transaction in order to terminate its obligation under the option and must deliver or receive the underlying securities at the exercise price. The exercise of puts purchased by a Portfolio may also cause the sale of related investments, also increasing turnover; although such exercise is within the Portfolio’s control, holding a protective put might cause it to sell the related investments for reasons that would not exist in the absence of the put. A Portfolio will pay a brokerage c ommission each time it buys or sells a put or call or purchases or sells a futures contract. Such commissions may be higher than those that would apply to direct purchases or sales.

Repurchase Agreements

               Each Portfolio may purchase securities subject to repurchase agreements, subject to its limitation on investment in illiquid investments. See Investment Restrictions and Limitations. A repurchase agreement is an instrument under which a Portfolio purchases a security and the seller (normally a commercial bank or broker-dealer) agrees, at the time of purchase, that it will repurchase the security at a specified time and price. The amount by which the resale price is greater than the purchase price reflects an agreed-upon market interest rate effective for the period of the agreement. The return on the securities subject to the repurchase agreement may be more or less than the return on the repurchase agreement.

               The majority of repurchase agreements in which a Portfolio will engage are overnight transactions, and the delivery pursuant to the resale typically will occur within one to five days of the purchase. The primary risk is that a Portfolio may suffer a loss if the seller fails to pay the agreed-upon amount on the delivery date and that amount is greater than the resale price of the underlying securities and other collateral held by the Portfolio. In the event of bankruptcy or other default by the seller, there may be possible delays and expenses in liquidating the underlying securities or other collateral, decline in their value or loss of interest. The return on such collateral may be more or less than that from the repurchase agreement. A Portfolio's repurchase agreements will be structured so as to fully collateralize the loans. In other words, the value of the underlying securities, which will be held by the P ortfolio's custodian bank or by a third party that qualifies as a custodian under section 17(f) of the Investment Company Act of 1940, as amended (1940 Act), is and, during the entire term of the agreement, will remain at least equal to the value of the loan, including the accrued interest earned thereon. Repurchase agreements are entered into only with those entities approved by WRIMCO.

Restricted Securities

               Each Portfolio may invest in restricted securities. Restricted securities are securities that are subject to legal or contractual restrictions on resale. However, restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act of 1933, as amended, or in a registered public offering. Where registration is required, a Portfolio may be obligated to pay all or part of the registration expense and a considerable period may elapse between the time it decides to seek registration and the time the Portfolio may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, a Portfolio might obtain a less favorable price than prevailed when it decided to seek registration of the security.

               There are risks associated with investments in restricted securities in that there can be no assurance of a ready market for resale. Also, the contractual restrictions on resale might prevent a Portfolio from reselling the securities at a time when such sale would be desirable. Restricted securities that are traded in foreign markets are often subject to restrictions that prohibit resale to U.S. persons or entities or permit sales only to foreign broker-dealers who agree to limit their resale to such persons or entities. The buyer of such securities must enter into an agreement that, usually for a limited period of time, it will resell such securities subject to such restrictions. Restricted securities in which a Portfolio seeks to invest need not be listed or admitted to trading on a foreign or domestic exchange and may be less liquid than listed securities. Certain restricted securities, for example Rule 144A securities, may be determined to be liquid in accordance with guidelines adopted by the Board of Directors. See Illiquid Investments.

Short Sales Against The Box

               Each Portfolio may sell securities "short against the box;" provided, however, that the Portfolio's aggregate short sales prices may not, at the time of any short sale, exceed 10% of its total assets. Whereas a short sale is the sale of a security a Portfolio does not own, a short sale is "against the box" if, at all times during which the short position is open, the Portfolio owns at least an equal amount of the securities sold short or other securities convertible into or exchangeable without further consideration for securities of the same issue as the securities sold short. Short sales against the box are typically used by sophisticated investors to defer recognition of capital gains or losses. None of the Portfolios has any present intention to sell securities short in this fashion.

U.S. Government Securities

               Securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities (U.S. Government securities) are high quality debt instruments issued or guaranteed as to principal or interest by the U.S. Treasury or an agency or instrumentality of the U.S. Government. These securities include Treasury Bills (which mature within one year of the date they are issued), Treasury Notes (which have maturities of one to ten years) and Treasury Bonds (which generally have maturities of more than ten years). All such Treasury securities are backed by the full faith and credit of the United States.

               U.S. Government agencies and instrumentalities that issue or guarantee securities include, but are not limited to, the Federal Housing Administration, Fannie Mae (also known as the Federal National Mortgage Association), Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Government National Mortgage Association (Ginnie Mae), General Services Administration, Central Bank for Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation (Freddie Mac), Farm Credit Banks, Maritime Administration, the Tennessee Valley Authority, the Resolution Funding Corporation and the Student Loan Marketing Association.

               Securities issued or guaranteed by U.S. Government agencies and instrumentalities are not always supported by the full faith and credit of the United States. Some, such as securities issued by the Federal Home Loan Banks, are backed by the right of the agency or instrumentality to borrow from the Treasury. Other securities, such as securities issued by Fannie Mae, are supported only by the credit of the instrumentality and by a pool of mortgage assets. If the securities are not backed by the full faith and credit of the United States, the owner of the securities must look principally to the agency issuing the obligation for repayment and may not be able to assert a claim against the United States in the event that the agency or instrumentality does not meet its commitment.

Variable or Floating Rate Instruments

               Variable or floating rate instruments (including notes purchased directly from issuers) bear variable or floating interest rates and may carry rights that permit holders to demand payment of the unpaid principal balance plus accrued interest from the issuers or certain financial intermediaries on dates prior to their stated maturities. Floating rate securities have interest rates that change whenever there is a change in a designated base rate while variable rate instruments provide for a specified periodic adjustment in the interest rate. These formulas are designed to result in a market value for the instrument that approximates its par value.

Warrants and Rights

               Each Portfolio may invest in warrants and rights. Warrants are options to purchase equity securities at specified prices for a specific period of time. The prices do not necessarily move parallel to the prices of the underlying securities. Rights are similar to warrants but normally have a short duration and are distributed directly by the issuer to its shareholders. Rights and warrants have no voting rights, receive no dividends and have no rights with respect to the assets of the issuer. Warrants and rights are highly volatile and, therefore, more susceptible to sharp declines in value than the underlying security might be. They are also generally less liquid than an investment in the underlying shares.

               Warrants With Cash Extractions. International II Portfolio may also invest up to 5% of its total assets in warrants used in conjunction with the cash extraction method. If an investor wishes to replicate an underlying share, the investor can use the warrant with cash extraction method by purchasing warrants and holding cash. The cash component would be determined by subtracting the market price of the warrant from the underlying share price.

               For example, assume one share for company "Alpha" has a current share price of $40 and issued warrants can be converted one for one share at an exercise price of $31 exercisable two years from today. Also assume that the market price of the warrant is $10 ($40 - $31 + $1) because investors are willing to pay a premium ($1) for previously stated reasons. If an investor wanted to replicate an underlying share by engaging in a warrant with cash extraction strategy, the amount of cash the investor would need to hold for every warrant would be $30 ($40 - $10 = $30). A warrant with cash extraction is, thus, simply a synthetically created quasi-convertible bond.

               If an underlying share issues no or a low dividend and has an associated warrant with a market price that is low relative to its share price, a warrant with cash extraction may provide attractive cash yields and minimize capital loss risk, provided the underlying share is also considered a worthy investment. For example, assume Alpha's share is an attractive investment opportunity and its share pays no dividend. Given the information regarding Alpha provided above, also assume that short-term cash currently yields 5% per year and that the investor plans to hold the investment at least two years, barring significant near-term capital appreciation. If the share price were to fall below $30, the warrant with cash extraction strategy would yield a lower loss than the underlying share because an investor cannot lose more than the purchase cost of the warrant (capital risk minimized). The cash component for this strate gy would yield $3.08 after two years (compound interest). The total value of the underlying investment would be $43.08 versus $40.00 for the non-yielding underlying share (attractive yield). Finally, it is important to note that this strategy will not be pursued if it is not economically more attractive than underlying shares.

When-Issued and Delayed-Delivery Transactions

               International II Portfolio may purchase securities in which it may invest on a when-issued or delayed-delivery basis or sell them on a delayed-delivery basis. In either case, payment and delivery for the securities take place at a future date. The securities so purchased or sold by the Portfolio are subject to market fluctuation; their value may be less or more when delivered than the purchase price paid or received. When purchasing securities on a when-issued or delayed-delivery basis, the Portfolio assumes the rights and risks of ownership, including the risk of price and yield fluctuations. No interest accrues to the Portfolio until delivery and payment are completed. When the Portfolio makes a commitment to purchase securities on a when-issued or delayed-delivery basis, it will record the transaction and thereafter reflect the value of the securities in determining its NAV per share. When the Portfolio sell s a security on a delayed-delivery basis, the Portfolio does not participate in further gains or losses with respect to the security. When the Portfolio makes a commitment to sell securities on a delayed basis, it will record the transaction and thereafter value the securities at the sales price in determining the Portfolio's NAV per share. If the other party to a delayed-delivery transaction fails to deliver or pay for the securities, the Portfolio could miss a favorable price or yield opportunity, or could suffer a loss.

               Ordinarily, International II Portfolio purchases securities on a when-issued or delayed-delivery basis with the intention of actually taking delivery of the securities. However, before the securities are delivered and before it has paid for them (the settlement date), the Portfolio may sell the securities if its Sub-Adviser decided it was advisable to do so for investment reasons. The Portfolio will hold aside or segregate cash or other securities, other than those purchased on a when-issued or delayed-delivery basis, at least equal in value to the amount it will have to pay on the settlement date; these other securities may, however, be sold at or before the settlement date to pay the purchase price of the when-issued or delayed-delivery securities.

Currency Exchange Transactions

               Spot Exchange Transactions. International II Portfolio usually effects currency exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing in the foreign exchange market. However, some price spread on currency exchange will be incurred when the Portfolio converts assets from one currency to another. Further, the Portfolio may be affected either unfavorably or favorably by fluctuations in the relative rates of exchange between the currencies of different nations. For example, in order to realize the value of a foreign investment, the Portfolio must convert that value, as denominated in its foreign currency, into U.S. dollars using the applicable currency exchange rate. The exchange rate represents the current price of a U.S. dollar relative to that foreign currency; that is, the amount of such foreign currency required to buy one U.S. dollar. If the Portfolio holds a foreign security which has appreciated in value as measured in the foreign currency, the level of appreciation actually realized by the Portfolio may be reduced or even eliminated if the foreign currency has decreased in value relative to the U.S. dollar subsequent to the date of purchase. In such a circumstance, the cost of a U.S. dollar purchased with that foreign currency has gone up and the same amount of foreign currency purchases fewer dollars than at an earlier date.

               Forward Currency Contracts. International II Portfolio also has the authority to deal in forward currency contracts between currencies of the different countries in which it may invest for speculative purposes. This is accomplished through contractual agreements to purchase or sell a specified currency at a specified future date and price set at the time of the contract. Forward currency contracts are individually negotiated and privately traded by currency traders and their customers. These forward currency contracts may involve the sale of U.S. dollars and the purchase of a foreign currency, or may be foreign cross-currency contracts involving the sale of one foreign currency and the purchase of another foreign currency (such foreign cross-currency contracts may be considered a hedging rather than a speculative strategy if the Portfolio’s commitment to purchase the new (more favorable) currency is lim ited to the market value of the Portfolio’s securities denominated in the old (less favorable) currency - see "Foreign Currency Hedging Strategies," above). Because these transactions are not entered into for hedging purposes, the Portfolio’s custodian bank maintains, in a separate account of the Portfolio, liquid assets, such as cash, short-term securities and other liquid securities (marked to the market daily), having a value equal to, or greater than, any commitments to purchase currency on a forward basis. The prediction of currency movements is extremely difficult and the successful execution of a speculative strategy is highly uncertain.

Investments In Russia

               International II Portfolio may invest in securities of Russian companies, which involves risks and special considerations not typically associated with investing in United States securities markets. Since the breakup of the Soviet Union at the end of 1991, Russia has experienced dramatic political and social change. The political system in Russia is emerging from a long history of extensive state involvement in economic affairs. The country is undergoing a rapid transition from a centrally controlled command system to a market-oriented, democratic model. The Portfolio may be affected unfavorably by political or diplomatic developments, social instability, changes in government policies, taxation and interest rates, currency repatriation restrictions and other political and economic developments in the law or regulations in Russia and, in particular, the risks of expropriation, nationalization and confiscation of assets and changes in legislation relating to foreign ownership.

               The planned economy of the former Soviet Union was run with qualitatively different objectives and assumptions from those prevalent in a market system and Russian businesses do not have any recent history of operating within a market-oriented economy. In general, relative to companies operating in Western economies, companies in Russian are characterized by a lack of: (i) management with experience of operating in a market economy; (ii) modern technology; and, (iii) a sufficient capital base with which to develop and expand their operations. It is unclear what will be the future effect on Russian companies, if any, of Russia's continued attempts to move toward a more market-oriented economy. Russia's economy has experienced severe economic recession, if not depression, since 1990 during which time the economy has been characterized by high rates of inflation, high rates of unemployment, declining gross domestic pr oduct, deficit government spending, and a devaluing currency. The economic reform program has involved major disruptions and dislocations in various sectors of the economy, and those problems have been exacerbated by growing liquidity problems. Further, Russia presently receives significant financial assistance from a number of countries through various programs. To the extent these programs are reduced or eliminated in the future, Russian economic development may be adversely impacted.

               The Russian securities markets are substantially smaller, less liquid and significantly more volatile than the securities markets in the United States. In addition, there is little historical data on these securities markets because they are of recent origin. A substantial proportion of securities transactions in Russia are privately negotiated outside of stock exchanges and over-the-counter markets. A limited number of issuers represent a disproportionately large percentage of market capitalization and trading volume. Although evolving rapidly, even the largest of Russia's stock exchanges are not well developed compared to Western stock exchanges. The actual volume of exchange-based trading in Russia is low and active on-market trading generally occurs only in the shares of a few private companies. Most secondary market trading of equity securities occurs through over-the-counter trading facilitated by a growi ng number of licensed brokers. Shares are traded on the over-the-counter market primarily by the management of enterprises, investment funds, short-term speculators and foreign investors. The securities of Russian companies are mostly traded over-the-counter and, despite the large number of stock exchanges, there is still no organized public market for such securities. This may increase the difficulty of valuing the Portfolio's investments. No established secondary markets may exist for many of the securities in which the Portfolio may invest. Reduced secondary market liquidity may have an adverse effect on market price and the Portfolio's ability to dispose of particular instruments when necessary to meet its liquidity requirements or in response to specific economic events such as a deterioration in the creditworthiness of the issuer. Reduced secondary market liquidity for securities may also make it more difficult for the Portfolio to obtain accurate market quotations for purposes of valuing its por tfolio and calculating its net asset value. Market quotations are generally available on many emerging country securities only from a limited number of dealers and may not necessarily represent firm bids of those dealers or prices for actual sales.

               Because of the recent formation of the securities markets as well as the underdeveloped state of the banking and telecommunications systems, settlement, clearing and registration transactions are subject to significant risks not normally associated with investments in the United States and other more developed markets. Ownership of shares (except where shares are held through depositories that meet the requirements of the 1940 Act) is defined according to entries in the company's share register and normally evidenced by extracts from the register or in certain limited cases by formal share certificates. However, there is not a central registration system and these services are carried out by the companies themselves or by registrars located throughout Russia. These registrars are not necessarily subject to effective state supervision and its possible for the Portfolio to lose its registration through fraud, neglig ence and even mere oversight. The laws and regulations in Russia affecting Western investment business continue to evolve in an unpredictable manner. Russian laws and regulations, particularly those involving taxation, foreign investment and trade, title to property or securities, and transfer of title, applicable to the Portfolio's activities are relatively new and can change quickly and unpredictably in a manner far more volatile than in the United States or other developed market economies. Although basic commercial laws are in place, they are often unclear or contradictory and subject to varying interpretation, and may at any time be amended, modified, repealed or replaced in a manner adverse to the interest of the Portfolio. There is still lacking a cohesive body of law and precedents normally encountered in business environments. Foreign investment in Russian companies is, in certain cases, legally restricted. Sometimes these restrictions are contained in constitutional documents of an enterprise that are not publicly available. Russian foreign investment legislation currently guarantees the right of foreign investors to transfer abroad income received on investments such as profits, dividends and interest payments. This right is subject to settlement of all applicable taxes and duties. However, more recent legislation governing currency regulation and control guarantees the right to export interest, dividends and other income on investments, but does not expressly permit the repatriation of capital from the realization of investments. Current practice is to recognize the right to repatriation of capital. Authorities currently do not attempt to restrict repatriation beyond the extent of the earlier law. No guarantee can be made, however, that amounts representing realization of capital of income will be capable of being remitted. If, for any reason, the Portfolio were unable to distribute an amount equal to substantially all of its investment company taxable income (as defined for U.S. tax pu rposes) within applicable time periods, the Portfolio would not qualify for the favorable U.S. federal income tax treatment afforded to regulated investment companies, or, even if it did so qualify, it might become liable for income and excise taxes on undistributed income.

               Russian courts lack experience in commercial dispute resolution and many of the procedural remedies for enforcement and protection of legal rights typically found in Western jurisdictions are not available in Russia. There remains uncertainty as to the extent to which local parties and entities, including Russian state authorities, will recognize the contractual and other rights of the parties with which they deal. Accordingly, there will be difficulty and uncertainty in the Portfolio's ability to protect and enforce its rights against Russian state and private entities. There is also no assurance that the Russian courts will recognize or acknowledge that the Portfolio has acquired title to any property or securities in which the Portfolio invests, or that the Portfolio is the owner of any property or security held in the name of a nominee which has acquired such property or security on behalf of the Portfolio, be cause there is at present in Russia no reliable system or legal framework regarding the registration of titles. There can be no assurance that this difficulty in protecting and enforcing rights in Russia will not have a material adverse effect on the Portfolio and its operations. Difficulties are likely to be encountered enforcing judgments of foreign courts within Russia or of Russian courts in foreign jurisdictions due to the limited number of countries which have signed treaties for mutual recognition of court judgments with Russia.

Investment Restrictions and Limitations

               Certain of the Portfolios' investment restrictions and other limitations are described in this SAI. The following are each Portfolio's fundamental investment limitations set forth in their entirety, which cannot be changed without shareholder approval. For this purpose, shareholder approval means the approval, at a meeting of Portfolio shareholders, by the lesser of (1) the holders of 67% or more of the Portfolio's shares represented at the meeting, if more than 50% of the Portfolio's outstanding shares are present in person or by proxy or (2) more than 50% of the Portfolio's outstanding shares. A Portfolio may not:

(1)	With respect to 75% of the Portfolio's total assets, purchase the securities of any issuer (other than obligations issued or guaranteed by the United States government, or any of its agencies or instrumentalities) if, as a result thereof, (a) more than 5% of the Portfolio's total assets would be invested in the securities of such issuer, or (b) the Portfolio would hold more than 10% of the outstanding voting securities of such issuer;
(2)	Issue bonds or any other class of securities preferred over shares of the Portfolio in respect to the Portfolio's assets or earnings, provided that the Portfolio may issue additional classes of shares in accordance with the Fund's Articles of Incorporation;
(3)	Sell securities short (unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short) or purchase securities on margin, except that (1) this policy does not prevent the Portfolio from entering into short positions in foreign currency, futures contracts, options, forward contracts, swaps, caps, floors, collars and other financial instruments, (2) the Portfolio may obtain such short-term credits as are necessary for the clearance of transactions, and (3) the Portfolio may make margin payments in connection with futures contracts, options, forward contracts, swaps, caps, floors, collars and other financial instruments;
(4)	Borrow money, except that the Portfolio may borrow money for temporary, emergency or extraordinary purposes (not for leveraging or investment) in an amount not exceeding 33 1/3% of the value of its total assets less liabilities (other than borrowings). Any borrowings that come to exceed 33 1/3% of the Portfolio's total assets less liabilities (other than borrowings) will be reduced within three days (not including Sundays and holidays) to the extent necessary to comply with the 33 1/3% limitation.
(5)	Underwrite securities issued by others, except to the extent that the Portfolio may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in the disposition of restricted securities;
(6)	Purchase the securities of any issuer (other than obligations issued or guaranteed by the United States government or any of its agencies or instrumentalities) if, as a result, more than 25% of the Portfolio's total assets (taken at current value) would be invested in the securities of issuers having their principal business activities in the same industry;
(7)	Invest in real estate limited partnerships or purchase or sell real estate unless acquired as a result of ownership of securities (but this shall not prevent the Portfolio from purchasing and selling securities issued by companies or other entities or investment vehicles that deal in real estate or interests therein, nor shall this prevent the Portfolio from purchasing interests in pools of real estate mortgage loans);
(8)	Purchase or sell physical commodities; however, this policy shall not prevent the Portfolio from purchasing and selling foreign currency, futures contracts, options, forward contracts, swaps, caps, floors, collars and other financial instruments; or
(9)	Make loans, except that the Portfolio may purchase or hold debt instruments in accordance with its investment objective and policies, lend Portfolio securities in accordance with its investment objective and policies and enter into repurchase agreements, to the extent allowed, and in accordance with the requirements, under the 1940 Act. For purposes of this restriction, the participation of the Portfolio in a credit facility whereby the Portfolio may directly lend and borrow money for temporary purposes, provided that the loans are made in accordance with an order of exemption from the SEC and any conditions thereto, will not be considered the making of a loan.

               The following investment restrictions are not fundamental and may be changed by the Fund's Board of Directors without approval of the shareholders of the affected Portfolio:

(1)	At least 80% of International II Portfolio's net assets will be invested, under normal market conditions, in foreign securities and at least 65% of its total assets will be invested in at least three different countries outside the United States. The Portfolio may not purchase a foreign security if, as a result, more than 75% of its total assets would be invested in issuers of any one foreign country. International II Portfolio will provide its shareholders with written notice at least 60 days prior to changing this policy;
(2)	At least 80% of Micro Cap Growth Portfolio's net assets will be invested, under normal market conditions, in the equity securities of micro cap companies. For purposes of this restriction, a micro cap company is a company with a market capitalization that is within the range of capitalizations of companies included in the Russell 2000 Growth Index. Micro Cap Growth Portfolio will provide its shareholders with written notice at least 60 days prior to changing this policy;
(3)	At least 80% of Small Company Value Portfolio's net assets will be invested, under normal market conditions, in small cap domestic companies and foreign companies that are publicly traded in the United States. For purposes of this restriction, a small cap company is a company with a market capitalization that is within the range of capitalizations of companies included in the Lipper, Inc. Small Cap Category. Small Company Value Portfolio will provide its shareholders with written notice at least 60 days prior to changing this policy;
(4)	International II Portfolio does not currently intend to invest more than 5% of its net assets in securities (including convertible securities) rated at least BBB by S&P or Baa by Moody's and may not invest in securities below those ratings;
(5)	Each of Micro Cap Growth Portfolio and Small Company Value Portfolio does not currently intend to invest more than 10% of its net assets in securities (including convertible securities) rated at least B- by S&P or B3 by Moody's and may not invest in securities below those ratings;
(6)	Each of Micro Cap Growth Portfolio and Small Company Value Portfolio currently intends to limit its investments in foreign securities that are not traded in the U.S., under normal market conditions, to no more than 10% of its total assets; for this purpose, ADRs are not considered foreign securities, although each of these Portfolios does not intend to invest more than 10% of its total assets in ADRs;
(7)	Micro Cap Growth Portfolio and Small Company Value Portfolio each may invest up to 5% of its total assets in one or more types of DRs;
(8)	International II Portfolio may also invest up to 5% of its total assets in warrants used in conjunction with the cash extraction method;
(9)	No Portfolio may not purchase a security if, as a result, more than 15% of its net assets would consist of illiquid investments;
(10)	Each Portfolio may purchase shares of another investment company subject to the restrictions and limitations of the 1940 Act;
(11)	No Portfolio may participate on a joint, or a joint and several, basis in any trading account in any securities (but this does not prohibit the bunching of orders for the sale or purchase of a Portfolio's securities with orders for other advisory accounts of the Portfolio's Sub-Advisor, as applicable, to reduce brokerage commissions or otherwise to achieve best execution);
(12)	No Portfolio currently intends to invest in oil, gas, or other mineral exploration or development programs or leases;
(13)	No Portfolio will purchase any security while borrowings representing more than 5% of its total assets are outstanding;
(14)	To the extent that the Portfolio enters into futures contracts, options on futures contracts or options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are in-the-money at the time of purchase) will not exceed 5% of the liquidation value of the Portfolio, after taking into account unrealized profits and unrealized losses on any contracts the Portfolio has entered into. (In general, a call option on a futures contract is in-the-money if the value of the underlying futures contract is exceeded by the strike price of the put.) This policy does not limit to 5% the percentage of the Portfolio's total assets that are at risk in futures contracts and options on futures contracts; and
(15)	Each Portfolio may purchase or sell options, futures contracts, options on futures contracts, forward currency contracts, swaps, caps, floors, collars, indexed securities and other derivative instruments only to the extent that the Portfolio is permitted to invest in the type of asset by which the return on, or value of, such instrument is measured.
(16)	The total market value of securities against which International II Portfolio may write, call or put options will not exceed 20% of the Portfolio's total assets. In addition, the Portfolio will not commit more than 5% of its total assets to premiums when purchasing put or call options.
(17)	A Portfolio's aggregate short sales prices may not, at the time of any short sale, exceed 10% of its total assets.

               An investment policy or limitation that states a maximum percentage of a Portfolio's assets that may be so invested or prescribes quality standards is typically applied immediately after, and based on, the Portfolio's acquisition of an asset. Accordingly, a subsequent change in the asset's value, net assets, or other circumstances will not be considered when determining whether the investment complies with a Portfolio's investment policies and limitations, except that International II Portfolio may not hold more than 5% of its net assets in securities that have been downgraded subsequent to purchase where such securities are not otherwise eligible for purchase by the Portfolio. (This is in addition to securities International II Portfolio may purchase under its other investment policies).

Portfolio Turnover

               A Portfolio's turnover rate is, in general, the percentage computed by taking the lesser of purchases or sales of portfolio securities for a year and dividing it by the monthly average of the market value of such securities during the year, excluding certain short-term securities. A Portfolio's turnover rate may vary greatly from year to year as well as within a particular year.

INVESTMENT MANAGEMENT AND OTHER SERVICES

The Management Agreement

               The Fund has an Investment Management Agreement (Management Agreement) with WRIMCO. Under the Management Agreement, WRIMCO is employed to supervise the investments of the Portfolios and provide investment advice to each Portfolio. The address of WRIMCO is 6300 Lamar Avenue, P. O. Box 29217, Shawnee Mission, Kansas 66201-9217.

               WRIMCO is a wholly owned subsidiary of Waddell & Reed, Inc. Waddell & Reed, Inc. (Waddell & Reed) is a wholly owned subsidiary of Waddell & Reed Financial Services, Inc., a holding company which is a wholly owned subsidiary of Waddell & Reed Financial, Inc., a publicly held company. The address of these companies is 6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission, Kansas 66201-9217.

               WRIMCO and its predecessor have served as investment manager to each of the registered investment companies in the Fund, Waddell & Reed Advisors Funds and Waddell & Reed InvestEd Portfolios, Inc. since 1940 or each company's inception date, whichever is later. Waddell & Reed serves as principal underwriter for the investment companies in the Waddell & Reed Advisors Funds and Waddell & Reed InvestEd Portfolios, Inc. and acts as the distributor for Policies for which the Fund is the underlying investment vehicle.

               The Management Agreement with respect to each of International II Portfolio, Micro Cap Growth Portfolio and Small Company Value Portfolio was approved by the Board of Directors at a meeting held ______, 2003, and will continue in effect through September 30, 2003, unless sooner terminated. The Management Agreement provides that it may be renewed year to year, provided that any such renewal has been specifically approved, at least annually, by (i) the Board of Directors, or by a vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the applicable Portfolio, and (ii) the vote of a majority of the Directors who are not deemed to be "interested persons" (as defined in the 1940 Act) of the Fund or WRIMCO (the Disinterested Directors). The Management Agreement also provides that either party has the right to terminate it, without penalty, upon 60 days' written notice to the other party, and that the Management Agreement automatically terminates in the event of its assignment (as defined in the 1940 Act).

               In connection with their consideration of the approval of the proposed Management Agreement as to each Portfolio, the Disinterested Directors met separately with independent legal counsel. In determining whether to approve the Management Agreement, the Disinterested Directors, as well as the Board of Directors, considered a number of factors, including: the nature and quality of investment management services to be provided to the Portfolio by WRIMCO, including WRIMCO's investment management expertise and the personnel, resources and experience of WRIMCO and, WRIMCO's anticipated retention of the Sub-Advisor; the cost to WRIMCO in providing its services under the Management Agreement and WRIMCO's profitability; whether WRIMCO or any of its affiliates receive ancillary benefits that should be taken into consideration in evaluating the investment management fee payable by the Portfolio; and the investment managemen t fees paid by comparable investment companies.

The Sub-Advisory Agreements

               International II Portfolio

               Templeton Investment Counsel, LLC (Templeton Counsel), a Delaware limited liability company with principal offices at 500 East Broward Boulevard, Fort Lauderdale, Florida 33394, has been retained under an investment sub-advisory agreement to provide investment advice for and, in general, conduct the investment management program of International II Portfolio, subject to the general control of the Board of Directors of the Fund. Templeton Counsel is an indirect, wholly owned subsidiary of Templeton Worldwide, Inc., Fort Lauderdale, Florida, which in turn is a wholly owned subsidiary of Franklin Resources, Inc.

               Franklin Resources, Inc. is a global investment organization operating as Franklin Templeton Investments. Franklin Templeton provides global and domestic investment management services through its Franklin, Templeton, Mutual Advisors and Fiduciary Trust subsidiaries with approximately 10 million shareholder accounts. With 51 offices in 28 countries, the company has over 50 years of investment experience and over $256 billion in assets under management as of January 31, 2003. Franklin Resources, Inc. is headquartered at One Franklin Parkway, P.O. Box 7777, San Mateo, California 94403-7777, and its common stock is listed on the New York Stock Exchange (NYSE) under the ticker symbol BEN.

               Templeton Counsel acts as investment sub-advisor to International II Portfolio under an Investment Sub-Advisory Agreement (the Templeton Agreement) with WRIMCO, which was approved by the Board of Directors at a meeting held ________ ___, 2003. The Templeton Agreement will continue in effect through September 30, 2003, unless sooner terminated.

               The Templeton Agreement will terminate automatically in the event of its assignment or upon the termination of the Management Agreement. In addition, the Templeton Agreement is terminable at any time, without penalty, by the Board of Directors of the Fund or by WRIMCO on 60 days' written notice to Templeton Counsel, and by Templeton Counsel on 60 days' written notice to WRIMCO. Unless sooner terminated, the Templeton Agreement shall continue in effect from year to year if approved at least annually either by the Board of Directors of the Fund, provided that in either event such continuance is also approved by the vote of a majority of the Directors who are not interested persons of any party to the Templeton Agreement, cast in person at a meeting called for the purpose of voting on such approval.

From the management fee received with respect to International II Portfolio, WRIMCO pays to Templeton Counsel a sub-advisory fee computed at an annual rate, which is a percentage of the average daily net assets of International II Portfolio, as follows: 0.70% of net assets up to $10 million, 0.65% of net assets over $10 million and up to $25 million, 0.55% of net assets over $25 million and up to $50 million, and 0.50% of net assets over $50 million and up to $100 million, and 0.40% of net assets over $100 million.

               Micro Cap Growth Portfolio

               Wall Street Associates (WSA), a California corporation with principal offices at La Jolla Financial Building, Suite 100, 1200 Prospect Street, La Jolla, California 92037, has been retained under an investment sub-advisory agreement to provide investment advice for and, in general, conduct the investment management program of Micro Cap Growth Portfolio, subject to the general control of the Board of Directors of the Fund. WSA, founded in 1987, provides investment advisory services for institutional clients and high net worth individuals.

               WSA acts as investment sub-advisor to Micro Cap Growth Portfolio under an Investment Sub-Advisory Agreement (the WSA Agreement) with WRIMCO, which was approved by the Board of Directors at a meeting held ________ ___, 2003. The WSA Agreement will continue in effect through September 30, 2003, unless sooner terminated.

               The WSA Agreement will terminate automatically in the event of its assignment or upon the termination of the Management Agreement. In addition, the WSA Agreement is terminable at any time, without penalty, by the Board of Directors of the Fund or by WRIMCO on 60 days' written notice to WSA, and by WSA on 60 days' written notice to WRIMCO. Unless sooner terminated, the WSA Agreement shall continue in effect from year to year if approved at least annually either by the Board of Directors of the Fund, provided that in either event such continuance is also approved by the vote of a majority of the Directors who are not interested persons of any party to the WSA Agreement, cast in person at a meeting called for the purpose of voting on such approval.

               From the management fee received with respect to Micro Cap Growth Portfolio, WRIMCO pays to WSA a sub-advisory fee computed at an annual rate, which is a percentage of the average daily net assets of Micro Cap Growth Portfolio, as follows: 0.85% of net assets. The sub-advisory fee is accrued daily and payable in arrears on the last day of each calendar month.

               Small Company Value Portfolio

               State Street Research & Management Company (State Street Research), a Delaware corporation with offices at One Financial Center, Boston, Massachusetts 02111-2690, has been retained under an investment sub-advisory agreement to provide investment advice for and, in general, conduct the investment management program of Small Company Value Portfolio, subject to the general control of the Board of Directors of the Fund.

               State Street Research was founded by Paul Cabot, Richard Saltonstall and Richard Paine to serve as investment adviser to one the nation's first mutual funds, presently known as State Street Research Investment Trust, which they formed in 1924. Their investment management philosophy emphasized comprehensive fundamental research and analysis, including meetings with the management of companies under consideration for investment. State Street Research's portfolio management group has extensive investment industry experience managing equity and debt securities. State Street Research is a wholly owned subsidiary of Metropolitan Life Insurance Company.

               State Street Research acts as investment sub-advisor to Small Company Value Portfolio under an Investment Sub-Advisory Agreement (the State Street Research Agreement) with WRIMCO, which was approved by the Board of Directors at a meeting held ________ ___, 2003. The State Street Research Agreement will continue in effect through September 30, 2003, unless sooner terminated.

               The State Street Research Agreement will terminate automatically in the event of its assignment or upon the termination of the Management Agreement. In addition, the State Street Research Agreement is terminable at any time, without penalty, by the Board of Directors of the Fund or by WRIMCO on 60 days' written notice to State Street Research, and by State Street Research on 60 days' written notice to WRIMCO. Unless sooner terminated, the State Street Research Agreement shall continue in effect from year to year if approved at least annually either by the Board of Directors of the Fund, provided that in either event such continuance is also approved by the vote of a majority of the Directors who are not interested persons of any party to the State Street Research Agreement, cast in person at a meeting called for the purpose of voting on such approval.

               From the management fee received with respect to Small Company Value Portfolio, WRIMCO pays to State Street Research a sub-advisory fee computed at an annual rate, which is a percentage of the average daily net assets of Small Company Value Portfolio, as follows: 0.65% of net assets. The sub-advisory fee is accrued daily and payable in arrears on the last day of each calendar month.

Accounting Services

               The Management Agreement permits WRIMCO or an affiliate of WRIMCO to enter into a separate agreement for accounting services (Accounting Services Agreement) with the Fund. The Management Agreement contains detailed provisions as to the matters to be considered by the Fund's Directors prior to approving any Accounting Services Agreement.

               Under the Accounting Services Agreement entered into between the Fund and Waddell & Reed Services Company (WRSCO), a subsidiary of Waddell & Reed, WRSCO provides the Fund with bookkeeping and accounting services and assistance including maintenance of the Fund's records, pricing of the Portfolios' shares, preparation of prospectuses for existing shareholders, preparation of proxy statements and certain shareholder reports. A new Accounting Services Agreement, or amendments to an existing one, may be approved by the Fund's Board of Directors without shareholder approval.

Payments by the Fund for Management and Accounting Services

               Under the Management Agreement, for WRIMCO's management services to each Portfolio, the Fund pays WRIMCO a fee as described in the Prospectus. The Fund accrues and pays this fee daily. The Portfolios have not been in operation prior to the date of this SAI; therefore, no management fees were paid to WRIMCO for the Portfolios for the period ended December 31, 2002.

               Under the Accounting Services Agreement, the Fund pays WRSCO a monthly fee of one-twelfth of the annual fee shown in the following table, based on the assets of each Portfolio.

Accounting Services Fee

Average Net Asset Level	Annual Fee
(all dollars in millions)	for Each Portfolio
------------------------------	----------------------------
From $ 0 to $ 10	$ 0
From $ 10 to $ 25	$11,000
From $ 25 to $ 50	$ 22,000
From $ 50 to $ 100	$ 33,000
From $ 100 to $ 200	$ 44,000
From $ 200 to $ 350	$ 55,000
From $ 350 to $ 550	$ 66,000
From $ 550 to $ 750	$ 77,000
From $ 750 to $1,000	$ 93,500
$1,000 and Over	$110,000

               Since the Fund pays a management fee for investment supervision and an accounting services fee for accounting services as discussed above, WRIMCO and WRSCO, respectively, pay all of their own expenses in providing these services. Waddell & Reed and its affiliates pay the Fund's Directors and officers who are affiliated with WRIMCO and Waddell & Reed. The Fund pays the fees and expenses of the Fund's other Directors. The Fund pays all of its other expenses. These include the costs of printing and mailing materials sent to shareholders, audit and outside legal fees, taxes, brokerage commissions, interest, insurance premiums, fees payable under securities laws and to the Investment Company Institute, cost of processing and maintaining shareholder records, cost of systems or services used to price Portfolio securities and nonrecurring or extraordinary expenses, including litigation and indemnification relatin g to litigation.

Service Plan

               Under a Service Plan (Plan) adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act, each Portfolio may pay Waddell & Reed a fee not to exceed 0.25% of the Portfolio's average annual net assets, paid daily, to compensate Waddell & Reed for its costs and expenses in connection with the provision of personal services to Policyowners.

               The Plan permits Waddell & Reed to be compensated for amounts it expends in compensating, training and supporting registered financial advisors, sales managers and/or other appropriate personnel in providing personal services to Policyowners; increasing services provided to Policyowners by office personnel; engaging in other activities useful in providing personal service to Policyowners; and in compensating broker-dealers who may regularly sell Policies, and other third parties, for providing shareholder services.

               The only Directors or interested persons, as defined in the 1940 Act, of the Fund who have a direct or indirect financial interest in the operation of the Plan are the officers and Directors who are also officers of either Waddell & Reed or its affiliate(s) or who are shareholders of Waddell & Reed Financial, Inc., the indirect parent company of Waddell & Reed. The Plan is anticipated to benefit the Portfolio and the Policyholders through Waddell & Reed's activities to provide directly, or indirectly, personal services to the Policyowners and thereby promote the maintenance of their accounts with the Fund. The Fund anticipates that Policyowners may benefit to the extent that Waddell & Reed's activities are successful in increasing the assets of the Fund through reduced redemptions and reducing a Policyowner's share of Fund and Portfolio expenses. In addition, the Fund anticipates that the reven ues from the Plan will provide Waddell & Reed with greater resources to make the financial commitments necessary to continue to improve the quality and level of services to the Fund and Policyowners.

               The Plan was approved by the Fund's Board of Directors, including the Directors who are not interested persons of the Fund and who have no direct or indirect financial interest in the operations of the Plan or any agreement referred to in the Plan (hereafter, Plan Directors).

               Among other things, the Plan provides that (1) Waddell & Reed will provide to the Directors of the Fund at least quarterly, and the Directors will review, a report of amounts expended under the Plan and the purposes for which such expenditures were made, (2) the Plan will continue in effect only so long as it is approved at least annually, and any material amendments thereto will be effective only if approved, by the Directors including the Plan Directors acting in person at a meeting called for that purpose, (3) amounts to be paid by a Portfolio under the Plan may not be materially increased without the vote of the holders of a majority of the outstanding shares of the Portfolio, and (4) while the Plan remains in effect, the selection and nomination of the Directors who are Plan Directors will be committed to the discretion of the Plan Directors.

Custodial and Auditing Services

               The Custodian for each Portfolio is UMB Bank, n.a., 928 Grand Boulevard, Kansas City, Missouri. In general, the Custodian is responsible for holding the Portfolios' cash and securities. Deloitte & Touche LLP, 1010 Grand Boulevard, Kansas City, Missouri, the Fund's independent auditors, audits the Fund's annual financial statements.

NET ASSET VALUE

               The NAV of one of the shares of a Portfolio is the value of its assets, less liabilities, divided by the total number of shares outstanding. For example, if on a particular day a Portfolio owned securities worth $100 and held cash of $15, the total value of the assets would be $115. If it had a liability of $5, the NAV would be $110 ($115 minus $5). If it had 11 shares outstanding, the NAV of one share would be $10 ($110 divided by 11).

               The NAV per share of each Portfolio is ordinarily computed once each day that the NYSE is open for trading as of the close of the regular session of the NYSE or the close of the regular session of any other securities or commodities exchange on which an option or future held by the Portfolio is traded. The NYSE ordinarily closes at 4:00 p.m. Eastern time. The NYSE annually announces the days on which it will not be open for trading. The most recent announcement indicates that it will not be open on the following days: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. However, it is possible that the NYSE may close on other days. The NAV may change every business day, since the value of the assets and the number of shares outstanding typically change every business day.

               The portfolio securities of a Portfolio that are listed or traded on a stock exchange are valued on the basis of the last sale on that day or, lacking any sales, at the mean of the last bid and asked prices available. In cases where securities or other instruments are traded on more than one exchange, such securities or other instruments generally are valued on the exchange designated by WRIMCO (under procedures established by and under the general supervision and responsibility of the Board of Directors) as the primary market. Securities traded in the OTC market are valued using the Nasdaq Stock Market, which provides information on bid and asked prices quoted by major dealers in such stocks.

               Bonds, other than convertible bonds, are valued using a third-party pricing system. Convertible bonds are valued using this pricing system only on days when there is no sale reported. Short-term debt securities held by the Portfolios are valued at amortized cost. When market quotations for options and futures contracts and non-exchange traded foreign securities held by a Portfolio are readily available, those securities will be valued based upon such quotations. Market quotations generally will not be available for options traded in the OTC market. Warrants and rights to purchase securities are valued at market value. When market quotations are not readily available, securities, options, futures contracts and other assets are valued at fair value as determined in good faith under procedures established by and under the general supervision and responsibility of the Board of Directors.

               Foreign currency exchange rates are generally determined prior to the close of trading of the regular session of the NYSE. Occasionally events affecting the value of foreign investments and such exchange rates occur between the time at which they are determined and the close of the regular session of trading on the NYSE, which events will not be reflected in a computation of a Portfolio's NAV on that day. If events materially affecting the value of such investments or currency exchange rates occur during such time period, investments will be valued at their fair value as determined in good faith by or under the direction of the Board of Directors. The foreign currency exchange transactions of a Portfolio conducted on a spot (that is, cash) basis are valued at the spot rate for purchasing or selling currency prevailing on the foreign exchange market. This rate under normal market conditions differs from the prevai ling exchange rate in an amount generally less than one-tenth of one percent due to the costs of converting from one currency to another.

               When a Portfolio writes a call or a put option, an amount equal to the premium received is included in the Portfolio's Statement of Assets and Liabilities as an asset, and an equivalent deferred credit is included in the liability section. The deferred credit is marked-to-market to reflect the current market value of the option. If an option a Portfolio wrote is exercised, the proceeds received on the sale of the related investment are increased by the amount of the premium that the Portfolio received. If an option written by a Portfolio expires, it has a gain in the amount of the premium; if it enters into a closing transaction, it will have a gain or loss depending on whether the premium was more or less than the cost of the closing transaction.

               Optional delivery standby commitments are valued at fair value under the general supervision and responsibility of the Fund's Board of Directors. They are accounted for in the same manner as exchange-listed puts.

DIRECTORS AND OFFICERS

               Following is a list of the Board of Directors (Board) and the officers of the Fund. The Board oversees all of the Portfolios in the Fund, in addition to the other funds in the Family of Investment Companies. The Family of Investment Companies is comprised of the funds in the Fund, Waddell & Reed Advisors Funds, and Waddell & Reed InvestEd Portfolios, Inc. Eleanor B. Schwartz, Joseph Harroz, Jr., Henry J. Herrmann and Keith A. Tucker also serve as directors or trustees of the funds in the Ivy Family of Funds, which together with the Family of Investment Companies, comprise the 66 funds in the Fund Complex. Directors serve until resignation, retirement, death or removal. The Board appoints officers and delegates to them the management of the day-to-day operations of the Fund, based on policies reviewed and approved by the Board.

Disinterested Directors

               The following table provides information regarding each Director who is not an "interested person" as defined in the 1940 Act.

NAME, ADDRESS AND AGE	POSITION HELD WITH THE FUND	TERM OF OFFICE: DIRECTOR SINCE	PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS	NUMBER OF FUNDS IN FUND COMPLEX OVERSEEN BY DIRECTOR	OTHER DIRECTORSHIPS HELD BY DIRECTOR
James M. Concannon Washburn Law School 1700 College Topeka, KS 66621 Age: 55	Director	1997	Professor of Law, Washburn Law School; Formerly, Dean, Washburn Law School	38	Director, Am Vestors CBO II, Inc. (bond investment firm)
John A. Dillingham 4040 Northwest Claymont Drive Kansas City, MO 64116 Age: 64	Director	1997	President and Director, JoDill Corp. and Dillingham Enterprises, Inc., both farming enterprises; formerly, Instructor at Central Missouri State University; formerly, Consultant and Director, McDougal Construction Company	38	None
David P. Gardner 2441 Iron Canyon Drive Park City, UT 84060 Age: 70	Director	1998	Formerly, president, William and Flora Hewlett Foundation	38	None
Linda K. Graves 6300 Lamar Avenue Overland Park, KS 66202 Age: 49	Director	1995	Formerly, First Lady of Kansas	38	Director, American Guaranty Life Insurance Company
Joseph Harroz, Jr. 6300 Lamar Avenue Overland Park, KS 66202 Age: 36	Director	1998	General Counsel of the University of Oklahoma, Cameron University and Rogers State Univ.; Vice President of the University of Oklahoma; Adjunct Professor, University of Oklahoma Law School; Managing Member, Harroz Investments, LLC, commercial enterprise investments	66	Director, Oklahoma Appleseed Center for Law and Justice
John F. Hayes 6300 Lamar Avenue Overland Park, KS 66202 Age: 83	Director	1988	Chairman, Gilliland & Hayes, P.A., a law firm	38	Director, Central Bank & Trust; Central Financial Corporation
Glendon E. Johnson 13635 Deering Bay Drive, #284 Miami, FL 33158 Age: 79	Director	1971	Retired; formerly, Chief Executive Officer and Director, John Alden Financial Corporation	38	Chairman of the Board, Bank Assurance Partners (marketing)
Eleanor B. Schwartz 1213 West 95th Court Chartwell #4 Kansas City, MO 64114 Age: 66	Director	1995	Professor Emeritus, formerly, Professor of Business Administration, University of Missouri at Kansas City; formerly, Chancellor, University of Missouri at Kansas City	66	None
Frederick Vogel III 6300 Lamar Avenue Overland Park, KS 66202 Age: 67	Director	1971	Retired	38	None

Interested Directors

               Two of the three interested directors are "interested" by virtue of their current or former engagement as officers of Waddell & Reed Financial, Inc. (WDR) or its wholly owned subsidiaries, including the Fund's investment manager, Waddell & Reed Investment Management Company (WRIMCO), the distributor of the Policies funded by the Fund, Waddell & Reed, Inc. (W&R), and the Fund's accounting services agent, Waddell & Reed Services Company (WRSCO), as well as by virtue of their personal ownership in shares of WDR. The third interested director, Mr. Ross, is a shareholder in a law firm that has represented Waddell & Reed within the past two years.

NAME, ADDRESS AND AGE	POSITION(S) HELD WITH THE FUND	TERM OF OFFICE: DIRECTOR/OFFICER SINCE	PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS	TOTAL NUMBER OF PORTFOLIOS OVERSEEN	OTHER DIRECTORSHIPS HELD
Keith A. Tucker 6300 Lamar Avenue Overland Park, KS 66202 Age: 58	Chairman of the Board Director	1998 1993	Chairman of the Board, Chief Executive Officer and Director of WDR; formerly, Principal Financial Officer of WDR; Chairman of the Board and Director of Waddell & Reed, WRIMCO and WRSCO; formerly, Vice Chairman of the Board of Directors of Torchmark Corporation	66	None
Henry J. Herrmann 6300 Lamar Avenue Overland Park, KS 66202 Age: 60	President Director	2001 1998	President, Chief Investment Officer and Director of WDR; formerly, Treasurer of WDR; Director of Waddell & Reed; President, Chief Executive Officer, Chief Investment Officer and Director of WRIMCO; President, Chief Executive Officer and Director of Waddell & Reed Ivy Investment Company (WRIICO), an affiliate of WDR	66	Director, Austin, Calvert & Flavin, Inc., an affiliate of WRIMCO; Director, Ivy Services Inc. (ISI), an affiliate of WRIICO
Frank J. Ross, Jr. Polsinelli, Shalton & Welte, P.C. 700 West 47th Street Suite 1000 Kansas City, MO 64112 Age: 50	DIrector	1996	Shareholder/Director, Polsinelli, Shalton & Welte, P.C., a law firm	38	Director, Columbian Bank & Trust

Officers

               The Board has appointed officers who are responsible for the day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Herrmann, who is President, the Fund's officers are:

NAME, ADDRESS AND AGE	POSITION(S) HELD WITH THE FUND	TERM OF OFFICE: OFFICER SINCE	PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Theodore W. Howard 6300 Lamar Avenue Overland Park KS 66202 Age: 60	Vice President Treasurer Principal Accounting Officer Principal Financial Officer	1987 1976 1976 2002	Senior Vice President of WRSCO; Vice President, and Treasurer of each of the funds in the Fund Complex; Principal Accounting Officer and Principal Financial Officer of each of the funds in the Family of Investment Companies; formerly, Vice President of WRSCO
Kristen A. Richards 6300 Lamar Avenue Overland Park KS 66202 Age: 35	Vice President Secretary Associate General Counsel	2000 2000 2000	Vice President, Associate General Counsel and Chief Compliance Officer of WRIMCO and WRIICO; Vice President, Secretary and Associate General Counsel of each of the funds in the Fund Complex; formerly, Assistant Secretary of funds in the Fund Complex; formerly, Compliance Officer of WRIMCO
Daniel C. Schulte 6300 Lamar Avenue Overland Park KS 66202 Age: 37	Vice President General Counsel Assistant Secretary	2000 2000 2000	Vice President, Secretary and General Counsel of WDR; Senior Vice President, Secretary and General Counsel of Waddell & Reed, WRIMCO and WRSCO; Senior Vice President, Assistant Secretary and General Counsel of WRIICO and ISI; Vice President, General Counsel and Assistant Secretary of each of the funds in the Fund Complex; formerly, Assistant Secretary of WDR; formerly, an attorney with Klenda, Mitchell, Austerman & Zuercher, L.L.C.

RESPONSIBILITIES OF THE BOARD OF DIRECTORS

               The Board oversees the operations of the Fund, and is responsible for the overall management and supervision of its affairs in accordance with the laws of the State of Maryland, and directs the officers to perform the daily functions of the Fund. The Board similarly oversees the operations of each of the other funds in the Family of Investment Companies.

Committees of the Board of Directors

               The Board has established the following committees: Audit Committee, Executive Committee, Nominating Committee, Valuation Committee and Investment Review Committee. The respective duties and current memberships are:

AUDIT COMMITTEE: The Audit Committee meets with the Fund's independent auditors, internal auditors and corporate officers to discuss the scope and results of the annual audit of the Fund, to review financial statements, reports, compliance matters, and to discuss such other matters as the Committee deems appropriate or desirable. The Committee acts as a liaison between the Fund's independent auditors and the full Board of Directors. James M. Concannon, David P. Gardner, Linda K. Graves, John F. Hayes, and Frank J. Ross, Jr. are the members of the Audit Committee. During the calendar year ended December 31, 2002, the Audit Committee met four times.

EXECUTIVE COMMITTEE: When the Board is not in session, the Executive Committee has and may exercise any or all of the powers of the Board in the management of the business and affairs of the Fund except the power to increase or decrease the size of, or fill vacancies on the Board, and except as otherwise provided by law. Keith A. Tucker, Glendon E. Johnson and John A. Dillingham are the members of the Executive Committee. During the calendar year ended December 31, 2002, the Executive Committee did not meet.

NOMINATING COMMITTEE: The Nominating Committee evaluates, selects and recommends to the Board candidates for disinterested directors. Glendon E. Johnson, Eleanor B. Schwartz and Frederick Vogel III are the members of the Nominating Committee. During the calendar year ended December 31, 2002, the Nominating Committee did not meet.

VALUATION COMMITTEE: The Valuation Committee reviews and considers valuation recommendations by management for securities for which market quotations are not available, and values such securities and other assets at fair value as determined in good faith under procedures established by the Board. Keith A. Tucker and Henry J. Herrmann are the members of the Valuation Committee. During the calendar year ended December 31, 2002, the Valuation Committee met six times.

INVESTMENT REVIEW COMMITTEE: The Investment Review Committee considers such matters relating to the investment management of the funds in the Family of Investment Companies as the Committee may, from time to time, determine warrant review, such as investment management policies and strategies, investment performance, risk management techniques and securities trading practices, and may make recommendations as to these matters to the Board. Frederick Vogel III, Joseph Harroz, Jr. and David P. Gardner are the members of the Investment Review Committee. The Investment Review Committee was formed in February 2002; the Committee met once during the calendar year ended December 31, 2002.

OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2002

The following table provides information regarding shares of the Portfolio, as well as the aggregate dollar range of shares of all funds overseen by the Director within the Family of Investment Companies.

DISINTERESTED DIRECTORS

Director	Dollar Range of Portfolios' Shares Owned*	Aggregate Dollar Range of Fund Shares Owned in Funds Overseen by Director in Family of Investment Companies
James M. Concannon	$0	over $100,000
John A. Dillingham	$0	over $100,000
David P. Gardner	$0	$10,001 to $50,000
Linda K. Graves	$0	over $100,000
Joseph Harroz, Jr.	$0	over $100,000
John F. Hayes	$0	over $100,000
Glendon E. Johnson	$0	over $100,000
Eleanor B. Schwartz	$0	$0
Frederick Vogel III	$0	over $100,000

INTERESTED DIRECTORS

Director	Dollar Range of Portfolios' Shares Owned*	Aggregate Dollar Range of Fund Shares Owned in Funds Overseen by Director in Family of Investment Companies
Henry J. Herrmann	$0	over $100,000
Frank J. Ross, Jr.	$0	over $100,000
Keith A. Tucker	$0	over $100,000

The Directors who are not "affiliated persons" of the Fund, as defined in the 1940 Act, have deferred a portion of their annual compensation. The values of the Directors' deferred accounts, as of December 31, 2002 were:

Director	Dollar Range of Portfolios' Shares Deemed to be Owned*	Aggregate Dollar Range of Fund Shares Deemed Owned in Funds Overseen by Director in Family of Investment Companies
James M. Concannon	$0	$1 to $10,000
John A. Dillingham	$0	$1 to $10,000
David P. Gardner	$0	$10,001 to $50,000
Linda K. Graves	$0	$1 to $10,000
Joseph Harroz, Jr.	$0	$50,001 to $100,000
John F. Hayes	$0	$1 to $10,000
Glendon E. Johnson	$0	$1 to $10,000
Frank J. Ross, Jr.	$0	$10,001 to $50,000
Eleanor B. Schwartz	$0	$1 to $10,000
Frederick Vogel III	$0	$1 to $10,000

*The Portfolios' shares are available for purchase only by Participating Insurance Companies.

               The Board of Directors of the Fund has created an honorary position of Director Emeritus. The Director Emeritus policy currently provides that an incumbent Director who has attained the age of 70 may, or if initially elected as a Director on or after May 31, 1993, has attained the age of 75 must, resign his or her position as Director and, unless he or she elects otherwise, will serve as Director Emeritus provided that the Director has served as a Director of the Fund for at least five years, which need not have been consecutive. A Director Emeritus receives an annual fee from the Fund in an amount equal to the annual retainer at the time he or she resigned as a Director; provided that a Director initially elected to a Board of Directors on or after May 31, 1993, receives such annual fee only for a period of three years commencing upon the date the Director began his or her service as Director Emeritus, or in an equivalent lump sum. A Director Emeritus receives these fees in recognition of his or her past services, whether or not services are rendered in his or her capacity as Director Emeritus, but he or she has no authority or responsibility with respect to management of the Fund. Messrs. Henry L. Bellmon, Jay B. Dillingham, William T. Morgan, Doyle Patterson, Ronald K. Richey and Paul S. Wise retired as Directors of the Fund and of each of the other funds in the Family of Investment Companies, and each serves as Director Emeritus.

               The funds in the Family of Investment Companies pay to each Director (other than Directors who are affiliates of Waddell & Reed) an annual base fee of $65,500 (of which at least $7,500 is deferred), plus $4,250 for each meeting of the Board attended, plus reimbursement of expenses for attending such meeting, and $500 for each committee meeting attended which is not in conjunction with a Board meeting. The fees to the Directors are divided among the funds in the Family of Investment Companies based on each fund's relative size. Ivy Fund pays to each of its trustees annual compensation of $30,000, which includes $1,000 for each meeting of the Board attended. It is anticipated that the Directors will receive the following fees for service as a director of the Fund:

COMPENSATION TABLE

Disinterested Directors
Director	Aggregate Compensation From Portfolio1	Total Compensation From Fund and Fund Complex2
--------	------------	------------
James M. Concannon	$0	$82,500
John A. Dillingham	0	82,500
David P. Gardner	0	82,500
Linda K. Graves	0	82,500
Joseph Harroz, Jr.	0	82,500
John F. Hayes	0	82,500
Glendon E. Johnson	0	82,500
Eleanor B. Schwartz	0	82,500
Frederick Vogel III	0	82,500
Interested Directors
Director	Aggregate Compensation From Portfolio1	Total Compensation From Portfolio and Fund Complex2
--------	------------	------------
Henry J. Herrmann	0	0
Frank J. Ross, Jr.	0	82,500
Keith A. Tucker	0	0

¹For the current fiscal year, the Directors have agreed to not allocate any portion of their total compensation to the Portfolio.

²No pension or retirement benefits have been accrued as a part of Portfolio expenses.

               The officers of the Fund are paid by WRIMCO or its affiliates.

PURCHASES AND REDEMPTIONS

               The separate accounts of the Participating Insurance Companies place orders to purchase and redeem shares of a Portfolio based on, among other things, the amount of premium payments to be invested and the number of surrender and transfer requests to be effected on any day according to the terms of the Policies. Shares of a Portfolio are sold at their NAV per share. No sales charge is paid by any Participating Insurance Company for purchase of shares. Redemptions will be made at the NAV per share of the applicable Portfolio. Payment is generally made within seven days after receipt of a proper request to redeem. The Fund may suspend the right of redemption of shares of the Portfolios and may postpone payment for any period if any of the following conditions exist: (1) the NYSE is closed other than customary weekend and holiday closings or trading on the NYSE is restricted; (2) the SEC has determined that a state of emergency exists which may make payment or transfer not reasonably practicable; (3) the SEC has permitted suspension of the right of redemption of shares for the protection of the shareholders of the Fund; or (4) applicable laws and regulations otherwise permit the Fund to suspend payment on the redemption of shares. Redemptions are ordinarily made in cash but under extraordinary conditions the Fund's Board may determine that the making of cash payments is undesirable. In such case, redemption payments may be made in Portfolio securities. The redeeming shareholders would incur brokerage costs in selling such securities. The Fund has elected to be governed by Rule 18f-1 under the 1940 Act, pursuant to which it 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.

               Should any conflict between Policyowners arise which would require that a substantial amount of net assets be withdrawn from a Portfolio, orderly portfolio management could be disrupted to the potential detriment of Policyowners. The Fund need not accept any purchase order, and it may discontinue offering the shares of any Portfolio.

SHAREHOLDER COMMUNICATIONS

               Policyowners will receive, from the Participating Insurance Companies, financial statements of the Fund as required under the 1940 Act. Each report shows the investments owned by each Portfolio and the market values thereof and provides other information about the Fund and its operations.

TAXES

General

               Shares of the Portfolios are offered only to insurance company separate accounts that fund Policies. See the applicable Policy prospectus for a discussion of the special taxation of insurance companies with respect to such accounts and of the Policyholders.

               Each Portfolio is treated as a separate corporation for Federal income tax purposes. Each Portfolio intends to qualify for treatment as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as amended (Code), so that it is relieved of Federal income tax on that part of its investment company taxable income (consisting generally of net taxable investment income, net short-term capital gain and net gains from certain foreign currency transactions) that it distributes to its shareholders. To continue to qualify for treatment as a RIC, a Portfolio must distribute to its shareholders for each taxable year at least 90% of its investment company taxable income (Distribution Requirement) and must meet several additional requirements. With respect to a Portfolio, these requirements include the following: (1) the Portfolio must derive at least 90% of its gross income each taxable year from dividends , interest, payments with respect to securities loans, and gains from the sale or other disposition of securities or foreign currencies or other income (including gains from options, futures contracts or forward contracts) derived with respect to its business of investing in securities or those currencies (Income Requirement); (2) at the close of each quarter of the Portfolio's taxable year, at least 50% of the value of its total assets must be represented by cash and cash items, U.S. Government securities, securities of other RICs and other securities that are limited, in respect of any one issuer, to an amount that does not exceed 5% of the value of the Portfolio's total assets and that does not represent more than 10% of the issuer's outstanding voting securities (50% Diversification Requirement); and (3) at the close of each quarter of the Portfolio's taxable year, not more than 25% of the value of its total assets may be invested in securities (other than U.S. Government securities or the securities of other RICs) of any one issuer.

               Each Portfolio intends to comply with the diversification requirements imposed by section 817(h) of the Code and the regulations thereunder. These requirements, which are in addition to the diversification requirements imposed on a Portfolio by the 1940 Act and Subchapter M of the Code, place certain limitations on the assets of each separate account -- and, because section 817(h) and those regulations treat the assets of the Portfolio as assets of the related separate account, of the Portfolio -- that may be invested in securities of a single issuer. Specifically, the regulations provide that, except as permitted by the safe harbor described below, as of the end of each calendar quarter or within 30 days thereafter, no more than 55% of a Portfolio's total assets may be represented by any one investment, no more than 70% by any two investments, no more than 80% by any three investments and no more than 90% by any f our investments. For this purpose, all securities of the same issuer are considered a single investment, and while each U.S. Government agency and instrumentality is considered a separate issuer, a particular foreign government and its agencies, instrumentalities and political subdivisions all will be considered the same issuer. Section 817(h) provides, as a safe harbor, that a separate account will be treated as being adequately diversified if the diversification requirements under Subchapter M are satisfied and no more than 55% of the value of the account's total assets are cash and cash items, government securities and securities of other RICs. Failure of a Portfolio to satisfy the section 817(h) requirements would result in taxation of the Participating Insurance Companies and treatment of the Policyowners other than as described in the prospectuses for the Policies. If a Portfolio failed to qualify for treatment as a regulated investment company for any taxable year, (1) it would be taxed at corpora te rates on the full amount of its taxable income for that year without being able to deduct the distributions it makes to its shareholders, (2) the shareholders would treat all those distributions, including distributions of net capital gains (the excess of net long-term capital gains over net short-term capital losses), as dividends (that is, ordinary income) to the extent of the Portfolio's earnings and profits, and (3) most importantly, each insurance company separate account invested therein would fail to satisfy the diversification requirements of Code section 817(h), with the result that the variable annuity contracts supported by that account would no longer be eligible for tax deferral. In addition, the Portfolio could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying for regulated investment company treatment.

               Dividends and distributions declared by a Portfolio in December of any year and payable to its shareholders of record on a date in that month are deemed to have been paid by the Portfolio and received by the shareholders on December 31 of that year even if they are paid by the Portfolio during the following January. Accordingly, those dividends and distributions will be taxed to the shareholders for the year in which that December 31 falls.

               A Portfolio will be subject to a nondeductible 4% excise tax (Excise Tax) to the extent it fails to distribute, by the end of any calendar year, substantially all of its ordinary income for that year and capital gains net income for the one-year period ending on October 31 of that year, plus certain other amounts. For these purposes, a Portfolio may defer into the next calendar year net capital losses incurred between November 1 and the end of the current calendar year. It is each Portfolio's policy to pay sufficient dividends and distributions each year to avoid imposition of the Excise Tax.

Income from Foreign Securities

               Dividends and interest received, and gains realized, by a Portfolio may be subject to income, withholding or other taxes imposed by foreign countries and U.S. possessions (foreign taxes) that would reduce the yield and/or total return on its securities. Tax conventions between certain countries and the United States may reduce or eliminate foreign taxes, however, and many foreign countries do not impose taxes on capital gains in respect of investments by foreign investors.

               A Portfolio may invest in the stock of passive foreign investment companies (PFICs). A PFIC is any foreign corporation that (with certain exceptions), in general, meets either of the following tests: (1) at least 75% of its gross income is passive or (2) an average of at least 50% of its assets produce, or are held for the production of, passive income. Under certain circumstances, a Portfolio will be subject to Federal income tax on a portion of any excess distribution received on the stock of a PFIC or of any gain on disposition of the stock (collectively PFIC income), plus interest thereon, even if the Portfolio distributes the PFIC income as a taxable dividend to its shareholders. The balance of the PFIC income will be included in the Portfolio's investment company taxable income and, accordingly, will not be taxable to it to the extent it distributes that income to its shareholders.

               If a Portfolio invests in a PFIC and elects to treat the PFIC as a qualified electing fund (QEF), then in lieu of the foregoing tax and interest obligation, the Portfolio will be required to include in income each year its pro rata share of the QEF's annual ordinary earnings and net capital gain -- which probably would have to be distributed by the Portfolio to satisfy the Distribution Requirement and to avoid imposition of the Excise Tax -- even if those earnings and gain were not distributed to the Portfolio by the QEF. In most instances it will be very difficult, if not impossible, to make this election because of certain requirements thereof.

               A Portfolio may elect to mark to market its stock in any PFIC. Marking-to-market, in this context, means including in ordinary income each taxable year the excess, if any, of the fair market value of a PFIC's stock over the Portfolio's adjusted basis therein as of the end of that year. Pursuant to the election, the Portfolio also may deduct (as an ordinary, not capital, loss) the excess, if any, of its adjusted basis in PFIC stock over the fair market value thereof as of the taxable year-end, but only to the extent of any net mark-to-market gains with respect to that stock included by the Portfolio for prior taxable years under the election (and under regulations proposed in 1992 that provided a similar election with respect to the stock of certain PFICs). The Portfolio's adjusted basis in each PFIC's stock with respect to which it makes this election will be adjusted to reflect the amounts of income included and deductions taken under the election.

Income from Options, Futures and Forward Currency Contracts and Foreign Currencies

               The use of hedging and option income strategies, such as writing (selling) and purchasing options and futures contracts and entering into forward currency contracts, involves complex rules that will determine for income tax purposes the amount, character and timing of recognition of the gains and losses a Portfolio realizes in connection therewith. Gains from the disposition of foreign currencies (except certain gains that may be excluded by future regulations), and gains from options, futures contracts and forward currency contracts derived by a Portfolio with respect to its business of investing in securities or foreign currencies, will qualify as permissible income under the Income Requirement.

               Any income the Portfolio earns from writing options is treated as short-term capital gains. If a Portfolio enters into a closing purchase transaction, it will have a short-term capital gain or loss based on the difference between the premium it received for the option it wrote and the premium it pays for the option it buys. If an option written by a Portfolio lapses without being exercised, the premium it receives also will be a short-term capital gain. If such an option is exercised and the Portfolio thus sells the securities subject to the option, the premium the Portfolio receives will be added to the exercise price to determine the gain or loss on the sale.

               Certain options, futures contracts and forward currency contracts in which a Portfolio may invest may be section 1256 contracts. Section 1256 contracts held by a Portfolio at the end of its taxable year, other than contracts subject to a mixed straddle election made by the Portfolio, are marked-to-market (that is, treated as sold at that time for their fair market value) for Federal income tax purposes, with the result that unrealized gains or losses are treated as though they were realized. Sixty percent of any net gains or losses recognized on these deemed sales, and 60% of any net realized gains or losses from any actual sales of section 1256 contracts, are treated as long-term capital gains or losses, and the balance is treated as short-term capital gains or losses. Section 1256 contracts also may be marked-to-market for purposes of the Excise Tax and other purposes. A Portfolio may need to distribute any mar k-to-market gains to its shareholders to satisfy the Distribution Requirement and/or avoid imposition of the Excise Tax, even though it may not have closed the transactions and received cash to pay the distributions.

               Code section 1092 (dealing with straddles) may also affect the taxation of options and futures contracts in which a Portfolio may invest. That section defines a straddle as offsetting positions with respect to personal property; for these purposes, options, futures contracts and forward currency contracts are personal property. Section 1092 generally provides that any loss from the disposition of a position in a straddle may be deducted only to the extent the loss exceeds the unrealized gain on the offsetting position(s) of the straddle. In addition, these rules may postpone the recognition of loss that would otherwise be recognized under the mark-to-market rules discussed above. The regulations under section 1092 also provide certain wash sale rules, which apply to transactions where a position is sold at a loss and a new offsetting position is acquired within a prescribed period, and short sale rules applicable to straddles. If a Portfolio makes certain elections, the amount, character and timing of the recognition of gains and losses from the affected straddle positions will be determined under rules that vary according to the elections made. Because only a few of the regulations implementing the straddle rules have been promulgated, the tax consequences of straddle transactions to a Portfolio are not entirely clear.

               If a Portfolio has an appreciated financial position -- generally, an interest (including an interest through an option, futures or forward currency contract or short sale) with respect to any stock, debt instrument (other than straight debt) or partnership interest the fair market value of which exceeds its adjusted basis -- and enters into a constructive sale of the position, the Portfolio will be treated as having made an actual sale thereof, with the result that gain will be recognized at that time. A constructive sale generally consists of a short sale, an offsetting notional principal contract or futures or forward currency contract entered into by a Portfolio or a related person with respect to the same or substantially identical property. In addition, if the appreciated financial position is itself a short sale or such a contract, acquisition of the underlying property or substantially identical property wi ll be deemed a constructive sale. The foregoing will not apply, however, to any transaction during any taxable year that otherwise would be treated as a constructive sale if the transaction is closed within 30 days after the end of that year and the Portfolio holds the appreciated financial position unhedged for 60 days after that closing (i.e., at no time during that 60-day period is the Portfolio's risk of loss regarding that position reduced by reason of certain specified transactions with respect to substantially identical or related property, such as having an option to sell, being contractually obligated to sell, making a short sale, or granting an option to buy substantially identical stock or securities).

DIVIDENDS AND DISTRIBUTIONS

               It is the Fund's intention to distribute substantially all the net investment income, if any, of each Portfolio. For dividend purposes, net investment income of the Portfolio, will consist of all payments of dividends or interest received by the Portfolio less the estimated expenses of the Portfolio.

               Dividends from investment income of each Portfolio will usually be declared and paid annually in December in additional full and fractional shares of the Portfolio. Ordinarily, dividends are paid on shares starting on the day after they are issued and on shares the day they are redeemed.

               All net realized long-term or short-term capital gains of a Portfolio, if any, are declared and distributed annually in December to its shareholders.

               It is the policy of each Portfolio to make annual capital gains distributions to the extent that net capital gains are realized in excess of available capital loss carryovers. Income and expenses are earned and incurred separately by each Portfolio, and gains and losses on portfolio transactions of a Portfolio are attributable only to that Portfolio. For example, capital losses realized by one Portfolio would not affect capital gains realized by another portfolio of the Fund.

PORTFOLIO TRANSACTIONS AND BROKERAGE

               One of the duties undertaken by a Portfolio's Sub-Advisor, pursuant to its Sub-Advisory Agreement, is to arrange the purchase and sale of securities for the Portfolio. Purchases from underwriters include a commission or concession paid by the issuer to the underwriter. Purchases from dealers will include the spread between the bid and the asked prices. Otherwise, transactions in securities other than those for which an exchange is the primary market are generally effected with dealers acting as principals or market makers. Brokerage commissions are paid primarily for effecting transactions in securities traded on an exchange and otherwise only if it appears likely that a better price or execution can be obtained. A Portfolio's Sub-Advisor may manage other advisory accounts with investment objectives similar to those of the Portfolio. It can be anticipated that a Sub-Advisor will frequently, yet not alway s, place concurrent orders for all or most accounts for which it has responsibility, or the Sub-Advisor may otherwise combine orders for the Portfolio with those of other accounts for which it has investment discretion, including accounts of its affiliates. Under current written procedures, transactions effected pursuant to such combined orders are averaged as to price and allocated in accordance with the purchase or sale orders actually placed for each fund or advisory account, except where the combined order is not filled completely. In this case, for a transaction not involving an initial public offering (IPO), a Sub-Advisor will ordinarily allocate the transaction pro rata based on the orders it has placed, subject to certain variances provided for in the written procedures. For a partially filled IPO order, subject to certain variances specified in the written procedures, a Sub-Advisor generally allocates the shares as follows: the IPO shares are initially allocated pro rata among the included portf olios/funds and/or advisory accounts grouped according to investment objective, based on relative total assets of each group; and the shares are then allocated within each group pro rata based on relative total assets of the included portfolios/funds and/or advisory accounts, except that (a) within a group having a small cap-related investment objective, shares are allocated on a rotational basis after taking into account the impact of the anticipated initial gain on the value of the included portfolio/fund or advisory account and (b) within a group having a mid cap-related investment objective, shares are allocated based on the portfolio manager's judgment, including but not limited to such factors as the portfolio/fund's or advisory account's investment strategies and policies, cash availability, any minimum investment policy, liquidity, anticipated term of the investment and current securities positions. In all cases, a Sub-Advisor seeks to implement its allocation procedures to achieve a fair and equita ble allocation of securities among its portfolios/funds and other advisory accounts. Sharing in large transactions could affect the price a Portfolio pays or receives or the amount it buys or sells. As well, a better negotiated commission may be available through combined orders.

               To effect the portfolio transactions of a Portfolio, its Sub-Advisor is authorized to engage broker-dealers (brokers) which, in its best judgment based on all relevant factors, will implement the policy of the Portfolio to seek best execution (prompt and reliable execution at the best price obtainable) for reasonable and competitive commissions. The Sub-Advisor need not seek competitive commission bidding but is expected to minimize the commissions paid to the extent consistent with the interests and policies of the Portfolio. Subject to review by the Board, such policies include the selection of brokers which provide execution and/or research services and other services, including pricing or quotation services directly or through others (research and brokerage services) considered by the Sub-Advisor to be useful or desirable for its investment management of the Portfolio and/or the other funds and accounts over wh ich the Sub-Advisor has investment discretion.

               Research and brokerage services are, in general, defined by reference to Section 28(e) of the Securities Exchange Act of 1934 as including (1) advice, either directly or through publications or writings, as to the value of securities, the advisability of investing in, purchasing or selling securities and the availability of securities and purchasers or sellers, (2) furnishing analyses and reports, or (3) effecting securities transactions and performing functions incidental thereto (such as clearance, settlement and custody). Investment discretion is, in general, defined as having authorization to determine what securities shall be purchased or sold for an account, or making those decisions even though someone else has responsibility.

               The commissions paid to brokers that provide such research and/or brokerage services may be higher than the commission another qualified broker would charge for effecting comparable transactions and are permissible if a good faith determination is made by the Sub-Advisor that the commission is reasonable in relation to the research or brokerage services provided. No allocation of brokerage or principal business is made to provide any other benefits to the Sub-Advisor or its affiliates.

               The investment research provided by a particular broker may be useful only to one or more of the other advisory accounts of a Sub-Advisor, and investment research received for the commissions of those other accounts may be useful both to the Portfolio and one or more of such other accounts. Such investment research, which may be supplied by a third party at the request of a broker, includes information on particular companies and industries as well as market, economic or institutional activity areas. It serves to broaden the scope and supplement the research activities of the Sub-Advisor; serves to make available additional views for consideration and comparisons; and enables the Sub-Advisor, as applicable, to obtain market information on the price of securities held in the Portfolio or being considered for purchase.

               To the extent that electronic or other products provided by such brokers to assist a Sub-Advisor in making investment management decisions are used for administration or other non-research purposes, a reasonable allocation of the cost of the product attributable to its non-research use is made and this cost is paid by the Sub-Advisor.

               The Fund may also use its brokerage to pay for pricing or quotation services to value securities. The Portfolios have not been in operation prior to the date of this SAI; therefore, no brokerage commissions were paid by the Fund with respect to the Portfolios.

               The Fund, WRIMCO, Waddell & Reed and each of the Sub-Advisors have adopted a Code of Ethics under Rule 17j-1 of the 1940 Act that permits their respective directors, officers and employees to invest in securities, including securities that may be purchased or held by the Portfolio. The Code of Ethics subjects covered personnel to certain restrictions that include prohibited activities, pre-clearance requirements and reporting obligations.

OTHER INFORMATION

Capital Stock

               Capital stock is currently divided into the following classes which are a type of class designated a series as that term is defined in the Articles of Incorporation of the Fund: Asset Strategy Portfolio, Balanced Portfolio, Bond Portfolio, Growth Portfolio, High Income Portfolio, Core Equity Portfolio, International Portfolio, International II Portfolio, Limited-Term Bond Portfolio, Money Market Portfolio, Micro Cap Growth Portfolio, Science and Technology Portfolio, Small Cap Portfolio, Small Company Value Portfolio, and Value Portfolio.

               The Board may change the designation of any Fund series and may increase or decrease the numbers of shares of any Fund series but may not decrease the number of shares of any Fund series below the number of shares then outstanding.

               Each issued and outstanding share in a Fund series is entitled to participate equally in dividends and distributions declared by the Fund series and, upon liquidation or dissolution, in net assets of such Fund series remaining after satisfaction of outstanding liabilities. The shares of each Fund series when issued are fully paid and nonassessable.

               The Fund does not hold annual meetings of shareholders; however, certain significant corporate matters, such as the approval of a new investment advisory agreement or a change in a fundamental investment policy, which require shareholder approval, will be presented to shareholders at a meeting called by the Board for such purpose.

               Special meetings of shareholders may be called for any purpose upon receipt by the Fund of a request in writing signed by shareholders holding not less than 25% of all shares entitled to vote at such meeting, provided certain conditions stated in the Bylaws are met. There will normally be no meeting of the shareholders for the purpose of electing directors until such time as less than a majority of directors holding office have been elected by shareholders, at which time the directors then in office will call a shareholders' meeting for the election of directors. To the extent that Section 16(c) of the 1940 Act applies to the Fund, the directors are required to call a meeting of shareholders for the purpose of voting upon the question of removal of any director when requested in writing to do so by the shareholders of record of not less than 10% of the Fund's outstanding shares.

Voting Rights

               All shares of the Fund have equal voting rights (regardless of the NAV per share) except that on matters affecting only one series, only shares of that series are entitled to vote. The shares do not have cumulative voting rights. Accordingly, the holders of more than 50% of the shares of the Fund voting for the election of directors can elect all of the directors of the Fund if they choose to do so, and in such event the holders of the remaining shares would not be able to elect any directors.

               Matters in which the interests of all the Fund series are substantially identical (such as the election of Directors or the approval of independent public accountants) will be voted on by all shareholders without regard to the separate Fund series. Matters that affect all the Fund series but where the interests of the Fund series are not substantially identical (such as approval of the Investment Management Agreement) will be voted on separately by each Fund series. Matters affecting only one Fund series, such as a change in its fundamental policies or its Sub-Advisor, will be voted on separately by that Fund series.

               Matters requiring separate shareholder voting by the Fund series shall have been effectively acted upon with respect to any Fund series if a majority of the outstanding voting securities of that Fund series votes for approval of the matter, notwithstanding that: (1) the matter has not been approved by a majority of the outstanding voting securities of any other Fund series; or (2) the matter has not been approved by a majority of the outstanding voting securities of the Fund.

               The phrase "a majority of the outstanding voting securities" of a Fund series (or of the Fund) means the vote of the lesser of: (1) 67% of the shares of the Fund series (or the Fund) present at a meeting if the holders of more than 50% of the outstanding shares are present in person or by proxy; or (2) more than 50% of the outstanding shares of a series (or the Fund).

               To the extent required by law, Policyholders are entitled to give voting instructions with respect to Fund shares held in the separate accounts of Participating Insurance Companies. Participating Insurance Companies will vote the shares in accordance with such instructions unless otherwise legally required or permitted to act with respect to such instructions.

APPENDIX A

               The following are descriptions of some of the ratings of securities which the Fund may use. The Fund may also use ratings provided by other nationally recognized statistical rating organizations in determining the eligibility of securities for the Portfolios.

DESCRIPTION OF BOND RATINGS

               Standard & Poor's, a division of The McGraw-Hill Companies, Inc. An S&P corporate or municipal bond rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment of creditworthiness may take into consideration obligors such as guarantors, insurers or lessees.

               The debt rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor.

               The ratings are based on current information furnished to S&P by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform any audit in connection with any ratings and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances.

               The ratings are based, in varying degrees, on the following considerations:

1.               Likelihood of default -- capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation;

2.               Nature of and provisions of the obligation;

3.               Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.

               A brief description of the applicable S&P rating symbols and their meanings follow:

               AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong.

               AA -- Debt rated AA also qualifies as high-quality debt. Capacity to pay interest and repay principal is very strong, and debt rated AA differs from AAA issues only in a small degree.

               A -- Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.

               BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories.

               BB, B, CCC, CC, C -- Debt rated BB, B, CCC, CC and C is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major exposures to adverse conditions.

               BB -- Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating.

               B -- Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating.

               CCC -- Debt rated CCC has a currently indefinable vulnerability to default, and is dependent upon favorable business, financial and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The CCC rating category is also used for debt subordinated to senior debt that is assigned an actual or implied B or B- rating.

               CC -- The rating CC is typically applied to debt subordinated to senior debt that is assigned an actual or implied CCC rating.

               C -- The rating C is typically applied to debt subordinated to senior debt which is assigned an actual or implied CCC- debt rating. The C rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued.

               CI -- The rating CI is reserved for income bonds on which no interest is being paid.

               D -- Debt rated D is in payment default. It is used when interest payments or principal payments are not made on a due date even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace periods. The D rating will also be used upon a filing of a bankruptcy petition if debt service payments are jeopardized.

               Plus (+) or Minus (-) -- To provide more detailed indications of credit quality, the ratings from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

               NR -- Indicates that no public rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.

               Debt Obligations of issuers outside the United States and its territories are rated on the same basis as domestic corporate and municipal issues. The ratings measure the creditworthiness of the obligor but do not take into account currency exchange and related uncertainties.

               Bond Investment Quality Standards: Under present commercial bank regulations issued by the Comptroller of the Currency, bonds rated in the top four categories (AAA, AA, A, BBB, commonly known as Investment Grade ratings) are generally regarded as eligible for bank investment. In addition, the Legal Investment Laws of various states governing legal investments may impose certain rating or other standards for obligations eligible for investment by savings banks, trust companies, insurance companies and fiduciaries generally.

               Moody's. A brief description of the applicable Moody's rating symbols and their meanings follows:

               Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as gilt edge. Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.

               Aa -- Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuations of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.

               A -- Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.

               Baa -- Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Some bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

NOTE: Bonds within the above categories which possess the strongest investment attributes are designated by the symbol 1 following the rating.

               Ba -- Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during good and bad times over the future. Uncertainty of position characterizes bonds in this class.

               B -- Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.

               Caa -- Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.

               Ca -- Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.

               C -- Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

Description of preferred stock ratings

               Standard & Poor's, a division of The McGraw-Hill Companies, Inc. An S&P preferred stock rating is an assessment of the capacity and willingness of an issuer to pay preferred stock dividends and any applicable sinking fund obligations. A preferred stock rating differs from a bond rating inasmuch as it is assigned to an equity issue, which issue is intrinsically different from, and subordinated to, a debt issue. Therefore, to reflect this difference, the preferred stock rating symbol will normally not be higher than the debt rating symbol assigned to, or that would be assigned to, the senior debt of the same issuer.

               The preferred stock ratings are based on the following considerations:

1.               Likelihood of payment - capacity and willingness of the issuer to meet the timely payment of preferred stock dividends and any applicable sinking fund requirements in accordance with the terms of the obligation;

2.               Nature of, and provisions of, the issue;

3.               Relative position of the issue in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.

               AAA -- This is the highest rating that may be assigned by S&P to a preferred stock issue and indicates an extremely strong capacity to pay the preferred stock obligations.

               AA -- A preferred stock issue rated AA also qualifies as a high-quality fixed income security. The capacity to pay preferred stock obligations is very strong, although not as overwhelming as for issues rated AAA.

               A -- An issue rated A is backed by a sound capacity to pay the preferred stock obligations, although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions.

               BBB -- An issue rated BBB is regarded as backed by an adequate capacity to pay the preferred stock obligations. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to make payments for a preferred stock in this category than for issues in the 'A' category.

               BB, B, CCC -- Preferred stock rated BB, B, and CCC are regarded, on balance, as predominantly speculative with respect to the issuer's capacity to pay preferred stock obligations. BB indicates the lowest degree of speculation and CCC the highest degree of speculation. While such issues will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

               CC -- The rating CC is reserved for a preferred stock issue in arrears on dividends or sinking fund payments but that is currently paying.

               C -- A preferred stock rated C is a non-paying issue.

               D -- A preferred stock rated D is a non-paying issue with the issuer in default on debt instruments.

               NR -- This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.

               Plus (+) or minus (-) -- To provide more detailed indications of preferred stock quality, the rating from AA to CCC may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

               A preferred stock rating is not a recommendation to purchase, sell, or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to S&P by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances.

               Moody's. Note: Moody's applies numerical modifiers 1, 2 and 3 in each rating classification; the modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.

               Preferred stock rating symbols and their definitions are as follows:

               aaa -- An issue which is rated aaa is considered to be a top-quality preferred stock. This rating indicates good asset protection and the least risk of dividend impairment within the universe of preferred stocks.

               aa -- An issue which is rated aa is considered a high-grade preferred stock. This rating indicates that there is a reasonable assurance the earnings and asset protection will remain relatively well-maintained in the foreseeable future.

               a -- An issue which is rated a is considered to be an upper-medium grade preferred stock. While risks are judged to be somewhat greater than in the aaa and aa classification, earnings and asset protection are, nevertheless, expected to be maintained at adequate levels.

               baa -- An issue which is rated baa is considered to be a medium-grade preferred stock, neither highly protected nor poorly secured. Earnings and asset protection appear adequate at present but may be questionable over any great length of time.

               ba -- An issue which is rated ba is considered to have speculative elements and its future cannot be considered well assured. Earnings and asset protection may be very moderate and not well safeguarded during adverse periods. Uncertainty of position characterizes preferred stocks in this class.

               b -- An issue which is rated b generally lacks the characteristics of a desirable investment. Assurance of dividend payments and maintenance of other terms of the issue over any long period of time may be small.

               caa -- An issue which is rated caa is likely to be in arrears on dividend payments. This rating designation does not purport to indicate the future status of payments.

               ca -- An issue which is rated ca is speculative in a high degree and is likely to be in arrears on dividends with little likelihood of eventual payments.

               c -- This is the lowest rated class of preferred or preference stock. Issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

DESCRIPTION OF COMMERCIAL PAPER RATINGS

               S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt considered short-term in the relevant market. Ratings are graded into several categories, ranging from A-1 for the highest quality obligations to D for the lowest. Issuers rated A are further referred to by use of numbers 1, 2 and 3 to indicate the relative degree of safety. Issues assigned an A rating (the highest rating) are regarded as having the greatest capacity for timely payment. An A-1 designation indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. An A-2 rating indicates that capacity for timely payment is satisfactory; however, the relative degree of safety is not as high as for issues designated A-1. Issues rated A-3 have adequate capacity for timely payment; howe ver, they are more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. Issues rated B are regarded as having only speculative capacity for timely payment. A C rating is assigned to short-term debt obligations with a doubtful capacity for payment. Debt rated D is in payment default, which occurs when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period.

               Moody's commercial paper ratings are opinions of the ability of issuers to repay punctually promissory obligations not having an original maturity in excess of nine months. Moody's employs the designations of Prime 1, Prime 2 and Prime 3, all judged to be investment grade, to indicate the relative repayment capacity of rated issuers. Issuers rated Prime 1 have a superior capacity for repayment of short-term promissory obligations and repayment capacity will normally be evidenced by (1) leading market positions in well established industries; (2) high rates of return on funds employed; (3) conservative capitalization structures with moderate reliance on debt and ample asset protection; (4) broad margins in earnings coverage of fixed financial charges and high internal cash generation; and (5) well established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime 2 al so have a strong capacity for repayment of short-term promissory obligations as will normally be evidenced by many of the characteristics described above for Prime 1 issuers, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation; capitalization characteristics, while still appropriate, may be more affected by external conditions; and ample alternate liquidity is maintained. Issuers rated Prime 3 have an acceptable capacity for repayment of short-term promissory obligations, as will normally be evidenced by many of the characteristics above for Prime 1 issuers, but to a lesser degree. The effect of industry characteristics and market composition may be more pronounced; variability in earnings and profitability may result in changes in the level of debt protection measurements and requirement for relatively high financial leverage; and adequate alternate liquidity is maintained.

                         REGISTRATION STATEMENT

                                  PART C

                             OTHER INFORMATION

23. Exhibits:

    (a)  Articles of Incorporation, as amended, filed July 1, 1998 as EX-
         99.B1-charter to Post-Effective Amendment No. 21 to the
         Registration Statement on Form N-1A*

         Articles of Amendment, dated May 13, 1998, filed July 1, 1998 as
         EX-99.B1-tkartsup to Post-Effective Amendment No. 21 to the
         Registration Statement on Form N-1A*

         Articles Supplementary, dated May 25, 1999, filed by EDGAR on
         April 29, 2002 as EX-99.B(a)tmkartsup1 to Post-Effective
         Amendment No. 27 to the Registration Statement on Form N-1A*

         Articles Supplementary, dated July 19, 1999, filed by EDGAR on
         April 29, 2002 as EX-99.B(a)tmkartsup2 to Post-Effective
         Amendment No. 27 to the Registration Statement on Form N-1A*

         Articles Supplementary, dated August 21, 1998, filed by EDGAR on
         April 29, 2002 as EX-99.B(a)tmkartsup3 to Post-Effective
         Amendment No. 27 to the Registration Statement on Form N-1A*

         Articles Supplementary, dated February 18, 2000, filed by EDGAR
         on April 27, 2000 as EX-99.B(a)tgtsupp to Post-Effective
         Amendment No. 23 to the Registration Statement on Form N-1A*

         Articles of Amendment, dated September 26, 2000, filed by EDGAR
         on March 1, 2001 as EX-99.B(a)tgtartamend1 to Post-Effective
         Amendment No. 24 to the Registration Statement on Form N-1A*

         Articles of Amendment, dated November 15, 2000, filed by EDGAR on
         March 1, 2001 as EX-99.B(a)tgtartamend2 to Post-Effective
         Amendment No. 24 to the Registration Statement on Form N-1A*

         Articles Supplementary, dated February 14, 2001, filed by EDGAR
         on March 1, 2001 as EX-99.B(a)tgtartsupp to Post-Effective
         Amendment No. 24 to the Registration Statement on Form N-1A*

         Articles of Amendment, dated August 22, 2001, filed by EDGAR on
         April 29, 2002 as EX-99.B(a)tgtartamend1 to Post-Effective
         Amendment No. 27 to the Registration Statement on Form N-1A*

         Articles of Amendment, dated November 14, 2001, filed by EDGAR on
         April 29, 2002 as EX-99.B(a)tgtartamend2 to Post-Effective
         Amendment No. 27 to the Registration Statement on Form N-1A*

         Articles of Amendment for Reallocation of Shares, dated November
         13, 2002, attached hereto as EX-99.B(a)tgtartamend

         Articles of Amendment for Reallocation of Shares, dated March 26,
         2003, attached hereto as EX-99.B(a)tgtartamend2

         Articles Supplementary, dated May 22, 2003, attached hereto as
         Ex-99.B(a)tgtartsup

    (b)  Bylaws filed April 29, 1996 as EX-99.B2-tmkbylaw to Post-
         Effective Amendment No. 13 to the Registration Statement on Form
         N-1A*

         Amendment to Bylaws, dated February 10, 1999, filed by EDGAR on
         March 1, 1999 as EX-99.B(b)-bylaw2 to Post-Effective Amendment
         No. 22 to the Registration Statement on Form N-1A*

         Amendment to Bylaws, dated May 17, 2000, filed by EDGAR on March
         1, 2001 as EX-99.B(b)tgtbylawamend1 to Post-Effective Amendment
         No. 24 to the Registration Statement on Form N-1A*

         Amendment to Bylaws, dated August 16, 2000, filed by EDGAR on
         March 1, 2001 as EX-99.B(b)tgtbylawamend2 to Post-Effective
         Amendment No. 24 to the Registration Statement on Form N-1A*

    (c)  Articles Fifth and Seventh of the Articles of Incorporation, as
         amended, and Articles I and IV of the Bylaws, as amended, each
         define the rights of shareholders.

    (d)  Investment Management Agreement with fee schedule amended to
         reflect the addition of Science and Technology Portfolio filed
         October 31, 1996 as EX-99.B5-tmkima to Post-Effective Amendment
         No. 14 to the Registration Statement on Form N-1A*

         Fee Schedule (Exhibit A) to the Investment Management Agreement,
         as amended, filed by EDGAR on March 1, 2001 as EX-
         99.B(d)tgtimafees to Post-Effective Amendment No. 24 to the
         Registration Statement on Form N-1A*

         Investment Management Agreement with respect to International II
         Portfolio, Micro Cap Portfolio and Small Company Value Portfolio,
         attached hereto as EX-99.B(d)tgtima2

         Subadvisory Agreement between Waddell & Reed Investment
         Management Company and Wall Street Associates, attached hereto as
         EX-99.B(d)tgtsubadv1

         Subadvisory Agreement between Waddell & Reed Investment
         Management Company and Templeton Investment Counsel, Inc.,
         attached hereto as EX-99.B(d)tgtsubadv2

         Subadvisory Agreement between Waddell & Reed Investment
         Management Company and State Street Research & Management
         Company, to be filed

    (e)  Distribution Contract between TMK/United Funds, Inc. and United
         Investors Life Insurance Company, dated April 4, 1997, filed by
         EDGAR on March 1, 2001 as EX-99.B(e)tmkdist to Post-Effective
         Amendment No. 24 to the Registration Statement on Form N-1A*

         Agreement Amending Distribution Contract, dated March 3, 1998,
         reflecting termination of the agreement as of December 31, 1998
         filed by EDGAR on March 1, 2001 as EX-99.B(e)tmkterm1 to Post-
         Effective Amendment No. 24 to the Registration Statement on Form
         N-1A*

         Agreement Amending Distribution Contract, effective December 31,
         1998, to rescind the provision to terminate the agreement filed
         by EDGAR on March 1, 2001 as EX-99.B(e)amnddist to Post-Effective
         Amendment No. 24 to the Registration Statement on Form N-1A*

         Letter Agreement, dated July 8, 1999, filed by EDGAR on March 1,
         2001 as EX-99.B(e)amendpua to Post-Effective Amendment No. 24 to
         the Registration Statement on Form N-1A*

         Limited Selling Agreement, dated May 16, 2001, filed by EDGAR on
         April 29, 2002 as EX-99.B(e)tgtuilicsel to Post-Effective
         Amendment No. 27 to the Registration Statement on Form N-1A*

         Fund Participation Agreement with Nationwide Life Insurance
         Company, dated December 1, 2000, filed by EDGAR on March 1, 2001
         as EX-99.B(e)tgtnwpart to Post-Effective Amendment No. 24 to the
         Registration Statement on Form N-1A*

    (f)  Not applicable

    (g)  Custodian Agreement, as amended, filed April 26, 2000 as EX-
         99.B(g)tgtca to Post-Effective Amendment No. 23 to the
         Registration Statement on Form N-1A*. The Custodian Agreement for
         Target/United Funds, Inc. Asset Strategy Portfolio was filed as a
         representative copy. The Custodian Agreements for all portfolios
         of W&R Target Funds, Inc. are identical with the exception of
         their respective effective dates.

         Custodian Agreement for Micro Cap Growth Portfolio, attached
         hereto as EX-99.B(g)mcgpca. The Custodian Agreement for
         International II Portfolio and for Small Company Value Portfolio
         is identical to the Custodian Agreement for Micro Cap Growth
         Portfolio.

         Rule 17f-5 Delegation Agreement for Micro Cap Growth Portfolio,
         attached hereto as EX-99.B(g)mcgpcadel. The Rule 17f-5 Delegation
         Agreement for International II Portfolio and for Small Company
         Value Portfolio is identical to the Rule 17f-5 Delegation
         Agreement for Micro Cap Growth Portfolio.

    (h)  Accounting Services Agreement filed October 3, 1995 as EX-99.B9-
         tmkasa to Post-Effective Amendment No. 12 to the Registration
         Statement on Form N-1A*

         Amendment to Accounting Services Agreement, dated September 1,
         2000, filed by EDGAR on March 1, 2001 as EX-99.B(h)tgtasaamend to
         Post-Effective Amendment No. 24 to the Registration Statement on
         Form N-1A*

    (i)  Opinion and Consent of Counsel attached hereto as EX-
         99.B(i)tgtlegopn

    (j)  Not applicable

    (k)  Not applicable

    (l)  Agreement between United Investors Life Insurance Company and
         Income Portfolio filed April 21, 1992 as Exhibit No. 13 to Post-
         Effective Amendment No. 8 to the Registration Statement on Form
         N-1A*

         Agreement between United Investors Life Insurance Company and
         International Portfolio, Small Cap Portfolio, Balanced Portfolio
         and Limited-Term Bond Portfolio filed February 15, 1995 as EX-
         99.B13-tmkuil to Post-Effective Amendment No. 11 to the
         Registration Statement on Form N-1A*

         Agreement between United Investors Life Insurance Company and
         Asset Strategy Portfolio filed October 3, 1995 as EX-99.B13-
         tmkuilasp to Post-Effective Amendment No. 12 to the Registration
         Statement on Form N-1A*

         Agreement between United Investors Life Insurance Company and
         Science and Technology Portfolio filed October 31, 1996 as EX-
         B.13-tmkuilst to Post-Effective Amendment No. 14 to the
         Registration Statement on Form N-1A*

    (m)  Service Plan filed by EDGAR on March 1, 1999 as EX-99.B(m)-tmksp
         to Post-Effective Amendment No. 22 to the Registration Statement
         on Form N-1A*

         Service Plan, as revised May 16, 2001, filed by EDGAR on April
         29, 2002 as EX-99.B(m)tgtsp to Post-Effective Amendment No. 27 to
         the Registration Statement on Form N-1A*

    (n)  Not applicable

    (o)  Not applicable

    (p)  Code of Ethics, as amended November 13, 2002, attached hereto as
         EX-99.B(p)tgtcode

24. Persons Controlled by or under common control with Registrant
    -------------------------------------------------------------
    None

25. Indemnification
    ---------------
    Reference is made to Section 7 of Article SEVENTH of the Articles of
    Incorporation of Registrant, as amended, filed July 1, 1998 as EX-
    99.B1-charter to Post-Effective Amendment No. 21 to the Registration
    Statement on Form N-1A*, to Paragraph 7 of the Distribution Contract
    between TMK/United Funds, Inc. and United Investors Life Insurance
    Company, dated April 4, 1997, filed by EDGAR on March 1, 2001 as EX-
    99.B(e)tmkdist to Post-Effective Amendment No. 24 to the Registration
    Statement on Form N-1A*, and to Paragraph 12 of the Fund Participation
    Agreement with Nationwide Life Insurance Company, dated December 1,
    2000, filed by EDGAR on March 1, 2001 as EX-99.B(e)tgtnwpart to Post-
    Effective Amendment No. 24 to the Registration Statement on Form N-
    1A*, each of which provides for indemnification. Also refer to Section
    2-418 of the Maryland General Corporation Law regarding
    indemnification of directors, officers, employees and agents.

    Registrant undertakes to carry out all indemnification provisions of
    its Articles of Incorporation, Bylaws, and the above-described
    contracts in accordance with the Investment Company Act Release No.
    11330 (September 4, 1980) and successor releases.

    Insofar as indemnification for liability arising under the 1933 Act,
    as amended, may be provided to directors, officers and controlling
    persons of the Registrant pursuant to the foregoing provisions, or
    otherwise, the Registrant has been advised that in the opinion of the
    Securities and Exchange Commission such indemnification is against
    public policy as expressed in the Act and is, therefore unenforceable.
    In the event that a claim for indemnification against such liabilities
    (other than the payment of the Registrant of expenses incurred or paid
    by a director, officer of controlling person of the Registrant in the
    successful defense of any action, suit or proceeding) is asserted by
    such director, officer, or controlling person in connection with the
    securities being registered, the Registrant will, unless in the
    opinion of its counsel the matter has been settled by controlling
    precedent, submit to a court of appropriate jurisdiction the question
    whether such indemnification by it is against public policy as
    expressed in the Act and will be governed by the final adjudication of
    such issue.

26. Business and Other Connections of Investment Manager
    ----------------------------------------------------
    Waddell & Reed Investment Management Company (WRIMCO)is the investment
    manager of the Registrant. WRIMCO is not engaged in any business other
    than the provision of investment management services to those
    registered investment companies as described in Part A and Part B of
    this Post-Effective Amendment and to other investment advisory
    clients.

    Each director and executive officer of WRIMCO or its predecessors, has
    had as his sole business, profession, vocation or employment during
    the past two years only his duties as an executive officer and/or
    employee of WRIMCO or its predecessors, except as to persons who are
    directors and/or officers of the Registrant and have served in the
    capacities shown in the Statement of Additional Information of the
    Registrant. The address of such officers is 6300 Lamar Avenue, Shawnee
    Mission, Kansas  66202-4200.

    As to each director and officer of WRIMCO, reference is made to the
    Prospectus and SAI of this Registrant.

27. Principal Underwriter and Distributor
    -------------------------------------
    (a)  Waddell & Reed, Inc. is the Principal Underwriter and Distributor
         of the Registrant's shares. It is the principal underwriter to
         the following investment companies:

         Waddell & Reed Advisors Asset Strategy Fund, Inc.
         Waddell & Reed Advisors Cash Management, Inc.
         Waddell & Reed Advisors Continental Income Fund, Inc.
         Waddell & Reed Advisors Fixed Income Funds, Inc.
         Waddell & Reed Advisors Funds, Inc.
         Waddell & Reed Advisors Global Bond Fund, Inc.
         Waddell & Reed Advisors High Income Fund, Inc.
         Waddell & Reed Advisors International Growth Fund, Inc.
         Waddell & Reed Advisors Municipal Bond Fund, Inc.
         Waddell & Reed Advisors Municipal High Income Fund, Inc.
         Waddell & Reed Advisors Municipal Money Market Fund, Inc.
         Waddell & Reed Advisors New Concepts Fund, Inc.
         Waddell & Reed Advisors Retirement Shares, Inc.
         Waddell & Reed Advisors Select Funds, Inc.
         Waddell & Reed Advisors Small Cap Fund, Inc.
         Waddell & Reed Advisors Tax-Managed Equity Fund, Inc.
         Waddell & Reed Advisors Vanguard Fund, Inc.
         W&R Funds, Inc.
         Waddell & Reed InvestEd Portfolios, Inc.
         Waddell & Reed Advisors Select Life
         Waddell & Reed Advisors Survivorship Life
         Waddell & Reed Advisors Select Annuity
         Waddell & Reed Advisors Select Income Annuity
         Waddell & Reed Advisors Select Plus Annuity

    (b)  The information contained in the underwriter's application on
         Form BD, as filed on June 2, 2003 SEC No. 8-27030 under the
         Securities Exchange Act of 1934, is herein incorporated by
         reference.

    (c)  No compensation was paid by the Registrant to any principal
         underwriter who is not an affiliated person of the Registrant or
         any affiliated person of such affiliated person.

28. Location of Accounts and Records
    --------------------------------
    The accounts, books and other documents required to be maintained by
    Registrant pursuant to Section 31(a) of the Investment Company Act and
    rules promulgated thereunder are under the possession of Ms. Kristen
    A. Richards and Mr. Theodore W. Howard, as officers of the Registrant,
    each of whose business address is Post Office Box 29217, Shawnee
    Mission, Kansas 66201-9217.

29. Management Services
    -------------------
    There are no service contracts other than as discussed in Part A and B
    of this Post-Effective Amendment and as listed in response to Items
    23(h) and 23(m) hereof.

30. Undertakings
    ------------
    Not applicable

- ---------------------------------
*Incorporated herein by reference

                             POWER OF ATTORNEY

     KNOW ALL MEN BY THESE PRESENTS, That each of the undersigned,  WADDELL
& REED ADVISORS ASSET STRATEGY FUND, INC., WADDELL & REED ADVISORS CASH
MANAGEMENT, INC., WADDELL & REED ADVISORS CONTINENTAL INCOME FUND, INC.,
WADDELL & REED ADVISORS FIXED INCOME FUNDS, INC., WADDELL & REED ADVISORS
FUNDS, INC., WADDELL & REED ADVISORS GLOBAL BOND FUND, INC., WADDELL & REED
ADVISORS HIGH INCOME FUND, INC., WADDELL & REED ADVISORS INTERNATIONAL
GROWTH FUND, INC., WADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.,
WADDELL & REED ADVISORS MUNICIPAL HIGH INCOME FUND, INC., WADDELL & REED
ADVISORS MUNICIPAL MONEY MARKET FUND, INC., WADDELL & REED ADVISORS NEW
CONCEPTS FUND, INC., WADDELL & REED ADVISORS RETIREMENT SHARES, INC.,
WADDELL & REED ADVISORS SELECT FUNDS, INC., WADDELL & REED ADVISORS SMALL
CAP FUND, INC., WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.,
WADDELL & REED ADVISORS VANGUARD FUND, INC., W&R TARGET FUNDS, INC., W&R
FUNDS, INC. AND WADDELL & REED INVESTED PORTFOLIOS, INC. (each hereinafter
called the Corporation), and certain directors and officers for the
Corporation, do hereby constitute and appoint KEITH A. TUCKER, DANIEL C.
SCHULTE and KRISTEN A. RICHARDS, and each of them individually, their true
and lawful attorneys and agents to take any and all action and execute any
and all instruments which said attorneys and agents may deem necessary or
advisable to enable each Corporation to comply with the Securities Act of
1933 and/or the Investment Company Act of 1940, as amended, and any rules,
regulations, orders or other requirements of the United States Securities
and Exchange Commission thereunder, in connection with the registration
under the Securities Act of 1933 and/or the Investment Company Act of 1940,
as amended, including specifically, but without limitation of the
foregoing, power and authority to sign the names of each of such directors
and officers in his/her behalf as such director or officer as indicated
below opposite his/her signature hereto, to any Registration Statement and
to any amendment or supplement to the Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and/or
the Investment Company Act of 1940, as amended, and to any instruments or
documents filed or to be filed as a part of or in connection with such
Registration Statement or amendment or supplement thereto; and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.



Date:  May 21, 2003                     /s/Henry J. Herrmann
                                       --------------------------
                                       Henry J. Herrmann, President


/s/Keith A. Tucker          Chairman of the Board        May 21, 2003
- -------------------                                      ---------------
Keith A. Tucker


/s/Henry J. Herrmann        President and Director       May 21, 2003
- --------------------                                     ---------------
Henry J. Herrmann


/s/Theodore W. Howard       Vice President, Treasurer    May 21, 2003
- --------------------        and Principal Accounting     ---------------
Theodore W. Howard          Officer


/s/James M. Concannon       Director                     May 21, 2003
- --------------------                                     ---------------
James M. Concannon


/s/John A. Dillingham       Director                     May 21, 2003
- --------------------                                     ---------------
John A. Dillingham


/s/David P. Gardner         Director                     May 21, 2003
- -------------------                                      ---------------
David P. Gardner


/s/Linda K. Graves          Director                     May 21, 2003
- --------------------                                     ---------------
Linda K. Graves


/s/Joseph Harroz, Jr.       Director                     May 21, 2003
- --------------------                                     ---------------
Joseph Harroz, Jr.


/s/John F. Hayes            Director                     May 21, 2003
- --------------------                                     ---------------
John F. Hayes



/s/Glendon E. Johnson       Director                     May 21, 2003
- --------------------                                     ---------------
Glendon E. Johnson


/s/Frank J. Ross, Jr.       Director                     May 21, 2003
- --------------------                                     ---------------
Frank J. Ross, Jr.


/s/Eleanor B. Schwartz      Director                     May 21, 2003
- --------------------                                     ---------------
Eleanor B. Schwartz


/s/Frederick Vogel III      Director                     May 21, 2003
- --------------------                                     ---------------
Frederick Vogel III



Attest:

/s/Kristen A. Richards
- --------------------------------
Kristen A. Richards
Secretary

                                SIGNATURES


Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Post-Effective Amendment
pursuant to Rule 485(a) of the Securities Act of 1933 and has duly caused
this Post-Effective Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Overland Park, and
State of Kansas, on the 10th day of June, 2003.

                         W&R TARGET FUNDS, INC.

                               (Registrant)

                         By /s/ Henry J. Herrmann*
                        ------------------------
                      Henry J. Herrmann, President

     Pursuant to the requirements of the Securities Act of 1933, and/or the
Investment Company Act of 1940, this Post-Effective Amendment has been
signed below by the following persons in the capacities and on the date
indicated.

     Signatures          Title
    ----------           -----

/s/Keith A. Tucker*      Chairman of the Board         June 10, 2003
- ----------------------                                 ------------------
Keith A. Tucker


/s/Henry J. Herrmann*    President and Director        June 10, 2003
- ----------------------                                 ------------------
Henry J. Herrmann


/s/Theodore W. Howard*   Vice President, Treasurer,    June 10, 2003
- ----------------------   Principal Financial Officer   ------------------
Theodore W. Howard       and Principal Accounting
                         Officer


/s/James M. Concannon*   Director                      June 10, 2003
- -------------------                                    ------------------
James M. Concannon


/s/John A. Dillingham*   Director                      June 10, 2003
- -------------------                                    ------------------
John A. Dillingham


/s/David P. Gardner*     Director                      June 10, 2003
- -------------------                                    ------------------
David P. Gardner


/s/Linda K. Graves*      Director                      June 10, 2003
- -------------------                                    ------------------
Linda K. Graves


/s/Joseph Harroz, Jr.*   Director                      June 10, 2003
- -------------------                                    ------------------
Joseph Harroz, Jr.


/s/John F. Hayes*        Director                      June 10, 2003
- -------------------                                    ------------------
John F. Hayes


/s/Glendon E. Johnson*   Director                      June 10, 2003
- -------------------                                    ------------------
Glendon E. Johnson


/s/Frank J. Ross, Jr.*   Director                      June 10, 2003
- -------------------                                    ------------------
Frank J. Ross, Jr.


/s/Eleanor B. Schwartz*  Director                      June 10, 2003
- -------------------                                    ------------------
Eleanor B. Schwartz


/s/Frederick Vogel III*  Director                      June 10, 2003
- -------------------                                    ------------------
Frederick Vogel III


*By/s/Kristen A. Richards
- ------------------------
  Kristen A. Richards
  Attorney-in-Fact


ATTEST:/s/Daniel C. Schulte
- ---------------------------
  Daniel C. Schulte
  Assistant Secretary

EX-99.B(A)TGTARTAMEN

                                             EX-99.B(a)tgtartamend



                           ARTICLES OF AMENDMENT
                                    TO
                         ARTICLES OF INCORPORATION
                                    OF
                          W&R TARGET FUNDS, INC.

     W&R Target Funds, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Maryland,
having its principal office in the State of Maryland in Baltimore,
Maryland (hereinafter referred to as the "Corporation"), DOES HEREBY
CERTIFY:

      FIRST:  That the Board of Directors of the Corporation, at a
meeting held on November 13, 2002, adopted resolutions authorizing the
reallocation of shares of the capital stock of the Corporation.

      SECOND:  That there are no changes in the preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of the
Corporation's capital stock, as set forth in the Corporation's Articles of
Incorporation.

      THIRD:  Pursuant to the authority vested in the Board of Directors
of the Corporation by Article FIFTH of the Articles of Incorporation of
the Corporation, the Board of Directors has heretofore duly designated, in
accordance with Maryland General Corporation Law, the aggregate number of
shares of capital stock which the Corporation is authorized to issue at
One Billion (1,000,000,000) shares of capital stock, (par value $0.001 per
share), amounting in the aggregate to a par value of One Million Dollars
($1,000,000.00). Such shares have heretofore been classified by the Board
of Directors among the series of the Corporation as follows:

          Asset Strategy Portfolio          40,000,000 shares
          Balanced Portfolio                50,000,000 shares
          Bond Portfolio                    60,000,000 shares
          Core Equity Portfolio            160,000,000 shares
          Growth Portfolio                 210,000,000 shares
          High Income Portfolio             70,000,000 shares
          International Portfolio           60,000,000 shares
          Limited-Term Bond Portfolio       15,000,000 shares
          Money Market Portfolio           185,000,000 shares
          Science and Technology Portfolio  40,000,000 shares
          Small Cap Portfolio               80,000,000 shares
          Value Portfolio                   30,000,000 shares

      FOURTH:  Pursuant to the authority vested in the Board of Directors
of the Corporation by Article FIFTH of the Articles of Incorporation of
the Corporation, the Board of Directors, in accordance with Maryland
General Corporation Law, now duly redesignates and reclassifies the
capital stock of the Corporation among the series of the Corporation as
follows:

          Asset Strategy Portfolio          45,000,000 shares
          Balanced Portfolio                50,000,000 shares
          Bond Portfolio                    80,000,000 shares
          Core Equity Portfolio            160,000,000 shares
          Growth Portfolio                 190,000,000 shares
          High Income Portfolio             70,000,000 shares
          International Portfolio           55,000,000 shares
          Limited-Term Bond Portfolio       15,000,000 shares
          Money Market Portfolio           185,000,000 shares
          Science and Technology Portfolio  40,000,000 shares
          Small Cap Portfolio               80,000,000 shares
          Value Portfolio                   30,000,000 shares

     The aggregate number of shares of stock of the Corporation remains at
One Billion (1,000,000,000) shares of capital stock, the par value remains
$0.001 per share, and the aggregate value of all authorized stock remains
One Million Dollars ($1,000,000.00).

      FIFTH:  The Corporation is registered with the Securities and
Exchange Commission as an open-end investment company under the Investment
Company Act of 1940, as amended.

      IN WITNESS WHEREOF, the undersigned Vice President of the
Corporation hereby executes these Articles of Amendment on behalf of the
Corporation this 13th day of November, 2002.


                         W&R Target Funds, Inc.


                         /s/Kristen A. Richards
                         ------------------------------
                         Kristen A. Richards, Vice President



(Corporate Seal)


Attest: /s/Daniel C. Schulte
        ----------------------------
        Daniel C. Schulte, Assistant Secretary


     The undersigned, Vice President of W&R Target Funds, Inc. who
executed on behalf of said Corporation the foregoing Articles of
Amendment, of which this certificate is made a part, hereby acknowledges,
in the name and on behalf of said Corporation, the foregoing Articles of
Amendment to be the act of said Corporation and further certifies that, to
the best of her knowledge, information and belief, the matters and facts
set forth therein with respect to the approval thereof are true in all
material respects, under the penalties of perjury.


                         By: /s/Kristen A. Richards
                             ----------------------------------
                             Kristen A. Richards, Vice President

EX-99.B(A)TGTARTAMEN

                                        EX-99.B(a)tgtartamend2


                          ARTICLES OF AMENDMENT
                                   TO
                        ARTICLES OF INCORPORATION
                                   OF
                         W&R TARGET FUNDS, INC.

     W&R Target Funds, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Maryland, having
its principal office in the State of Maryland in Baltimore, Maryland
(hereinafter referred to as the "Corporation"), DOES HEREBY CERTIFY:

       FIRST:  That the Executive Committee of the Board of Directors of
the Corporation, at a meeting held on March 26, 2003, adopted resolutions
authorizing the reallocation of shares of the capital stock of the
Corporation.

       SECOND:  That there are no changes in the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the Corporation's
capital stock, as set forth in the Corporation's Articles of Incorporation.

       THIRD:  Pursuant to the authority vested in the Board of Directors
of the Corporation by Article FIFTH of the Articles of Incorporation of the
Corporation, the Board of Directors has heretofore duly designated, in
accordance with Maryland General Corporation Law, the aggregate number of
shares of capital stock which the Corporation is authorized to issue at One
Billion (1,000,000,000) shares of capital stock, (par value $0.001 per
share), amounting in the aggregate to a par value of One Million Dollars
($1,000,000.00). Such shares have heretofore been classified by the Board
of Directors among the series of the Corporation as follows:

         Asset Strategy Portfolio              45,000,000 shares
         Balanced Portfolio                    50,000,000 shares
         Bond Portfolio                        80,000,000 shares
         Core Equity Portfolio                160,000,000 shares
         Growth Portfolio                     190,000,000 shares
         High Income Portfolio                 70,000,000 shares
         International Portfolio               55,000,000 shares
         Limited-Term Bond Portfolio           15,000,000 shares
         Money Market Portfolio               185,000,000 shares
         Science and Technology Portfolio      40,000,000 shares
         Small Cap Portfolio                   80,000,000 shares
         Value Portfolio                       30,000,000 shares

       FOURTH:  Pursuant to the authority vested in the Board of Directors
of the Corporation by Article FIFTH of the Articles of Incorporation of the
Corporation, the Board of Directors, in accordance with Maryland General
Corporation Law, now duly redesignates and reclassifies the capital stock
of the Corporation among the series of the Corporation as follows:

         Asset Strategy Portfolio              45,000,000 shares
         Balanced Portfolio                    45,000,000 shares
         Bond Portfolio                        80,000,000 shares
         Core Equity Portfolio                140,000,000 shares
         Growth Portfolio                     190,000,000 shares
         High Income Portfolio                 70,000,000 shares
         International Portfolio               50,000,000 shares
         Limited-Term Bond Portfolio           15,000,000 shares
         Micro Cap Growth Portfolio            15,000,000 shares
         Money Market Portfolio               185,000,000 shares
         Science and Technology Portfolio      35,000,000 shares
         Small Cap Portfolio                   80,000,000 shares
         Small Company Value Portfolio         20,000,000 shares
         Value Portfolio                       30,000,000 shares

     The aggregate number of shares of stock of the Corporation remains at
One Billion (1,000,000,000) shares of capital stock, the par value remains
$0.001 per share, and the aggregate value of all authorized stock remains
One Million Dollars ($1,000,000.00).

       FIFTH:  The Corporation is registered with the Securities and
Exchange Commission as an open-end investment company under the Investment
Company Act of 1940, as amended.

       IN WITNESS WHEREOF, the undersigned Vice President of the
Corporation hereby executes these Articles of Amendment on behalf of the
Corporation this 26th day of March, 2003.

                         W&R Target Funds, Inc.


                         /s/Kristen A. Richards
                         ---------------------------------------
                         Kristen A. Richards, Vice President


(Corporate Seal)


Attest: /s/Daniel C. Schulte
        ---------------------------------------
        Daniel C. Schulte, Assistant Secretary



     The undersigned, Vice President of W&R Target Funds, Inc. who executed
on behalf of said Corporation the foregoing Articles of Amendment, of which
this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles of Amendment to be the
act of said Corporation and further certifies that, to the best of her
knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects,
under the penalties of perjury.



                       By: /s/Kristen A. Richards
                           -------------------------------------------
                           Kristen A. Richards, Vice President

EX-99.B(A)TGTARTSUP

                                                        EX-99.B(a)tgtartsup

                         ARTICLES SUPPLEMENTARY
                                   TO
                        ARTICLES OF INCORPORATION
                                   OF
                         W&R TARGET FUNDS, INC.

     W&R Target Funds, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Maryland, having
its principal office in the State of Maryland in Baltimore, Maryland
(hereinafter referred to as the "Corporation"), DOES HEREBY CERTIFY:

    FIRST: (a) The total number of shares of all series of stock of the
Corporation heretofore authorized is One Billion (1,000,000,000) shares of
common stock, and as increased is Two Billion (2,000,000,000) shares of
common stock.

     (b) The number of shares of stock of each series are as follows:

                                  Heretofore Authorized          As Increased
    Asset Strategy Portfolio          45,000,000 shares     90,000,000 shares
    Balanced Portfolio                45,000,000 shares     90,000,000 shares
    Bond Portfolio                    80,000,000 shares    160,000,000 shares
    Core Equity Portfolio            140,000,000 shares    250,000,000 shares
    Growth Portfolio                 190,000,000 shares    350,000,000 shares
    High Income Portfolio             70,000,000 shares    140,000,000 shares
    International Portfolio           50,000,000 shares    100,000,000 shares
    International II Portfolio                 0 shares     50,000,000 shares
    Limited-Term Bond Portfolio       15,000,000 shares     50,000,000 shares
    Micro Cap Growth Portfolio        15,000,000 shares     50,000,000 shares
    Money Market Portfolio           185,000,000 shares    350,000,000 shares
    Science and Technology Portfolio  35,000,000 shares     70,000,000 shares
    Small Cap Portfolio               80,000,000 shares    140,000,000 shares
    Small Company Value Portfolio     20,000,000 shares     50,000,000 shares
    Value Portfolio                   30,000,000 shares     60,000,000 shares

     (c) The par value of each of the shares of each series of the capital
stock of the Corporation is $0.001, and the aggregate par value for each
series of shares is:

                              Heretofore Authorized    As Increased
    Asset Strategy Portfolio             $45,000.00      $90,000.00
    Balanced Portfolio                   $45,000.00      $90,000.00
    Bond Portfolio                       $80,000.00     $160,000.00
    Core Equity Portfolio               $140,000.00     $250,000.00
    Growth Portfolio                    $190,000.00     $350,000.00
    High Income Portfolio                $70,000.00     $140,000.00
    International Portfolio              $50,000.00     $100,000.00
    International II Portfolio                $0.00      $50,000.00
    Limited-Term Bond Portfolio          $15,000.00      $50,000.00
    Micro Cap Growth Portfolio           $15,000.00      $50,000.00
    Money Market Portfolio              $185,000.00     $350,000.00
    Science and Technology Portfolio     $35,000.00      $70,000.00
    Small Cap Portfolio                  $80,000.00     $140,000.00
    Small Company Value Portfolio        $20,000.00      $50,000.00
    Value Portfolio                      $30,000.00      $60,000.00

    (d)  The aggregate par value of all of the shares of all series of
stock of the Corporation heretofore authorized is One Million Dollars
($1,000,000.00), and as increased is Two Million Dollars ($2,000,000.00).

    (e)  The capital stock of the Corporation is divided into series and
except as noted above, there are no changes in the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption as shares of capital
stock as set forth in the Corporation's Articles of Incorporation.

    SECOND:  The total number of shares of stock that the Corporation
has authority to issue has been increased by the Board of Directors of the
Corporation, at a meeting held on May 21, 2003, in accordance with Section
2-105 of Title 2 of the Maryland General Corporation Law.

    THIRD:  The Corporation is registered with the Securities and
Exchange Commission as an open-end investment company under the Investment
Company Act of 1940, as amended.

    IN WITNESS WHEREOF, the undersigned Vice President of the
Corporation hereby executes these Articles Supplementary on behalf of the
Corporation this 22nd day of May, 2003.

                        W&R Target Funds, Inc.


                        /s/Kristen A. Richards
                        --------------------------------------------
                        Kristen A. Richards, Vice President


(Corporate Seal)


Attest: /s/Daniel C. Schulte
        ----------------------------------
        Daniel C. Schulte, Assistant Secretary

     The undersigned, Vice President of W&R Target Funds, Inc. who executed
on behalf said Corporation the foregoing Articles Supplementary, of which
this certificate is made a part, hereby acknowledges, in the name and on
behalf of said Corporation, the foregoing Articles Supplementary to be the
act of said Corporation and further certifies that, to the best of her
knowledge, information and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects,
under the penalties of perjury.

                         By: /s/Kristen A. Richards
                             -----------------------------------------
                             Kristen A. Richards, Vice President

EX-99.B(D)TGTIMA2

                                                     EX-99.B(d)tgtima2

                     INVESTMENT MANAGEMENT AGREEMENT


THIS AGREEMENT, made this ___ day of ________, 2003, by and between W&R
TARGET FUNDS, INC. (hereinafter called "Fund"), and WADDELL & REED
INVESTMENT MANAGEMENT COMPANY, with respect to the series of the Fund
currently known as International II Portfolio, Micro Cap Growth Portfolio,
and Small Company Value Portfolio (collectively hereinafter called
"Portfolios").

                                WITNESSETH:

In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as
follows:

               I.  In General

                   Waddell & Reed Investment Management Company agrees to
act as investment adviser to the Portfolios with respect to the investment
of its assets and in general to supervise the investments of the
Portfolios, subject at all times to the direction and control of the Board
of Directors of Fund, all as more fully set forth herein.

               II. Duties of Waddell & Reed Investment Management Company
with respect to investment of assets of the Portfolios

                   A. Waddell & Reed Investment Management Company shall
regularly provide investment advice for the Portfolios and shall, subject
to the succeeding provisions of this section, continuously supervise the
investment and reinvestment of cash, securities or other property
comprising the assets of the investment portfolio of the Portfolios; and in
furtherance thereof, Waddell & Reed Investment Management Company shall:

                         1. obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally or
the Portfolios, and whether concerning the individual companies whose
securities or other financial instruments are included in the Portfolios or
the industries in which they engage, or with respect to securities or other
financial instruments which Waddell & Reed Investment Management Company
considers desirable for inclusion in the Portfolios;

                        2. furnish continuously an investment program for
the Portfolios;

                        3. determine what securities or other financial
instruments shall be purchased or sold by the Portfolios;

                        4. take, on behalf of the Portfolios, all actions
which appear to Waddell & Reed Investment Management Company necessary to
carry into effect such investment programs and supervisory functions as
aforesaid, including the placing of purchase and sale orders.

                   B. Subject to the provisions of this Agreement and the
requirements of the Investment Company Act of 1940 (and any rules or
regulations in force thereunder), Waddell & Reed Investment Management
Company is authorized to appoint one or more qualified investment sub-
advisers (each, a "Sub-Adviser") to provide the Portfolios with certain
services required by this Agreement. Each Sub-Adviser shall have such
investment discretion and shall make all determinations with respect to the
investment of the Portfolios' assets as shall be assigned to that Sub-
Adviser by Waddell & Reed Investment Management Company and the purchase
and sale of portfolio securities and other financial instruments with
respect to those assets.

                   Subject to the supervision and direction of the Board
of Directors of Fund, Waddell & Reed Investment Management Company shall:

                        1. have overall supervisory responsibility for the
general management and investment of the Portfolios' assts;

                        2. determine the allocation and reallocation of
assets among the Sub-Advisers, if any; and

                        3. have full investment discretion to make all
determinations with respect to the investment of Portfolios' assets not
otherwise assigned to a Sub-Adviser.

                   Waddell & Reed Investment Management Company shall
research and evaluate each Sub-Adviser, if any, including: performing
initial due diligence on prospective Sub-Advisers and monitoring each
Sub-Adviser's ongoing performance; communicating performance expectations
and evaluations to each Sub-Adviser; and recommending to the Board of
Directors of Fund whether a Sub-Adviser's contract should be renewed,
modified or terminated. When appropriate, Waddell & Reed Investment
Management Company shall also recommend to the Board of Directors of Fund
changes or additions to the Sub-Advisers.

                   C. Waddell & Reed Investment Management Company shall
make appropriate and regular reports to the Board of Directors of Fund on
the actions it takes pursuant to Section II.A. or B. above. Any investment
programs furnished by Waddell & Reed Investment Management Company under
this section, or any supervisory function taken hereunder by Waddell & Reed
Investment Management Company, shall at all times conform to and be in
accordance with any requirements imposed by:

                        1. the provisions of the Investment Company Act of
1940 and any rules or regulations in force thereunder;

                        2. any other applicable provision of law;

                        3. the provisions of the Articles of Incorporation
of Fund as amended from time to time;

                        4. the provisions of the Bylaws of Fund, as
amended from time to time;

                        5. the terms of the registration statement of
Fund, as applicable to the Portfolios, as amended from time to time, under
the Securities Act of 1933 and the Investment Company Act of 1940.

                   D. Any investment programs furnished by Waddell & Reed
Investment Management Company under this section or any supervisory
functions taken hereunder by Waddell & Reed Investment Management Company
shall at all times be subject to any directions of the Board of Directors
of Fund, its Executive Committee, or any committee or officer of Fund
acting pursuant to authority given by the Board of Directors.


               III. Allocation of Expenses

                    The expenses of the Portfolios and the expenses of
Waddell & Reed Investment Management Company in performing its functions
under this Agreement shall be divided into two classes, to wit:  (i) those
expenses which will be paid in full by Waddell & Reed Investment Management
Company as set forth in subparagraph "A" hereof, and (ii) those expenses
which will be paid in full by the Portfolios, as set forth in subparagraph
"B" hereof.

                   A. With respect to the duties of Waddell & Reed
Investment Management Company under Section II above, it shall pay in full,
except as to the brokerage and research services acquired through the
allocation of commissions as provided in Section IV hereinafter, for (a)
the salaries and employment benefits of all employees of Waddell & Reed
Investment Management Company who are engaged in providing these advisory
services; (b) adequate office space and suitable office equipment for such
employees; and (c) all telephone and communications costs relating to such
functions. Waddell & Reed Investment Management Company shall compensate
each of the Portfolios' Sub-Advisers, if any. In addition, Waddell & Reed
Investment Management Company shall pay the fees and expenses of all
directors of Fund who are employees of Waddell & Reed Investment Management
Company or an affiliated corporation and the salaries and employment
benefits of all officers of Fund who are affiliated persons of Waddell &
Reed Investment Management Company.

                   B. The Portfolios shall pay in full for all of their
expenses which are not listed above (other than those assumed by Waddell &
Reed Investment Management Company or one of its affiliates in its capacity
as principal underwriter of the shares of the Portfolios, as Shareholder
Servicing Agent or as Accounting Services Agent for the Portfolios),
including (a) the costs of preparing and printing prospectuses and reports
to shareholders of the Portfolios, including mailing costs; (b) the costs
of printing all proxy statements and all other costs and expenses of
meetings of shareholders of the Portfolios (unless Fund and Waddell & Reed
Investment Management Company shall otherwise agree); (c) interest, taxes,
brokerage commissions and premiums on fidelity and other insurance; (d)
audit fees and expenses of independent accountants and legal fees and
expenses of attorneys, but not of attorneys who are employees of Waddell &
Reed Investment Management Company or an affiliated company; (e) fees and
expenses of its directors not affiliated with Waddell & Reed, Inc.; (f)
custodian fees and expenses; (g) fees payable by the Portfolios under the
Securities Act of 1933, the Investment Company Act of 1940, and the
securities or "Blue-Sky" laws of any jurisdiction; (h) fees and assessments
of the Investment Company Institute or any successor organization; (i) such
nonrecurring or extraordinary expenses as may arise, including litigation
affecting the Portfolios, and any indemnification by the Portfolios of its
officers, directors, employees and agents with respect thereto; (j) the
costs and expenses provided for in any Shareholder Servicing Agreement or
Accounting Services Agreement, including amendments thereto, contemplated
by subsection C of this Section III. In the event that any of the foregoing
shall, in the first instance, be paid by Waddell & Reed Investment
Management Company, the Portfolios shall pay the same to Waddell & Reed
Investment Management Company on presentation of a statement with respect
thereto.

                   C. Waddell & Reed Investment Management Company, or an
affiliate of Waddell & Reed Investment Management Company, may also act as
(i) transfer agent or shareholder servicing agent of the Portfolios and/or
as (ii) accounting services agent of the Portfolios if at the time in
question there is a separate agreement, "Shareholder Servicing Agreement"
and/or "Accounting Services Agreement," covering such functions between the
Portfolios and Waddell & Reed Investment Management Company, or such
affiliate. The corporation, whether Waddell & Reed Investment Management
Company, or its affiliate, which is the party to either such Agreement with
Fund is referred to as the "Agent."  Each such Agreement shall provide in
substance that it shall go into effect, or be amended, or a new agreement
covering the same topics between Fund and the Agent may be entered into,
only if the terms of such Agreement, such amendment or such new agreement
have been approved by the Board of Directors of Fund, including the vote of
a majority of the directors who are not "interested persons" as defined in
the Investment Company Act of 1940, of either party to the Agreement, such
amendment or such new agreement (considering Waddell & Reed Investment
Management Company to be such a party even if at the time in question the
Agent is an affiliate of Waddell & Reed Investment Management Company),
cast in person at a meeting called for the purpose of voting on such
approval. Such a vote is referred to as a "disinterested director" vote.
Each such Agreement shall also provide in substance for its continuance,
unless terminated, for a specified period which shall not exceed two years
from the date of its execution and from year to year thereafter only if
such continuance is specifically approved at least annually by a
disinterested director vote, and that any disinterested director vote shall
include a determination that (i) the Agreement, amendment, new agreement or
continuance in question is in the best interests of the Portfolios and
their shareholders; (ii) the services to be performed under the Agreement,
the Agreement as amended, new agreement or agreement to be continued are
services required for the operation of the Portfolios; (iii) the Agent can
provide services the nature and quality of which are at least equal to
those provided by others offering the same or similar services; and (iv)
the fees for such services are fair and reasonable in light of the usual
and customary charges made by others for services of the same nature and
quality. Any such Agreement may also provide in substance that any
disinterested director vote may be conditioned on the favorable vote of the
holders of a majority (as defined in or under the Investment Company Act of
1940) of the outstanding shares of each class or series of the Portfolios.
Any such Agreement shall also provide in substance that it may be
terminated by the Agent at any time without penalty upon giving Fund one
hundred twenty (120) days' written notice (which notice may be waived by
Fund) and may be terminated by Fund at any time without penalty upon giving
the Agent sixty (60) days' written notice (which notice may be waived by
the Agent), provided that such termination by Fund shall be directed or
approved by the vote of a majority of the Board of Directors of Fund in
office at the time or by the vote of the holders of a majority (as defined
in or under the Investment Company Act of 1940) of the outstanding shares
of each class or series of the Portfolios.

              IV.  Brokerage

                   (a)  Waddell & Reed Investment Management Company may
select brokers to effect the portfolio transactions of the Portfolios on
the basis of its estimate of their ability to obtain, for reasonable and
competitive commissions, the best execution of particular and related
portfolio transactions. For this purpose, "best execution" means prompt and
reliable execution at the most favorable price obtainable. Such brokers may
be selected on the basis of all relevant factors including the execution
capabilities required by the transaction or transactions, the importance of
speed, efficiency, or confidentiality, and the willingness of the broker to
provide useful or desirable investment research and/or special execution
services. Waddell & Reed Investment Management Company shall have no duty
to seek advance competitive commission bids and may select brokers based
solely on its current knowledge of prevailing commission rates.

                   (b)  Subject to the foregoing, Waddell & Reed
Investment Management Company shall have discretion, in the interest of the

Portfolios, to direct the execution of its portfolio transactions to
brokers who provide brokerage and/or research services (as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934) for
the Portfolios and/or other accounts for which Waddell & Reed Investment
Management Company exercises "investment discretion" (as that term is
defined in Section 3(a)(35) of the Securities Exchange Act of 1934); and in
connection with such transactions, to pay commission in excess of the
amount another adequately qualified broker would have charged if Waddell &
Reed Investment Management Company determines, in good faith, that such
commission is reasonable in relation to the value of the brokerage and/or
research services provided by such broker, viewed in terms of either that
particular transaction or the overall responsibilities of Waddell & Reed
Investment Management Company with respect to the accounts for which it
exercises investment discretion. In reaching such determination, Waddell &
Reed Investment Management Company will not be required to attempt to place
a specified dollar amount on the brokerage and/or research services
provided by such broker; provided that Waddell & Reed Investment Management
Company shall be prepared to demonstrate that such determinations were made
in good faith, and that all commissions paid by the Portfolios over a
representative period selected by its Board of Directors were reasonable in
relation to the benefits to the Portfolios.

                   (c)  Subject to the foregoing provisions of this
Paragraph "IV," Waddell & Reed Investment Management Company may also
consider sales of the Portfolios' shares and shares of investment companies
distributed by Waddell & Reed, Inc. or one of its affiliates, and portfolio
valuation or pricing services as a factor in the selection of brokers to
execute brokerage and principal portfolio transactions.


              V.   Compensation of Waddell & Reed Investment Management
Company

                   As compensation in full for services rendered and for
the facilities and personnel furnished under sections I, II, and IV of this
Agreement, the Portfolios will pay to Waddell & Reed Investment Management
Company for each day the fees specified in Exhibit A hereto.

                   The amounts payable to Waddell & Reed Investment
Management Company shall be determined as of the close of business each
day; shall, except as set forth below, be based upon the value of net
assets computed in accordance with the Articles of Incorporation of Fund;
and shall be paid in arrears whenever requested by Waddell & Reed
Investment Management Company. In computing the value of the net assets of
the Portfolios, there shall be excluded the amount owed to the Portfolio
with respect to shares which have been sold but not yet paid to the
Portfolios by Waddell & Reed, Inc.

                   Notwithstanding the foregoing, if the laws, regulations
or policies of any state in which shares of the Portfolios are qualified
for sale limit the operation and management expenses of the Portfolios,
Waddell & Reed Investment Management Company will refund to the Portfolios
the amount by which such expenses exceed the lowest of such state
limitations.

              VI.  Undertakings of Waddell & Reed Investment Management
Company; Liabilities

                   Waddell & Reed Investment Management Company shall give
to Fund the benefit of its best judgment, efforts and facilities in
rendering advisory services hereunder.

                   Waddell & Reed Investment Management Company shall at
all times be guided by and be subject to the Portfolios' investment
policies, the provisions of the Articles of Incorporation and Bylaws of
Fund as each shall from time to time be amended, and to the decision and
determination of Fund's Board of Directors.

                   This Agreement shall be performed in accordance with
the requirements of the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Securities Act of 1933, and the Securities
Exchange Act of 1934, to the extent that the subject matter of this
Agreement is within the purview of such Acts. Insofar as applicable to
Waddell & Reed Investment Management Company, as an investment adviser and
affiliated person of Fund, Waddell & Reed Investment Management Company
shall comply with the provisions of the Investment Company Act of 1940, the
Investment Advisers Act of 1940 and the respective rules and regulations of
the Securities and Exchange Commission thereunder.

                   In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the
part of Waddell & Reed Investment Management Company, it shall not be
subject to liability to Fund, the Portfolios or any stockholder of the
Portfolios for any act or omission in the course of or connected with
rendering services thereunder or for any losses that may be sustained in
the purchase, holding or sale of any security or financial instrument.

              VII. Duration of this Agreement

                   This Agreement shall become effective at the start of
business on the date hereof and shall continue in effect, unless terminated
as hereinafter provided, for a period of one year and from year-to-year
thereafter only if such continuance is specifically approved at least
annually by the Board of Directors, including the vote of a majority of the
directors who are not parties to this Agreement or "interested persons" (as
defined in the Investment Company Act of 1940) of any such party, cast in
person at a meeting called for the purpose of voting on such approval, or
by the vote of the holders of a majority (as so defined) of the outstanding
voting securities of each class or series of the Portfolios and by the vote
of a majority of the directors who are not parties to this Agreement or
"interested persons" (as so defined) of any such party, cast in person at a
meeting called for the purpose of voting on such approval.

              VIII. Termination

                   This Agreement may be terminated by Waddell & Reed
Investment Management Company at any time without penalty upon giving Fund
one hundred twenty (120) days' written notice (which notice may be waived
by Fund) and may be terminated by Fund at any time without penalty upon
giving Waddell & Reed Investment Management Company sixty (60) days'
written notice (which notice may be waived by Waddell & Reed Investment
Management Company), provided that such termination by Fund shall be
directed or approved by the vote of a majority of the Board of Directors of
Fund in office at the time or by the vote of a majority (as defined in the
Investment Company Act of 1940) of the outstanding voting securities of the
Portfolios. This Agreement shall automatically terminate in the event of
its assignment, the term "assignment" for this purpose having the meaning
defined in Section 2(a)(4) of the Investment Company Act of 1940 and the
rules and regulations thereunder.


IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers and their corporate seal
to be hereunto affixed, all as of the day and year first above written.


(Seal)                     W&R Target Funds, Inc., for its
                           International II Portfolio
                           Micro Cap Growth Portfolio
                           Small Company Value Portfolio


                      By:  _____________________
                           Kristen A. Richards
                           Vice President and Secretary

ATTEST:


By:  ___________________
     Daniel C. Schulte
     Assistant Secretary



(Seal)                     WADDELL & REED INVESTMENT
                           MANAGEMENT COMPANY


                      By:  ____________________
                           Henry J. Herrmann
                           President

ATTEST:



By:  ___________________
     Daniel C. Schulte
     Secretary


              EXHIBIT A TO INVESTMENT MANAGEMENT AGREEMENT

                          W&R TARGET FUNDS, INC.
                       International II Portfolio
                           Micro Cap Growth Portfolio
                      Small Company Value Portfolio

                              FEE SCHEDULE

A cash fee computed each day on net asset value for each Portfolio at the
annual rate listed below:

International II Portfolio

Net Assets                              Fee

Up to $1 billion                        0.85%
Over $1 billion and up to $2 billion    0.83%
Over $2 billion and up to $3 billion    0.80%
Over $3 billion                         0.76%


Micro Cap Growth Portfolio

Net Assets                              Fee

Up to $1 billion                        0.95%
Over $1 billion and up to $2 billion    0.93%
Over $2 billion and up to $3 billion    0.90%
Over $3 billion                         0.86%


Small Company Value Portfolio

Net Assets                              Fee

Up to $1 billion                        0.85%
Over $1 billion and up to $2 billion    0.83%
Over $2 billion and up to $3 billion    0.80%
Over $3 billion                         0.76%





As Amended and Effective _________________, 2003.

EX-99.B(D)TGTSUBADV1

                                                     EX-99.B(d)tgtsubadv1

                     INVESTMENT SUB-ADVISORY AGREEMENT

     THIS AGREEMENT, made as of the ___ day of __________, 2003, by and
between Waddell & Reed Investment Management Company, a Kansas
corporation, registered as an Investment Adviser under the Investment
Advisers Act of 1940 (the "Adviser") and Wall Street Associates, a
California corporation, registered as an Investment Adviser under the
Investment Advisers Act of 1940 (the "Sub-Adviser").

    WHEREAS, the Adviser is the Investment Adviser to W&R Target Funds,
Inc., (the "Fund"), an open-end diversified management investment company
organized as a series fund, registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and

    WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish it
with portfolio selection and related research and statistical services in
connection with the Adviser's investment advisory activities on behalf of
the Fund's Micro Cap Growth Portfolio (hereinafter "Portfolio"), and the
Sub-Adviser desires to furnish such services to the Adviser;

     NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, it is agreed as follows:

     1.  Appointment of Sub-Adviser

     In accordance with and subject to the Investment Advisory Agreement
between the Fund and the Adviser dated ______________, the Adviser hereby
appoints the Sub-Adviser to perform portfolio selection services described
herein for investment and reinvestment of the Portfolio, subject to the
control and direction of the Fund's Board of Directors, for the period and
on the terms hereinafter set forth. The Sub-Adviser accepts such
appointment and agrees to furnish the services hereinafter set forth for
the compensation herein provided. The Sub-Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, except as
expressly provided or authorized, have no authority to act for or represent
the Fund or the Adviser in any way or otherwise be deemed an agent of the
Fund or the Adviser.

     2.  Obligations of and Services to be Provided by the Sub-Adviser

     (a) The Sub-Adviser shall provide the following services and assume
the following obligations with respect to the Portfolio of the Fund:

       (1) The investment of the assets of the Portfolio shall at all
           times be subject to the applicable provisions of the Articles
           of Incorporation, the Bylaws, the Registration Statement, the
           current Prospectus and the Statement of Additional Information
           of the Fund and shall conform to the investment objectives,
           policies and restrictions of the Portfolio as set forth in
           such documents and as interpreted from time to time by the
           Board of Directors of the Fund and by the Adviser, including
           diversification of the holdings of the Portfolio as a
           segregated asset account in accordance with Section 817 of the
           Internal Revenue Code, as amended (the "Code"), and Regulation
           Section 1.817-5 thereunder, provided that the Adviser shall
           be responsible for ensuring that the Fund as a whole is
           "adequately diversified" if and to the extent required by
           Section 817(h) of the Code and Regulation 1.817-5 thereunder.
           Within the framework of the investment objectives, policies
           and restrictions of the Portfolio, and subject to the
           supervision of the Adviser, the Sub-Adviser shall have the
           sole and exclusive responsibility for the making and execution
           of all investment decisions for the Portfolio.  The Adviser
           agrees to promptly inform the Sub-Adviser if such objective,
           policies or restrictions change and to deliver to the
           Sub-Adviser updated documents, if prepared.

       (2) In carrying out its obligations to manage the investments and
           reinvestments of the assets of the Portfolio, the Sub-Adviser
           shall:  (1) obtain and evaluate pertinent economic,
           statistical, financial and other information affecting the
           economy generally and individual companies or industries the
           securities of which are included in the Portfolio or are under
           consideration for inclusion therein; (2) formulate and
           implement a continuous investment program for the Portfolio
           consistent with the investment objective and related
           investment policies for such Portfolio as set forth in the
           Fund's registration statement, as amended; and (3) take such
           steps as are necessary to implement the aforementioned
           investment program by purchase and sale of securities
           including the placing, or directing the placement through an
           affiliate of the Sub-Adviser, of orders for such purchases and
           sales.

       (3) In connection with the purchase and sale of securities of the
           Portfolio, the Sub-Adviser shall arrange for the transmission
           to the Adviser and the Custodian for the Fund on a daily basis
           such confirmation, trade tickets and other documents as may be
           necessary to enable them to perform their administrative
           responsibilities with respect to the Portfolio. With respect
           to portfolio securities to be purchased or sold through the
           Depository Trust Company, the Sub-Adviser shall arrange for
           the automatic transmission of the I.D. confirmation of the
           trade to the Custodian of the Portfolio. The Sub-Adviser shall
           render such reports to the Adviser and/or to the Fund's Board
           of Directors concerning the investment activity and portfolio
           composition of the Portfolio in such form and at such
           intervals as the Adviser or the Board may from time to time
           require.

       (4) The Sub-Adviser shall, in the name of the Fund, place or
           direct the placement of orders for the execution of portfolio
           transactions in accordance with the policies with respect
           thereto, as set forth in the Fund's Registration Statement, as
           amended from time to time, and under the 1933 Act and the 1940
           Act. In connection with the placement of orders for the
           execution of the Fund's portfolio transactions, the Sub-
           Adviser shall create and maintain all necessary brokerage
           records of the Fund in accordance with all applicable law,
           rules and regulations, including but not limited to, records
           required by Section 31(a) of the 1940 Act. All records shall
           be the property of the Fund and shall be available for
           inspection and use by the Securities and Exchange Commission,
           the Fund or any person retained by the Fund. Where applicable,
           such records shall be maintained by the Sub-Adviser for the
           period and in the place required by Rule 31a-2 under the 1940
           Act.

       (5) In placing orders or directing the placement of orders for the
           execution of portfolio transactions, the Sub-Adviser shall
           select brokers and dealers for the execution of the
           Portfolio's transactions. In selecting brokers or dealers to
           execute such orders, the Sub-Adviser is expressly authorized
           to consider the fact that a broker or dealer has furnished
           statistical, research or other information or services which
           enhance the Sub-Adviser's investment research and portfolio
           management capability generally. It is further understood in
           accordance with Section 28(e) of the Securities Exchange Act
           of 1934, as amended, that the Sub-Adviser may negotiate with
           and assign to a broker a commission which may exceed the
           commission which another broker would have charged for
           effecting the transaction if the Sub-Adviser determines in
           good faith that the amount of commission charged was
           reasonable in relation to the value of brokerage and/or
           research services (as defined in Section 28(e)) provided by
           such broker, viewed in terms either of the Portfolio or the
           Sub-Adviser's overall responsibilities to the Sub-Adviser's
           discretionary accounts.

    (b)  The Sub-Adviser shall use the same skill and care in providing
services to the Fund as it uses in providing services to fiduciary accounts
for which it has investment responsibility. The Sub-Adviser will conform
with all applicable rules and regulations of the Securities and Exchange
Commission.

     3.  Expenses

     During the terms of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement.


     4.  Compensation

     In payment for the investment sub-advisory services to be rendered by
the Sub-Adviser in respect of the Portfolio hereunder, the Adviser shall
pay to the Sub-Adviser as full compensation for all services hereunder a
fee computed at an annual rate which shall be a percentage of the average
daily value of the net assets of the Portfolio. The fee shall be accrued
daily and shall be based on the net asset values of all of the issued and
outstanding shares of the Portfolio as determined as of the close of each
business day pursuant to the Articles of Incorporation, Bylaws and
currently effective Prospectus and Statement of Additional Information of
the Fund. The fee shall be payable in arrears on the last day of each
calendar month.

     The amount of such annual fee, as applied to the average daily value
of the net assets of the Portfolio shall be as described in the schedule
below:

           Assets                 Fee

       Total Portfolio Assets    .85%

     5.  Renewal and Termination

     This Agreement shall continue in effect for a period not more than two
years from the date of this Agreement, only so long as such continuance is
specifically approved at least annually by a vote of the holders of the
majority of the outstanding voting securities of the Portfolio, or by a
vote of the majority of the Fund's Board of Directors. And further provided
that such continuance is also approved annually by a vote of the majority
of the Fund's Board of Directors who are not parties to this Agreement or
interested persons of parties hereto, cast in person at a meeting called
for the purpose of voting on such approval. This Agreement may be
terminated at any time without payment of penalty:  (i) by the Fund's Board
of Directors or by a vote of a majority of the outstanding voting
securities of the class of capital stock of the Portfolio on sixty days'
prior written notice, or (ii) by either party hereto upon sixty days' prior
written notice to the other. This Agreement will terminate automatically
upon any termination of the Investment Advisory Agreement between the Fund
and the Adviser or in the event of its assignment. The terms "interested
person," "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act.

     6.  General Provisions

     (a) The Sub-Adviser may rely on information reasonably believed by it
to be accurate and reliable. Except as may otherwise be provided by the
1940 Act, neither the Sub-Adviser nor its officers, directors, employees or
agents shall be subject to any liability for any error of judgment or
mistake of law or for any loss arising out of any investment or other act
or omission in the performance by the Sub-Adviser of its duties under this
Agreement or for any loss or damage resulting from the imposition by any
government or exchange control restrictions which might affect the
liquidity of the Portfolio's assets, or from acts or omissions of
custodians or securities depositories, or from any war or political act of
any foreign government to which such assets might be exposed, provided that
nothing herein shall be deemed to protect, or purport to protect, the Sub-
Adviser against any liability to the Fund or to its shareholders to which
the Sub-Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties
hereunder, or by reason of the Sub-Adviser's reckless disregard of its
obligations and duties hereunder.

     (b) The Adviser and the Fund's Board of Directors understand that the
value of investments made for the Account may go up as well as down, is not
guaranteed and that investment decisions will not always be profitable. The
Adviser has not made and is not making any guarantees, including any
guarantee as to any specific level of performance of the Portfolio. The
Adviser and the Fund's Board of Directors acknowledge that this Portfolio
is designed for the described investment objective and is not intended as a
complete investment program. They also understand that investment decisions
made on behalf of the Portfolio by Sub-Adviser are subject to various
market and business risks.

     (c) This Agreement shall not become effective unless and until it is
approved by the Board of Directors of the Fund, including a majority of the
members who are not "interested persons" to parties to this Agreement, by a
vote cast in person at a meeting called for the purpose of voting such
approval, and by a majority of the outstanding voting securities of the
class of capital stock of the Portfolio.

     (d) The Adviser understands that the Sub-Adviser now acts, will
continue to act, or may act in the future, as investment adviser to
fiduciary and other managed accounts, including other investment companies,
and the Adviser has no objection to the Sub-Adviser so acting, provided
that the Sub-Adviser duly performs all obligations under this Agreement.
The Adviser also understands that the Sub-Adviser may give advice and take
action with respect to any of its other clients or for its own account
which may differ from the timing or nature of action taken by the Sub-
Adviser with respect to the Fund. Nothing in this Agreement shall impose
upon the Sub-Adviser any obligation to purchase or sell or to recommend for
purchase or sale, with respect to the Fund, any security which the Sub-
Adviser or its shareholders, directors, officers, employees or affiliates
may purchase or sell for its or their own account(s) or for the account of
any other client.

     (e) Except to the extent necessary to perform its obligations
hereunder, nothing herein shall be deemed to limit or restrict the right of
the Sub-Adviser, or the right of any of its officers, directors or
employees who may also be an officer, director or employee of the Fund, or
persons otherwise affiliated with the Fund (within the meaning of the 1940
Act) to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other trust,
corporation, firm, individual or association.

     (f) Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof. This
Agreement shall be construed and enforced in accordance with and governed
by the laws of the State of Minnesota. The captions in this Agreement are
included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.

     (g) Any notice under this Agreement shall be in writing, addressed
and delivered or mailed postage pre-paid to the appropriate party at the
following address:  The Adviser and the Fund at 6300 Lamar Avenue, P.O.
Box 29217, Shawnee Mission, Kansas, 66201-9217, and the Sub-Adviser at
Wall Street Associates, 1200 Prospect Street, Suite 100, La Jolla,
California 92037, Attention:  Dirk Anderson.

     (h) Sub-Adviser agrees to notify Adviser of any change in Sub-
Adviser's officers and directors within a reasonable time after such
change.

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.


WADDELL & REED INVESTMENT MANAGEMENT COMPANY


By:   _______________________________

Its:  _______________________________

Date: _______________________________


WALL STREET ASSOCIATES


By:   _______________________________

Its:  _______________________________

Date: _______________________________

EX-99.B(D)TGTSUBADV2

                                                       EX-99.B(d)tgtsubadv2

                    INVESTMENT SUB-ADVISORY AGREEMENT


    THIS AGREEMENT, made as of this ___ day of _______, 2003, by and
between Waddell & Reed Investment Management Company, a Kansas corporation
registered as an Investment Adviser under the Investment Advisers Act of
1940 (the "Adviser") and Templeton Investment Counsel, Inc., a Florida
corporation registered as an Investment Adviser under the Investment
Advisers Act of 1940 (the "Sub-Adviser").

     WHEREAS, the Adviser is the Investment Adviser to W&R Target Funds,
Inc. (the "Fund"), an open-end diversified management investment company
organized as a series fund, registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and

     WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish it
with portfolio selection and related research and statistical services in
connection with the Adviser's investment advisory activities on behalf of
the Fund's International II Portfolio, and the Sub-Adviser desires to
furnish such services to the Adviser;

     NOW, THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, it is agreed as follows:

    1. Appointment of Sub-Adviser

       The Adviser hereby appoints the Sub-Adviser to perform portfolio
selection services described herein for investment and reinvestment of the
Fund's International II Portfolio, subject to the control and direction of
the Fund's Board of Directors, for the period and on the terms hereinafter
set forth. The Sub-Adviser accepts such appointment and agrees to furnish
the services hereinafter set forth for the compensation herein provided.
The Sub-Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or
authorized, have no authority to act for or represent the Fund or the
Adviser in any way or otherwise be deemed an agent of the Fund or the
Adviser.

    2. Obligations of and Services to be Provided by the Sub-Adviser

       (a) The Sub-Adviser shall provide the following services and
           assume the following obligations with respect to the Fund's
           International II Portfolio:

       (1) The investment of the assets of the International II
           Portfolio shall at all times be subject to the applicable
           provisions of the Articles of Incorporation, the Bylaws, the
           Registration Statement, the current Prospectus and the
           Statement of Additional Information of the Fund and shall
           conform to the investment objectives, policies and
           restrictions of the International II Portfolio as set forth
           in such documents and as interpreted from time to time by the
           Board of Directors of the Fund and by the Adviser. Within the
           framework of the investment objectives, policies and
           restrictions of the International II Portfolio, and subject
           to the supervision of the Adviser, the Sub-Adviser shall have
           the sole and exclusive responsibility for the making and
           execution of all investment decisions for the International
           II Portfolio.

       (2) In carrying out its obligations to manage the investments and
           reinvestments of the assets of the International II
           Portfolio, the Sub-Adviser shall:  (1) obtain and evaluate
           pertinent economic, statistical, financial and other
           information affecting the economy generally and individual
           companies or industries the securities of which are included
           in the International II Portfolio or are under consideration
           for inclusion therein; (2) formulate and implement a
           continuous investment program for the International II
           Portfolio consistent with the investment objective and
           related investment policies for such Portfolio as set forth
           in the Fund's registration statement, as amended; and (3)
           take such steps as are necessary to implement the
           aforementioned investment program by purchase and sale of
           securities including the placing, or directing the placement
           through an affiliate of the Sub-Adviser, of orders for such
           purchases and sales.

       (3) In connection with the purchase and sale of securities of the
           Fund's International II Portfolio, the Sub-Adviser shall
           arrange for the transmission to the Adviser and the Custodian
           for the Fund on a daily basis such confirmation, trade
           tickets and other documents as may be necessary to enable
           them to perform their administrative responsibilities with
           respect to the Fund's International II Portfolio. With
           respect to portfolio securities to be purchased or sold
           through the Depository Trust Company, the Sub-Adviser shall
           arrange for the automatic transmission of the I.D.
           confirmation of the trade to the Custodian of the Portfolio,
           UMB Bank, N.A. The Sub-Adviser shall render such reports to
           the Adviser and/or to the Fund's Board of Directors
           concerning the investment activity and portfolio composition
           of the Fund's International II Portfolio in such form and at
           such intervals as the Adviser or the Board may from time to
           time require.

       (4) The Sub-Adviser shall, in the name of the Fund, place or
           direct the placement of orders for the execution of portfolio
           transactions in accordance with the policies with respect
           thereto, as set forth in the Fund's Registration Statement,
           as amended from time to time, and under the 1933 Act and the
           1940 Act. In connection with the placement of orders for the
           execution of the Fund's portfolio transactions, the Sub-
           Adviser shall create and maintain all necessary brokerage
           records of the Fund in accordance with all applicable law,
           rules and regulations, including but not limited to, records
           required by Section 31(a) of the 1940 Act. All records shall
           be the property of the Fund and shall be available for
           inspection and use by the Securities and Exchange Commission,
           the Fund or any person retained by the Fund. Where
           applicable, such records shall be maintained by the Sub-
           Adviser for the period and in the place required by Rule 31a-
           2 under the 1940 Act.

       (5) In placing orders or directing the placement of orders for
           the execution of portfolio transactions, the Sub-Adviser
           shall select brokers and dealers for the execution of the
           International II Portfolio's transactions. In selecting
           brokers or dealers to execute such orders, the Sub-Adviser is
           expressly authorized to consider the fact that a broker or
           dealer has furnished statistical, research or other
           information or services which enhance the Sub-Adviser's
           investment research and portfolio management capability
           generally. It is further understood in accordance with
           Section 28(e) of the Securities Exchange Act of 1934, as
           amended, that the Sub-Adviser may negotiate with and assign
           to a broker a commission which may exceed the commission
           which another broker would have charged for effecting the
           transaction if the Sub-Adviser determines in good faith that
           the amount of commission charged was reasonable in relation
           to the value of brokerage and/or research services (as
           defined in Section 28(e)) provided by such broker, viewed in
           terms either of the Portfolio or the Sub-Adviser's overall
           responsibilities to the Sub-Adviser's discretionary accounts.

       (b) The Sub-Adviser shall use the same skill and care in
           providing services to the Fund as it uses in providing services
           to fiduciary accounts for which it has investment responsibility.
           The Sub-Adviser will conform with all applicable rules and
           regulations of the Securities and Exchange Commission.

    3. Expenses

       During the terms of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement.

    4. Compensation

       In payment for the investment sub-advisory services to be rendered
by the Sub-Adviser in respect of the International II Portfolio hereunder,
the Adviser shall pay to the Sub-Adviser as full compensation for all
services hereunder a fee computed at an annual rate which shall be a
percentage of the average daily value of the net assets of the
International II Portfolio. The fee shall be accrued daily and shall be
based on the net asset values of all of the issued and outstanding shares
of the International II Portfolio as determined as of the close of each
business day pursuant to the Articles of Incorporation, Bylaws and
currently effective Prospectus and Statement of Additional Information of
the Fund. The fee shall be payable in arrears on the last day of each
calendar month.

       The amount of such annual fee, as applied to the average daily
value of the net assets of the International II Portfolio shall be as
described in the schedule below:

               Assets                                     Fee
      On the first $10 million in assets                  0.70%
      On the next $15 million in assets                   0.65%
      On the next $25 million in assets                   0.55%
      On the next $50 million in assets                   0.50%
      On all assets exceeding $100 million                0.40%

       Notwithstanding the schedule described above, there shall be a
minimum annual fee paid by the Adviser to the Sub-Adviser which shall be
$75,000.

    5. Renewal and Termination

       This Agreement shall continue in effect for a period not more than two
years from the date of this Agreement, only so long as such continuance is
specifically approved at least annually by a vote of the holders of the
majority of the outstanding voting securities of the Fund's International
II Portfolio, or by a vote of the majority of the Fund's Board of
Directors. And further provided that such continuance is also approved
annually by a vote of the majority of the Fund's Board of Directors who are
not parties to this Agreement or interested persons of parties hereto, cast
in person at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time without payment of penalty:
(i) by the Fund's Board of Directors or by a vote of a majority of the
outstanding voting securities of the class of capital stock of the Fund's
International II Portfolio on sixty days' prior written notice, or (ii) by
either party hereto upon sixty days' prior written notice to the other.
This Agreement will terminate automatically upon any termination of the
Investment Advisory Agreement between the Fund and the Adviser or in the
event of its assignment. The terms "interested person," "assignment" and
"vote of a majority of the outstanding voting securities" shall have the
meanings set forth in the 1940 Act.

    6. General Provisions

       (a) The Sub-Adviser may rely on information reasonably believed
           by it to be accurate and reliable. Except as may otherwise be
           provided by the 1940 Act, neither the Sub-Adviser nor its
           officers, directors, employees or agents shall be subject to any
           liability for any error of judgment or mistake of law or for any
           loss arising out of any investment or other act or omission in
           the performance by the Sub-Adviser of its duties under this
           Agreement or for any loss or damage resulting from the imposition
           by any government or exchange control restrictions which might
           affect the liquidity of the International II Portfolio's assets,
           or from acts or omissions of custodians or securities
           depositories, or from any war or political act of any foreign
           government to which such assets might be exposed, provided that
           nothing herein shall be deemed to protect, or purport to protect,
           the Sub-Adviser against any liability to the Fund or to its
           shareholders to which the Sub-Adviser would otherwise be subject
           by reason of willful misfeasance, bad faith or gross negligence
           in the performance of its duties hereunder, or by reason of the
           Sub-Adviser's reckless disregard of its obligations and duties
           hereunder.

       (b) The Adviser and the Fund's Board of Directors understand
           that the value of investments made for the Account may go up as
           well as down, is not guaranteed and that investment decisions
           will not always be profitable. The Adviser has not made and is
           not making any guarantees, including any guarantee as to any
           specific level of performance of the Portfolio. The Adviser and
           the Fund's Board of Directors acknowledge that this Portfolio is
           designed for investors seeking international diversification and
           is not intended as a complete investment program. They also
           understand that investment decisions made on behalf of the
           Portfolio by Sub-Adviser are subject to various market and
           business risks, and that investing in securities of companies in
           emerging countries involves special risks which are not typically
           associated with investing in U.S. companies. Risks include but
           are not limited to, foreign currency fluctuations, investment and
           repatriation restrictions, and political and social instability.
           Although the Sub-Adviser intends to invest in companies located
           in countries which the Sub-Adviser considers to have relatively
           stable and friendly governments, the Fund's Board of Directors
           accepts the possibility that countries in which the Sub-Adviser
           invests may expropriate or nationalize properties of foreigners,
           may impose confiscatory taxation or exchange controls, including
           suspending currency transfers from a given country, or may be
           subject to political or diplomatic developments that could affect
           investments in those countries.

       (c) This Agreement shall not become effective unless and until
           it is approved by the Board of Directors of the Fund, including a
           majority of the members who are not "interested persons" to
           parties to this Agreement, by a vote cast in person at a meeting
           called for the purpose of voting such approval, and by a majority
           of the outstanding voting securities of the class of capital
           stock of the Fund's International II Portfolio.

       (d) The Adviser understands that the Sub-Adviser now acts, will
           continue to act, or may act in the future, as investment adviser
           to fiduciary and other managed accounts, including other
           investment companies, and the Adviser has no objection to the
           Sub-Adviser so acting, provided that the Sub-Adviser duly
           performs all obligations under this Agreement. The Adviser also
           understands that the Sub-Adviser may give advice and take action
           with respect to any of its other clients or for its own account
           which may differ from the timing or nature of action taken by the
           Sub-Adviser with respect to the Fund. Nothing in this Agreement
           shall impose upon the Sub-Adviser any obligation to purchase or
           sell or to recommend for purchase or sale, with respect to the
           Fund, any security which the Sub-Adviser or its shareholders,
           directors, officers, employees or affiliates may purchase or sell
           for its or their own account(s) or for the account of any other
           client.

       (e) Except to the extent necessary to perform its obligations
           hereunder, nothing herein shall be deemed to limit or restrict
           the right of the Sub-Adviser, or the right of any of its
           officers, directors or employees who may also be an officer,
           director or employee of the Fund, or persons otherwise affiliated
           with the Fund (within the meaning of the 1940 Act) to engage in
           any other business or to devote time and attention to the
           management or other aspects of any other business, whether of a
           similar or dissimilar nature, or to render services of any kind
           to any other trust, corporation, firm, individual or association.

       (f) Each party agrees to perform such further acts and execute
           such further documents as are necessary to effectuate the
           purposes hereof. This Agreement shall be construed and enforced
           in accordance with and governed by the laws of the State of
           Minnesota. The captions in this Agreement are included for
           convenience only and in no way define or delimit any of the
           provisions hereof or otherwise affect their construction or
           effect.

       (g) Any notice under this Agreement shall be in writing,
           addressed and delivered or mailed postage pre-paid to the
           appropriate party at the following address:  The Adviser and the
           Fund at 6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission,
           Kansas, 66201-9217, and the Sub-Adviser at 500 East Broward
           Boulevard, Suite 2100, Fort Lauderdale, Florida 33394.

       (h) Sub-Adviser agrees to notify Adviser of any change in Sub-
           Adviser's officers and directors within a reasonable time after
           such change.

     IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.




WADDELL & REED INVESTMENT MANAGEMENT COMPANY


By: ____________________________

Its:____________________________






TEMPLETON INVESTMENT COUNSEL, INC.


By: ____________________________

Its:____________________________

EX-99.B(G)MCGPCA

                                             EX-99.B(g)mcgpca




                            CUSTODIAN AGREEMENT


                      Dated as of __________, 2003



                                 Between


                             UMB BANK, N.A.

                                   and

                         W&R TARGET FUNDS, INC.
                            on behalf of the
                   MICRO CAP GROWTH PORTFOLIO series


                             Table of Contents

ARTICLE

I.  Appointment of Custodian

II. Powers and Duties of Custodian

    2.01   Safekeeping
    2.02   Manner of Holding Securities
    2.03   Purchase of Assets
    2.04   Exchanges of Securities
    2.05   Sales of Securities
    2.06   Depositary Receipts
    2.07   Exercise of Rights, Tender Offers, Etc.
    2.08   Stock Dividends, Rights, Etc.
    2.09   Options
    2.10   Futures Contracts
    2.11   Borrowing
    2.12   Interest Bearing Deposits
    2.13   Foreign Exchange Transactions
    2.14   Securities Loans
    2.15   Collections
    2.16   Dividends, Distributions and Redemptions
    2.17   Proceeds from Shares Sold
    2.18   Proxies, Notices, Etc.
    2.19   Bills and Other Disbursements
    2.20   Nondiscretionary Functions
    2.21   Bank Accounts
    2.22   Deposit of Fund Assets in Securities System
    2.23   Other Transfers
    2.24   Establishment of Segregated Account
    2.25   Custodian's Books and Records
    2.26   Opinion of Fund's Independent Certified Public Accountants
    2.27   Reports by Independent Certified Public Accountants
    2.28   Overdraft Facility

III. Proper Instructions, Special Instructions and Related Matters

    3.01   Proper Instructions and Special Instructions
    3.02   Authorized Persons
    3.03   Persons Having Access to Assets of the Portfolios
    3.04   Actions of Custodian Based on Proper
           Instructions and Special Instructions

IV. Subcustodians

    4.01   Domestic Subcustodians
    4.02   Foreign Sub-Subcustodians and Interim Sub-Subcustodians
    4.03   Special Subcustodians
    4.04   Termination of a Subcustodian
    4.05   Certification Regarding Foreign Sub-Subcustodians

V.  Standard of Care, Indemnification

    5.01   Standard of Care
    5.02   Liability of the Custodian for Actions of Other Persons
    5.03   Indemnification by Fund
    5.04   Investment Limitations
    5.05   Fund's Right to Proceed
    5.06   Indemnification by Custodian
    5.07   Custodian's Right to Proceed

VI.  Compensation

VII. Termination

VIII. Defined Terms

IX. Miscellaneous

    9.01   Execution of Documents, Etc.
    9.02   Representations and Warranties
    9.03   Entire Agreement
    9.04   Waivers and Amendments
    9.05   Interpretation
    9.06   Captions
    9.07   Governing Law
    9.08   Notices
    9.09   Assignment
    9.10   Counterparts
    9.11   Confidentiality; Survival of Obligations

Appendix A


                            CUSTODIAN AGREEMENT

     AGREEMENT made as of the ____ day of ________, 2003 between W&R Target
Funds, Inc., on behalf of the Micro Cap Growth Portfolio series (the
"Fund"), as may be amended from time to time, and UMB Bank, n.a. (the
"Custodian").


                                WITNESSETH

     WHEREAS, the Fund desires to appoint the Custodian as custodian on
behalf of the Fund in accordance with the provisions of the Investment
Company Act of 1940, as amended (the "1940 Act") and the rules and
regulations thereunder, under the terms and conditions set forth in this
Agreement, and the Custodian has agreed so to act as custodian.

     NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:

                                 ARTICLE I
                        APPOINTMENT OF CUSTODIAN

     Subject to the terms and provisions of this Agreement, the Fund hereby
employs and appoints the Custodian as a custodian of the cash, securities
and other assets owned by the Fund and deposited from time to time with the
Custodian ("Assets"). The Fund shall deliver to the Custodian, or shall
cause to be delivered to the Custodian, Assets during the term of this
Agreement. The Custodian is authorized to act under the terms and
conditions of this Agreement as the Fund's agent and shall be representing
the Fund when acting within the scope of this Agreement. The Custodian
hereby accepts such appointment as custodian and shall perform the duties
and responsibilities set forth herein on the terms and conditions set forth
herein.

                                 ARTICLE II
                     POWERS AND DUTIES OF CUSTODIAN

     As custodian, the Custodian shall have and perform the powers and
duties set forth in this Article II. Pursuant to and in accordance with
Article IV hereof, the Custodian may appoint one or more Subcustodians (as
hereinafter defined) to exercise the powers and perform the duties of the
Custodian set forth in this Article II and references to the Custodian in
this Article II shall include any Subcustodian so appointed.

     Section 2.01.   Safekeeping. The Custodian shall accept delivery of
and keep safely the Assets in accordance with the terms and conditions
hereof on behalf of the Fund.

     Section 2.02.   Manner of Holding Securities.

     (a)  The Custodian shall at all times hold securities of the Fund
either: (i) by physical possession of the share certificates or other
instruments representing such securities in registered or bearer form; or
(ii) in book-entry form by a Securities System (as hereinafter defined) in
accordance with the provisions of Section 2.22 below.

     (b)  The Custodian may at all times hold registered securities of the
Fund in the name of the Fund or the Fund's nominee, or in the nominee name
of the Custodian unless specifically directed by Proper Instructions (as
hereinafter defined) to hold such registered securities in so-called street
name; provided that, in any event, all Assets shall be held in an account
of the Custodian containing only assets of the Fund. Notwithstanding the
foregoing, unless it receives Proper Instructions to the contrary, the
Custodian shall register all securities in the name of the Custodian's
nominee as authorized by the Fund. All securities held directly or
indirectly by the Custodian hereunder shall at all times be identifiable on
the records of the Custodian. Except as otherwise provided herein, the
Custodian shall keep the Assets physically segregated from those of other
persons or entities. The Custodian shall execute and deliver all
certificates and documents in connection with registration of securities as
may be required by the applicable provisions of the Internal Revenue Code,
the laws of any State or territory of the United States and the laws of any
jurisdiction in which the securities are held.

     Section 2.03.   Purchase of Assets.

     (a)  Security Purchases. Upon receipt of Proper Instructions, the
Custodian shall pay for and receive securities purchased for the account of
the Fund, provided that payment shall be made by Custodian only upon
receipt of the securities:  (a) by the Custodian; (b) by a clearing
corporation of a national securities exchange of which the Custodian is a
member; or (c) by a Securities System. Notwithstanding the foregoing, upon
receipt of Proper Instructions:  (i) in the case of a repurchase agreement,
the Custodian may release funds to a Securities System prior to the receipt
of advice from the Securities System that the securities underlying such
repurchase agreement have been transferred by book-entry into the Account
(as hereinafter defined) maintained with such Securities System by the
Custodian, provided that the Custodian's instructions to the Securities
System require that the Securities System may make payment of such funds to
the other party to the repurchase agreement only upon transfer by book-
entry of the securities underlying the repurchase agreement into the
Account; (ii) in the case of time deposits, call account deposits, currency
deposits and other deposits, foreign exchange transactions, futures
contracts or options, pursuant to Sections 2.09, 2.10, 2.12 and 2.13
hereof, the Custodian may make payment therefor before receipt of an advice
or transaction; and (iii) in the case of the purchase of securities, the
settlement of which occurs outside of the United States of America, the
Custodian may make payment therefor and receive delivery of such securities
in accordance with local custom and practice generally accepted by
Institutional Clients (as hereinafter defined) in the country in which the
settlement occurs, but in all events subject to the standard of care set
forth in Article V hereof. For purposes of this Agreement, an
"Institutional Client" shall mean a major commercial bank, corporation,
insurance company, or substantially similar institution, which, as a
substantial part of its business operations, purchases or sells securities
and makes use of custodial services.

     (b)  Other Asset Purchases. Upon receipt of Proper Instructions and
except as otherwise provided herein, the Custodian shall pay for and
receive other Assets for the account of the Fund as provided in Proper
Instructions.

     Section 2.04.   Exchanges of Securities. Upon receipt of Proper
Instructions, the Custodian shall exchange securities held by it for the
account of the Fund for other securities in connection with any
reorganization, recapitalization, split-up of shares, change of par value,
conversion or other event relating to the securities or the issuer of such
securities, and shall deposit any such securities in accordance with the
terms of any reorganization or protective plan. The Custodian shall,
without receiving Proper Instructions: surrender securities for transfer
into the name of the Fund, the Fund's nominee or the nominee name of the
Custodian as permitted by Section 2.02(b); and surrender securities for a
different number of certificates or instruments representing the same
number of shares or same principal amount of indebtedness, provided that
the securities to be issued will be delivered to the Custodian.

     Section 2.05.   Sales of Securities. Upon receipt of Proper
Instructions, the Custodian shall make delivery of securities which have
been sold for the account of the Fund, but only against payment therefor in
the form of:  (a) cash, certified check, bank cashier's check, bank credit,
or bank wire transfer; (b) credit to the account of the Custodian with a
clearing corporation of a national securities exchange of which the
Custodian is a member; or (c) credit to the Account of the Custodian with a
Securities System, in accordance with the provisions of Section 2.22
hereof. Notwithstanding the foregoing:  (i) in the case of the sale of
securities, the settlement of which occurs outside of the United States of
America, such securities shall be delivered and paid for in accordance with
local custom and practice generally accepted by Institutional Clients in
the country in which the settlement occurs, but in all events subject to
the standard of care set forth in Article V hereof; and (ii) in the case of
securities held in physical form, such securities shall be delivered and
paid for in accordance with "street delivery custom" to a broker or its
clearing agent, against delivery to the Custodian of a receipt for such
securities, provided that the Custodian shall have taken reasonable steps
to ensure prompt collection of the payment for, or return of, such
securities by the broker or its clearing agent, and provided further that,
subject to the standard of care set forth in Article V hereof, the
Custodian shall not be responsible for the selection of or the failure or
inability to perform of such broker or its clearing agent.

     Section 2.06.   Depositary Receipts. Upon receipt of Proper
Instructions, the Custodian shall surrender securities to the depositary
used for such securities by an issuer of American Depositary Receipts or
International Depositary Receipts (hereinafter referred to, collectively ,
as "ADRs"), against a written receipt therefor adequately describing such
securities and written evidence satisfactory to the Custodian that the
depositary has acknowledged receipt of instructions to issue ADRs with
respect to such securities in the name of the Custodian or a nominee of the
Custodian, for delivery to the Custodian at such place as the Custodian may
from time to time designate. Upon receipt of Proper Instructions, the
Custodian shall surrender ADRs to the issuer thereof, against a written
receipt therefor adequately describing the ADRs surrendered and written
evidence satisfactory to the Custodian that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
securities underlying such ADRs to the Custodian.

     Section 2.07.   Exercise of Rights, Tender Offers, Etc. Upon receipt
of Proper Instructions, the Custodian shall: (a) deliver warrants, puts,
calls, rights or similar securities to the issuer or trustee thereof (or to
the agent of such issuer or trustee) for the purpose of exercise or sale,
provided that the new securities, cash or other Assets, if any, acquired as
a result of such actions are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to the
Custodian, or the tendered securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall promptly notify the Fund in writing of (i) any default in
payment of funds on securities; (ii) any securities that have matured, been
called or redeemed; and (iii) to the extent the Custodian has notice which
is contained in services to which it normally subscribes for such purposes,
or actual knowledge if not contained in such services, any other default
involving securities; and all announcements of defaults, bankruptcies,
reorganizations, mergers, consolidations, recapitalizations or rights or
privileges to subscribe, convert, exchange, put, redeem or tender
securities held subject to this Agreement. The Custodian shall, following
receipt or knowledge, convey such information to the Fund in a timely
manner based upon the circumstances of each particular case. Whenever any
such rights or privileges exist, the Fund will, in a timely manner based
upon the circumstances of each particular case, provide the Custodian with
Proper Instructions. Absent the Custodian's timely receipt of Proper
Instructions, the Custodian shall not be liable for not taking any action
or not exercising such rights prior to their expiration unless such failure
is due to Custodian's failure to give timely notice to the Fund in
accordance with this Section 2.07.

     Section 2.08.   Stock Dividends, Rights, Etc. The Custodian shall
receive and collect all stock dividends, rights and other items of like
nature and, upon receipt of Proper Instructions, take action with respect
to the same as directed in such Proper Instructions.

     Section 2.09.   Options. Upon receipt of Proper Instructions and in
accordance with the provisions of any agreement between the Custodian, any
registered broker-dealer and, if necessary, the Fund relating to compliance
with the rules of the Options Clearing Corporation (the "OCC") or of any
registered national securities exchange or similar organization(s), the
Custodian shall:  (a) receive and retain confirmations or other documents,
if any, evidencing the purchase or writing of an option by the Fund; (b)
deposit and maintain in a segregated account, securities (either physically
or by book-entry in a Securities System), cash or other Assets; and (c)
pay, release and/or transfer such securities, cash or other Assets in
accordance with any such agreement and with notices or other communications
evidencing the expiration, termination or exercise of such options
furnished by the OCC, the securities or options exchange on which such
options are traded or such other organization as may be responsible for
handling such option transactions. The Fund and the broker-dealer shall be
responsible for determining the sufficiency of assets held in any
segregated account established in compliance with applicable margin
maintenance requirements and the performance of other terms of any option
contract; provided, however, that the Custodian shall be liable for
performance of its duties under this Agreement and in accordance with
Proper Instructions, and shall be liable for performance of its duties
under any other agreement between the Custodian, any registered broker-
dealer and, if necessary, the Fund. Notwithstanding anything herein to the
contrary, if the Fund issues Proper Instructions to sell a naked option
(including stock index options), then as part of the transaction, the
Custodian, the Fund and the broker-dealer shall have entered into a tri-
party agreement, as described above.

     Section 2.10.   Futures Contracts. Upon receipt of Proper
Instructions, or pursuant to the provisions of any futures margin
procedural agreement among the Fund, the Custodian and any futures
commission merchant (a "Procedural Agreement"), the Custodian shall: (a)
receive and retain confirmations, if any evidencing the purchase of or sale
of a futures contract or an option on a futures contract by the Fund; (b)
deposit and maintain in a segregated account cash, securities and other
Assets designated as initial, maintenance or variation "margin" deposits
intended to secure the Fund's performance of its obligations under any
futures contracts purchased or sold or any options on futures contracts
written by the Fund, in accordance with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or contract market
(such as the Chicago Board of Trade), or any similar organization(s),
regarding such margin deposits; and (c) release assets from and/or transfer
assets into such margin accounts only in accordance with any such
Procedural Agreements. The Fund and such futures commission merchant shall
be responsible for determining the sufficiency of assets held in the
segregated account in compliance with applicable margin maintenance
requirements and the performance of any futures contract or option on a
futures contract in accordance with its terms; provided, however, that the
Custodian shall be liable for performance of its duties under this
Agreement and in accordance with Proper Instructions, and shall be liable
for performance of its duties under any Procedural Agreement.

     Section 2.11.   Borrowing. Upon receipt of Proper Instructions, the
Custodian shall deliver securities of the Fund to lenders or their agents,
or otherwise establish a segregated account as agreed to by the Fund and
the Custodian, as collateral for borrowings effected by the Fund, provided
that such borrowed money is payable by the lender (a) to or upon the
Custodian's order, as Custodian for the Fund, and (b) concurrently with
delivery of such securities.

     Section 2.12.   Interest Bearing Deposits. Upon receipt of Proper
Instructions directing the Custodian to purchase interest bearing fixed
term and call deposits (hereinafter referred to collectively, as "Interest
Bearing Deposits") for the account of the Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of the Fund with such
banks or trust companies (including the Custodian, any Subcustodian or any
subsidiary or affiliate of the Custodian) (hereinafter referred to as
"Banking Institutions")  and in such amounts as the Fund may direct
pursuant to Proper Instructions. Such Interest Bearing Deposits may be
denominated in U.S. Dollars or other currencies, as the Fund may determine
and direct pursuant to Proper Instructions. The Custodian shall include in
its records with respect to the Assets of the Fund appropriate notation as
to the amount and currency of each such Interest Bearing Deposit, the
accepting Banking Institution and all other appropriate details, and shall
retain such forms of advice or receipt evidencing such account, if any, as
may be forwarded to the Custodian by the Banking Institution. The
responsibilities of the Custodian to the Fund for Interest Bearing Deposits
accepted on the Custodian's books in the United States shall be that of a
U.S. bank for a similar deposit. With respect to Interest Bearing Deposits
other than those accepted on the Custodian's books, (a) the Custodian shall
be responsible for the collection of income as set forth in Section 2.15
and the transmission of cash and instructions to and from such accounts;
and (b) the Custodian shall have no duty with respect to the selection of
the Banking Institution or, so long as the Custodian acts in accordance
with Proper Instructions and the terms and conditions of this Agreement,
for the failure of such Banking Institution to pay upon demand. Upon
receipt of Proper Instructions, the Custodian shall take such reasonable
actions as the Fund deems necessary or appropriate to cause each such
Interest Bearing Deposit account to be insured to the maximum extent
possible by all applicable deposit insurers including, without limitation,
the Federal Deposit Insurance Corporation.

     Section 2.13.   Foreign Exchange Transactions.

     (a)  Foreign Exchange Transactions Other than as Principal. Upon
receipt of Proper Instructions, the Custodian shall settle foreign exchange
contracts or options to purchase and sell foreign currencies for spot and
future delivery on behalf of and for the account of the Fund with such
currency brokers or Banking Institutions as the Fund may determine and
direct pursuant to Proper Instructions. The Fund accepts full
responsibility  for its use of third party foreign exchange brokers (any
dealer other than the Foreign Subcustodian) (as hereinafter defined) and
for execution of said foreign exchange contracts and understands that the
Fund shall be responsible for any and all costs and interest charges which
may be incurred as a result of the failure or delay of its third party
broker to deliver foreign exchange unless such loss, damage, or expense is
caused by, or results from the negligence, misfeasance or misconduct of the
Custodian. Notwithstanding the foregoing, the Custodian shall be
responsible for the transmission of cash and instructions to and from the
currency broker or Banking Institution with which the contract or option is
made, the safekeeping of all certificates and other documents and
agreements evidencing or relating to such foreign exchange transactions and
the maintenance of proper records as set forth in Section 2.25. The
Custodian shall have no duty with respect to the selection of the currency
brokers or Banking Institutions with which the Fund deals or, so long as
the Custodian acts in accordance with Proper Instructions, for the failure
of such brokers or Banking Institutions to comply with the terms of any
contract or option.

     (b)  Foreign Exchange Contracts as Principal. The Custodian shall not
be obligated to enter into foreign exchange transactions as principal.
However, if the Custodian has made available to the Fund its services as a
principal in foreign exchange transactions, upon receipt of Proper
Instructions, the Custodian shall enter into foreign currencies for spot
and future delivery on behalf of and for the account of the Fund with the
Custodian as principal. The Custodian shall be responsible for the
selection of the currency brokers or Banking Institutions and the failure
of such currency brokers or Banking Institutions to comply with the terms
of any contract or option.

     (c)  Payments. Notwithstanding anything to the contrary contained
herein, upon receipt of Proper Instructions the Custodian may, in
connection with a foreign exchange contract, make free outgoing payments of
cash in the form of U.S. Dollars or foreign currency prior to receipt of
confirmation of such foreign exchange contract or confirmation that the
countervalue currency completing such contract has been delivered or
received.

     Section 2.14.   Securities Loans. Upon receipt of Proper Instructions,
the Custodian shall, in connection with loans of securities by the Fund,
deliver securities of the Fund to the borrower thereof and may, except as
otherwise provided below, deliver such securities prior to receipt of the
collateral, if any, for such borrowing; provided that, in cases of loans of
securities secured by cash collateral, the Custodian's instructions to the
Securities System shall require that the Securities System deliver the
securities of the Fund to the borrower thereof only upon receipt of the
collateral for such borrowing. The Custodian shall retain on the Fund's
behalf the right to any dividends, interest or distribution on such loaned
securities and any other rights specified in Proper Instructions. Upon
receipt of Proper Instructions and the loaned securities, the Custodian
will release the collateral to the borrower.

     Section 2.15.   Collections. The Custodian shall: (a) collect amounts
due and payable to the Fund with respect to portfolio securities and other
Assets; (b) promptly credit to the account of the Fund all income and other
payments relating to portfolio securities and other Assets held by the
Custodian hereunder upon Custodian's receipt of such income or payments or
as otherwise agreed in writing by the Custodian and the Fund; (c) promptly
endorse and deliver any instruments required to effect such collection; and
(d) promptly execute ownership and other certificates and affidavits for
all federal, state, local and foreign tax purposes in connection with
receipt of income or other payments with respect to portfolio securities
and other Assets, or in connection with the transfer of such securities or
other Assets; provided, however, that with respect to portfolio securities
registered in so-called street name, or physical securities with variable
interest rates, the Custodian shall use its best efforts to collect amounts
due and payable to the Fund. The Custodian shall promptly notify the Fund
in writing by facsimile transmission or in such other manner as the Fund
and Custodian may agree in writing if any amount payable with respect to
portfolio securities or other Assets is not received by the Custodian when
due. The Custodian shall not be responsible for the collection of amounts
due and payable with respect to portfolio securities or other Assets that
are in default.

     Section 2.16.   Dividends, Distributions and Redemptions. To enable
the Fund to pay dividends or other distributions to shareholders of the
Fund and to make payment to shareholders who have requested repurchase or
redemption of their shares of the Fund (collectively, the "Shares"), the
Custodian shall promptly release cash or securities (a) in the case of
cash, upon receipt of Proper Instructions, to one or more Distribution
Accounts (as hereinafter defined) designated by the Fund in such Proper
Instructions; or (b) in the case of securities, upon the receipt of Special
Instructions (as hereinafter defined) to such entity or account designated
by the Fund in such Special Instructions. For purposes of this Agreement, a
"Distribution Account" shall mean an account established at a Banking
Institution designated by the Fund in Special Instructions.

     Section 2.17.   Proceeds from Shares Sold. The Custodian shall receive
funds representing cash payments received for Shares issued or sold from
time to time by the Fund, and shall promptly credit such funds to the
account of the Fund. The Custodian shall promptly notify the Fund of
Custodian's receipt of cash in payment for Shares issued by the Fund by
facsimile transmission or in such other manner as the Fund and Custodian
may agree in writing. Upon receipt of Proper Instructions, the Custodian
shall:  (a) deliver all federal funds received by the Custodian in payment
for Shares in payment for such investments as may be set forth in such
Proper Instructions and at a time agreed upon between the Custodian and the
Fund; and (b) make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian, in the
amount of checks received in payment for Shares which are deposited to the
accounts of the Fund.

     Section 2.18.   Proxies, Notices, Etc. The Custodian shall deliver or
cause to be delivered to the Fund, in the most expeditious manner
practicable, all forms of proxies, all notices of meetings, and any other
notices or announcements affecting or relating to securities owned by the
Fund that are received by the Custodian, any Subcustodian, or any nominee
of either of them, and, upon receipt of Proper Instructions, the Custodian
shall execute and deliver, or cause such Subcustodian or nominee to execute
and deliver, such proxies or other authorizations as may be required.
Except as directed pursuant to Proper Instructions, neither the Custodian
nor any Subcustodian or nominee shall vote upon any such securities, or
execute any proxy to vote thereon, or give any consent or take any other
action with respect thereto. The Custodian will not release the identity of
the Fund to an issuer which requests such information pursuant to the
Shareholder Communications Act of 1985, for the specific purpose of direct
communications between such issuer and the Fund unless the Fund directs the
Custodian otherwise in writing.

     Section 2.19.   Bills and Other Disbursements. Upon receipt of Proper
Instructions, the Custodian shall pay or cause to be paid, all bills,
statements, or other obligations of the Fund.

     Section 2.20.   Nondiscretionary Functions. The Custodian shall attend
to all nondiscretionary details not specifically covered by this Agreement
in accordance with industry standards in connection with the sale,
exchange, substitution, purchase, transfer or other dealings with
securities or other Assets held by the Custodian, except as otherwise
directed from time to time pursuant to Proper Instructions.

     Section 2.21.   Bank Accounts.

     (a)  Accounts with the Custodian. The Custodian shall open and operate
a bank account or accounts (hereinafter referred to collectively, as "Bank
Accounts") on the books of the Custodian; provided that such Bank
Account(s) shall be in the name of the Custodian or a nominee thereof, for
the account of the Fund, and shall be subject only to draft or order of the
Custodian. The responsibilities of the Custodian to the Fund for deposits
accepted on the Custodian's books shall be that of a U.S. bank for a
similar deposit.

     (b)  Deposit Insurance. Upon receipt of Proper Instructions, the
Custodian shall take such action as the Fund deems necessary or appropriate
to cause each deposit account established by the Custodian pursuant to this
Section 2.21 to be insured to the maximum extent possible by all applicable
deposit insurers, including, without limitation, the Federal Deposit
Insurance Corporation.

     Section 2.22.   Deposit of Fund Assets in Securities Systems. The
Custodian may deposit and/or maintain domestic securities owned by the Fund
in:  (a) The Depository Trust Company; (b) the Participants Trust Company;
(c) any book-entry system as provided in (i) Subpart O of Treasury Circular
No. 300, 31 CFR 306.115 (ii) Subpart B of Treasury Circular Public Debt
Series No. 27-76, 31 CFR 350.2, or (iii) the book-entry regulations of
federal agencies substantially in the form of 31 CFR 306.115; or (d) any
other domestic clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Securities Exchange Act of 1934
(or as may otherwise be authorized by the Securities and Exchange
Commission to serve in the capacity of depository or clearing agent for the
securities or other assets of investment companies) which acts as a
securities depository; provided, however, that no such deposit or
maintenance of securities may be made except with respect to those agencies
and entities the use of which the Fund has previously approved by Special
Instructions (each of the foregoing being referred to in this Agreement as
a "Securities System"). Use of a Securities System shall be in accordance
with applicable Federal Reserve Board and SEC rules and regulations, if
any, and subject to the following provisions:

     (A) The Custodian or any Subcustodian may deposit and/or maintain
securities held hereunder in a Securities System, provided that such
securities are represented in an account ("Account") of the Custodian in
the Securities System which Account shall not contain any assets of the
Custodian other than assets held as fiduciary, custodian or otherwise for
customers.

     (B) The books and records of the Custodian shall at all times identify
those securities belonging to the Fund which are maintained in a Securities
System.

     (C) The Custodian shall pay for securities purchased for the account
of the Fund only upon (i) receipt of advice from the Securities System that
such securities have been transferred to the Account of the Custodian, and
(ii) the making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Fund. The Custodian shall
transfer securities sold for the account of the Fund only upon (iii)
receipt of advice from the Securities System that payment for such
securities has been transferred to the Account of the Custodian, and (iv)
the making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of the Fund. Copies of all advices
from the Securities System relating to transfers of securities for the
account of the Fund shall identify the Fund, and shall be maintained for
the Fund by the Custodian. The Custodian shall deliver to the Fund on the
next succeeding business day daily transaction reports which shall include
each day's transactions in the Securities System for the account of the
Fund. Such transaction reports shall be delivered to the Fund or any agent
designated by the Fund pursuant to Proper Instructions, by computer or in
such other manner as the Fund and Custodian may agree in writing.

     (D) The Custodian shall, if requested by the Fund pursuant to Proper
Instructions, provide the Fund with all reports obtained by the Custodian
or any Subcustodian with respect to a Securities System's accounting
system, internal accounting control and procedures for safeguarding
securities deposited in the Securities System.

     (E) Upon receipt of Special Instructions, the Custodian shall
terminate the use of any Securities System (except the federal book-entry
system) on behalf of the Fund as promptly as practicable and shall take all
actions reasonably practicable to safeguard the securities of the Fund
maintained with such Securities System.

     Section 2.23.   Other Transfers. Upon receipt of Special Instructions,
the Custodian shall make such other dispositions of securities, funds, or
other Assets of the Fund in a manner or for purposes other than as
expressly set forth in this Agreement, provided that the Special
Instructions relating to such disposition shall include a statement of the
purposes for which the delivery is to be made, the amount of funds, Assets
and/or securities to be delivered and the name of the person or persons to
whom delivery is to be made, and shall otherwise comply with the provisions
of Sections 3.01 and 3.03 hereof.

     Section 2.24.   Establishment of Segregated Account. Upon receipt of
Proper Instructions, the Custodian shall establish and maintain on its
books a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or securities or
other Assets of the Fund, including securities maintained by the Custodian
in a Securities System pursuant to Section 2.22 hereof, said account or
accounts to be maintained:  (a) for the purposes set forth in Section 2.09,
2.10 and 2.11 hereof; (b) for the purposes of compliance by the Fund with
the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies; or (c) for such
other purposes as may be set forth, from time to time, in Special
Instructions. The Custodian shall not be responsible for the determination
of the type or amount of Assets to be held in any segregated account
referred to in this Section 2.24.

     Section 2.25.   Custodian's Books and Records. The Custodian shall
provide any assistance reasonably requested by the Fund in the preparation
of reports to Fund shareholders and others, audits of accounts, and other
ministerial matters of like nature. The Custodian shall maintain complete
and accurate records with respect to securities and other Assets held for
the accounts of the Fund as required by the rules and regulations of the
SEC applicable to investment companies registered under the 1940 Act,
including, but not limited to:   (a) journals or other records of original
entry containing a detailed and itemized daily record of all receipts and
deliveries of securities (including certificate and transaction
identification numbers, if any), and all receipts and disbursements of
cash; (b) ledgers or other records reflecting (i) securities in transfer,
(ii) securities in physical possession, (iii) securities borrowed, loaned
or collateralizing obligations of the Fund, (iv) monies borrowed and monies
loaned (together with a record of the collateral therefor and substitutions
of such collateral), and (v) dividends and interest received; and (c)
cancelled checks and bank records relating thereto. The Custodian shall
keep such other books and records of the Fund as the Fund shall reasonably
request. All such books and records maintained by the Custodian shall be
maintained in a form acceptable to the Fund and in compliance with the
rules and regulations of the SEC, including, but not limited to, books and
records required to be maintained by Section 31(a) of the 1940 Act and the
rules and regulations from time to time adopted thereunder. All books and
records maintained by the Custodian pursuant to this Agreement shall at all
times be the property of the Fund and shall be available during normal
business hours for inspection and use by the Fund and its agents, including
without limitation, its independent certified public accountants.
Notwithstanding the preceding sentence, the Funds shall not take any
actions or cause the Custodian to take any actions which would knowingly
cause, either directly or indirectly, the Custodian to violate any
applicable laws, regulations or orders. Notwithstanding the provisions of
this Section 2.25, in the event the Fund purchases cash, securities and
other Assets requiring the use of a Domestic Subcustodian or Foreign Sub-
Subcustodian, the Custodian shall be entitled to rely upon and use the
books, records and accountings of the Domestic Subcustodian as its means of
accounting to the Fund for all cash, securities and other Assets deposited
with such entities; provided however, that such books, records and
accountings on which the Bank may rely must be maintained in the United
States by such Domestic Subcustodian and, provided further, that any
agreement between the Custodian and such Domestic Subcustodian must state
that the Domestic Subcustodian agrees to make any records available upon
request and preserve, for the periods described in Rule 31a-2 of the 1940
Act, the records required to be maintained by Rule 31a-1 of the 1940 Act.
In no event shall the Custodian be entitled to rely upon and use books,
records and accountings which are maintained outside of the United States.

     Section 2.26.   Opinion of Fund's Independent Certified Public
Accountants. The Custodian shall take all reasonable action as the Fund may
request to obtain from year to year favorable opinions from the Fund's
independent certified public accountants with respect to the Custodian's
activities hereunder in connection with the preparation of the Fund's Form
N-1A and the Fund's Form N-SAR or other periodic reports to the SEC and
with respect to any other requirements of the SEC.

     Section 2.27.   Reports by Independent Certified Public Accountants.
At the request of the Fund, the Custodian shall deliver to the Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under
this Agreement, including, without limitation, the Custodian's accounting
system, internal accounting control and procedures for safeguarding cash,
securities and other assets, including cash, securities and other assets
deposited and/or maintained in a Securities System or with a Subcustodian.
Such report shall be of sufficient scope and in sufficient detail as may
reasonably be required by the Fund and as may reasonably be obtained by the
Custodian.

     Section 2.28.   Overdraft Facility. In the event that the Custodian is
directed by Proper Instructions to make any payment or transfer of funds on
behalf of the Fund for which there would be, at the close of business on
the date of such payment or transfer, insufficient funds held by the
Custodian on behalf of the Fund, the Custodian may, in its sole discretion,
provide an overdraft (an "Overdraft") to the Fund in an amount sufficient
to allow the completion of such payment. Any Overdraft provided hereunder:
(a) shall be payable on the next business day, unless otherwise agreed by
the Fund and the Custodian; and (b) shall accrue interest from the date of
the Overdraft to the date of payment in full by the Fund at a rate agreed
upon in writing, from time to time, by the Custodian and the Fund. The
purpose of such Overdrafts is to temporarily finance extraordinary or
emergency expenses not reasonably foreseeable by the Fund. The Custodian
shall promptly notify the Fund in writing ("Overdraft Notice") of any
Overdraft by facsimile transmission or in such other manner as the Fund and
the Custodian may agree in writing. The Custodian shall have a right of
set-off against all Assets (except for Assets held in a segregated margin
account or otherwise pledged in connection with options or futures
contracts held for the benefit of the Fund and for Assets allocated to any
other Overdraft or loan made hereunder); provided, however, the Custodian
shall promptly notify the Fund in writing of any intent to exercise a right
of set-off against Assets hereunder and shall not exercise any such right
of set-off against Assets hereunder unless and until the Fund has failed to
pay (within ten (10) days after the Fund's receipt of such notice of intent
to exercise a right of set-off), any Overdraft, together with all accrued
interest thereon. Notwithstanding the provisions of any applicable law,
including, without limitation, the Uniform Commercial Code, the only rights
or remedies which the Custodian is entitled to with respect to Overdrafts
is the right of set-off granted herein.

                                ARTICLE III
                PROPER INSTRUCTIONS, SPECIAL INSTRUCTIONS
                          AND RELATED MATTERS

     Section 3.01. Proper Instructions and Special Instructions.

     (a)  Proper Instructions. As used herein, the term "Proper
Instructions" shall mean:  (i) a tested telex, a written (including,
without limitation, facsimile transmission) request, direction, instruction
or certification signed or initialed by or on behalf of the Fund by two or
more Authorized Persons (as hereinafter defined); (ii) a telephonic or
other oral communication by  one or more Authorized Persons; or (iii) a
communication effected directly between an electro-mechanical or electronic
device or system (including, without limitation, computers) by or on behalf
of the Fund by one or more Authorized Persons; provided, however, that
communications of the types described in clauses (ii) and (iii) above
purporting to be given by an Authorized Person shall be considered Proper
Instructions only if the Custodian reasonably believes such communications
to have been given by an Authorized Person with respect to the transaction
involved. Proper Instructions in the form of oral communications shall be
confirmed by the Fund by tested telex or in writing in the manner set forth
in clause (i) above, but the lack of such confirmation shall in no way
affect any action taken by the Custodian in reliance upon such oral
instructions prior to the  Custodian's receipt of such confirmation. The
Fund and the Custodian are hereby authorized to record any and all
telephonic or other oral instructions communicated to the Custodian. Proper
Instructions may relate to specific transactions or to types or classes of
transactions, and may be in the form of standing instructions.

     (b)  Special Instructions. As used herein, the term "Special
Instructions" shall mean Proper Instructions countersigned or confirmed in
writing by the Treasurer or any Assistant Treasurer of the Fund or any
other person designated by the Treasurer of the Fund in writing, which
countersignature or confirmation shall be (i) included on the same
instrument containing the Proper Instructions or on a separate instrument
relating thereto, and (ii) delivered by hand, by facsimile transmission or
in such other manner as the Fund and the Custodian agree in writing.

     (c)  Address for Proper Instructions and Special Instructions. Proper
Instructions and Special Instructions shall be delivered to the Custodian
at the address and/or telephone, telecopy or telex number agreed upon from
time to time by the Custodian and the Fund.

     Section 3.02.   Authorized Persons. Concurrently with the execution of
this Agreement and from time to time thereafter, as appropriate, the Fund
shall deliver to the Custodian, duly certified as appropriate by a
Treasurer or Assistant Treasurer of the Fund, a certificate setting forth:
(a) the names, titles, signatures, and scope of authority of all persons
authorized to give Proper Instructions or any other notice, request,
direction, instruction, certificate or instrument on behalf of the Fund
(collectively, the "Authorized Persons" and individually, an "Authorized
Person"); and (b) the names, titles and signatures of those persons
authorized to issue Special Instructions. Such certificate may be accepted
and relied upon by the Custodian as conclusive evidence of the facts set
forth therein and shall be considered to be in full force and effect until
delivery to the Custodian of a similar certificate to the contrary. Upon
delivery of a certificate which deletes or does not include the name(s) of
a person previously authorized to give Proper Instructions or to issue
Special Instructions, such persons shall no longer be considered an
Authorized Person or authorized to issue Special Instructions.

     Section 3.03.   Persons Having Access to Assets of the Portfolios.
Notwithstanding anything to the contrary contained in this Agreement, no
Authorized Person, Director, officer, employee or agent of the Fund shall
have physical access to the Assets of the Fund held by the Custodian nor
shall the Custodian deliver any Assets of the Fund to an account of such
person; provided, however, that nothing in this Section 3.03 shall prohibit
(a) any Authorized Person from giving Proper Instructions, or any person
authorized to issue Special Instructions from issuing Special Instructions,
so long as such action does not result in delivery of or access to Assets
of the Fund prohibited by this Section 3.03; or (b) the Fund's independent
certified public accountants from examining or reviewing the Assets of the
Fund held by the Custodian. The Fund will deliver from time to time a
written certificate executed by two Authorized Persons identifying such
Authorized Persons, Directors, officers, employees and agents of the Fund.
Notwithstanding the foregoing, to the extent that the person acting on
behalf of the Custodian in making such delivery has actual knowledge that
any person is an Authorized Person, Director, officer, employee or agent of
the Fund, the Custodian will comply with this Section 3.03 as if the name
of such Authorized Person, Director, officer, employee or agent had been
contained in a written certificate provided pursuant to this Section 3.03.

     Section 3.04.   Actions of Custodian Based on Proper Instructions and
Special Instructions. So long as and to the extent that the Custodian acts
in accordance with (a) Proper Instructions or Special Instructions, as the
case may be, and (b) the terms of this Agreement, the Custodian shall not
be responsible for the title, validity or genuineness of any property, or
evidence of title thereof, received by it or delivered by it pursuant to
this Agreement.

                                 ARTICLE IV
                             SUBCUSTODIANS

     From time to time, in accordance with the relevant provisions of this
Agreement, (i) the Custodian may appoint one or more Domestic Subcustodians
and Special Subcustodians (each as hereinafter defined) to act on behalf of
the Fund; and (ii) the Custodian may be directed, pursuant to an agreement
between the Fund and the Custodian ("Delegation Agreement"), to appoint a
Domestic Subcustodian to perform the duties of the Foreign Custody Manager
(as such term is defined in Rule 17f-5 under the 1940 Act) ("Approved
Foreign Custody Manager") so long as the Domestic Subcustodian is so
eligible under the 1940 Act. Such Delegation Agreement shall provide that
the appointment of any Domestic Subcustodian as the Approved Foreign
Custody Manager must be governed by a written agreement between the
Custodian and the Domestic Subcustodian, which provides for compliance with
Rule 17f-5. The Approved Foreign Custody Manager may appoint a Foreign Sub-
Subcustodian or Interim Sub-Subcustodian (each as hereinafter defined) in
accordance with this Article IV. For purposes of this Agreement, all
Domestic Subcustodians, Special Subcustodians, Foreign Sub-Subcustodians
and Interim Sub-Subcustodians shall be referred to collectively as
"Subcustodians".

     Section 4.01.   Domestic Subcustodians. The Custodian may, at any time
and from time to time, appoint any bank as defined in Section 2(a)(5) of
the 1940 Act or any trust company or other entity any of which meet
requirements of a custodian under Section 17(f) of the 1940 Act and the
rules and regulations thereunder, to act as agent for the Custodian on
behalf of the Fund as a subcustodian for purposes of holding cash,
securities and other Assets of the Fund and performing other functions of
the Custodian within the United States (a "Domestic Subcustodian");
provided, that, the Custodian shall notify the Fund in writing of the
identity and qualifications of any proposed Domestic Subcustodian at least
sixty (60) days prior to the desired appointment of such Domestic
Subcustodian, and the Fund will notify the Custodian, in writing signed by
two or more Authorized Persons, of approval or disapproval of the
appointment of the proposed Domestic Subcustodian; and provided, further,
that the Custodian may not appoint any such Domestic Subcustodian without
such prior written approval of the Fund by such Authorized Persons. Each
such duly approved Domestic Subcustodian and the countries where Foreign
Sub-Subcustodians through which they may hold securities and other Assets
of the Fund shall be as agreed upon by the parties hereto in writing, from
time to time, in accordance with the provisions of Section 9.04 hereof (the
"Subcustodian List").


    Section 4.02.  Foreign Sub-Subcustodians and Interim Sub-Subcustodians.

     (a)  Foreign Sub-Subcustodians. The Approved Foreign Custody Manager
may appoint any entity meeting the requirements of an Eligible Foreign
Custodian, as such term is defined in Rule 17f-5(a)(1) under the 1940 Act,
and which term shall also include a bank that qualifies to serve as a
custodian of assets of investment companies under Section 17(f) of the 1940
Act or by SEC order is exempt therefrom (each a "Foreign Sub-
Subcustodian"), provided that the Approved Foreign Custody Manager's
appointments of such Eligible Foreign Custodians shall at all times be
governed by an agreement that complies with Rule 17f-5.

     (b)  Interim Sub-Subcustodians. Notwithstanding the foregoing, in the
event that the Fund shall invest in a security or other Asset to be held in
a country in which the Approved Foreign Custody Manager has not appointed a
Foreign Sub-Subcustodian or for which the Fund has otherwise directed that
a specific Foreign Sub-Subcustodian be used, the Custodian shall, or shall
cause the Approved Foreign Custody Manager to, promptly notify the Fund in
writing by facsimile transmission or in such other manner as the Fund and
Custodian shall agree in writing of the unavailability of an approved
Foreign Sub-Subcustodian in such country; and upon the receipt of Special
Instructions, the Custodian shall, or shall cause the Approved Foreign
Custody Manager to, appoint or approve any Person (as hereinafter defined)
designated by the Fund in such Special Instructions, to hold such security
or other Asset. The subcustodian agreement between the Custodian and the
Interim Sub-Subcustodian (as hereinafter defined) shall comply with the
provisions of the 1940 Act and the rules and regulations thereunder
(including Rule 17f-5, if applicable) and the terms and provisions of this
Agreement. The Custodian shall comply with Section 4.02(a) hereof with
respect to the appointment of an Interim Sub-Subcustodian. (Any Person
appointed or approved as the sub-subcustodian pursuant to this Section
4.02(b) is hereinafter referred to as an "Interim Sub-Subcustodian.")

     (c)  In the event that the Approved Foreign Custody Manager or its
delegate reasonably determines that such Person will not provide delegation
services (i) in a country in which the Fund has directed that the Fund
shall invest in a security or other Asset or (ii) with respect to a
specific Foreign Sub-Subcustodian which the Fund has directed be used, the
Approved Foreign Custody Manager or the Custodian (or its agent), as
applicable, shall be entitled to rely on any such instruction provided
pursuant to Section 4.02(b) as a Proper Instruction and shall have no
duties or liabilities under this Agreement with respect to such arrangement
save those that it may undertake specifically in writing with respect to
each particular instance; provided that the Delegation Agreement and this
Agreement shall not constitute the Approved Foreign Custody Manager or the
Custodian (or its agent), as the exclusive delegate of the Fund for
purposes of Rule 17f-5 and, particularly where such Person does not agree
to provide fully the services under this Agreement and the Delegation
Agreement to the Fund with respect to a particular country or specific
Foreign Sub-Subcustodian, the Fund may delegate such services to another
delegate pursuant to Rule 17f-5.

     Section 4.03.   Special Subcustodians. Upon receipt of Special
Instructions, the Custodian shall, on behalf of the Fund, appoint one or
more banks, trust companies or other entities designated in such Special
Instructions to act as a subcustodian for the purpose of (i) effecting
third-party repurchase transactions with banks, brokers, dealers or other
entities, (ii) providing depository and clearing agency services with
respect to certain variable rate demand note securities; and (iii)
effecting any other transactions designated by the Fund in Special
Instructions. (Each such designated subcustodian is hereinafter referred to
as a "Special Subcustodian.")  Each such duly appointed Special
Subcustodian shall be listed on the Subcustodian List. In connection with
the appointment of any Special Subcustodian, the Custodian shall enter into
a subcustodian agreement with the Special Subcustodian in form and
substance approved by the Fund, provided that such agreement shall in all
events comply with the provisions of the 1940 Act and the rules and
regulations thereunder and the terms and provisions of this Agreement. The
Custodian shall not amend any subcustodian agreement entered into with a
Special Subcustodian, or agree to change or permit any changes thereunder,
or waive any rights under such agreement, except upon prior approval
pursuant to Special Instructions.

     Section 4.04.   Termination of a Subcustodian. The Custodian shall (i)
cause each Domestic Subcustodian to, and (ii) use its best efforts to cause
each Interim Sub-Subcustodian and Special Subcustodian to, perform all of
its obligations in accordance with the terms and conditions of the
subcustodian agreement between the Custodian and such Domestic Subcustodian
and Special Subcustodian or between the Domestic Subcustodian and an
Interim Sub-Subcustodian. In the event that the Custodian is unable to
cause such subcustodian or sub-subcustodian to fully perform its
obligations thereunder, the Custodian shall promptly notify the Fund in
writing and forthwith, upon the receipt of Special Instructions, terminate
or cause the termination of such Subcustodian or Sub-Subcustodian with
respect to the Fund and, if necessary or desirable, appoint or cause the
appointment of a replacement Subcustodian or Sub-Subcustodian in accordance
with the provisions of this Article IV. In addition to the foregoing, the
Custodian (A) may, at any time in its discretion, upon written notification
to the Fund, terminate any Domestic Subcustodian which is not an approved
Foreign Custody Manager, and (B) shall, upon receipt of Special
Instructions, terminate any Special Subcustodian or Domestic Subcustodian
which is an Approved Foreign Custody Manager with respect to the Fund, in
accordance with the termination provisions under the applicable
subcustodian agreement, and (C) shall, upon receipt of Special
Instructions, cause the Domestic Subcustodian to terminate any Foreign Sub-
Subcustodian or Interim Sub-Subcustodian as to its use of such entities
with respect to the Fund, in accordance with the termination provisions
under the applicable sub-subcustodian agreement.

     Section 4.05.   Certification Regarding Foreign Sub-Subcustodians.
Upon request of the Fund, the Custodian shall deliver, or cause any
Approved Foreign Custody Manager to deliver, to the Fund a certificate
stating:  (i) the identity of each Foreign Sub-Subcustodian then acting on
behalf of the Custodian; (ii) the countries in which the Eligible
Securities Depositories (as defined in Section 4.06) through which each
Foreign Sub-Subcustodian is then holding cash, securities and other Assets
of the Fund; and (iii) such other information as may be requested by the
Fund to ensure compliance with rules and regulations under the 1940 Act.

     Upon request of the Fund, the Custodian also shall deliver, or cause
any Domestic Subcustodian that has been approved as a Foreign Custody
Manager to deliver, to the Fund:  (i) legal opinions relating to whether
local law restricts with respect to U.S.-registered mutual funds (a) access
of a fund's independent public accountants to books and records of a
Foreign Sub-Subcustodian, foreign Securities Depository or foreign Clearing
Agent, (b) a fund's ability to recover in the event of bankruptcy or
insolvency of a Foreign Sub-Subcustodian, foreign Securities Depository or
foreign Clearing Agent, (c) a fund's ability to recover in the event of a
loss by a Foreign Sub-Subcustodian, foreign Securities Depository or
foreign Clearing Agent, and (d) the ability of a foreign investor (such as
a fund) to convert cash and cash equivalents to U.S. dollars; (ii) a
summary of information regarding foreign Securities Depositories and
foreign Clearing Agents; and (iii) country profile information containing
market practice for (a) delivery versus payment, (b) settlement method, (c)
currency restrictions, (d) buy-in practices, (e) foreign ownership limits
and (f) unique market arrangements.

     Section 4.06.   Securities Depositories.

     (a)  The Custodian (or its agent) may place and maintain the Fund's
Foreign Assets (as defined in Rule 17f-5 under the 1940 Act) with an
Eligible Securities Depository (as defined in Rule 17f-7, which term shall
include any other securities depository for which the SEC by exemptive
order has permitted registered investment companies to maintain their
assets).

     (b)  The Custodian (or its agent) shall, for evaluation by the Fund or
its adviser, provide an analysis of the custody risks associated with
maintaining the Fund's Foreign Assets with each Eligible Securities
Depository utilized directly or indirectly by the Custodian as of the date
hereof (or, in the case of an Eligible Securities Depository not so
utilized as of the date hereof, prior to the initial placement of the
Fund's Foreign Assets at such Depository) and at which any Foreign Assets
of the Fund are held or are expected to be held. The Custodian (or its
agent) shall monitor the custody risks associated with maintaining the
Fund's Foreign Assets at each such Eligible Securities Depository on a
continuing basis and shall promptly notify the Fund or its adviser of any
material changes in such risks.

     (c)  Based on the information available to it in the exercise of
diligence, the Custodian (or its agent) shall determine the eligibility
under Rule 17f-7 of each foreign securities depository before maintaining
the Fund's Foreign Assets therewith and shall promptly advise the Fund if
any Eligible Securities Depository ceases to be so eligible. A list of
Eligible Securities Depositories used by the Custodian directly or
indirectly as of the date hereof is attached as Appendix A. Notwithstanding
Section 9.04 hereof, Eligible Securities Depositories may, subject to Rule
17f-7, be added to the list from time to time.

     (d)  Withdrawal of Assets. If an arrangement with an Eligible
Securities Depository no longer meets the requirements of Rule 17f-7, the
Custodian (or its agent) will withdraw the Fund's Foreign Assets from such
depository as soon as reasonably practicable.

     (e)  Standard of Care. In fulfilling its responsibilities under this
Section 4.06, the Custodian will exercise reasonable care, prudence and
diligence.

     Section 4.07.   The Fund shall not place or maintain any of the Fund's
Foreign Assets in any country, and shall as promptly as practicable
withdraw the Fund's Foreign Assets from any country, that is identified in
the Global Custody Network Listing provided by the Custodian (or its agent)
as a country where the liability or responsibility of the Approved Foreign
Custody Manager or the Custodian (or its agent) is conditioned or
predicated on the ability of the Approved Foreign Custody Manager or the
Custodian (or its agent) to recover damages from the Foreign Sub-
Subcustodian in such country.


                                 ARTICLE V
                   STANDARD OF CARE:  INDEMNIFICATION

     Section 5.01.   Standard of Care.

     (a)  General Standard of Care. The Custodian shall exercise reasonable
care and diligence in carrying out all of its duties and obligations under
this Agreement, and shall be liable to the Fund for all loss, damage and
expense suffered or incurred by the Fund resulting from the failure of the
Custodian to exercise such reasonable care and diligence.

     (b)  Actions Prohibited by Applicable Law, Etc. In no event shall the
Custodian incur liability hereunder if the Custodian or any Subcustodian or
Securities System, or any subcustodian, Eligible Securities Depository
utilized by any such Subcustodian, or any nominee of the Custodian or any
Subcustodian (individually, a "Person") is prevented, forbidden or delayed
from performing, or omits to perform, any act or thing which this Agreement
provides shall be performed or omitted to be performed, by reason of:  (i)
any provision of any present or future law or regulation or order of the
United States of America, or any state thereof, or of any foreign country,
or political subdivision thereof or of any court of competent jurisdiction
(and the Custodian nor any other Person shall not be obligated to take any
action contrary thereto); or (ii) any "Force Majeure," which for purposes
of this Agreement, shall mean any circumstance or event which is beyond the
reasonable control of the Custodian, a Subcustodian or any agent of the
Custodian or a Subcustodian and which adversely affects the performance by
the Custodian of its obligations hereunder, by the Subcustodian of its
obligations under its subcustody agreement or by any other agent of the
Custodian or the Subcustodian, unless in each case, such delay or
nonperformance is caused by the negligence, misfeasance or misconduct of
the Custodian. Such Force Majeure events may include any event caused by,
arising out of or involving (a) an act of God, (b) accident, fire, water
damage or explosion, (c) any computer, system or other equipment failure or
malfunction caused by any computer virus or the malfunction or failure of
any communications medium, (d) any interruption of the power supply or
other utility service, (e) any strike or other work stoppage, whether
partial or total, (f) any delay or disruption resulting from or reflecting
the occurrence of any Sovereign Risk (as defined below), (g) any disruption
of, or suspension of trading in, the securities, commodities or foreign
exchange markets, whether or not resulting from or reflecting the
occurrence of any Sovereign Risk, (h) any encumbrance on the
transferability of a currency or a currency position on the actual
settlement date of a foreign exchange transaction, whether or not resulting
from or reflecting the occurrence of any Sovereign Risk, or (i) any other
cause similarly beyond the reasonable control of the Custodian.

Subject to the Custodian's general standard of care set forth in Section
5.01(a) hereof and the requirements of Section 17(f) of the 1940 Act and
Rules 17f-5 and 17f-7 thereunder, the Custodian shall not incur liability
hereunder if any Person is prevented, forbidden or delayed from performing,
or omits to perform, any act or thing which this Agreement provides shall
be performed or omitted to be performed by reason of any (i) "Sovereign
Risk," which for the purpose of this Agreement shall mean, in respect of
any jurisdiction, including the United States of America, where investments
are acquired or held under this Agreement, (a) any act of war, terrorism,
riot, insurrection or civil commotion, (b) the imposition of any
investment, repatriation or exchange control restrictions by any
governmental authority, (c) the confiscation, expropriation or
nationalization of any investments by any governmental authority, whether
de facto or de jure, (d) any devaluation or revaluation of the currency,
(e) the imposition of taxes, levies or other charges affecting investments,
(f) any change in the applicable law, or (g) any other economic or
political risk incurred or experienced that is not directly related to the
economic or financial conditions of the Eligible Foreign Custodian, except
as otherwise provided in this Agreement or the Delegation Agreement, or
(ii) "Country Risk," which for the purpose of this Agreement shall mean,
with respect to the acquisition, ownership, settlement or custody of
investments in a jurisdiction, all risks relating to, or arising in
consequence of, systemic and markets factors affecting the acquisition,
payment for or ownership of investments, including (a) the prevalance of
crime and corruption except for crime or corruption by the Eligible Foreign
Custodian, or its employees, directors or officers, (b) the inaccuracy or
unreliability of business and financial information (unrelated to the
Approved Foreign Custody Manager's duties imposed by Rule 17f-5(c) under
the 1940 Act or to the duties imposed on the Custodian by Rule 17f-7 under
the 1940 Act), (c) the instability or volatility of banking and financial
systems, or the absence or inadequacy of an infrastructure to support such
systems, (d) custody and settlement infrastructure of the market in which
such investments are transacted and held, (e) the acts, omissions and
operation of any Eligible Securities Depository, it being understood that
this provision shall not affect any liability that the Custodian otherwise
would have under the Delegation Agreement or with respect to foreign
subcustodians and securities depositories under this Agreement, (f) the
risk of the bankruptcy or insolvency of banking agents, counterparties to
cash and securities transactions, registrars or transfer agents, (g) the
existence of market conditions which prevent the orderly execution or
settlement of transactions or which affect the value of assets, and (h) the
laws relating to the safekeeping and recovery of the Fund's Foreign Assets
held in custody pursuant to the terms of this Agreement; provided, however,
that, in compliance with Rule 17f-5, neither Sovereign Risk nor Country
Risk shall include the custody risk of a particular Eligible Foreign
Custodian of the Fund's Foreign Assets.

     (c)  Mitigation by Custodian. Upon the occurrence of any event which
causes or may cause any loss, damage or expense to the Fund, (i) the
Custodian shall, (ii) the Custodian shall cause any applicable Domestic
Subcustodian or Foreign Sub-Subcustodian to, and (iii) the Custodian shall
use its best efforts to cause any applicable Interim Sub-Subcustodian or
Special Subcustodian to, use all commercially reasonable efforts and take
all reasonable steps under the circumstances to mitigate the effects of
such event and to avoid continuing harm to the Fund.

     (d)  Advice of Counsel. The Custodian shall be without liability for
any action reasonably taken or omitted in good faith pursuant to the
written advise of (i) counsel for the Fund, or (ii) at the expense of the
Custodian, such other counsel as the Fund and the Custodian may agree upon
in writing; provided, however, with respect to the performance of any
action or omission of any action upon such advice, the Custodian shall be
required to conform to the standard of care set forth in Section 5.01 (a).

     (e)  Expenses of the Fund. In addition to the liability of the
Custodian under this Article V, the Custodian shall be liable to the Fund
for all reasonable costs and expenses incurred by the Fund in connection
with any claim by the Fund against the Custodian arising from the
obligations of the Custodian hereunder including, without limitation, all
reasonable attorneys' fees and expenses incurred by the Fund in asserting
any such claim, and all expenses incurred by the Fund in connection with
any investigations, lawsuits or proceedings relating to such claim;
provided however, that the Fund has recovered from the Custodian for such
claim.

     (f)  Liability for Past Records. The Custodian shall have no liability
in respect of any loss, damage or expense suffered by the Fund, insofar as
such loss, damage or expense arises from the performance of the Custodian
in reliance upon records that were maintained for the Fund by entities
other than the Custodian prior to the Custodian's employment hereunder
which the Custodian has no reason to believe are inaccurate or incomplete
after reasonable inquiry.

     Section 5.02.  Liability of the Custodian for Actions of Other Persons.

     (a)  Domestic Subcustodian and Foreign Sub-Subcustodian. The Custodian
shall be liable for the actions or omissions of any Domestic Subcustodian
or Foreign Sub-Subcustodian (excluding any Eligible Securities Depository
appointed by them) to the same extent as if such actions or omissions were
performed by the Custodian itself. In the event of any loss, damage or
expense suffered or incurred by the Fund caused by or resulting from the
actions or omissions of any Domestic Subcustodian or Foreign Sub-
Subcustodian for which the Custodian would otherwise be liable, the
Custodian shall promptly reimburse the Fund in the amount of any such loss,
damage or expense.

     (b)  Special Subcustodians, Interim Sub-Subcustodians, Security
Systems, Securities Depositories and Clearing Agencies. The Custodian shall
not be liable to the Fund for any loss, damage or expense suffered or
incurred by the Fund resulting from the actions or omissions of a Special
Subcustodian, Interim Sub-Subcustodian, Securities System or Eligible
Securities Depository unless such loss, damage or expense is caused by, or
results from, the negligence, misfeasance or misconduct of the Custodian;
provided, however, in the event of any such loss, damage or expense, the
Custodian shall take all reasonable steps to enforce such rights as it may
have against such Special Subcustodian, Interim Sub-Subcustodian, Security
System, or Eligible Securities Depository to protect the interest of the
Fund.

     (c)  Reimbursement of Expenses. The Fund agrees to reimburse the
Custodian for all reasonable out-of-pocket expenses incurred by the
Custodian in connection with the fulfillment of its obligations under
Section 5.01(c) as it relates to Interim Sub-Subcustodians and Special
Subcustodians and 5.02(b); provided however, that such reimbursement shall
not apply to expenses occasioned by or resulting from the negligence,
misfeasance or misconduct of the Custodian.

     Section 5.03.   Indemnification by Fund.

     (a)  Indemnification Obligations of Fund. Subject to the limitations
set forth in this Agreement, the Fund agrees to indemnify and hold harmless
the Custodian and its nominees from all loss, damage and expense (including
reasonable attorneys' fees) suffered or incurred by the Custodian or its
nominee caused by or arising from actions taken by the Custodian, its
employees or agents in the performance of its duties and obligations under
this Agreement; provided, however, that such indemnity shall not apply to
loss, damage and expense occasioned by or resulting from the negligence,
misfeasance or misconduct of the Custodian or its nominee. In addition, the
Fund agrees to indemnify any Person against liability incurred by reason of
taxes assessed to such Person resulting from the fact that securities and
other property of the Fund are registered in the name of such Person in
accordance with the provisions of this Agreement; provided, however, that
in no event shall such indemnification be applicable to income, franchise
or similar taxes which may be imposed or assessed against any Person. It is
also understood that the Fund agrees to indemnify and hold harmless the
Custodian and its nominee for any loss arising from a foreign currency
transaction or contract, where the loss results from a Sovereign Risk
(defined in Section 5.01(b)) or where any Person maintaining securities,
currencies, deposits or other Assets of the Fund in connection with any
such transactions has exercised reasonable care maintaining such property
or in connection with any such transaction involving such Assets. A
"Sovereign Risk" shall mean nationalization, expropriation, devaluation,
revaluation, confiscation, seizure, cancellation, destruction or similar
action by any governmental authority, de facto or de jure; or enactment,
promulgation, imposition or enforcement by any such governmental authority
of currency restrictions, exchange controls, taxes, levies or other charges
affecting the Fund's property; or acts of war, terrorism, insurrection or
revolution.

     (b)  Notice of Litigation. Right to Prosecute, Etc. The Fund shall not
be liable for indemnification under this Section 5.03 unless a Person shall
have promptly notified the Fund in writing of the commencement of any
litigation or proceeding brought against the Custodian or other Person in
respect of which indemnity may be sought under this Section 5.03. With
respect to claims in such litigation or proceedings for which indemnity by
the Fund may be sought and subject to applicable law and the ruling of any
court of competent jurisdiction, the Fund shall be entitled to participate
in any such litigation or proceeding with counsel of its choice at its own
expense in respect of that portion of the litigation for which the Fund may
be subject to an indemnification obligation; provided, however, a Person
shall be entitled to participate in (but not control) at its own cost and
expense, the defense of any such litigation or proceeding if the Fund has
not acknowledged in writing it obligation to indemnify the Person with
respect to such litigation or proceeding. If the Fund is not permitted to
participate or control such litigation or proceeding under applicable law
or by a ruling of a court of competent jurisdiction, or if the Fund chooses
not to so participate, the Custodian or other Person shall not consent to
the entry of any judgment or enter into any settlement in any such
litigation or proceeding without providing the Fund with adequate notice of
any such settlement or judgment, and without the Fund's prior written
consent which consent shall not be unreasonably withheld or delayed. All
Persons shall submit written evidence to the Fund with respect to any cost
or expense for which they are seeking indemnification in such form and
detail as the Fund may reasonably request.

     Section 5.04.   Investment Limitations. If the Custodian has otherwise
complied with the terms and conditions of this Agreement in performing its
duty generally, and more particularly in connection with the purchase, sale
or exchange of securities made by or for the Fund, the Custodian shall not
be liable to the Fund and the Fund agrees to indemnify the Custodian and
its nominees, for any loss, damage or expense suffered or incurred by the
Custodian and its nominees arising out of any violation of any investment
or other limitation to which the Fund is subject except for violations of
which the Custodian has actual knowledge. For purposes of this Section 5.04
the term "actual knowledge" shall mean knowledge gained by the Custodian by
means other than from any prospectus published by the Fund or contained in
any filing by the Fund with the SEC.

     Section 5.05.   Fund's Right to Proceed. Notwithstanding anything to
the contrary contained herein, the Fund shall have, at its election upon
reasonable notice to the Custodian, the right to enforce, to the extent
permitted by any applicable agreement and applicable law, the Custodian's
rights against any Subcustodian, Securities System or other Person for
loss, damage or expense caused the Fund by such Subcustodian, Securities
System or other Person, which the Custodian may have as a consequence of
any such loss, damage or expense, if and to the extent that the Fund has
not been made whole for any such loss, expense or damage. If the Custodian
makes the Fund whole for any such loss, expense or damage, the Custodian
shall retain the ability to enforce its rights directly against such
Subcustodian, Securities System or other Person. Upon the Fund's election
to enforce any rights of the Custodian under this Section 5.05, the Fund
shall reasonably prosecute all actions and proceedings directly relating to
the rights of the Custodian in respect of the loss, damage or expense
incurred by the Fund; provided that, so long as the Fund has acknowledged
in writing its obligation to indemnify the Custodian under Section 5.03
hereof with respect to such claim, the Fund shall retain the right to
settle, compromise and/or terminate any action or proceeding in respect of
the loss, damage or expense incurred by the Fund without the Custodian's
consent and provided further, that if the Fund has not made an
acknowledgement of its obligation to indemnify, the Fund shall not settle,
compromise or terminate any such action or proceeding without the written
consent of the Custodian, which consent shall not be unreasonably withheld
or delayed. The Custodian agrees to cooperate with the Fund and take all
actions reasonably requested by the Fund in connection with the Fund's
enforcement of any rights of the Custodian. Nothing contained in this
Section 5.05 shall be construed as an obligation of the Fund to enforce the
Custodian's rights. The Fund agrees to reimburse the Custodian for out-of-
pocket expenses incurred by it in connection with the fulfillment of its
obligations under this Section 5.05; provided, however, that such
reimbursement shall not apply to expenses occasioned by or resulting from
the negligence, misfeasance or misconduct of the Custodian.

     Section 5.06.   Indemnification by Custodian.

     (a)  Indemnification Obligations of Custodian. Subject to the
limitations set forth in this Agreement and in addition to the
reimbursement obligations provided in Section 5.02(a), the Custodian agrees
to indemnify and hold harmless the Fund and its nominees from all loss,
damage and expense (including reasonable attorneys' fees) suffered or
incurred by the Fund or its nominee caused by or arising from the failure
of the Custodian, its nominee, employees or agents to comply with the terms
or conditions of this Agreement or arising out of the negligence,
misfeasance or misconduct of the Custodian or its nominee.

     (b)  Notice of Litigation, Right to Prosecute, Etc. The Custodian
shall not be liable for indemnification under this Section 5.06 unless the
Fund shall have promptly notified the Custodian in writing of the
commencement of any litigation or proceeding brought against the Fund in
respect of which indemnity may be sought under this Section 5.06. With
respect to claims in such litigation or proceedings for which indemnity by
the Custodian may be sought and subject to applicable law and the ruling of
any court of competent jurisdiction, the Custodian shall be entitled to
participate in any such litigation or proceeding with counsel of its choice
at its own expense in respect of that portion of the litigation for which
the Custodian may be subject to an indemnification obligation; provided,
however, the Fund shall be entitled to participate in (but not control) at
its own cost and expense, the defense of any such litigation or proceeding
if the Custodian has not acknowledged in writing its obligation to
indemnify the Fund with respect to such litigation or proceeding. If the
Custodian is not permitted to participate or control such litigation or
proceeding under applicable law or by a ruling of a court of competent
jurisdiction, or if the Custodian chooses not to so participate, the Fund
shall not consent to the entry of any judgement or enter into any
settlement in any such litigation or proceeding without providing the
Custodian with adequate notice of any such settlement or judgement, and
without the Custodian's prior written consent which consent shall not be
unreasonably withheld or delayed. The Fund shall submit written evidence to
the Custodian with respect to any cost or expense for which it is seeking
indemnification in such form and detail as the Custodian may reasonably
request.

     Section 5.07.   Custodian's Right to Proceed. Notwithstanding anything
to the contrary contained herein, the Custodian shall have, at its election
upon reasonable notice to the Fund, the right to enforce, to the extent
permitted by any applicable agreement and applicable law, the Fund's rights
against any Subcustodian, Securities System or other Person for loss,
damage or expense caused the Custodian by such Subcustodian, Securities
System or other Person, which the Fund may have as a consequence of any
such loss, damage or expense, if and to the extent that the Custodian has
not been made whole for any such loss, expense or damage. If the Fund makes
the Custodian whole for any such loss, expense or damage, the Fund shall
retain the ability to enforce its rights directly against such
Subcustodian, Securities System or other Person. Upon the Custodian's
election to enforce any rights of the Fund under this Section 5.07, the
Custodian shall reasonably prosecute all actions and proceedings directly
relating to the rights of the Fund in respect of the loss, damage and
expense incurred by the Custodian; provided that, so long as the Custodian
has acknowledged in writing its obligation to indemnify the Fund under
Section 5.06 hereof with respect to such claim, the Custodian shall retain
the right to settle, compromise and/or terminate any action or proceeding
in respect of the loss, damage or expense incurred by the Custodian without
the Fund's consent and provided further, that if the Custodian has not made
an acknowledgement of its obligation to indemnify, the Custodian shall not
settle, compromise or terminate any such action or proceeding without the
written consent of the Fund, which consent shall not be unreasonably
withheld or delayed. The Fund agrees to cooperate with the Custodian and
take all actions reasonably requested by the Custodian in connection with
the Custodian's enforcement of any rights of the Fund. Nothing contained in
this Section 5.07 shall be construed as an obligation of the Custodian to
enforce the Fund's rights. The Custodian agrees to reimburse the Fund for
out-of-pocket expenses incurred by it in connection with the fulfillment of
its obligations under this Section 5.07; provided, however, that such
reimbursement shall not apply to expenses occasioned by or resulting from
the negligence, misfeasance or misconduct of the Fund.

                                 ARTICLE VI
                              COMPENSATION

     For the initial three year period beginning on the effective date of
this Agreement, the Fund shall compensate the Custodian in the amount and
at the times specified in Appendix A attached hereto. Thereafter, the Fund
shall compensate the Custodian in the amount, and at times, as may be
agreed upon in writing, from time to time, by the Custodian and the Fund.

                                ARTICLE VII
                              TERMINATION

     This Agreement shall continue in full force and effect until the first
to occur of:  (a) termination by the Custodian by an instrument in writing
delivered or mailed (certified mail, return receipt requested) to the Fund,
such termination to take effect not sooner than ninety (90) days after the
date of such delivery or receipt; (b) termination by the Fund by an
instrument in writing delivered or mailed (certified mail, return receipt
requested) to the Custodian, such termination to take effect not sooner
than ninety (90) days after the date of such delivery or receipt; or (c)
termination by the Fund by an instrument in writing delivered to the
Custodian, based upon the Fund's determination that there is reasonable
basis to conclude that the Custodian is insolvent or that the financial
condition of the Custodian is deteriorating in any material respect, in
which case termination shall take effect upon the Custodian's receipt of
such notice or at such later time as the Fund shall designate. In the event
of termination pursuant to this Article VII, the Fund shall make payment of
all accrued fees and unreimbursed expenses within a reasonable time
following termination and delivery of a statement to the Fund setting forth
such fees and expenses. The Fund shall identify in any notice of
termination a successor custodian to which the cash, securities and other
Assets of the Fund shall, upon termination of this Agreement, be delivered.
In the event that securities and other Assets remain in the possession of
the Custodian after the date of termination hereof owing to failure of the
Fund to appoint a successor custodian, the Custodian shall be entitled to
compensation for its services in accordance with the fee schedule most
recently in effect, for such period as the Custodian retains possession of
such securities and other Assets, and the provisions of this Agreement
relating to the duties and obligations of the Custodian and the Fund shall
remain in full force and effect for such period. In the event of the
appointment of a successor custodian, the cash, securities and other Assets
owned by the Fund and held by the Custodian, any Subcustodian or nominee
shall be delivered, at the terminating party's expense, to the successor
custodian; and the Custodian agrees to cooperate with the Fund in the
execution of documents and performance of other actions necessary or
desirable in order to substitute the successor custodian for the Custodian
under this Agreement.

                                ARTICLE VIII
                             DEFINED TERMS

     The following terms are defined in the following sections:

Term                                         Section
Account                                      2.22(A)
ADRs                                         2.06
Approved Foreign Custody Manager             Article IV
Assets                                       Article I
Authorized Person                            3.02
Banking Institution                          2.12
Bank Accounts                                2.21
Country Risk                                 5.01(b)
Delegation Agreement                         Article IV
Distribution Account                         2.16
Domestic Subcustodian                        4.01
Eligible Foreign Custodian                   4.02(a)
Eligible Securities Depository               4.06(a)
Force Majeure                                5.01(b)
Foreign Assets                               4.06(a)
Foreign Custody Manager                      Article IV
Foreign Sub-Subcustodian                     4.02(a)
Institutional Client                         2.03
Interest Bearing Deposit                     2.12
Interim Sub-Subcustodian                     4.02(b)
OCC                                          2.09
Overdraft                                    2.28
Overdraft Notice                             2.28
Person                                       5.01(b)
Procedural Agreement                         2.10
Proper Instructions                          3.01(a)
SEC                                          2.22
Securities System                            2.22
Shares                                       2.16
Sovereign Risk                               5.01(b)
Special Instructions                         3.01(b)
Special Subcustodian                         4.03
Subcustodian                                 Article IV
1940 Act                                     Preamble

                                 ARTICLE IX
                             MISCELLANEOUS

     Section 9.01.   Execution of Documents, Etc.

     (a)  Actions by the Fund. Upon request, the Fund shall execute and
deliver to the Custodian  such proxies, powers of attorney or other
instruments as may be reasonable and necessary or desirable in connection
with the performance by the Custodian or any Subcustodian of their
respective obligations under this Agreement or any applicable subcustodian
agreement, provided that the exercise by the Custodian or any Subcustodian
of any such rights shall in all events be in compliance with the terms of
this Agreement.

     (b)  Actions by Custodian. Upon receipt of Proper Instructions, the
Custodian shall execute and deliver to the Fund or to such other parties as
the Fund may designate in such Proper Instructions, all such documents,
instruments or agreements as may be reasonable and necessary or desirable
in order to effectuate any of the transactions contemplated hereby and
designated therein.

     Section 9.02.   Representations and Warranties.

     (a)  Representations and Warranties of the Fund. The Fund hereby
represents and warrants that each of the following shall be true, correct
and complete as of the date of execution of this Agreement and, unless
notice to the contrary is provided by the Fund to the Custodian, at all
times during the term of this Agreement:  (i) the Fund is duly organized
under the laws of its jurisdiction of organization and is registered as an
open-end management investment company under the 1940 Act or is a series of
portfolio of such entity; and (ii) the execution, delivery and performance
by the Fund of this Agreement are (w) within its power, (x) have been duly
authorized by all necessary action, and (y) will not (A) contribute to or
result in a breach of or default under or conflict with any existing law,
order, regulation or ruling of any governmental or regulatory agency or
authority, or (B) violate any provision of the Fund's corporate charter or
other organizational document, or bylaws, or any amendment thereof or any
provision of its most recent Prospectus or Statement of Additional
Information.

     (b)  Representations and Warranties of the Custodian. The Custodian
hereby represents and warrants that each of the following shall be true,
correct and complete as of the date of execution of this Agreement and,
unless notice to the contrary is provided by the Custodian to the Fund, at
all times during the term of this Agreement:  (i) the Custodian is duly
organized under the laws of its jurisdiction of organization and qualifies
to serve as a custodian to open-end management investment companies under
the provisions of the 1940 Act; and (ii) the execution, delivery and
performance by the Custodian of this Agreement are (w) within its power (x)
have been duly authorized by all necessary action, and (y) will not (A)
contribute to or result in a breach of or default under or conflict with
any existing law, order, regulation or ruling of any governmental or
regulatory agency or authority, or (B) violate any provision of the
Custodian's corporate charter, or other organizational document, or bylaws,
or any amendment thereof. The Custodian acknowledges receipt of a copy of
the Fund's most recent Prospectus and Statement of Additional Information.

     Section 9.03.   Entire Agreement. This Agreement and the Delegation
Agreement, as amended from time to time, constitute the entire
understanding and agreement of the parties thereto with respect to the
subject matter therein and accordingly, supercedes as of the effective date
of this Agreement any custodian agreement heretofore in effect between the
Fund and the Custodian.

     Section 9.04.   Waivers and Amendments. No provisions of this
Agreement may be waived, amended or deleted except by a statement in
writing signed by the party against which enforcement of such waiver,
amendment or deletion is sought.

     Section 9.05.   Interpretation. In connection with the operation of
this Agreement, the Custodian and the Fund may agree in writing from time
to time on such provisions interpretative of or in addition to the
provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. No interpretative or additional
provisions made as provided in the preceding sentence shall be deemed to be
an amendment of this Agreement.

     Section 9.06.   Captions. Headings contained in this Agreement, which
are included as convenient references only, shall have no bearing upon the
interpretation of the terms of the Agreement or the obligations of the
parties hereto.

     Section 9.07.   Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of Missouri, in each
case without giving effect to principles of conflicts of law.

     Section 9.08.   Notices. Except in the case of Proper Instructions or
Special Instructions, and as otherwise provided in this Agreement, notices
and other writings contemplated by this Agreement shall be delivered by
hand or by facsimile transmission or as otherwise agreed to by the Fund and
the Custodian in writing (provided that in the case of delivery by
facsimile transmission, notice shall also be mailed postage prepaid) to the
parties at the following addresses:

    (a)  If to the Fund:

         W&R Target Funds, Inc. Micro Cap Growth Portfolio
         6300 Lamar Avenue
         Overland Park, Kansas  66202
         Attn:  Fund Treasurer
         Telephone: 913-236-2000
         Telefax:   913-236-1595
         CC:  Fund Secretary

    (b)  If to the Custodian:

         UMB Bank, n.a.
         928 Grand Avenue, 10th Floor
         Kansas City, Missouri  64106
         Attn:  Securities Administration
         Telephone: 816-860-7764
         Telefax:   816-860-4869

or such other address as either party may have designated in writing to the
other party hereto.

     Section 9.09.   Assignment.  This Agreement shall be binding on and
shall inure to the benefit of the Fund and the Custodian and their
respective successors and assigns, provided that, subject to the provisions
of Section 7.01 hereof, neither party hereto may assign this Agreement or
any of its rights or obligations hereunder without the prior written
consent of the other party.

     Section 9.10.   Counterparts.  This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original. This
Agreement shall become effective when one or more counterparts have been
signed and delivered by each of the parties.

     Section 9.11.   Confidentiality; Survival of Obligations.  The parties
hereto agree that each shall treat confidentially the terms and conditions
of this Agreement and all information provided by each party to the other
regarding its business and operations. All confidential information
provided by a party hereto shall be used by any other party hereto solely
for the purpose of rendering services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be
disclosed to any third party without the prior consent of such providing
party. The foregoing shall not be applicable to any information that is
publicly available when provided or thereafter becomes publicly available
other than through a breach of this Agreement, or that is required to be
disclosed by any bank examiner of the Custodian or any Subcustodians, any
auditor or examiner of the parties hereto, by judicial or administrative
process or otherwise by applicable law or regulation. The provisions of
this Section 9.11 and Section 9.01, 9.07, Section 2.28, Section 3.04,
Section 4.05, Section 7.01, Article V and Article VI hereof and any other
rights or obligations incurred or accrued by any party hereto prior to
termination of this Agreement shall survive any termination of this
Agreement.

     IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed in its name and behalf on the day and year first above written.

W&R TARGET FUNDS, INC., on             UMB BANK, n.a.
behalf of the MICRO CAP GROWTH
PORTFOLIO series


By:  _________________________          By:  _____________________________
Name:  Kristen A. Richards              Name:  Ralph Santoro

Title:  Vice President                  Title:  Senior Vice President



                               APPENDIX A
                                   to
                           CUSTODIAN AGREEMENT
                                 between
                         W&R TARGET FUNDS, INC.
                            on behalf of the
                    MICRO CAP GROWTH PORTFOLIO series
                                   and
                             UMB BANK, N.A.

                    Dated as of ______________, 2003

    The Fund shall be responsible for providing the Custodian the net
asset levels the Custodian requires to calculate the net asset portion of
the Custodian's fees. Such determinations shall be based upon the average
monthly assets of each Fund and shall specify the level of domestic assets
and foreign assets by country, as appropriate. Domestic assets shall
include all assets held in the United States including but not limited to
American Depositary Receipts. Foreign assets shall include all assets held
outside the United States including but not limited to securities which
clear through Euroclear or CEDEL. The Custodian will provide as soon as
practicable after receiving the information provided by the Fund with
respect to the net asset level numbers, a bill for the Fund, including such
reasonable detail in support of each bill as may be reasonably requested by
the Fund. As used in this Appendix A, "Advisors Funds" shall mean all funds
in the Waddell & Reed Advisors Funds, W&R Target Funds, Inc., W&R Funds,
Inc., Waddell & Reed InvestEd Portfolios, Inc. and Ivy Fund.

                       DOMESTIC CUSTODY FEE SCHEDULE

A.  Annual Fee (combining all domestic assets):

    An annual fee to be computed as of month end and payable each month of
    the Fund's fiscal year (after receipt of the bill issued to each Fund
    based upon its portion of domestic assets), at the annual rate of:

    .00003 for the first $5,000,000,000 of the net assets of all the
    Advisors Funds, plus
    .0000275 for the next $10,000,000,000 of the net assets of all the
    Advisors Funds, plus
    .0000265 for any net assets exceeding $15,000,000,000 of the assets of
    all the Advisor Funds

B.   Portfolio Transaction Fees (billed to each Fund):

    (a)  For each portfolio transaction* processed through a
         Depository (DTC, PTC or Fed)                           $ 5.25
    (b)  For each portfolio transaction* processed through
         the New York office (physical settlement)              $20.00
    (c)  For each futures/option contract written               $25.00
    (d)  For each principal/interest paydown                    $ 5.75
    (e)  For each interfund note transaction                    $ 6.00
    (f)  Fed                                                    $ 8.00

    * A portfolio transaction includes a receive, delivery, maturity, free
    security movement and corporate action.

C.  Earnings Credits:

    Positive earnings credits will be applied on all collected custody and
    cash management balances of each Fund at the Custodian to earn the
    Custodian's daily repurchase agreement rate less reserve requirements
    and FDIC premiums. Negative earnings credits will be charged on all
    uncollected custody and cash management balances of each Fund at the
    Custodian's prime rate less 150 basis points on each day a negative
    balance occurs. Positive and/or negative earnings credits will be
    monitored daily for each Fund and the net positive or negative amount
    for each Fund will be included in the monthly statements. Excess
    positive credits for each Fund will be carried forward indefinitely.

D.  Out-of-Pocket Expenses (passed directly from Special Subcustodians):

    Includes all charges by any Special Subcustodian to the Custodian as
    Custodian for any Assets held at the Special Subcustodian.

                          GLOBAL CUSTODY FEE SCHEDULE

A.  Global Fee Schedule:
    Market:                         Annual Asset Fees      Transaction Fees
    Argentina                          .0018               $ 55
    Australia                          .0003               $ 40
    Austria                            .000525             $ 40
    Bangladesh                         .0006               $140
    Belgium (Equity)                   .000325             $ 40
    Belgium (Fixed Income)             .00034              $ 40
    Bolivia                            .0045               $100
    Botswana                           .0060               $135
    Brazil                             .0017               $ 55
    Bulgaria                           .0060               $135
    Canada                             .00019              $ 18
    Cedel/Euroclear (Fixed Income)     .00017              $ 17
    Cedel/Euroclear (Equity)           .00045              $ 17
    Chile                              .0015               $ 65
    China                              .0015               $ 65
    Colombia                           .0037               $100
    Croatia                            .0070               $135
    Czech Republic (Equity)            .0023               $ 50
    Czech Republic (Fixed Income)      .0014               $ 50
    Denmark                            .00035              $ 40
    Equador                            .0040               $110
    Egypt                              .0040               $120
    Estonia                            .0040               $ 90
    Finland                            .00035              $ 40
    France                             .00024              $ 23
    Germany                            .00024              $ 21
    Greece (Equity)                    .0020               $ 50
    Greece (Fixed Income)              .0013               $ 50
    Hong Kong                          .000375             $ 48
    Hungary (Physical Equity)          .0029               $ 70
    Hungary (Keler Eq/Fi)              .0023               $ 70
    India                              .0035               $ 80
    Indonesia                          .0007               $ 70
    Ireland                            .00015              $ 18
    Israel                             .0015               $ 75
    Italy                              .00019              $ 25
    Japan                              .00019              $ 26
    Jordan                             .0040               $115
    Korea                              .0010               $ 48
    Latvia                             .0060               $ 85
    Lithuania                          .0050               $ 85
    Malaysia                           .0007               $ 60
    Mauritius                          .0055               $165
    Mexico                             .00044              $ 28
    Morocco                            .0040               $135
    Netherlands                        .00019              $ 21
    New Zealand                        .000375             $ 70
    Norway                             .000285             $ 38
    Pakistan                           .0040               $110
    Panama                             .0070               $135
    Peru                               .0040               $ 90
    Philippines                        .0015               $ 70
    Poland                             .0031               $ 80
    Portugal                           .00095              $ 65
    Romania                            .0035               $ 80
    Russia (Equity)                    .0060               $100
    Russia (Fixed Income)              .0050               $100
    Singapore                          .000375             $ 50
    Slovakia                           .0035               $ 65
    Slovinia                           .0070               $165
    South Africa                       .000375             $ 45
    Spain                              .000375             $ 51
    Sri Lanka                          .0025               $ 55
    Sweden                             .0003               $ 40
    Switzerland                        .00021              $ 31
    Taiwan                             .0015               $ 70
    Thailand                           .00085              $ 65
    Turkey                             .0015               $ 50
    U.K.                               .000135             $ 14
    Uruguay                            .0035               $ 85
    Venezuela                          .0037               $ 90
    Zimbabwe                           .0060               $145


Note: Fee Schedule eliminates sub-custodian asset and transaction-based
      out-of-pocket expenses. Other sub-custodian out-of-pocket expenses
      (i.e. Scrip fees, stamp duties, certificate fees, etc.)

B.  Out-of-Pocket Expenses (passed directly from Citibank):

    Includes, but is not limited to telex, legal, telephones, postage, and
    direct expenses including but not limited to tax reclaim, customized
    systems programming, certificate fees, duties, and registration fees.



                            SUBCUSTODIAN LIST
                     PURSUANT TO CUSTODIAN AGREEMENT
                                 between
                         W&R TARGET FUNDS, INC.
                            on behalf of the
                    MICRO CAP GROWTH PORTFOLIO series
                                   and
                             UMB BANK, n.a.

                  Dated as of __________________, 2003


The following is a list of  Foreign Subcustodians and Special Subcustodians
under the Custodian Agreement as amended:

A.    Foreign Sub-Custodians

COUNTRY          SUBCUSTODIAN                     DEPOSITORIES

ARGENTINA    CITIBANK, NA                            CDV
                                                     CRYL

AUSTRALIA    CITICORP NOMINEES PTY                   Austraclear
                                                     CHESS

AUSTRIA      CITIBANK, NA (through Milan)            OeKB

BANGLADESH   STANDARD CHARTERED BANK (SCB)           None

BELGIUM      FORTIS BANK                             CIK
                                                     NBB
                                                     Euroclear

BELGIUM      CITIBANK, NA Clearing Only              CIK
             (through Milan)                         NBB

BERMUDA      BANK OF BERMUDA                         BSD

BOLIVIA      CITIBANK, NA                            None

BOTSWANA     BARCLAYS BANK OF BOTSWANA LIMITED       None

BRAZIL       CITIBANK, NA                            CBLC
                                                     CETIP
                                                     SELIC

BULGARIA     SG EXPRESSBANK                          BNB
                                                     CDAD

CANADA       CITIBANK CANADA                         CDS

CHILE        CITIBANK, NA                            DCV

CHINA        CITIBANK, NA                            CSDCC Shanghai
                                                     CSDCC Shenzhen

COLOMBIA     CITITRUST COLOMBIA SA                   DCV
                                                     DECEVAL

COSTA RICA   BANCO BCT                               CEVAL

CROATIA      PRIVREDNA BANKA ZAGREB DD.              SDA
                                                     MoF

CZECH REPUBLIC CITIBANK, AS                          CNB
                                                     SCP

DENMARK      UNIBANK                                 VP

ECUADOR      CITIBANK, NA                            None

EGYPT        CITIBANK, NA                            MCSD

ESTONIA      HANSABANK LTD                           ECDS

FINLAND      NORDEA BANK FINLAND PLC                 FCSD

FRANCE       CITIBANK INTERNATIONAL PLC              Euroclear France

GERMANY      CITIBANK, AG                            CBF

GREECE       CITIBANK, NA                            CSD
                                                     BOGS

HONG KONG    CITIBANK, NA                            CMU
                                                     HKSCC

HUNGARY      CITIBANK RT                             KELER Ltd

INDIA        CITIBANK, NA                            NSDL
                                                     CDSL
                                                     RBI

INDONESIA    CITIBANK, NA                            KSEI

IRELAND      CITIBANK, NA                            CREST
                                                     Euroclear SA/NV

ISRAEL       BANK HAPOALIM                           SECH

ITALY        CITIBANK, NA                            MT

JAPAN        CITIBANK, NA                            BOJ
                                                     JASDEC

JORDAN       CITIBANK, NA                            None

KOREA        CITIBANK, NA                            KSD

LATVIA       HANSABANK                               BOL
                                                     LCD

LITHUANIA    HANSABANK                               CSDL

LUXEMBOURG   CLEARSTREAM BANKING (Luxembourg)        Clearstream

MALAYSIA     CITIBANK BERHAD                         BNM
                                                     MCD

MAURITIUS    HONGKONG & SHANGHAI BANKING CORP        CDS

MEXICO       BANAMEX SA                              Indeval

MOROCCO      CITIBANK MAGHREB                        MCLR

NETHERLANDS  CITIBANK, NA                            NECIGEF
                                                     NIEC

NEW ZEALAND  CITIBANK NOMINEES (NEW ZEALAND) LIMITED NZCSD

NORWAY       NORDEA BANK NORGE ASA                   VPS

PAKISTAN     CITIBANK, NA                            CDC
                                                     SBP

PERU         CITIBANK, NA                            CAVALI

PHILIPPINES  CITIBANK, NA                            PCD
                                                     ROSS

POLAND       BANK HANDLOWY W WARSZAWIE SA            NBP
                                                     NDS

PORTUGAL     CITIBANK INTERNATIONAL PLC              Interbolsa

PUERTO RICO  CITIBANK, NA                            None

ROMANIA      CITIBANK ROMANIA SA                     BSE
                                                     SNCDD

RUSSIA       ZAO CITIBANK                            VTB
                                                     NDC

SINGAPORE    CITIBANK, NA                            CDP

SLOVAKIA     CESKOSLOVENSKA OBCHODNI BANK AS (CSOB)  NBS
                                                     SCP

SLOVENIA     BANK AUSTRIA                            KDD

SOUTH AFRICA FIRST NATIONAL BANK OF                  CDL
               SOUTH AFRICA LIMITED                  STRATE

SPAIN        CITIBANK INTERNATIONAL PLC              CADE
                                                     SCLV

SRI LANKA    CITIBANK, NA                            CDS

SWEDEN       SKANDINAVISKA ENSKILDA BANKEN (SEB)     VPC

SWITZERLAND  CITIBANK, NA                            SIS

TAIWAN       CITIBANK, NA                            TSCD

THAILAND     CITIBANK, NA                            TSD

TURKEY       CITIBANK, NA                            CBT
                                                     Takasbank

UKRAINE      ING BANK                                MFS
                                                     NBU

UNITED KINGDOM CITIBANK, NA                          CMO
                                                     CRESTCO

VENEZUELA    CITIBANK, NA                            CVV
                                                     BCV

ZIMBABWE     BARCLAYS BANK OF ZIMBABWE LIMITED       None


B.  Special Subcustodians:

    Republic National Bank of New York
    The Bank of New York, n.a.

EX-99.B(G)MCGPCADEL

                                        EX-99.B(g)mcgpcadel

                    RULE 17f-5 DELEGATION AGREEMENT


    By its execution of this Delegation Agreement by and between W&R
TARGET FUNDS, INC., on behalf of the MICRO CAP GROWTH PORTFOLIO series
(the   Fund), a management investment company registered with the
Securities and Exchange Commission (the   Commission) under the Investment
Company Act of 1940, as amended (the   1940 Act), and UMB BANK, N. A. (the
Custodian), the Fund hereby directs the Custodian to appoint Citibank,
N.A. as the Approved Foreign Custody Manager under the terms of the
Custodian Agreement between the Fund and the Custodian (the   Delegate) to
perform certain functions with respect to the custody of the Fund's Assets
(as defined in Section 14 of this Delegation Agreement) outside the United
States of America.

     NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Fund and Custodian agree as follows.
Capitalized terms shall have the meaning indicated in Section 14 of this
Delegation Agreement unless otherwise indicated.

1.   Maintenance of  Fund's Assets  Abroad. The  Fund,  acting through  its
Board of Directors  (the  Board),  or  its  duly authorized  representative,
hereby instructs the Custodian to  enter into a written agreement with  the
Delegate to place and maintain the Fund's Assets outside the United  States
in  accordance  with  instructions  received  from  the  Fund's  investment
adviser. (An  investment  adviser  may  include any  duly  authorized  sub-
adviser  to  the  Fund.)    Such  instruction  shall  represent  a   Proper
Instruction under the  terms of  the Custodian Agreement  between the  Fund
and the Custodian dated _______________, as amended from time to time  (the
Custodian Agreement).  The  Fund  acknowledges that:  (a)  the  Custodian
shall direct the Delegate  to perform services hereunder only with  respect
to the  countries where  the Delegate  provides custodial  services to  the
Fund as  set  forth  in  Schedule  A  to  this  Delegation  Agreement;  (b)
depending on conditions  in the particular  country, advance notice may  be
required before  the Delegate,  upon the  Custodian's  direction, shall  be
able to  perform  its duties  in  or with  respect  to such  country  (such
advance notice  to  be  reasonable  in  light of  the  specific  facts  and
circumstances attendant to performance of duties in such country); and  (c)
nothing in this Delegation Agreement shall require the Custodian to  direct
the Delegate to  provide delegated  or custodial services  in any  country,
and there  may from  time to  time be countries  as to  which the  Delegate
determines it will not provide delegation services.

2.   Delegation. Pursuant to  the provisions of  Rule 17f-5 under the  1940
Act, and on behalf  of and at the  direction of the Fund, the Board  hereby
directs the  Custodian, and  the Custodian  hereby agrees,  to appoint  the
Delegate to  perform  only  those  duties  set  forth  in  this  Delegation
Agreement concerning the safekeeping of  each Fund's Assets in each of  the
countries as  to  which  Custodian  has  reported  to  the  Fund  that  the
Custodian shall have appointed the Delegate to act pursuant to Rule  17f-5.
The Custodian is hereby authorized to take such actions, and to direct  the
Delegate to take such actions, on  behalf of or in the name of the Fund  as
are reasonably  required  to discharge  its  duties under  this  Delegation
Agreement, including, without limitation, to cause the Fund's Assets to  be
placed  with  a  particular   Eligible  Foreign  Custodian  in   accordance
herewith. The  Fund  confirms  that its  Board  or investment  adviser  has
considered and accepted the  Sovereign Risk and prevailing Country Risk  as
part of its continuing investment decision process.

3.   Selection of Eligible  Foreign Custodian and Contract  Administration.
The Custodian shall direct the Delegate pursuant to a written agreement  to
perform the  following duties  with respect  to the  selection of  Eligible
Foreign Custodians and  administration of  certain contracts governing  the
Fund's foreign custodial arrangements:

     (a)  Selection of  Eligible  Foreign  Custodian.  The  Delegate  shall
place and maintain  the Fund's Assets  with an Eligible Foreign  Custodian;
provided that, the Delegate shall be required to determine that the  Fund's
Assets  will  be  subject  to  reasonable  care  based  on  the   standards
applicable to  custodians in  the relevant  market,  after considering  all
factors relevant  to  the safekeeping  of  such assets,  including  without
limitation:

               (i)  The    Eligible    Foreign    Custodian's    practices,
    procedures, and internal controls, including, but not limited to,  the
    physical  protections  available   for  certificated  securities   (if
    applicable),  the  controls  and  procedures  for  dealing  with   any
    Securities Depository, the  method of  keeping custodial records,  and
    the security and data protection practices;

              (ii) Whether  the   Eligible  Foreign   Custodian  has   the
    requisite financial  strength  to  provide  reasonable  care  for  the
    Fund's Assets;

              (iii)     The   Eligible    Foreign   Custodian's    general
    reputation and standing; and

              (iv) Whether the  Fund will  have jurisdiction  over and  be
    able to  enforce  judgments against  the Eligible  Foreign  Custodian,
    such as by  virtue of the  existence of any  offices of such  Eligible
    Foreign Custodian  in  the  United  States or  such  Eligible  Foreign
    Custodian's appointment  of an  agent for  service of  process in  the
    United States or consent to jurisdiction in the United States.

The  Delegate  shall  be  required  to  make  the  foregoing  determination
consistent with  the  standard of  care  set forth  in  Section 9  of  this
Delegation Agreement.

     (b)  Contract Administration.  The Custodian  shall require  that  the
Delegate cause  that  the foreign  custody  arrangements with  an  Eligible
Foreign Custodian be governed by  a written contract that the Delegate  has
determined will provide reasonable care for the Fund's Assets based on  the
standards  applicable   to  custodians   in  the   relevant  market   after
considering all factors  relevant to the  safekeeping of the Fund's  Assets
as specified in Rule 17f-5(c)(1).  Each such contract shall, except as  set
forth in  the last  paragraph of  this subsection  (b), include  provisions
that provide:

               (i)  For indemnification or  insurance arrangements (or  any
    combination of the  foregoing) such that  the Fund will be  adequately
    protected against the risk of  loss of assets held in accordance  with
    such contract;

              (ii) That the  Fund's  Assets will  not  be subject  to  any
    right, charge, security interest, lien  or claim of any kind in  favor
    of the Eligible Foreign Custodian or its creditors, except a claim  of
    payment for their  safe custody or administration  or, in the case  of
    cash  deposits,  liens  or  rights  in  favor  of  creditors  of  such
    Custodian arising under bankruptcy, insolvency or similar laws;

              (iii)     That beneficial  ownership  of the  Fund's  Assets
    will be  freely transferable  without the  payment of  money or  value
    other than for safe custody or administration;

              (iv) That adequate  records will  be maintained  identifying
    the Fund's  Assets as  belonging to  the Fund or  as being  held by  a
    third party for the benefit of the Fund;

              (v)  That the Fund's independent public accountants will  be
    given access to those records described in (iv) above or  confirmation
    of the contents of such records; and

              (vi) That the Delegate  will receive  sufficient and  timely
    periodic reports  with  respect  to  the  safekeeping  of  the  Fund's
    Assets, including, but  not limited to,  notification of any  transfer
    to or  from the  Fund's account or  a third  party account  containing
    foreign assets held for the benefit of the Fund.

    The Custodian may permit in its agreement with the Delegate that  such
contract may contain, in lieu of any or all of the provisions  specified in
this Section 3(b), such other provisions that the Delegate determines  will
provide, in  their  entirety, the  same  or a  greater  level of  care  and
protection for  the Fund's  Assets as  the specified  provisions, in  their
entirety.

    (c)   Limitation to  Delegated Selection.  Notwithstanding anything  in
this Delegation  Agreement  to  the  contrary, the  agreement  between  the
Custodian and the Delegate may  provide that the duties under this  Section
3 shall apply only to Eligible Foreign Custodians selected by the  Delegate
and shall not apply to any Eligible Foreign Custodian that the Delegate  is
directed to use pursuant to Section 8 of this Delegation Agreement.

4.   Monitoring. The  Custodian  shall enter  into  an agreement  with  the
Delegate that requires  the Delegate to establish  a system to monitor  the
appropriateness of  maintaining  each  Fund's  Assets  with  each  Eligible
Foreign Custodian  that  has  been selected  by  the Delegate  pursuant  to
Section 3  of this  Delegation Agreement.  The Custodian  shall direct  the
Delegate to  monitor the  continuing appropriateness  of  placement of  the
Fund's Assets  in accordance with  the criteria  established under  Section
3(a) of  this Delegation Agreement  and such  Eligible Foreign  Custodian's
actual performance in accordance  with the written contract as provided  in
Section 3(b) of this  Delegation Agreement. The Custodian shall direct  the
Delegate  to  monitor  the  continuing  appropriateness  of  the   contract
governing  the  Fund's  arrangements   in  accordance  with  the   criteria
established under Section 3(b) of this Delegation Agreement.

5.   Reporting. The  Custodian  shall  enter  into an  agreement  with  the
Delegate providing that,  initially, prior to  the placement of the  Fund's
Assets with  each  Eligible Foreign  Custodian,  and thereafter,  at  least
annually and  at  such  other  times  as the  Board  deems  reasonable  and
appropriate based  on the  circumstances of  the  Fund's arrangements,  the
Delegate shall provide to the Board  of each Fund, or to the Custodian  for
prompt provision  to such Board,  written reports  specifying placement  of
the Fund's  Assets with  each Eligible  Foreign Custodian  selected by  the
Delegate pursuant  to Section  3  of this  Delegation Agreement  and  shall
promptly report  as  to  any  material  changes  to  such  foreign  custody
arrangements.  Such   reporting  will   include  the   appropriateness   of
maintaining the Fund's Assets  with a particular custodian under  paragraph
(c)(1) of Rule  17f-5 and the performance  of the contract under  paragraph
(c)(2) of  Rule 17f-5.  The agreement may  provide that  the Delegate  will
prepare such a report with  respect to any Eligible Foreign Custodian  that
the Delegate has been instructed to  use pursuant to Section 8 only to  the
extent specifically agreed with respect to the particular situation.

6.   Withdrawal of  Fund's  Assets.  The  Custodian  shall  enter  into  an
agreement with  the Delegate  providing that,  if  the Delegate  determines
that an arrangement with a specific Eligible Foreign Custodian selected  by
the Delegate  consistent with  Section 3  of this  Delegation Agreement  no
longer meets  the requirements  of said  Section,  Delegate shall  withdraw
each  Fund's  Assets  from   the  non-complying  arrangement  as  soon   as
reasonably practicable;  provided,  however,  that  if  in  the  reasonable
judgment of the Delegate, such withdrawal would require liquidation of  any
of the Fund's  Assets or  would materially impair  the liquidity, value  or
other investment  characteristics of  the Fund's  Assets, it  shall be  the
duty of  the  Delegate  to  provide information  regarding  the  particular
circumstances and to  act only  in accordance with  Proper Instructions  of
the Fund  or its  investment adviser with  respect to  such liquidation  or
other withdrawal.

7.   Precious Metals.  The  Fund  shall,  with respect  to  precious  metal
deposits, instruct  the Custodian  to  enter into  a written  agreement  to
direct the Delegate to hold such  precious metals on an allocated or on  an
unallocated  basis  in  accordance  with  the  terms  of  this   Delegation
Agreement. Accordingly, the Custodian shall enter into a written  agreement
to direct the Delegate to be responsible for exercising reasonable care  in
the administration of such  accounts, and to the  extent that the Fund  has
appointed the Custodian  to direct the Delegate  to act as foreign  custody
manager pursuant  to the  provisions  of Rule  17f-5, the  Custodian  shall
direct  the  Delegate  to  comply  with  its  responsibilities  thereunder.
Allocated Precious Metal(s) shall  mean any and all gold, silver,  platinum
or palladium  and  any  other metals  maintained  in  any account  with  an
Eligible Foreign Custodian or  its agents in the  name of the Custodian  or
its Delegate for  the Fund.  Unallocated Precious Metal(s)  shall mean  any
and  all  gold,  silver,  platinum  or  palladium  and  any  other   metals
maintained in any account with an Eligible Foreign Custodian or its  agents
in the name of the Custodian or the Delegate for its customers generally.

     (a) Unallocated  Precious Metals. The  Fund shall  be responsible  for
any and  all taxes,  duties,  costs, charges  or fees  (including,  without
limitation, insurance, delivery, collection and storage charges) which  may
be incurred by the Fund, the  Delegate or the Custodian in connection  with
the holding  of or  transacting in  Unallocated Precious  Metals. The  Fund
acknowledges that such deposits are  nonfungible and shall be treated as  a
cash deposit with  the Eligible Foreign  Custodian or its agents.  Provided
that the Delegate has exercised reasonable care, prudence and diligence  in
its own  acts  or omissions  with  respect to  the administration  of  such
Unallocated Precious  Metals and  has complied  with any  duties that  have
been established pursuant  to this Delegation  Agreement and provided  that
the  Custodian  has  complied   with  its  duties  under  this   Delegation
Agreement,  the  Custodian  shall  not  be  liable  for  the  repayment  of
Unallocated Precious Metals  in the event  such Eligible Foreign  Custodian
or its agent, by reason  of its bankruptcy, insolvency or otherwise,  fails
to make repayment.

     (b) Allocated  Precious  Metals. With  respect to  Allocated  Precious
Metals, the Custodian shall enter  into a written agreement to direct  that
the Delegate  be  responsible  for  the  failure of  any  Eligible  Foreign
Custodian or its agents to perform its obligations with respect to  holding
or returning of Allocated  Precious Metals. Each Fund shall be  responsible
for any and all taxes,  duties, costs, charges or fees (including,  without
limitation, insurance, delivery, collection and storage charges) which  may
be incurred by the Fund, the  Delegate or the Custodian in connection  with
the holding of or transacting in Allocated Precious Metals.

8.   Direction as  to  Eligible  Foreign  Custodian.  Notwithstanding  this
Delegation Agreement, the  Fund, acting through  its Board, its  investment
adviser or its other authorized representative, may instruct the  Custodian
to direct  the  Delegate to  place  and maintain  the  Fund's Assets  in  a
particular  country  or  with  a  particular  Eligible  Foreign  Custodian,
including without limitation with respect to investment in countries as  to
which  the  Delegate  reasonably  determines  that  it  will  not   provide
delegation services.  In the  event that  the Delegate  determines that  it
will provide  delegation services  in such  country or  with such  Eligible
Foreign Custodian, the Custodian will comply with the provisions  otherwise
set forth  in this  Delegation Agreement. In  the event  that the  Delegate
reasonably determines that it will not provide delegation services in  such
country or with such Eligible Foreign Custodian, the Custodian or  Delegate
shall be entitled to rely on  any such instruction as a Proper  Instruction
and shall have  no duties  or liabilities under  this Delegation  Agreement
with  respect  to  such  arrangement  save  those  that  it  may  undertake
specifically in writing with respect to each particular instance;  provided
that this  Delegation  Agreement  and  the Custodian  Agreement  shall  not
constitute the Custodian or the  Delegate as the exclusive delegate of  any
of the Funds for purposes  of Rule 17f-5 and, particularly where  Custodian
does not  agree  to  provide  fully  the  services  under  this  Delegation
Agreement and  the  Custodian  Agreement  to  a  Fund  with  respect  to  a
particular  country,  the  Fund  may  delegate  such  services  to  another
delegate pursuant to Rule 17f-5.

9.   Standard of Care.  In carrying  out its duties  under this  Delegation
Agreement, the Custodian agrees  to exercise reasonable care, prudence  and
diligence such  as  a  person  having responsibility  for  safekeeping  the
Fund's Assets would exercise. In addition, the Custodian will enter into  a
written agreement with  the Delegate  providing that, in  carrying out  its
duties under its agreement  with the Custodian, the Delegate will  exercise
reasonable  care,  prudence   and  diligence  such   as  a  person   having
responsibility for safekeeping of the Fund's Assets would exercise.

10.  Liability  of  the  Custodian  for  Actions  of  Other  Persons.   The
Custodian shall be liable for the  actions or omissions of the Delegate  or
any  Eligible  Foreign  Custodian  (excluding  any  Securities   Depository
appointed by them) to the same extent as if such actions or  omissions were
performed by  the  Custodian  itself,  except  as  provided  in  Section  8
hereunder. In  the  event  of  any  loss, damage  or  expense  suffered  or
incurred by the Fund caused by  or resulting from the actions or  omissions
of the  Delegate or  Eligible  Foreign Custodian  for which  the  Custodian
would otherwise be liable, the Custodian shall promptly reimburse the  Fund
in the amount of any such loss, damage or expense.

11.  Representations. The Custodian hereby represents and warrants that  it
is  a  U.S.  Bank  and  that  this  Delegation  Agreement  has  been   duly
authorized, executed and delivered by  the Custodian and is a legal,  valid
and  binding  agreement  of   the  Custodian  enforceable  against  it   in
accordance with its terms, except as such enforceability may be limited  by
applicable bankruptcy laws and any other similar laws affecting the  rights
and remedies  of  creditors  generally  and by  equitable  principles.  The
Custodian will  enter into  an agreement  with  the Delegate  in which  the
Delegate will represent  and warrant that  it is a  U.S. Bank and that  the
agreement between the Custodian and the Delegate has been duly  authorized,
executed and delivered by  the Delegate and is  a legal, valid and  binding
agreement of the  Delegate enforceable  against it in  accordance with  its
terms,  except  as  such  enforceability  may  be  limited  by   applicable
bankruptcy laws  and  any  other  similar  laws affecting  the  rights  and
remedies of creditors generally and by equitable principles.

     The Fund hereby represents and warrants that its Board has  determined
that it is reasonable  to rely on the  Custodian to direct the Delegate  to
perform the delegated  responsibilities provided for  herein and that  this
Delegation Agreement has  been duly authorized,  executed and delivered  by
the Fund  and  is  a  legal,  valid  and  binding  agreement  of  the  Fund
enforceable against  it  in  accordance  with  its terms,  except  as  such
enforceability may be limited  by applicable bankruptcy laws and any  other
similar laws affecting the  rights and remedies of creditors generally  and
by equitable principles.

12.  Effectiveness;  termination.  This   Delegation  Agreement  shall   be
effective as  of the  date on which  this Delegation  Agreement shall  have
been accepted by the  Custodian, as indicated by  the date set forth  below
the Custodian's signature. This  Delegation Agreement may be terminated  at
any time, without penalty, by written notice from the terminating party  to
the non-terminating party. Such termination shall be effective on the  60th
day following the  date on  which the non-terminating  party shall  receive
the foregoing notice. The  foregoing to the contrary notwithstanding,  this
Delegation Agreement shall be  deemed to have been terminated  concurrently
with the  termination  of  the  Custodian Agreement.  The  Custodian  shall
terminate its  agreement  with the  Delegate  pursuant to  this  Delegation
Agreement concurrently with any termination of this Delegation Agreement.

13.  Notices.  Notices  and  other  communications  under  this  Delegation
Agreement are to  be made  in accordance with  the arrangements  designated
for such purpose under  the Custodian Agreement unless otherwise  indicated
in a writing  referencing this  Delegation Agreement and  executed by  both
parties.

14.  Definitions. Capitalized terms in  this Delegation Agreement have  the
following meanings:

      a. Country Risk  -  shall mean,  with  respect to  the  acquisition,
      ownership, settlement  or custody of investments in a  jurisdiction,
      all risks  relating to, or arising  in consequence of, systemic  and
      markets factors affecting the acquisition, payment  for or ownership
      of investments including (a) the prevalence  of crime and corruption
      except for crime or corruption by  the Eligible Foreign Custodian or
      its  employees,  directors  or  officers,  (b)   the  inaccuracy  or
      unreliability of  business and  financial information (unrelated  to
      the Custodian's duties  imposed by Rule 17f-5(c) under the 1940  Act
      or to the duties imposed upon  it by Rule 17f-7 under the 1940 Act),
      (c) the instability or volatility of  banking and financial systems,
      or the  absence or inadequacy of  an infrastructure to support  such
      systems, (d) custody and settlement infrastructure  of the market in
      which  such  investments are  transacted  and  held, (e)  the  acts,
      omissions  and  operation of  any  Securities Depository,  it  being
      understood that this  provision shall not affect any liability  that
      the Custodian  otherwise would have under this Delegation  Agreement
      or   with   respect   to  foreign   subcustodians   and   securities
      depositories  under the  Custodian Agreement,  (f) the  risk of  the
      bankruptcy or  insolvency of banking agents, counterparties to  cash
      and securities transactions, registrars or transfer  agents, (g) the
      existence of  market conditions which prevent the orderly  execution
      or settlement of  transactions or which affect the value of  assets,
      and (h)  the laws relating  to the safekeeping  and recovery of  the
      Fund's  Assets  held  in  custody  pursuant  to  the  terms  of  the
      Custodian  Agreement; provided,  however, that,  in compliance  with
      Rule 17f-5,  neither Sovereign Risk  nor Country Risk shall  include
      the custody risk  of a particular Eligible Foreign Custodian of  the
      Fund's Assets.

      b. Eligible Foreign Custodian - shall have the meaning set forth  in
      Rule 17f-5(a)(1)  and shall  also include a  bank that qualifies  to
      serve  as  a  custodian of  assets  of  investment  companies  under
      Section 17(f) of the 1940 Act.

      c. Fund's  Assets  -  shall  mean  any  of  the  Fund's  investments
      (including  foreign  currencies) for  which  the primary  market  is
      outside the  United States,  and such cash  and cash equivalents  as
      are reasonably necessary  to effect the Fund's transactions in  such
      investments.

      d. Proper Instructions -  shall have  the meaning set  forth in  the
      Custodian Agreement.

      e. Securities Depository - shall  have the meaning for an  "Eligible
      Securities Depository" as set forth in Rule 17f-7.

      f. Sovereign Risk  - shall  mean, in  respect  of any  jurisdiction,
      including  the  United  States of  America,  where  investments  are
      acquired or  held hereunder  or under  the Custodian Agreement,  (a)
      any act  of war, terrorism,  riot, insurrection or civil  commotion,
      (b)  the  imposition of  any  investment, repatriation  or  exchange
      control  restrictions   by  any  governmental  authority,  (c)   the
      confiscation, expropriation  or nationalization  of any  investments
      by any governmental authority, whether de  facto or de jure, (d) any
      devaluation or  revaluation of the  currency, (e) the imposition  of
      taxes,  levies  or  other charges  affecting  investments,  (f)  any
      change  in  the  applicable  law,  or  (g)  any  other  economic  or
      political risk incurred or experienced that  is not directly related
      to  the economic  or financial  conditions of  the Eligible  Foreign
      Custodian,  except   as  otherwise   provided  in  this   Delegation
      Agreement or the Custodian Agreement.

      g. U. S.  Bank -  shall have  the  meaning set  forth in  Rule  17f-
      5(a)(7) under the 1940 Act.

15.  Governing Law  and Jurisdiction.  This Delegation  Agreement shall  be
construed in  accordance  with the  laws  of the  State  of New  York.  The
parties hereby submit to  the exclusive jurisdiction of the Federal  courts
sitting in the State  of New York or  the Commonwealth of Massachusetts  or
of the state courts of either such State or such Commonwealth.

16.  Fees. The Custodian shall perform its functions under this  Delegation
Agreement for the  compensation determined  under the Custodian  Agreement.
Neither the Custodian nor the Delegate shall receive separate  compensation
from the Fund for the performance  of the duties and services set forth  in
this Delegation Agreement.

17.  Integration.  This  Delegation  Agreement  supplements  the  Custodian
Agreement with respect to the selection and monitoring of Eligible  Foreign
Custodians,  the  administration   of  contracts   with  Eligible   Foreign
Custodians, the withdrawal of  assets from Eligible Foreign Custodians  and
the issuance of reports in  connection with such duties; provided that,  in
the event  that  there  are  any  inconsistencies  between  the  Delegation
Agreement and  the Custodian Agreement,  the provisions  of the  Delegation
Agreement shall govern for the  purpose of compliance with Rule 17f-5.  The
terms of the  Custodian Agreement shall apply  generally as to matters  not
expressly covered  in this  Delegation Agreement,  including dealings  with
the  Eligible  Foreign  Custodians  in  the  course  of  discharge  of  the
Custodian's obligations under the Custodian Agreement, and the  Custodian's
obligation to  indemnify the  Fund as  set  forth in  Section 5.06  of  the
Custodian Agreement, and the  Fund's obligation to indemnify the  Custodian
as set  forth in  Section 5.03  of the  Custodian Agreement,  the terms  of
which are incorporated herein by reference.

    IN WITNESS  WHEREOF,  each  of the  parties  hereto has  caused  this
Delegation Agreement  to be  duly  executed and  effective as  provided  in
Section 12 hereof.


W&R TARGET FUNDS, INC., on          UMB BANK, n.a.
behalf of the MICRO CAP GROWTH
PORTFOLIO series


By:  __________________________      By:  ________________________
Name:  Kristen A. Richards           Name:  Ralph R. Santoro
Title:  Vice President               Title:  Senior Vice President
Dated as of:  __________________     Dated as of:  _______________

EX-99.B(I)TGTLEGOPN

                                                       EX-99.B(i)tgtlegopn



June 10, 2003



SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N. W.
Judiciary Plaza
Washington, D. C. 20549


Re: W&R Target Funds, Inc.
    Post-Effective Amendment No. 31

Dear Sir or Madam:

In connection with the public offering of shares of Capital Stock of W&R
Target Funds, Inc. (the Fund), I have examined such corporate records and
documents and have made such further investigation and examination as I
deemed necessary for the purpose of this opinion.

It is my opinion that the indefinite number of shares of such Capital Stock
covered by the Fund's Registration Statement on Form N-1A, when issued and
paid for in accordance with the terms of the offering, as set forth in the
Prospectus and Statement of Additional Information forming a part of the
Registration Statement, will be, when such Registration shall have become
effective, legally issued, fully paid and non-assessable by the Fund.

I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to me in such Statement of
Additional Information.

Yours truly,


/s/Kristen A. Richards
- ----------------------
Kristen A. Richards
Vice President, Associate General Counsel
 and Secretary

EX-99.B(P)TGTCODE

                                        EX-99.B(p)tgtcode







                              CODE OF ETHICS


                     Waddell & Reed Financial, Inc.
                          Waddell & Reed, Inc.
              Waddell & Reed Investment Management Company
                     Austin, Calvert & Flavin, Inc.
                Fiduciary Trust Company of New Hampshire
                      Waddell & Reed Advisors Funds
                            W & R Funds, Inc.
                         W&R Target Funds, Inc.
                Waddell & Reed InvestEd Portfolios, Inc.













                                             As Revised:  November 13, 2002



1. Preface

Rule 17j-1 of the Investment Company Act of 1940 (the "Act") requires
registered investment companies and their investment advisers and principal
underwriters to adopt codes of ethics and certain other requirements to
prevent fraudulent, deceptive and manipulative practices. Each investment
company in Waddell & Reed Advisors Funds, W & R Funds, Inc., W&R Target
Funds, Inc. and Waddell & Reed InvestEd Portfolios, Inc. (each a "Fund,"
and collectively the "Funds") is registered as an open-end management
investment company under the Act. Waddell & Reed, Inc. ("W&R") is the
principal underwriter of each of the Funds. Waddell & Reed Investment
Management Company ("WRIMCO") is the investment adviser of the Funds and
may also serve as investment adviser to institutional clients other than
the Funds. Austin, Calvert & Flavin, Inc. ("ACF") is a subsidiary of WRIMCO
and serves as investment adviser to individuals and institutional clients
other than the Funds. Fiduciary Trust Company of New Hampshire ("FTC"), is
a trust company and a subsidiary of W&R; Waddell & Reed Financial, Inc.
("WDR") is the public holding company. Except as otherwise specified
herein, this Code applies to all employees, officers and directors of W&R,
WRIMCO, ACF and the Funds, (collectively, the "Companies").

This Code of Ethics (the "Code") is based on the principle that the
officers, directors and employees of the Companies have a fiduciary duty to
place the interests of their respective advisory clients first, to conduct
all personal securities transactions consistently with this Code and in
such a manner as to avoid any actual or potential conflict of interest or
any abuse of their position of trust and responsibility, and to conduct
their personal securities transactions in a manner which does not interfere
with the portfolio transactions of any advisory client or otherwise take
unfair advantage of their relationship to any advisory client. Persons
covered by this Code must adhere to this general principle as well as
comply with the specific provisions of this Code. Technical compliance with
this Code will not insulate from scrutiny trades which indicate an abuse of
an individual's fiduciary duties to any advisory client.

This Code has been approved, and any material change to it must be
approved, by each Fund's board of directors, including a majority of the
Fund's Disinterested directors.

2. Definitions

"Access Person" means (i) any employee, director, officer or general
partner of a Fund, W&R, WRIMCO or ACF, (ii) any director or officer of  FTC
or WDR or any employee of any company in a control relationship to the
Companies who, in the ordinary course of his or her business, makes,
participates in or obtains information regarding the purchase or sale of
securities for an advisory client or whose principal function or duties
relate to the making of any recommendation to an advisory client regarding
the purchase or sale of securities and (iii) any natural person in a
control relationship to the Companies who obtains information concerning
recommendations made to an advisory client with regard to the purchase or
sale of a security. A natural person in a control relationship or an
employee of a company in a control relationship does not become an "Access
Person" simply by virtue of the following:  normally assisting in the
preparation of public reports, but not receiving information about current
recommendations or trading; or a single instance of obtaining knowledge of
current recommendations or trading activity, or infrequently and
inadvertently obtaining such knowledge. The Legal Department, in
cooperation with department heads, is responsible for determining who are
Access Persons.

"Advisory Client" means any client (including both investment companies and
managed accounts) for which WRIMCO or ACF serves as an investment adviser,
renders investment advice or makes investment decisions.

A security is "being considered for purchase or sale" when the order to
purchase or sell such security has been given to the trading room, or prior
thereto when, in the opinion of the portfolio manager or division head, a
decision, whether or not conditional, has been made (even though not yet
implemented) to make the purchase or sale, or when the decision-making
process has reached a point where such a decision is imminent.

"Beneficial Ownership" shall be interpreted in the same manner as it would
be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in
determining whether a person is the beneficial owner of a security for
purposes of Section 16 of the Securities Exchange Act of 1934. (See
Appendix A for a more complete description.)

"Control" shall have the same meaning as that set forth in Section 2(a)(9)
of the Act.

"De Minimis Transaction" means a transaction in an equity security (or an
equivalent security) which is equal to or less than 300 shares, or is a
fixed-income security (or an equivalent security) which is equal to or less
than $15,000 principal amount. Purchases and sales, as the case may be, in
the same security or an equivalent security within 30 days will be
aggregated for purposes of determining if the transaction meets the
definition of a De Minimis Transaction.

"Disinterested Director" means a director who is not an "interested person"
within the meaning of Section 2(a)(19) of the Act.

"Equivalent Security" means any security issued by the same entity as the
issuer of a subject security, including options, rights, warrants,
preferred stock, restricted stock, phantom stock, bonds and other
obligations of that company, or security convertible into another security.

"Immediate Family" of an individual means any of the following persons who
reside in the same household as the individual:

    child               grandparent         son-in-law
    stepchild           spouse              daughter-in-law
    grandchild          sibling             brother-in-law
    parent              mother-in-law       sister-in-law
    stepparent          father-in-law

Immediate Family includes adoptive relationships and any other relationship
(whether or not recognized by law) which the Legal Department determines
could lead to possible conflicts of interest, diversions of corporate
opportunity, or appearances of impropriety which this Code is intended to
prevent.

"Investment Personnel" means those employees who provide information and
advice to a portfolio manager or who help execute the portfolio manager's
decisions.

"Large Cap Transaction" means a purchase or sale of securities issued by
(or equivalent securities with respect to) companies with market
capitalization of at least $2.5 billion.

"Non-Affiliated Director" is a Director that is not an affiliated person of
W&R.

"Portfolio Manager" means those employees entrusted with the direct
responsibility and authority to make investment decisions affecting an
Advisory Client.

"Purchase or sale of a security" includes, without limitation, the writing,
purchase or exercise of an option to purchase or sell a security,
conversions of convertible securities and short sales.

"Security" shall have the meaning set forth in Section 2(a)(36) of the Act,
except that it shall not include shares of registered open-end investment
companies, securities issued by the Government of the United States, short-
term debt securities which are "government securities" within the meaning
of Section 2(a)(16) of the Act, bankers' acceptances, bank certificates of
deposit, commercial paper, high quality short-term debt instruments,
including repurchase agreements, and such other money market instruments as
are designated by the boards of directors of the Companies.

Security does not include futures contracts or options on futures contracts
(provided these instruments are not used to indirectly acquire an interest
which would be prohibited under this Code), but the purchase and sale of
such instruments are nevertheless subject to the reporting requirements of
this Code.

"Security held or to be acquired" by an Advisory Client means (a) any
security which, within the most recent 15 days, (i) is or has been held by
an Advisory Client or (ii) is being or has been considered for purchase by
an Advisory Client, and (b) any option to purchase or sell, and any
security convertible into or exchangeable into, a security described in the
preceding clause (a).

3. Pre-Clearance Requirements

Except as otherwise specified in this Code, all Access Persons, except a
Non-Affiliated Director or a member of his or her Immediate Family, shall
clear in advance through the Legal Department any purchase or sale, direct
or indirect, of any Security in which such Access Person has, or by reason
of such transaction acquires, any direct or indirect Beneficial Ownership;
provided, however, that an Access Person shall not be required to clear
transactions effected for securities held in any account over which such
Access Person does not have any direct or indirect influence or control.

For accounts affiliated with Waddell & Reed, Inc. or any of its affiliates
or related companies ("affiliated accounts"), WRIMCO must clear in advance
purchases of equity securities in initial public offerings only.

Except as otherwise provided in Section 5, the Legal Department will not
grant clearance for any purchase by an Access Person if the Security is
currently being considered for purchase or being purchased by any Advisory
Client or for sale by an Access Person if currently being considered for
sale or being sold by any Advisory Client. If the Security proposed to be
purchased or sold by the Access Person is an option, clearance will not be
granted if the securities subject to the option are being considered for
purchase or sale as indicated above. If the Security proposed to be
purchased or sold is a convertible security, clearance will not be granted
if either that security or the securities into which it is convertible are
being considered for purchase or sale as indicated above. The Legal
Department will not grant clearance for any purchase by an affiliated
account of any security in an initial public offering if an Advisory Client
is considering the purchase or has submitted an indication of interest in
purchasing shares in such initial public offering. For all other purchases
and sales of securities for affiliated accounts, no clearance is necessary,
but such transactions are subject to WRIMCO's Procedures for Aggregation of
Orders for Advisory Clients, as amended from time to time.

The Legal Department may refuse to preclear a transaction if it deems the
transaction to involve a conflict of interest, possible diversion of
corporate opportunity, or an appearance of impropriety.

Clearance is effective, unless earlier revoked, until the earlier of (1)
the close of business on the fifth trading day, beginning on and including
the day on which such clearance was granted, or (2) such time as the Access
Person learns that the information provided to the Legal Department in such
Access Person's request for clearance is not accurate. If an Access Person
places an order for a transaction within the five trading days but such
order is not executed within the five trading days (e.g., a limit order),
clearance need not be reobtained unless the person who placed the original
order amends such order in any way. Clearance may be revoked at any time
and is deemed revoked if, subsequent to receipt of clearance, the Access
Person has knowledge that a Security to which the clearance relates is
being considered for purchase or sale by an Advisory Client.

4. Exempted Transactions

The pre-clearance requirements in Section 3, the prohibited actions and
transactions in Section 5 and the reporting requirements set forth in
Section 6 of this Code shall not apply to:

(a) Purchases or sales which are non-volitional on the part of either the
    Access Person or the Advisory Client. This exemption includes accounts
    managed by WRIMCO, on a discretionary basis, that are deemed to be
    beneficially owned by an Access Person.

(b) Purchases which are part of an automatic dividend reinvestment plan.

(c) Purchases effected upon the exercise of rights issued by an issuer pro
    rata to all holders of a class of its securities, to the extent such
    rights were acquired from such issuer, and sales of such rights so
    acquired.

(d) Transactions in securities of WDR; however, individuals subject to the
    Insider Trading Policy remain subject to such policy. (See Appendix
    B).

(e) Purchases or sales by a Non-Affiliated Director or a member of his or
    her Immediate Family.

5. Prohibited Actions and Transactions

Clearance will not be granted under Section 3 with respect to the following
prohibited actions and transactions. Engaging in any such actions or
transactions by Access Persons will result in sanctions, including, but not
limited to, the sanctions expressly provided for in this Section.

(a) Except with respect to Large Cap Transactions, Investment Personnel
    and Portfolio Managers shall not acquire any security for any account
    in which such Investment Personnel or Portfolio Manager has a
    beneficial interest, excluding the Funds, in an initial public
    offering of that security.

(b) Except with respect to Large Cap Transactions, Access Persons shall
    not execute a securities transaction on a day during which an Advisory
    Client has a pending buy or sell order in that same security or an
    equivalent security until that order is executed or withdrawn. An
    Access Person shall disgorge any profits realized on trades within
    such period.

(c) Except for De Minimis Transactions and Large Cap Transactions, a
    Portfolio Manager shall not buy or sell a Security within seven (7)
    trading days before or after an Advisory Client that the Portfolio
    Manager manages trades in that Security or an equivalent security. A
    Portfolio Manager shall disgorge any profits realized on such trades
    within such period.

(d) Except for De Minimis Transactions and Large Cap Transactions,
    Investment Personnel and Portfolio Managers shall not profit in the
    purchase or sale, or sale and purchase, of the same (or equivalent)
    securities within sixty (60) calendar days. The Legal Department will
    review all such short-term trading by Investment Personnel and
    Portfolio Managers and may, in its sole discretion, allow exceptions
    when it has determined that an exception would be equitable and that
    no abuse is involved. Investment Personnel and Portfolio Managers
    profiting from a transaction shall disgorge any profits realized on
    such transaction. This section shall not apply to options on
    securities used for hedging purposes for securities held longer than
    sixty (60) days.

(e) Except with respect to Large Cap Transactions, Investment Personnel
    and Portfolio Managers shall not acquire a security in a private
    placement, absent prior authorization from the Legal Department. The
    Legal Department will not grant clearance for the acquisition of a
    security in a private placement if it is determined that the
    investment opportunity should be reserved for an Advisory Client or
    that the opportunity to acquire the security is being offered to the
    individual requesting clearance by virtue of such individual's
    position with the Companies. An individual who has been granted
    clearance to acquire securities in a private placement shall disclose
    such investment when participating in an Advisory Client's subsequent
    consideration of an investment in the issuer. A subsequent decision by
    an Advisory Client to purchase such a security shall be subject to
    independent review by Investment Personnel with no personal interest
    in the issuer.

(f) An Access Person shall not execute a securities transaction while in
    possession of material non-public information regarding the security
    or its issuer.

(g) An Access Person shall not execute a securities transaction which is
    intended to result in market manipulation, including but not limited
    to, a transaction intended to raise, lower, or maintain the price of
    any security or to create a false appearance(s) of active trading.

(h) Except with respect to Large Cap Transactions, an Access Person shall
    not execute a securities transaction involving the purchase or sale of
    a security at a time when such Access Person intends, or knows of
    another's intention, to purchase or sell that security (or an
    equivalent security) on behalf of an Advisory Client. This prohibition
    would apply whether the transaction is in the same (e.g., two
    purchases) or the opposite (a purchase and sale) direction as the
    transaction of the Advisory Client.

(i) An Access Person shall not cause or attempt to cause any Advisory
    Client to purchase, sell, or hold any security in a manner calculated
    to create any personal benefit to such Access Person or his or her
    Immediate Family. If an Access Person or his or her Immediate Family
    stands to materially benefit from an investment decision for an
    Advisory Client that the Access Person is recommending or in which the
    Access Person is participating, the Access Person shall disclose to
    the persons with authority to make investment decisions for the
    Advisory Client, any beneficial interest that the Access Person or his
    or her Immediate Family has in such security or an equivalent
    security, or in the issuer thereof, where the decision could create a
    material benefit to the Access Person or his or her Immediate Family
    or result in the appearance of impropriety.

(j) Investment Personnel and Portfolio Managers shall not accept from any
    person or entity that does or proposes to do business with or on
    behalf of an Advisory Client a gift or other thing of more than de
    minimis value or any other form of advantage. The solicitation or
    giving of such gifts by Investment Personnel and Portfolio Managers is
    also prohibited. For purposes of this subparagraph, "de minimis" means
    $75 or less if received in the ordinary course of business.

(k) Investment Personnel and Portfolio Managers shall not serve on the
    board of directors of publicly traded companies, absent prior
    authorization from the Legal Department. The Legal Department will
    grant authorization only if it is determined that the board service
    would be consistent with the interests of any Advisory Client. In the
    event board service is authorized, such individuals serving as
    directors shall be isolated from those making investment decisions
    through procedures designed to safeguard against potential conflicts
    of interest, such as a Chinese Wall policy or investment restrictions.

6. Reporting by Access Persons

(a) Each Access Person, except a Non-Affiliated Director or a member of
    his or her Immediate Family, shall require a broker-dealer or bank
    effecting a transaction in any security in which such Access Person
    has, or by reason of such transaction acquires, any direct or indirect
    Beneficial Ownership in the security to timely send duplicate copies
    of each confirmation for each securities transaction and/or periodic
    account statement for each brokerage account in which such Access
    Person has a beneficial interest to Waddell & Reed, Inc., Attention:
    Legal Department.

(b) Each Access Person, except a Non-Affiliated Director or a member of
    his or her Immediate Family, shall report to the Legal Department no
    later than 10 days after the end of each calendar quarter the
    information described below with respect to transactions during the
    quarter in any security, other than securities of WDR, in which such
    Access Person has, or by reason of such transaction acquired, any
    direct or indirect Beneficial Ownership in the security and with
    respect to any account established by the Access Person in which
    securities were held during the quarter for the direct or indirect
    benefit of the Access Person; provided, however, that an Access Person
    shall not be required to make a report with respect to transactions
    effected for or securities held in any account over which such Access
    Person does not have any direct or indirect influence or control:

    (i)   The date of the transaction, the name, the interest rate and
          maturity date (if applicable), the number of shares and the
          principal amount of the security;

    (ii)  The nature of the transaction (i.e., purchase, sale or any other
          type of acquisition or disposition);

    (iii) The price at which the transaction was effected;

    (iv) The name of the broker, dealer or bank with or through whom the
         transaction was effected and, with respect to an account
         described above in this paragraph, with whom the Access Person
         established the account;

    (v)  The date the account was established; and

    (vi) The date the report is submitted.

(c) Upon commencement of employment, or, if later, at the time he or she
    becomes an Access Person each such Access Person, except a Non-
    Affiliated Director or a member of his or her Immediate Family, shall
    provide the Legal Department with a report that discloses:

    (i)   The name, number of shares and principal amount of each security
          in which the Access Person had any direct or indirect Beneficial
          Ownership when he or she became an Access Person;

    (ii)  The name of any broker, dealer or bank with which the Access
          Person maintained an account in which securities were held for
          the direct or indirect benefit of the Access Person as of the
          date he or she became an Access Person; and

    (iii) The date of the report.

    Annually thereafter, each Access Person, except a Non-Affiliated
    Director or a member of his or her Immediate Family, shall provide the
    Legal Department with a report that discloses the following
    information (current as of a date no more than 30 days before the
    report is submitted):

    (i)   The name, number of shares and principal amount of each security
          in which the Access Person had any direct or indirect Beneficial
          Ownership;

    (ii)  The name of any broker, dealer or bank with which the Access
          Person maintains an account in which securities were held for the
          direct or indirect benefit of the Access Person; and

    (iii) The date the report is submitted.

    However, an Access Person shall not be required to make a report with
    respect to securities held in any account over which such Access
    Person does not have any direct or indirect influence or control.

    In addition, each Access Person, except a Non-Affiliated Director or a
    member of his or her Immediate Family, shall annually certify in
    writing that all transactions in any security in which such Access
    Person has, or by reason of such transaction has acquired, any direct
    or indirect Beneficial Ownership have been reported to the Legal
    Department. If an Access Person had no transactions during the year,
    such Access Person shall so advise the Legal Department.

(d) A Non-Affiliated Director or a member of his or her Immediate Family
    need only report a transaction in a security if such director, at the
    time of that transaction, knew or, in the ordinary course of
    fulfilling his or her official duties as a director, should have known
    that, during the 15-day period immediately preceding the date of the
    transaction by the director, such security was purchased or sold by an
    Advisory Client or was being considered for purchase or sale by an
    Advisory Client.

(e) In connection with a report, recommendation or decision of an Access
    Person to purchase or sell a security, the Companies may, in their
    discretion, require such Access Person to disclose his or her direct
    or indirect Beneficial Ownership of such security. Any such report may
    contain a statement that the report shall not be construed as an
    admission by the person making such report that he or she has any
    direct or indirect Beneficial Ownership in the security to which the
    report relates.

(f) The Legal Department shall identify all Access Persons who are
    required to make reports under this section and shall notify those
    persons of their reporting obligations hereunder. The Legal Department
    shall review, or determine other appropriate personnel to review, the
    reports submitted under this section.

7. Reports to Board

At least annually, each Fund, WRIMCO and W&R shall provide the Fund's board
of directors, and the board of directors shall consider, a written report
that:

(a) Describes any issues arising under this Code or the related procedures
    instituted to prevent violation of this Code since the last report to
    the board of directors, including, but not limited to, information
    about material violations of this Code or such procedures and sanctions
    imposed in response to such violations; and

(b) Certifies that the Fund, WRIMCO and W&R, as applicable, have adopted
    procedures reasonably necessary to prevent Access Persons from
    violating this Code.

  In addition to the written report otherwise required by this section,
  all material violations of this Code and any sanctions imposed with
  respect thereto shall be periodically reported to the board of
  directors of the Fund with respect to whose securities the violation
  occurred.

8. Confidentiality of Transactions and Information

Every Access Person shall treat as confidential information the fact that a
security is being considered for purchase or sale by an Advisory Client,
the contents of any research report, recommendation or decision, whether at
the preliminary or final level, and the holdings of an Advisory Client and
shall not disclose any such confidential information without prior consent
from the Legal Department. Notwithstanding the foregoing, with respect to a
Fund, the holdings of the Fund shall not be considered confidential after
such holdings by the Fund have been disclosed in a public report to
shareholders or to the Securities and Exchange Commission.

Access Persons shall not disclose any such confidential information to any
person except those employees and directors who need such information to
carry out the duties of their position with the Companies.

9. Sanctions

Upon discovering a violation of this Code, the Companies may impose such
sanctions as it deems appropriate, including, without limitation, a letter
of censure or suspension or termination of the employment of the violator.

10. Certification of Compliance

Each Access Person, except a Non-Affiliated Director and members of his or
her Immediate Family, shall annually certify that he or she has read and
understands this Code and recognizes that he or she is subject hereto.


                     Appendix A to the Code of Ethics

                         "Beneficial Ownership"


For purposes of this Code, "Beneficial Ownership" is interpreted in the
same manner as it would be under Rule 16a-1(a)(2) of the Securities
Exchange Act of 1934 in determining whether a person is the beneficial
owner of a security for purposes of Section 16 of the Securities Exchange
Act of 1934. In general, a "beneficial owner" of a security is any person
who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares any direct or
indirect pecuniary interest in the security. The Companies will interpret
Beneficial Ownership in a broad sense.

The existence of Beneficial Ownership is clear in certain situations, such
as:  securities held in street name by brokers for an Access Person's
account, bearer securities held by an Access Person, securities held by
custodians, pledged securities, and securities held by relatives or others
for an Access Person. An Access Person is also considered the beneficial
owner of securities held by certain family members. The SEC has indicated
that an individual is considered the beneficial owner of securities owned
by such individual's Immediate Family. The relative's ownership of the
securities may be direct (i.e., in the name of the relative) or indirect.

An Access Person is deemed to have Beneficial Ownership of securities owned
by a trust of which the Access Person is the settlor, trustee or
beneficiary, securities owned by an estate of which the Access Person is
the executor or administrator, legatee or beneficiary, securities owned by
a partnership of which the Access Person is a partner, and securities of a
corporation of which the Access Person is a director, officer or
shareholder.

An Access Person must comply with the provisions of this Code with respect
to all securities in which such Access Person has a Beneficial Ownership.
If an Access Person is in doubt as to whether she or he has a Beneficial
Ownership interest in a security, the Access Person should report the
ownership interest to the Legal Department. An Access Person may disclaim
Beneficial Ownership as to any security on required reports.


                                APPENDIX B


                   POLICY STATEMENT ON INSIDER TRADING
                             August 22, 2001


I.   Prohibition on Insider Trading

     All employees, officers, directors and other persons associated with
the Companies as a term of their employment or association are forbidden to
misuse in violation of Federal securities laws or other applicable laws
material nonpublic information.

    This prohibition covers transactions for one's own benefit and also
    for the benefit of or on behalf of others, including the investment
    companies in the Waddell & Reed Advisors Group of Mutual Funds, W&R
    Funds, Inc., W&R Target Funds, Inc. and Waddell & Reed InvestEd
    Portfolios, Inc. (the "Funds") or other investment Advisory Clients.
    The prohibition also covers the unlawful dissemination of such
    information to others. Such conduct is frequently referred to as
    "insider trading". The policy of the Companies applies to every
    officer, director, employee and associated person of the Companies and
    extends to activities within and outside their duties at the
    Companies. The prohibition is in addition to the other policies and
    requirements under the Companies' Code of Ethics and other policies
    issued from time to time. It applies to transactions in any
    securities, including publicly traded securities of affiliated
    companies (e.g., Waddell & Reed Financial, Inc.[1])

[1]Reporting transactions in affiliated corporation securities is in addition
to and does not replace the obligation of certain senior officers to file
reports with the Securities and Exchange Commission.

    This Policy Statement is intended to inform personnel of the issues so
    as to enable them to avoid taking action that may be unlawful or to
    seek clearance and guidance from the Legal Department when in doubt.
    It is not the purpose of this Policy Statement to give precise and
    definitive rules which will relate to every situation, but rather to
    furnish enough information so that subject persons may avoid
    unintentional violations and seek guidance when necessary.

    All employees, officers and directors of the Companies will be
    furnished with or have access to a copy of this Policy Statement. Any
    questions regarding the policies or procedures described herein should
    be referred to the Legal Department. To the extent that inquiry of
    employees reveals that this Policy Statement is not self-explanatory
    or is likely to be substantively misunderstood, appropriate personnel
    will conduct individual or group meetings from time to time to assure
    that policies and procedures described herein are understood.

    The term "insider trading" is not defined in the Federal securities
    laws, but generally is used to refer to the use of material nonpublic
    information to trade in securities (whether or not one is an
    "insider") or to communications of material nonpublic information to
    others. In addition, there is no definitive and precise law as to what
    constitutes material nonpublic information or its unlawful use. The
    law in these areas has been developed through court decisions
    primarily interpreting basic anti-fraud provisions of the Federal
    securities laws. There is no statutory definition, only statutory
    sanctions and procedural requirements.

    While the law concerning insider trading is not static, it is
    generally understood that the law is as follows:

    (a)  It is unlawful for any person, directly or indirectly, to
         purchase, sell or cause the purchase or sale of any security,
         either personally or on behalf of or for the benefit of others,
         while aware of material, nonpublic information relating thereto,
         if such person knows or recklessly disregards that such
         information has been obtained wrongfully, or that such purchase
         or sale would constitute a wrongful use of such information. The
         law relates to trading by an insider while aware of material,
         nonpublic information or trading by a non-insider while aware of
         material, nonpublic information, where the information either was
         disclosed to the non-insider in violation of an insider's duty to
         keep it confidential or was misappropriated.

    (b)  It is unlawful for any person involved in any transaction which
         would violate the foregoing to communicate material, nonpublic
         information to others (or initiate a chain of communication to
         others) who purchase or sell the subject security if such sale or
         purchase is reasonably foreseeable.

    The major elements of insider trading and the penalties for such
    unlawful conduct are discussed below. If, after reviewing this Policy
    Statement, you have any questions, you should consult the Legal
    Department.

    1.   Who is an Insider?  The concept of "insider" is broad. It
         includes officers, directors and employees of the company in
         possession of nonpublic information. In addition, a person can be
         a "temporary insider" if he or she enters into a special
         confidential relationship in the conduct of the company's affairs
         and as a result is given access to information solely for the
         company's purposes. A temporary insider can include, among
         others, a company's attorneys, accountants, consultants, bank
         lending officers, and certain of the employees of such
         organizations. In addition, the Companies may become a temporary
         insider of a company it advises or for which it performs
         services.

    2.   What is Material Information?  Trading on inside information is
         not a basis for liability unless the information is material.
         "Material information" includes information that a reasonable
         investor would be likely to consider important in making an
         investment decision, information that is reasonably certain to
         have a substantial effect on the price of a company's securities
         if publicly known, or information which would significantly alter
         the total mix of information available to shareholders of a
         company. Information that one may consider material includes
         information regarding dividends, earnings, estimates of earnings,
         changes in previously released earnings estimates, merger or
         acquisition proposals or agreements, major litigation,
         liquidation problems, new products or discoveries and
         extraordinary management developments. Material information is
         not just information that emanates from the issuer of the
         security, but includes market information such as the intent of
         someone to commence a tender offer for the securities, a
         favorable or critical article in an important financial
         publication or information relating to a Fund's buying program.

    3.   What is Nonpublic Information?  Information is nonpublic until it
         has been effectively communicated to the marketplace and is
         available to investors generally. One must be able to point to
         some fact to show that the information is generally public. For
         example, information found in a report filed with the SEC, or
         appearing in The Wall Street Journal or other publications of
         general circulation would be considered public.

    4.   When is a Person Aware of Information?  A person is "aware" of
         material nonpublic information if he or she has knowledge or is
         conscious or cognizant of such information. Once a person is
         aware of material, nonpublic information, he or she may not buy
         or sell the subject security, even though the person is prompted
         by entirely different reasons to make the transaction, if such
         person knows or recklessly disregards that such information was
         wrongfully obtained or will be wrongfully used. Advisory
         personnel's normal analytical conclusions, no matter how thorough
         and convincing, can temporarily be of no use if the analyst has
         material nonpublic information, which he or she knows or
         recklessly disregards is information which was wrongfully
         obtained or would be wrongfully used.

    5.   When Is Information Wrongfully Obtained or Wrongfully Used?
         Wrongfully obtained connotes the idea of gaining the information
         from some unlawful activity such as theft, bribery or industrial
         espionage. It is not necessary that the subject person gained the
         information through his or her own actions. Wrongfully obtained
         includes information gained from another person with knowledge
         that the information was so obtained  or with reckless disregard
         that the information was so obtained. Wrongful use of information
         concerns circumstances where the person gained the information
         properly, often to be used properly, but instead used it in
         violation of some express or implied duty of confidentiality. An
         example would be the personal use of information concerning
         Funds' trades. The employee may need to know a Fund's pending
         transaction and may even have directed it, but it would be
         unlawful to use this information in his or her own transaction or
         to reveal it to someone he or she believes may personally use it.
         Similarly, it would be unlawful for a person to use information
         obtained from a family member if the person has agreed to keep
         the information confidential or knows (or reasonably should know)
         that the family member expected the information to be kept
         confidential.

    6.   When Is Communicating Information (Tipping) Unlawful?  It is
         unlawful for a person who, although not trading himself or
         herself, communicates material nonpublic information to those who
         make an unlawful transaction if the transaction is reasonably
         foreseeable. The reason for tipping the information is not
         relevant. The tipper's motivation is not of concern, but it is
         relevant whether the tipper knew the information was unlawfully
         obtained or was being unlawfully used. For example, if an
         employee tips a friend about a large pending trade of a Fund, why
         he or she did so is not relevant, but it is relevant that he or
         she had a duty not to communicate such information. It is
         unlawful for a tippee to trade while aware of material nonpublic
         information if he or she knew or recklessly ignored that the
         information was wrongfully obtained or wrongfully communicated to
         him or her directly or through a chain of communicators.

II. Penalties for Insider Trading

    Penalties for unlawful trading or communication of material nonpublic
    information are severe, both for individuals involved in such unlawful
    conduct and their employers. A person can be subject to some or all
    the penalties below even if he or she does not personally benefit from
    the violation. Penalties include civil injunctions, treble damages,
    disgorgement of profits, jail sentences, fines for the person who
    committed the violation and fines for the employer or other
    controlling person. In addition, any violation of this Policy
    Statement can be expected to result in serious sanctions by any or all
    of the Companies, including, but not limited to, dismissal of the
    persons involved.

III. Monitoring of Insider Trading

    The following are some of the procedures which have been established
    to aid the officers, directors and employees of the Companies in
    avoiding insider trading, and to aid the Companies in preventing,
    detecting and imposing sanctions against insider trading. Every
    officer, director and employee of the Companies must follow these
    procedures or risk serious sanctions, including dismissal, substantial
    liability and criminal penalties. If you have any questions about
    these procedures, you should consult the Legal Department.

    A.   Identifying Inside Information
         Before trading for yourself or others in the securities of a
         company about which you may have potential inside information,
         ask yourself the following questions:

         (1)  Is the information material?  Is this information that an
              investor would consider important in making his or her
              investment decisions?  Is this information that would
              substantially affect the market price of securities if
              generally disclosed?

         (2)  Is the information nonpublic?  To whom has this information
              been provided?  Has the information been effectively
              communicated to the marketplace by being published in a
              publication of general circulation?

         (3)  Do you know or have any reason to believe the information
              was wrongfully obtained or may be wrongfully used?

         If after consideration of the above, you believe that the
         information is material and nonpublic and may have been
         wrongfully obtained or may be wrongfully used, or if you have
         questions as to whether the information is material or nonpublic
         or may have been wrongfully obtained or may be wrongfully used,
         you should take the following steps:

         (1)  Report the matter immediately to the Legal Department.

         (2)  Do not purchase or sell the securities on behalf of yourself
              or others.