Please read this Prospectus before investing, and keep it on file for future
reference.  It sets forth concisely the information about the Fund that you
ought to know before investing.

Additional information has been filed with the Securities and Exchange
Commission and is contained in a Statement of Additional Information ("SAI")
dated February 19, 1996.  The SAI is available free upon request to the Fund or
Waddell & Reed, Inc., the Fund's underwriter, at the address or telephone number
below.  The SAI is incorporated by reference into this Prospectus and you will
not be aware of all facts unless you read both this Prospectus and the SAI.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

United Gold & Government Fund, Inc.
Class A Shares
This Fund seeks a high total return through investments in precious metals,
minerals-related securities or U.S. Government Securities.

This Prospectus describes one class of shares of the Fund -- Class A Shares.

Prospectus
February 19, 1996

UNITED GOLD & GOVERNMENT FUND, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000

<PAGE>
Table of Contents

AN OVERVIEW OF THE FUND.........................3

EXPENSES........................................5

FINANCIAL HIGHLIGHTS............................6

PERFORMANCE.....................................8
 Explanation of Terms ..........................8

ABOUT WADDELL & REED............................9

ABOUT THE INVESTMENT PRINCIPLES OF THE FUND....10
 Investment Goals and Principles ..............10
   Risk Considerations ........................12
 Securities and Investment Practices ..........14

ABOUT YOUR ACCOUNT.............................27
 Ways to Set Up Your Account ..................27
 Buying Shares ................................28
 Minimum Investments ..........................30
 Adding to Your Account .......................30
 Selling Shares ...............................31
 Shareholder Services .........................33
   Personal Service ...........................33
   Reports ....................................33
   Exchanges ..................................33
   Automatic Transactions .....................33
 Dividends, Distributions and Taxes ...........34
   Distributions ..............................34
   Taxes ......................................35

ABOUT THE MANAGEMENT AND EXPENSES OF THE FUND..37
 WRIMCO and Its Affiliates ....................38
 Breakdown of Expenses ........................39
   Management Fee .............................39
   Other Expenses .............................40

<PAGE>
An Overview of the Fund

The Fund:  This Prospectus describes the Class A shares of United Gold &
Government Fund, Inc., an open-end, diversified management investment company.

Goals and Strategies:  United Gold & Government Fund, Inc. (the "Fund") seeks a
high total return through investments in precious metals, minerals-related
securities or U.S. Government Securities.  The Fund's portfolio will generally
include minerals-related securities and gold, silver and platinum during periods
of actual or expected inflation or when the environment for investment in
precious metals appears to be favorable, and U.S. Government Securities during
periods of actual or expected disinflation or low inflation.  See "About the
Investment Principles of the Fund" for further information.

Management:  Waddell & Reed Investment Management Company ("WRIMCO") provides
investment advice to the Fund and manages the Fund's investments.  WRIMCO is a
wholly-owned subsidiary of Waddell & Reed, Inc.  WRIMCO, Waddell & Reed, Inc.
and its predecessors have provided investment management services to registered
investment companies since 1940.  See "About the Management and Expenses of the
Fund" for further information about management fees.

Distributor:  Waddell & Reed, Inc. acts as principal underwriter and distributor
of the shares of the Fund.

Purchases:  You may buy Class A shares of the Fund through Waddell & Reed, Inc.
and its account representatives.  The price to buy a Class A share of the Fund
is the net asset value of a Class A share plus a sales charge.  See "About Your
Account" for information on how to purchase Class A shares.

Redemptions:  You may redeem your shares at net asset value.  When you sell your
shares, they may be worth more or less than what you paid for them.  See "About
Your Account" for a description of redemption and reinvestment procedures.

Who May Want to Invest:  The Fund is designed for investors who are willing to
accept significant risks with the opportunity to participate in potentially high
returns.  You should consider whether the Fund fits with your particular
investment objectives.

Risk Considerations: The Fund is subject to significant risks associated with
gold and other minerals-related securities, foreign securities and precious
metals.  The value of the Fund's investments and the income generated will vary
from day to day, generally reflecting changes in interest rates, market
conditions and other company and economic news.  Performance will also depend on
WRIMCO's skill in selecting investments.  See "About the Investment Principles
of the Fund" for information about the risks associated with the Fund's
investments.

<PAGE>
Expenses

Shareholder transaction expenses are charges you pay when you buy or sell shares
of a fund.

Maximum sales load
on purchases   5.75%
(as a percentage of offering price)

Maximum sales load
on reinvested
dividends      None

Deferred sales load None

Redemption fees     None

Exchange fee   None

Annual Fund operating expenses (as a percentage of average net assets).

Management fees     0.71%
12b-1 fees     0.16%
Other expenses 0.79%
Total Fund operating expenses1     1.66%

Example:  You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return2 and (2) redemption at the end of each time period:

 1 year   $ 73
 3 years  $107
 5 years  $143
10 years  $243

The purpose of this table is to assist you in understanding the various costs
and expenses that a shareholder of the Class A shares of the Fund will bear
directly or indirectly.  The example should not be considered a representation
of past or future expenses; actual expenses may be greater or lesser than those
shown.  For a more complete discussion of certain expenses and fees, see
"Breakdown of Expenses."

                    
1Retirement plan accounts may be subject to a $2 fee imposed by the plan
custodian for use of the Flexible Withdrawal Service.

2Use of an assumed annual return of 5% is for illustration purposes only and is
not a representation of the Fund's future performance, which may be greater or
lesser.

<PAGE>
Financial Highlights
     (Audited)

The following information has been audited by Price Waterhouse LLP, independent
accountants, and should be read in conjunction with the financial statements and
notes thereto, together with the report of Price Waterhouse LLP, which is 
included in
the SAI.

For a Class A share outstanding throughout each period.3

<TABLE>
<CAPTION>
                                                              For the fiscal year ended December 31,
                                  -----------------------------------------------------------------------------------------------
                                   1995      1994      1993      1992      1991      1990      1989      1988      1987      1986
                                   ----      ----      ----      ----      ----      ----      ----      ----      ----      ----
<S>                               <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Net asset value,
  beginning of period ........    $8.19     $9.97     $5.70     $6.63     $6.68     $8.66     $7.47     $7.95     $6.83     $5.07
                                  -----     -----     -----     -----     -----     -----     -----     -----     -----     -----
Income from investment
  operations:
  Net investment income ......     0.24      0.05      0.04      0.06      0.15      0.11      0.16      0.17      0.14      0.17
  Net realized and
    unrealized gain
    (loss) on
    investments ..............     0.56     (1.78)     4.27     (0.93)    (0.05)    (1.97)     1.20     (0.48)     1.93      1.89
                                  -----     -----     -----     -----     -----     -----     -----     -----     -----     -----
Total from investment
  operations .................     0.80     (1.73)     4.31     (0.87)     0.10     (1.86)     1.36     (0.31)     2.07      2.06
                                  -----     -----     -----     -----     -----     -----     -----     -----     -----     -----
Less distributions:
  Dividends from net
    investment income ........    (0.24)    (0.05)    (0.04)    (0.06)    (0.15)    (0.12)    (0.17)    (0.17)    (0.13)    (0.22)
  Distributions from
    capital gains ............     0.00      0.00      0.00      0.00      0.00      0.00      0.00      0.00     (0.82)    (0.08)
                                   -----     -----     -----     -----     -----     -----     -----     -----     -----     -----
Total distributions ..........    (0.24)    (0.05)    (0.04)    (0.06)    (0.15)    (0.12)    (0.17)    (0.17)    (0.95)    (0.30)
                                   -----     -----     -----     -----     -----     -----     -----     -----     -----     -----
Net asset value,
  end of period ..............    $8.75     $8.19     $9.97     $5.70     $6.63     $6.68     $8.66     $7.47     $7.95     $6.83
                                  =====     =====     =====     =====     =====     =====     =====     =====     =====     =====
Total return* ................     9.80%   -17.36%    75.82%   -13.18%     1.47%   -21.59%    18.42%    -3.92%    30.36%    41.48%
Net assets, end of period
  (000 omitted) ..............  $32,733   $37,422   $46,908   $27,136   $40,587   $54,371   $83,154   $99,460  $119,894   $17,695
Ratio of expenses to average
  net assets .................     1.66%     1.59%     1.69%     1.88%     1.57%     1.56%     1.42%     1.42%     1.20%     1.48%
Ratio of net investment income
  to average net assets ......     2.55%     0.57%     0.48%     0.90%     2.11%     1.43%     1.91%     2.14%     1.81%     3.46%
Portfolio turnover rate** ....   164.21%    64.89%    84.00%    61.50%   112.80%    82.42%    89.92%   100.19%   107.00%   159.66%

 *Total return calculated without taking into account the sales load deducted on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the Fund's portfolio securities during the period into the
  lesser of its purchases or sales of securities in the period, excluding short-term securities and bullion.

                    
3On February 19, 1996, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class A shares.
</TABLE>

<PAGE>
Performance

Mutual fund performance is commonly measured as total return.  The Fund may also
advertise its performance by showing performance rankings.  Performance
information is calculated and presented separately for each class of Fund
shares.

Explanation of Terms

Total Return is the overall change in value of an investment in the Fund over a
given period, assuming reinvestment of any dividends and distributions.  A
cumulative total return reflects actual performance over a stated period of
time.  An average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period.  Average annual total
returns smooth out variations in performance; they are not the same as actual
year-by-year results.  Non-standardized total return may not reflect deduction
of the applicable sales charge or may be for periods other than those required
to be presented or may otherwise differ from standardized total return.  Total
return quotations that do not reflect the applicable sales charge will reflect a
higher rate of return.

Performance Rankings are comparisons of the Fund's performance to the
performance of other selected mutual funds, selected recognized market
indicators such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average, or non-market indices or averages of mutual fund industry
groups.  The Fund may quote its performance rankings and/or other information as
published by recognized independent mutual fund statistical services or by
publications of general interest.  In connection with a ranking, the Fund may
provide additional information, such as the particular category to which it
relates, 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.

All performance information that the Fund advertises or includes in information
provided to present or prospective shareholders is historical in nature and is
not intended to represent or guarantee future results.  The value of the Fund's
shares when redeemed may be more or less than their original cost.

The Fund's recent performance and holdings will be detailed twice a year in the
Fund's annual and semiannual reports, which are sent to all Fund shareholders.

<PAGE>
About Waddell & Reed

Since 1937, Waddell & Reed has been helping people make the most of their
financial future by helping them take advantage of various financial services.
Today, Waddell & Reed has over 2500 account representatives located throughout
the United States.  Your primary contact in your dealings with Waddell & Reed
will be your local account representative.  However, the Waddell & Reed
shareholder services department, which is part of the Waddell & Reed
headquarters operations in Overland Park, Kansas, is available to assist you and
your Waddell & Reed account representative.  You may speak with a customer
service representative by calling 913-236-2000.

<PAGE>
About the Investment Principles of the Fund

Investment Goals and Principles

The goal of the Fund is to seek a high total return to investors.  The Fund
seeks to achieve this goal by investing in (i) minerals-related securities and
gold, silver and platinum during periods of actual or expected inflation, (ii)
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government Securities") during periods of actual or
expected disinflation or low inflation, and (iii) gold, silver and platinum
during periods when the environment for investment in precious metals appears to
be favorable.  Minerals-related securities are securities that offer an
investment participation in the mining, processing, production, exploration,
refining or sales of gold, platinum, silver or hydrocarbons.  There is no
assurance that the Fund will achieve its goal.

During past inflationary periods, minerals-related securities and precious
metals, such as gold, silver and platinum, generally have increased in value,
while the value of debt securities has tended to decrease due to rising interest
rates.  Conversely, during periods of disinflation or low inflation, the value
of debt securities has generally increased, while the value of minerals-related
securities and precious metals has decreased.  Low inflation is considered to be
generally in the 3% to 6% range, as measured by the Consumer Price Index.  Also,
during periods of declining stock prices, the prices of gold, silver and
platinum may increase or remain stable, while the value of minerals-related
securities may be subject to a general decline experienced by the stock market
as a whole.  Based on these historical trends, WRIMCO will attempt to anticipate
inflationary and disinflationary periods and manage the Fund's investments in a
manner designed to achieve the Fund's goal.

As a matter of fundamental policy, the Fund will not invest in other than (i)
those minerals-related securities that are related to the mining, processing,
production, exploration, refining or sales of gold, (ii) U.S. Government
Securities, and/or (iii) gold, silver and platinum if thereafter less than 65%
of its total assets would be invested in these investments.  The Fund may invest
in securities other than minerals-related securities, U.S. Government Securities
and gold, silver or platinum, subject to this 65% test and to the other
restrictions set forth in this Prospectus and the SAI.

It is a fundamental policy of the Fund to concentrate its investments (i.e.,
invest more than 25% of its assets) in an industry related to gold and other
minerals during periods of actual or anticipated inflation and up to 100% of its
assets may be so invested.  During periods of actual or expected disinflation or
low inflation, up to 100% of the Fund's assets may be invested in U.S.
Government Securities of varying maturities and not more than 25% of the Fund's
assets will be invested in gold and other minerals-related securities.  When the
Fund is invested in minerals-related securities, it is anticipated that a
substantial portion, and up to 100%, of its assets will be invested in foreign
securities.  See "Foreign Securities."  The securities that the Fund may own
include debt securities, preferred stock, common stock and convertible
securities.

WRIMCO believes that this strategy will allow the Fund to achieve a higher total
return than could be achieved if it remained invested in minerals-related
securities and precious metals during periods of low inflation or disinflation
because the income and value of minerals-related securities and precious metals
might decline during periods of disinflation or low inflation.  During such
periods, WRIMCO expects that higher income can be achieved and that capital will
be better preserved by investing in U.S. Government Securities.  It is expected
that, during periods of disinflation and low inflation, a greater portion of the
total return of the Fund will be attributable to income achieved through
investment in U.S. Government Securities.  It is expected that, during
inflationary periods, a greater portion of the total return of the Fund will be
attributable to appreciation from investment in minerals-related securities and
precious metals.

WRIMCO will evaluate numerous economic and monetary factors in making a
determination as to whether the economy is in or is likely to enter into an
inflationary or disinflationary period.  Among the factors WRIMCO will evaluate
are changes in governmental fiscal and monetary policy, rates of changes in the
Consumer Price Index, and actual and anticipated changes and rate of change in
the value of the U.S. dollar in relation to other key foreign currencies, short-
and long-term interest rates, and the money supply.  For example, when WRIMCO
believes that the economy is in an inflationary cycle or an inflationary cycle
is expected because of rising interest rates, a decline in the value of the U.S.
dollar, and a higher rate of change in the Consumer Price Index, the Fund
generally will concentrate in minerals-related securities.  On the other hand,
when interest rates are declining, the value of the U.S. dollar is increasing,
and the rate of change in the Consumer Price Index is declining, the Fund
generally will invest in U.S. Government Securities.  However, WRIMCO will take
into account factors other than those given in these examples and WRIMCO's
subjective judgment of all factors it deems relevant precludes the application
of any formulas or mechanical determinations in assessing the state of the
economy.  WRIMCO's evaluation takes into consideration political instability in
certain parts of the world as well as domestic and international economic
factors.

Risk Considerations

There are risks inherent in any investment.  The Fund is subject to varying
degrees of market risk, financial risk and, in some cases, prepayment risk.
Market risk is the potential for fluctuations in the price of the security or
other asset because of market factors.  Because of market risks, you should
anticipate that the share price of the Fund will fluctuate.  Financial risk is
based on the financial situation of the issuer.  The financial risk of the Fund
depends on the credit quality of the underlying securities.  Prepayment risk is
the possibility that, during periods of falling interest rates, a debt security
with a high stated interest rate will be prepaid prior to its expected maturity
date.

Because the Fund owns different types of investments, its performance will be
affected by a variety of factors.  The value of the Fund's investments and the
income it generates will vary from day to day, generally reflecting changes in
interest rates, market conditions, and other company and economic news.

The Fund may also invest in certain derivative instruments, including options,
futures contracts, options on futures contracts, forward currency contracts,
indexed securities, stripped securities and mortgage-backed securities.  The use
of derivative instruments involves special risks.  See "Risks of Derivative
Instruments" for further information on the risks of investing in these
instruments.

Investments in minerals-related securities and precious metals are considered
speculative and involve substantial risks and special considerations, including
the following:

Risk of Price Fluctuations.  Metals and minerals prices are affected by various
factors such as economic conditions, political events, monetary policies and
other factors.  As a result, prices of minerals-related securities and of gold,
silver and platinum may fluctuate sharply.

Concentration of Source of Gold Supply and Control of Gold Sales.  The six
largest producers of gold are the Republic of South Africa, the United States,
Australia, Commonwealth of Independent States (the "CIS," formerly the Union of
Soviet Socialist Republics), Canada and China.  Economic, social and political
conditions and objectives prevailing in these countries may have a direct effect
on the production and marketing of newly-produced gold and sales of central bank
gold holdings.  In South Africa, the activities of companies engaged in gold
mining are subject to the policies adopted by the Ministry of Mines.  The
Reserve Bank of South Africa, as the sole authorized sales agent for South
African gold, has an influence on the price and timing of sales of South African
gold.  As South Africa is the largest producer of gold, social upheaval and
related economic difficulties in South Africa may, from time to time, influence
the price of gold and the share values of mining companies involved in South
Africa and elsewhere.  Investors should understand the special considerations
and risks related to an investment emphasis in securities of South African
issuers and its potential effects on the Fund's per share value.  The Fund may
invest up to 100% of its assets in securities of South African issuers.

Unpredictable International Monetary Policies, Economic and Political
Conditions.  There is the possibility that, under unusual international monetary
or political conditions, the Fund's assets might be less liquid or that the
change in value of its assets might be more volatile than would be the case with
other investments.  In particular, the price of gold is affected by direct and
indirect use of it to settle net deficits and surpluses between nations.
Because the prices of metals and minerals may be affected by unpredictable
international monetary policies and economic conditions, there may be greater
likelihood of a more dramatic impact upon the market price of the Fund's
investments than of other investments.

Foreign Securities.  A major portion of the Fund's assets will usually be
invested in foreign securities during periods of actual or anticipated
inflation.  See "Foreign Securities" below.

Failure to Anticipate Changes in Economic Cycles.  In addition to the risks
discussed above, the Fund's investment success will be dependent to a high
degree on WRIMCO's ability to anticipate the onset and termination of
inflationary and disinflationary cycles.  A failure to anticipate a
disinflationary cycle could result in the Fund's assets being disproportionately
invested in minerals-related securities.  Conversely, a failure to predict an
inflationary cycle could result in the Fund's assets being disproportionately
invested in U.S. Government Securities.  The Fund's investment success will be
dependent to a high degree on the validity of the premise that the values of
minerals-related securities will move in a different direction than the values
of U.S. Government Securities during periods of inflation or disinflation.  If
the values of both types of securities move down during the same period of time,
the value of the shareholder's investment will decline rather than stabilize or
increase, as anticipated, regardless of whether the Fund is invested in
minerals-related securities or U.S. Government Securities.

Securities and Investment Practices

The following pages contain more detailed information about types of instruments
in which the Fund may invest, and strategies WRIMCO may employ in pursuit of the
Fund's goal.  A summary of risks associated with these instrument types and
investment practices is included as well.

WRIMCO might not buy all of these instruments or use all of these techniques to
the full extent permitted by the Fund's investment policies and restrictions
unless it believes that doing so will help the Fund achieve its goal.  As a
shareholder, you will receive annual and semiannual reports detailing the Fund's
holdings.

Certain of the investment policies and restrictions of the Fund are noted above;
others are stated below.  A fundamental policy of the Fund may not be changed
without the approval of the shareholders of the Fund.  Operating policies may be
changed by the Board of Directors without the approval of the affected
shareholders.  The goal of the Fund is a fundamental policy.  Unless otherwise
indicated, the types of securities and other assets in which the Fund may invest
and other policies are operating policies.

Policies and limitations are typically considered at the time of purchase; the
sale of instruments is usually not required in the event of a subsequent change
in circumstances.

Please see the SAI for further information concerning the following instruments
and associated risks and the Fund's investment policies and restrictions.

Precious Metals.  The ownership of precious metals may allow the Fund to take
advantage of those periods of time when the outlook for the price of gold,
silver and platinum is favorable while the outlook for the share prices of
minerals-related securities may be unfavorable.  For example, during periods of
declining stock prices, the price of gold may increase or remain stable, while
the value of gold-related securities may be subject to the same general decline
experienced by the stock market as a whole.  Under these or similar
circumstances, the ability of the Fund to purchase and hold gold, silver or
platinum will allow it to benefit from a potential increase in the price of
precious metals or stability in the price of such metals at a time when the
value of minerals-related securities may be declining.

The Fund's ability to purchase platinum may allow the Fund to invest in platinum
without the risks associated with owning shares of South African and CIS
companies engaged in the production of platinum.  While the Fund is authorized
to invest in South African and CIS issuers, investments in South Africa and in
the CIS are subject to the risks associated with the unsettled political and
social conditions prevailing in that country and neighboring countries.

The Fund anticipates that gold, silver and platinum will be purchased in the
form of bullion or coins or in the form of vault or other negotiable receipts
representing ownership of these metals.  The Fund may incur expenses for the
shipping, storage and insurance of precious metals it purchases.

Precious metals prices are affected by various factors, such as economic
conditions, political events and monetary policies.  As a result, the price of
gold, silver or platinum may fluctuate widely.  The sole source of return to the
Fund from such investments will be gains realized on sales; a negative return
will be realized if the metal is sold at a loss.  Investments in precious metals
do not provide a yield.

Ownership of gold, silver and platinum may be prohibited by any one or more of
the states in which shares of the Fund are sold.  In the event that any state
prohibits such investment, the Fund may elect not to make such investments.  In
addition, the Fund's direct investment in these precious metals may be limited
by tax considerations.  See "Taxes" in the SAI.

Policies and Restrictions:  As a fundamental policy, the Fund may not invest
more than 25% of its total assets in gold, silver and platinum.

Equity Securities.  Equity securities represent an ownership interest in an
issuer.  This ownership interest often gives an investor the right to vote on
measures affecting the issuer's organization and operations.  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 the Fund invests may include
preferred stock that converts to common stock either automatically or after a
specified period of time or at the option of the issuer.

Debt Securities.  Bonds and other debt instruments are used by issuers to borrow
money from investors.  The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity.  Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values.  The debt securities in which the Fund invests
may include debt securities whose performance is linked to a specified equity
security or securities index.

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 debt securities fall and, conversely, when
interest rates fall, the values of fixed-rate debt securities rise.  The values
of floating and adjustable-rate debt securities are not as sensitive to changes
in interest rates as the values of fixed-rate debt securities.  Longer-term
bonds are generally more sensitive to interest rate changes than shorter-term
bonds.

U.S. Government Securities are high-quality instruments issued or guaranteed as
to principal or interest by the U.S. Treasury or by an agency or instrumentality
of the U.S. Government.  Not all U.S. Government Securities are backed by the
full faith and credit of the United States.  Some are backed by the right of the
issuer to borrow from the U.S. Treasury; others are backed by discretionary
authority of the U.S. Government to purchase the agencies' obligations; while
others are supported only by the credit of the instrumentality.  In the case of
securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment.

Zero coupon bonds do not make interest payments; instead, they are sold at a
deep discount from their face value and are redeemed at face value when they
mature.  Because zero coupon bonds do not pay current income, their prices can
be very volatile when interest rates change.  In calculating its dividends, the
Fund takes into account as income a portion of the difference between a zero
coupon bond's purchase price and its face value.

Subject to its investment restrictions, the Fund may invest in debt securities
rated in any rating category of the established rating services, including
securities in the lowest rating category (such as those rated D by Standard &
Poor's Ratings Services ("S&P") and C by Moody's Investors Service, Inc.
("MIS")).  In addition, the Fund will treat unrated securities judged by WRIMCO
to be of equivalent quality to a rated security to be equivalent to securities
having that rating.  Debt securities rated at least BBB by S&P or Baa by MIS are
considered to be investment grade securities.  Securities rated BBB or Baa may
have speculative characteristics.  Debt securities rated D by S&P or C by MIS
are in payment default and are regarded as having extremely poor prospects of
ever attaining any real investment standing.  Credit ratings for individual
securities may change from time to time, and the Fund may retain a portfolio
security whose rating has been changed.  See the SAI for additional information
about non-investment grade debt securities.

Policies and Restrictions:  In the case of U.S. Government Securities issued by
an agency or instrumentality that are not backed by the full faith and credit of
the United States, the Fund will invest in such securities only when WRIMCO is
satisfied that the credit risk with respect to such agency or instrumentality is
acceptable.

Preferred Stock.  The Fund may invest in preferred stock rated in any rating
category by an established rating service and unrated preferred stock judged by
WRIMCO to be of equivalent quality.

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 a different issuer within a
particular period of time at a specified price or formula.  A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged.  Convertible securities have unique investment
characteristics in that they generally have higher yields than those of 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.

Policies and Restrictions:  The Fund does not intend to invest more than 5% of
its assets in non-investment grade debt securities.  The Fund has no policy
limiting the maturity of the debt instruments in which it invests.

Foreign Securities and foreign currencies can involve significant risks in
addition to the risks inherent in U.S. investments.  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.  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 condition 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 a greater possibility
of default by foreign governments or foreign 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.  There is no assurance that WRIMCO will be able to
anticipate these potential events or counter their effects.

The considerations noted above generally are intensified for investments in
developing countries.  A developing country is a nation that, in WRIMCO's
opinion, is likely to experience long-term gross domestic product growth above
that expected to occur in the United States, the United Kingdom, France,
Germany, Italy, Japan and Canada.  Developing countries may have relatively
unstable governments, economies based on only a few industries and securities
markets that trade a small number of securities.

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.

When purchasing foreign securities, the Fund may purchase American Depository
Receipts, which are certificates issued by U.S. depositories representing the
right to receive securities of a foreign issuer deposited with that or another
depository, and may also purchase securities of a foreign issuer directly in the
foreign market.

Policies and Restrictions:  The Fund may purchase an unlimited amount of foreign
securities.  The Fund currently intends to limit its investment in obligations
of any single foreign government to less than 25% of its total assets.

Options, Futures and Other Strategies.  The Fund may use certain options and
indexed securities to attempt to enhance income or yield or may attempt to
reduce the overall risk of its investments by using certain options, futures
contracts, forward currency contracts and certain other strategies described
herein.  The strategies described below may be used in an attempt to manage
certain risks of the Fund's investments that can affect fluctuation in its net
asset value.

The Fund's ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations.  The Fund might not use any of these
strategies, and there can be no assurance that any strategy that is used will
succeed.  The risks associated with such strategies are described below.  Also
see the SAI for more information on these instruments and strategies and their
risk considerations.

Options.  The Fund may engage in certain strategies involving options to attempt
to enhance the Fund's income or yield or to attempt to reduce the overall risk
of its investments.  A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise 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 exercise 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.

Options offer large amounts of leverage, which will result in the Fund's net
asset value being more sensitive to changes in the value of the related
investment.  There is no assurance that a liquid secondary market will exist for
exchange-listed options. The market for options that are not listed on an
exchange may be less active than the market for exchange-listed options.  The
Fund will be able to close a position in an option it has written only if there
is a market for the put or call.  If the Fund is not able to enter into a
closing transaction on an option it has written, it will be required to maintain
the securities subject to the call or the collateral underlying the put until a
closing purchase transaction can be entered into or the option expires.

Policies and Restrictions:  As a fundamental policy, the Fund may purchase and
write (sell) put and call options only on U.S. Government Securities (except
that the Fund may write call options on securities whether or not they are U.S.
Government Securities) and the options on futures contracts described below,
subject to certain restrictions that are set forth in the SAI.

As a fundamental policy, the Fund may write calls on securities only if the
calls are covered calls (i.e., the Fund must own the related investments or
other investments acceptable for escrow arrangements).

As a fundamental policy, the Fund may only purchase or write options if they are
listed on a domestic securities or commodities exchange or quoted on Nasdaq,
except the Fund may purchase optional delivery standby commitments.

The Fund will only write puts on securities when it would be willing to purchase
the underlying security at the exercise price.

Futures Contracts and Options on Futures Contracts.  When the Fund purchases a
futures contract, it incurs an obligation to take delivery of a specified amount
of the obligation underlying the contract at a specified time in the future for
a specified price.  When the Fund sells a futures contract, it incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price.

When the Fund writes an option on a futures contract, it becomes obligated, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the term of the option.  If the Fund
has written a call, it assumes a short futures position.  If it has written a
put, it assumes a long futures position.  When the Fund purchases an option on a
futures contract, it acquires a right in return for the premium it pays to
assume a position in a futures contract (a long position if the option is a call
and a short position if the option is a put).

Policies and Restrictions:  As a fundamental policy, the Fund may only buy and
sell futures contracts relating to U.S. Government Securities ("U.S. Government
Securities Futures") and options thereon.  As a fundamental policy, the Fund may
buy and sell only listed options on U.S. Government Securities Futures.

Forward Contracts and Currencies.  The Fund may enter into forward currency
contracts for the purchase or sale of a specified currency at a specified future
date either with respect to specific transactions or with respect to portfolio
positions in order to minimize the risk to the Fund from adverse changes in the
relationship between the U.S. dollar and foreign currencies.  For example, when
WRIMCO anticipates purchasing or selling a security, the Fund may enter into a
forward contract in order to set the exchange rate at which the transaction will
be made.  The Fund also may enter into a forward contract to sell an amount of a
foreign currency approximating the value of some or all of the Fund's securities
positions denominated in such currency.  The Fund may also use forward contracts
in one currency or a basket of currencies to attempt to hedge against
fluctuations in the value of securities denominated in a different currency if
WRIMCO anticipates that there will be a correlation between the two currencies.

Successful use of forward currency contracts will depend on WRIMCO's skill in
analyzing and predicting currency values.  Forward contracts may substantially
change the Fund's investment exposure to changes in currency exchange rates, and
could result in losses to the Fund if currencies do not perform as WRIMCO
anticipates.  There is no assurance that WRIMCO's use of forward currency
contracts will be advantageous to the Fund or that it will hedge at an
appropriate time.

Currency conversion involves dealer spreads and other costs, although
commissions usually are not charged.

Policies and Restrictions:  As a fundamental policy, the Fund may not have more
than 15% of the value of its assets committed to the consummation of forward
currency contracts.  As a fundamental policy, the Fund will not enter into
forward currency contracts or maintain a net exposure to forward currency
contracts where the consummation of such contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of its portfolio
securities or other assets denominated in that currency.

As a fundamental policy, the Fund may hold foreign currency only in connection
with forward currency contracts, only up to four business days, as well as in
connection with the purchase or sale of foreign securities, but not otherwise.

Generally, the Fund will not enter into a forward currency contract with a term
of greater than one year.

Indexed Securities.  The Fund may purchase and sell indexed securities, which
are securities whose prices are indexed to the prices of other securities,
securities indices, currencies, precious metals or other commodities, or other
financial indicators.  Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or 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 U.S. 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
underlying instruments.

Mortgage-Backed Securities may include pools of mortgages, such as
collateralized mortgage obligations, and stripped mortgage-backed securities.
The value of these securities may be significantly affected by changes in
interest rates, the market's perception of the issuers and the creditworthiness
of the parties involved.

The yield characteristics of mortgage-backed securities differ from those of
traditional debt securities.  Among the major differences are that interest and
principal payments are made more frequently on mortgage-backed securities and
that principal may be prepaid at any time because the underlying mortgage loans
generally may be prepaid at any time.  As a result, if the Fund purchases these
securities at a premium, a prepayment rate that is faster than expected will
reduce yield to maturity while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity.  Conversely, if
the Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity.  Accelerated prepayments on securities purchased by the Fund
at a premium also impose a risk of loss of principal because the premium may not
have been fully amortized at the time the principal is repaid in full.

Timely payment of principal and interest on pass-through securities of the
Government National Mortgage Association (but not the Federal Home Loan Mortgage
Corporation or the Federal National Mortgage Association) is guaranteed by the
full faith and credit of the United States.  This is not a guarantee against
market decline of the value of these securities or shares of the Fund.  It is
possible that the availability and marketability (i.e., liquidity) of these
securities could be adversely affected by actions of the U.S. Government to
tighten the availability of its credit.

Stripped Securities are the separate income or principal components of a debt
instrument.  These involve risks that are similar to those of other debt
securities, although they may be more volatile.  The prices of stripped
mortgage-backed securities may be particularly affected by changes in interest
rates.

Risks of Derivative Instruments.  The use of options, futures contracts, options
on futures contracts, and forward contracts, and the investment in indexed
securities, stripped securities and mortgage-backed securities involve special
risks, including (i) possible imperfect or no correlation between price
movements of the portfolio investments (held or intended to be purchased)
involved in the transaction and price movements of the instruments involved in
the transaction, (ii) possible lack of a liquid secondary market for any
particular instrument at a particular time, (iii) the need for additional
portfolio management skills and techniques, (iv) losses due to unanticipated
market price movements, (v) the fact that, while such strategies can reduce the
risk of loss, they can also reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in investments involved in the
transaction, (vi) incorrect forecasts by WRIMCO concerning interest or currency
exchange rates or direction of price fluctuations of the investment involved in
the transaction, which may result in the strategy being ineffective, (vii) loss
of premiums paid by the Fund on options it purchases, and (viii) the possible
inability of the Fund to purchase or sell a portfolio security at a time when it
would otherwise be favorable for it to do so, or the possible need for the Fund
to sell a portfolio security at a disadvantageous time, due to the need for the
Fund to maintain "cover" or to segregate securities in connection with such
transactions and the possible inability of the Fund to close out or liquidate
its position.

For a hedging strategy to be completely effective, the price change of the
hedging instrument must equal the price change of the investment being hedged.
The risk of imperfect correlation of these price changes increases as the
composition of the Fund's portfolio diverges from instruments underlying a
hedging instrument.  Such equal price changes are not always possible because
the investment underlying the hedging instruments may not be the same investment
that is being hedged.  WRIMCO will attempt to create a closely correlated hedge
but hedging activity may not be completely successful in eliminating market
value fluctuation.

WRIMCO may use derivative instruments, including securities with embedded
derivatives, for hedging purposes to adjust the risk characteristics of the
Fund's portfolio of investments and may use some of these instruments to adjust
the return characteristics of the Fund's portfolio of investments.  An embedded
derivative is a derivative that is part of another financial instrument.
Embedded derivatives typically, but not always, are debt securities whose return
of principal or interest, in part, is determined by reference to something that
is not intrinsic to the security itself.  The use of derivative techniques for
speculative purposes can increase investment risk.  If WRIMCO judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return.  These techniques may
increase the volatility of the Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed.  In addition, these techniques
could result in a loss if the counterparty to the transaction does not perform
as promised or if there is not a liquid secondary market to close out a position
that the Fund has entered into.

The ordinary spreads between prices in the cash and futures markets, due to the
differences in the natures of those markets, are subject to distortion.  Due to
the possibility of distortion, a correct forecast of general interest rate,
foreign currency exchange rate or stock market trends by WRIMCO may still not
result in a successful transaction.  WRIMCO may be incorrect in its expectations
as to the extent of various interest or foreign currency exchange rate movements
or stock market movements or the time span within which the movements take
place.

Options and futures transactions may increase portfolio turnover rates, which
results in correspondingly greater commission expenses and transaction costs and
may result in certain tax consequences.

New financial products and risk management techniques continue to be developed.
The Fund may use these instruments and techniques to the extent consistent with
its goal, investment policies and regulatory requirements applicable to
investment companies.

When-Issued and Delayed-Delivery Transactions are trading practices in which
payment and delivery for the securities take place at a future date.  The market
value of a security could change during this period, which could affect the
Fund's yield.

When purchasing securities on a delayed-delivery basis, the Fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations.  When the Fund has sold a security on a delayed-delivery basis,
the Fund does not participate in further gains or losses with respect to the
security.  If the other party to a delayed-delivery transaction fails to deliver
or pay for the securities, the Fund could miss a favorable price or yield
opportunity, or could suffer a loss.

Policies and Restrictions:  The Fund may only purchase U.S. Government
Securities on a when-issued or delayed-delivery basis, or sell them on a
delayed-delivery basis.

Repurchase Agreements.  In a repurchase agreement, the Fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.  Delays
or losses could result if the other party to the agreement defaults or becomes
insolvent.

Restricted and Illiquid Securities.  Restricted securities are securities that
are subject to legal or contractual restrictions on resale.  Restricted
securities may be illiquid due to restrictions on their resale.  Certain
restricted securities may be determined to be liquid in accordance with
guidelines adopted by the Fund's Board of Directors.

Illiquid investments may be difficult to sell promptly at an acceptable price.
Difficulty in selling securities may result in a loss or may be costly to the
Fund.

Policies and Restrictions:  As a fundamental policy, the Fund may not purchase
restricted securities, except that the Fund may invest not more than 5% of its
total assets in restricted foreign securities.

The Fund may not purchase a security if, as a result, more than 10% of its net
assets would consist of illiquid investments.

Diversification.  Diversifying the Fund's investment portfolio can reduce the
risks of investing.  This may include limiting the amount of money invested in
any one issuer or, on a broader scale, in any one industry.  As described above,
however, the Fund intends to concentrate in gold and other minerals-related
securities.

Policies and Restrictions:  As a fundamental policy, the Fund may not buy a
security if, as a result, it would own more than 10% of the voting securities or
any class of securities of an issuer, or if more than 5% of the Fund's total
assets would be invested in securities of that issuer.

As a fundamental policy, the Fund may not buy a security if, as a result, more
than 25% of the Fund's total assets would then be invested in securities of
companies in any one industry; however, the Fund intends to concentrate in gold
and other minerals-related securities.

Borrowing.  If the Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off.

If the Fund makes additional investments while borrowings are outstanding, this
may be considered a form of leverage.

Policies and Restrictions:  As a fundamental policy, the Fund may not borrow for
investment purposes.  As a fundamental policy, the Fund may borrow money only
from banks, as a temporary measure or for extraordinary or emergency purposes
but only up to 5% of its total assets.  The Fund does not intend to borrow for
temporary measures; however, it may borrow to cover redemptions or settlements
of securities transactions.

Lending.  Securities loans may be made on a short-term or long-term basis for
the purpose of increasing the Fund's income.  This practice could result in a
loss or a delay in recovering the Fund's securities.  Loans will be made only to
parties deemed by WRIMCO to be creditworthy.

Policies and Restrictions:  As a fundamental policy, the Fund may not lend more
than 30% of its assets at any one time, and such loans must be on a
collateralized basis in accordance with applicable regulatory requirements.

Other Instruments may include warrants and securities of closed-end investment
companies.  As a shareholder in an investment company, the Fund 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.

Policies and Restrictions:  The Fund may invest up to 2% of its assets in
warrants.  Warrants acquired in units or attached to other securities are not
considered for purposes of computing this limitation.

As a fundamental policy, the Fund may buy shares of other investment companies
that do not redeem their shares only if it does so in a regular transaction in
the open market and only if not more than 10% of the Fund's total assets would
be invested in these shares, or as part of a merger or consolidation.  The Fund
does not intend to invest more than 5% of its assets in such securities.

The Fund will not purchase securities of unseasoned issuers, including
predecessor companies, which have been in operation for less than three years,
if the value of its investment in such securities would exceed 5% of its total
assets.

<PAGE>
About Your Account

The different ways to set up (register) your account are listed below.

                          Ways to Set Up Your Account

-------------------------------------------------

Individual or Joint Tenants
For your general investment needs

Individual accounts are owned by one person.  Joint accounts have two or more
owners (tenants).

-------------------------------------------------

Business or Organization
For investment needs of corporations, associations, partnerships, institutions
or other groups

-------------------------------------------------

Retirement
To shelter your retirement savings from taxes

Retirement plans allow individuals to shelter investment income and capital
gains from current taxes.  In addition, contributions to these accounts may be
tax deductible.

  Individual Retirement Accounts (IRAs) allow anyone of legal age and under 70
  1/2 with earned income to invest up to $2,000 per tax year.  The maximum is
  $2,250 if the investor's spouse has less than $250 of earned income in the
  taxable year.

  Rollover IRAs retain special tax advantages for certain distributions from
  employer-sponsored retirement plans.

  Simplified Employee Pension Plans (SEP - IRAs) provide small business owners
  or those with self-employed income (and their eligible employees) with many
  of the same advantages as a Keogh, but with fewer administrative
  requirements.

  Keogh Plans allow self-employed individuals to make tax-deductible
  contributions for themselves up to 25% of their annual earned income, with a
  maximum of $30,000 per year.

  401(k) Programs allow employees of corporations of all sizes to contribute a
  percentage of their wages on a tax-deferred basis.  These accounts need to be
  established by the administrator or trustee of the plan.

  403(b) Custodial Accounts are available to employees of public school systems
  or certain types of charitable organizations.

  457 Accounts allow employees of state and local governments and certain
  charitable organizations to contribute a portion of their compensation on a
  tax-deferred basis.

-------------------------------------------------

Gifts or Transfers to a Minor
To invest for a child's education or other future needs

These custodial accounts provide a way to give money to a child and obtain tax
benefits.  An individual can give up to $10,000 a year per child without paying
Federal gift tax.  Depending on state laws, you can set up a custodial account
under the Uniform Gifts to Minors Act ("UGMA") or the Uniform Transfers to
Minors Act ("UTMA").

-------------------------------------------------

Trust
For money being invested by a trust

The trust must be established before an account can be opened, or you may use a
trust form made available by Waddell & Reed.  Contact your Waddell & Reed
account representative for the form.

-------------------------------------------------

Buying Shares

You may buy shares of the Fund through Waddell & Reed, Inc. and its account
representatives.  To open your account you must complete and sign an
application.  Your Waddell & Reed account representative can help you with any
questions you might have.

The price to buy a share of the Fund, called the offering price, is calculated
every business day.

The offering price of a Class A share (price to buy one Class A share) is the
Fund's Class A net asset value ("NAV") plus the sales charge shown in the table
below.

                 Sales
          Sales  Charge
         Charge    as
           as   Approx.
         PercentPercent
           of      of
Size of Offering Amount
Purchase  Price Invested
-----------------------
Under
$100,000  5.75%  6.10%

$100,000
to less
than
$200,000  4.75    4.99

$200,000
to less
than
$300,000  3.50    3.63

$300,000
to less
than
$500,000  2.50    2.56

$500,000
to less
than
$1,000,0001.50    1.52

$1,000,000
to less
than
$2,000,0001.00    1.01

$2,000,000
and over  0.00    0.00

The Fund's Class A NAV is the value of a single share.  The Class A NAV is
computed by adding, with respect to that class, the value of the Fund's
investments, cash and other assets, subtracting its liabilities, and then
dividing the result by the number of Class A shares outstanding.

The securities in the Fund's portfolio that are listed or traded on an exchange
are valued primarily using market quotations or, if market quotations are not
available, at their fair value in a manner determined in good faith by or at the
direction of the Board of Directors.  Bonds are generally valued according to
prices quoted by a dealer in bonds that offers a pricing service.  Short-term
debt securities are valued at amortized cost, which approximates market value.
Other assets are valued at their fair value by or at the direction of the Board
of Directors.

The Fund is open for business each day the New York Stock Exchange (the "NYSE")
is open.  The Fund normally calculates the net asset values of its shares as of
the later of the close of business of the NYSE, normally 4 p.m. Eastern time, or
the close of the regular session of any other securities or commodities exchange
on which an option held by the Fund is traded.

The Fund may invest in securities listed on foreign exchanges which may trade on
Saturdays or on customary U.S. national business holidays when the NYSE is
closed.  Consequently, the NAV of Fund shares may be significantly affected on
days when the Fund does not price its shares and when you have no access to the
Fund.

When you place an order to buy shares, your order will be processed at the next
offering price calculated after your order is received and accepted.  Note the
following:

  Orders are accepted only at the home office of Waddell & Reed, Inc.
  All of your purchases must be made in U.S. dollars.
  If you buy shares by check, and then sell those shares by any method other
  than by exchange to another fund in the United Group, the payment may be
  delayed for up to ten days to ensure that your previous investment has
  cleared.

When you sign your account application, you will be asked to certify that your
Social Security or taxpayer identification number is correct and whether you are
subject to  backup withholding for failing to report income to the IRS.

Waddell & Reed, Inc. reserves the right to reject any purchase orders, including
purchases by exchange, and it and the Fund reserve the right to discontinue
offering Fund shares for purchase.

Lower sales charges are available by combining additional purchases of Class A
shares of any of the funds in the United Group, to the extent otherwise
permitted, except United Municipal Bond Fund, Inc., United Cash Management,
Inc., United Government Securities Fund, Inc. and United Municipal High Income
Fund, Inc., with the net asset value of Class A shares already held ("rights of
accumulation") and by grouping all purchases of Class A shares made during a
thirteen-month period ("Statement of Intention").  Shares of a corresponding
class of another fund purchased through a contractual plan may not be included
unless the plan has been completed.  Purchases by certain related persons may be
grouped.  Additional information and applicable forms are available from Waddell
& Reed account representatives.

Class A shares may be purchased at NAV by the Directors and officers of the
Fund, employees of Waddell & Reed, Inc., employees of their affiliates, account
representatives of Waddell & Reed, Inc. and the spouse, children, parents,
children's spouses and spouse's parents of each such Director, officer, employee
and account representative.  Purchases of Class A shares in certain retirement
plans and certain trusts for these persons may also be made at NAV.  Purchases
of Class A shares in a 401(k) plan having 100 or more eligible employees and
purchases of Class A shares in a 457 plan having 100 or more eligible employees
may be made at NAV.  Shares may also be issued at NAV in a merger, acquisition
or exchange offer made pursuant to a plan of reorganization to which the Fund is
a party.

Minimum Investments

To Open an Account  $500

For certain exchanges    $100

For certain retirement accounts and accounts opened with Automatic Investment
Service   $50

For certain retirement accounts and accounts opened through payroll deductions
for or by employees of WRIMCO, Waddell & Reed, Inc. and their affiliates   $25

To Add to an Account

For certain exchanges    $100

For Automatic Investment Service   $25

Adding to Your Account

Subject to the minimums described under "Minimum Investments," you can make
additional investments of any amount at any time.

To add to your account, make your check payable to Waddell & Reed, Inc.  Mail
the check along with:

  the detachable form that accompanies the confirmation of a prior purchase by
  you or your year-to-date statement; or

  a letter showing your account number, the account registration and stating
  the fund whose shares you wish to purchase.

Mail to Waddell & Reed, Inc. at the address printed on your confirmation or
year-to-date statement.

Selling Shares

You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares.

The redemption price (price to sell one Class A share) is the Fund's Class A
NAV.

To sell shares, your request must be made in writing.

Complete an Account Service Request form, available from your Waddell & Reed
account representative, or write a letter of instruction with:

  the name on the account registration;
  the Fund's name,
  the Fund account number;
  the dollar amount or number of shares to be redeemed; and
  any other applicable requirements listed in the table below.

Deliver the form or your letter to your Waddell & Reed account representative,
or mail it to:

Waddell & Reed, Inc.
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217

Unless otherwise instructed, Waddell & Reed will send a check to the address on
the account.

                    Special Requirements for Selling Shares

Account Type     Special Requirements
Individual or    The written instructions must
Joint Tenant     be signed by all persons
                 required to sign for
                 transactions, exactly as their
                 names appear on the account.
Sole             The written instructions must
Proprietorship   be signed by the individual
                 owner of the business.
UGMA, UTMA       The custodian must sign the
                 written instructions
                 indicating capacity as
                 custodian.
Retirement       The written instructions must
Account          be signed by a properly
                 authorized person.
Trust            The trustee must sign the
                 written instructions
                 indicating capacity as
                 trustee.  If the trustee's
                 name is not in the account
                 registration, provide a
                 currently certified copy of
                 the trust document.
Business or      At least one person authorized
Organization     by corporate resolution to act
                 on the account must sign the
                 written instructions.
Conservator,     The written instructions must
Guardian or      be signed by the person
Other Fiduciary  properly authorized by court
                 order to act in the particular
                 fiduciary capacity.

When you place an order to sell shares, your shares will be sold at the next NAV
calculated after receipt of a written request in good order by Waddell & Reed,
Inc. at its home office.  Note the following:

  If more than one person owns the shares, each owner must sign the written
  request.
  If you hold a certificate, it must be properly endorsed and sent to the Fund.
  If you recently purchased the shares by check, the Fund may delay payment of
  redemption proceeds.  You may arrange for the bank upon which the purchase
  check was drawn to provide to the Fund telephone or written assurance,
  satisfactory to the Fund, that the check has cleared and been honored.  If no
  such assurance is given, payment of the redemption proceeds on these shares
  will be delayed until the earlier of 10 days or the date the Fund is able to
  verify that your purchase check has cleared and been honored.
  Redemptions may be suspended or payment dates postponed on days when the NYSE
  is closed (other than weekends or holidays), when trading on the NYSE is
  restricted or as permitted by the Securities and Exchange Commission.
  Payment is normally made in cash, although under extraordinary conditions
  redemptions may be made in portfolio securities.

The Fund reserves the right to require a signature guarantee on certain
redemption requests.  This requirement is designed to protect you and Waddell &
Reed from fraud.  The Fund may require a signature guarantee in certain
situations such as:

  the request for redemption is made by a corporation, partnership or
  fiduciary;
  the request for redemption is made by someone other than the owner of record;
  or
  the check is being made payable to someone other than the owner of record.

The Fund will accept a signature guarantee from a national bank, a federally
chartered savings and loan or a member firm of a national stock exchange or
other eligible guarantor in accordance with procedures of the Fund's transfer
agent.  A notary public cannot provide a signature guarantee.

The Fund reserves the right to redeem at NAV all shares of the Fund owned or
held by you having an aggregate NAV of less than $500.  The Fund will give you
notice of its intention to redeem your shares and a 60-day opportunity to
purchase a sufficient number of additional shares to bring the aggregate NAV of
your shares to $500.

You may reinvest without charge all or part of the amount you redeemed by
sending to the Fund the amount you want to reinvest.  The reinvested amounts
must be received by the Fund within thirty days after the date of your
redemption.  You may do this only once as to Class A shares of the Fund.

Under the terms of the 401(k) prototype plan which Waddell & Reed, Inc. has
available, the plan may have the right to make a loan to a plan participant by
redeeming Fund shares held by the plan.  Principal and interest payments on the
loan made in accordance with the terms of the plan may be reinvested by the
plan, without payment of a sales charge, in Class A shares of any of the funds
in the United Group in which the plan may invest.

Shareholder Services

Waddell & Reed provides a variety of services to help you manage your account.

Personal Service

Your local Waddell & Reed account representative is available to provide
personal service.  Additionally, the Waddell & Reed Customer Services staff is
available to respond promptly to your inquiries and requests.

Reports

Statements and reports sent to you include the following:

  confirmation statements (after every purchase, exchange, transfer or
  redemption)
  year-to-date statements (quarterly)
  annual and semiannual reports (every six months)

To reduce expenses, only one copy of annual and semiannual reports will be
mailed to your household, even if you have more than one account with the Fund.
Call 913-236-2000 if you need copies of annual or semiannual reports or
historical account information.

Exchanges

You may sell your Class A shares and buy Class A shares of other funds in the
United Group.  You may exchange only into funds that are legally registered for
sale in your state of residence.  Note that exchanges out of the Fund may have
tax consequences for you.  Before exchanging into a fund, read its prospectus.

The Fund reserves the right to terminate or modify these exchange privileges at
any time, upon notice in certain instances.

Automatic Transactions

Flexible withdrawal service lets you set up monthly, quarterly, semiannual or
annual redemptions from your account.

Regular investment plans allow you to transfer money into your Fund account
automatically.  While regular investment plans do not guarantee a profit and
will not protect you against loss in a declining market, they can be an
excellent way to invest for retirement, a home, educational expenses and other
long-term financial goals.

Certain restrictions and fees imposed by the plan custodian may also apply for
retirement accounts.  Speak with your Waddell & Reed account representative for
more information.

                            Regular Investment Plans

Automatic Investment Service
To move money from your bank account to an existing Fund account

          Minimum        Frequency
          $25            Monthly

Funds Plus Service To move money from United Cash Management, Inc. to the Fund
whether in the same or a different account

          Minimum        Frequency
          $100           Monthly

Dividends, Distributions and Taxes

Distributions

The Fund distributes substantially all of its net investment income and net
capital gains to shareholders each year.  Ordinarily, dividends are distributed
from the Fund's net investment income, which includes accrued interest, earned
discount, dividends and other income earned on portfolio assets less expenses,
quarterly in March, June, September and December.  Net capital gains (and any
net realized gains from foreign currency transactions) ordinarily are
distributed in December.  The Fund may make additional distributions if
necessary to avoid Federal income or excise taxes on certain undistributed
income and capital gains.

Distribution Options.  When you open an account, specify on your application how
you want to receive your distributions.  The Fund offers three options:

1.  Share Payment Option.  Your dividend and capital gains distributions will be
automatically paid in additional Class A shares of the Fund.  If you do not
indicate a choice on your application, you will be assigned this option.

2.  Income-Earned Option.  Your capital gains distributions will be
automatically paid in Class A shares, but you will be sent a check for each
dividend distribution.

3.  Cash Option.  You will be sent a check for your dividend and capital gains
distributions.

For retirement accounts, all distributions are automatically paid in Class A
shares.

Taxes

The Fund has qualified and intends to continue to qualify for treatment as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, so that it will be relieved of Federal income tax on that part of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain and net gains from certain foreign currency
transactions) and net capital gain (the excess of net long-term capital gain
over net short-term capital loss) that are distributed to its shareholders.

There are certain requirements that the Fund must follow in order to avoid
Federal taxation.  In its effort to adhere to these requirements, the Fund may
have to limit its investment activity in some types of instruments.

As with any investment, you should consider how your investment in the Fund will
be taxed.  If your account is not a tax-deferred retirement account, you should
be aware of the following tax implications:

Taxes on distributions.  Dividends from the Fund's investment company taxable
income are taxable to you as ordinary income, whether received in cash or paid
in additional Fund shares.  Distributions of the Fund's net capital gains, when
designated as such, are taxable to you as long-term capital gains, whether
received in cash or paid in additional Fund shares and regardless of the length
of time you have owned your shares.  The Fund notifies you after each calendar
year-end as to the amounts of dividends and other distributions paid (or deemed
paid) to you for that year.  Under certain circumstances, the Fund may elect to
permit shareholders to take a credit or deduction for foreign income taxes paid
by the Fund.  The Fund will notify you of any such election.

A portion of the dividends paid by the Fund, whether received in cash or paid in
additional Fund shares, may be eligible for the dividends-received deduction
allowed to corporations.  The eligible portion may not exceed the aggregate
dividends received by the Fund from U.S. corporations.  However, dividends
received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the alternative minimum
tax.

Withholding.  The Fund is required to withhold 31% of all dividends, capital
gains distributions and redemption proceeds payable to individuals and certain
other noncorporate shareholders who do not furnish the Fund with a correct
taxpayer identification number.  Withholding at that rate from dividends and
capital gains distributions also is required for such shareholders who otherwise
are subject to backup withholding.

Taxes on transactions.  Your redemption of Fund shares will result in taxable
gain or loss to you, depending on whether the redemption proceeds are more or
less than your adjusted basis for the redeemed shares (which normally includes
any sales charge paid).  An exchange of Fund shares for shares of any other fund
in the United Group generally will have similar tax consequences.  However,
special rules apply when you dispose of Fund shares through a redemption or
exchange within ninety days after your purchase thereof and subsequently
reacquire Fund shares or acquire shares of another fund in the United Group
without paying a sales charge due to the thirty-day reinvestment privilege or
exchange privilege.  See "About Your Account."  In these cases, any gain on the
disposition of the Fund shares would be increased, or loss decreased, by the
amount of the sales charge you paid when those shares were acquired, and that
amount will increase the adjusted basis of the shares subsequently acquired.  In
addition, if you purchase Fund shares within thirty days before or after
redeeming other Fund shares (regardless of class) at a loss, part or all of that
loss will not be deductible and will increase the basis of the newly purchased
shares.

The foregoing is only a summary of some of the important Federal tax
considerations generally affecting the Fund and its shareholders.  There may be
other Federal, state or local tax considerations applicable to a particular
investor.  You are urged to consult your own tax adviser.

<PAGE>
About the Management and Expenses of the Fund

United Gold & Government Fund, Inc. is a mutual fund:  an investment that pools
shareholders' money and invests it toward a specified goal.  In technical terms,
the Fund is an open-end diversified management investment company organized as a
corporation under Maryland law on February 28, 1985.

The Fund is governed by a Board of Directors, which has overall responsibility
for the management of its affairs.  The majority of directors are not affiliated
with Waddell & Reed, Inc.

The Fund has two classes of shares.  Prior to February 19, 1996, the Fund
offered only one class of shares to the public.  Shares outstanding on that date
were designated as Class A shares, which are offered by this Prospectus.  In
addition, the Fund offers Class Y shares through a separate prospectus.  Class Y
shares are designed for institutional investors.  Class Y shares are not subject
to a sales charge on purchases and are not subject to redemption fees.  Class Y
shares are not subject to a Rule 12b-1 fee.  Additional information about Class
Y shares may be obtained by calling 913-236-2000 or by writing to Waddell &
Reed, Inc. at the address on the inside back cover of this Prospectus.

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 of Directors 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 of the Fund 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 Investment
Company Act of 1940, as amended (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.

Each share (regardless of class) has one vote.  All shares of the Fund vote
together as a single class, except as to any matter for which a separate vote of
any class is required by the 1940 Act, and except as to any matter which affects
the interests of one or more particular classes, in which case only the
shareholders of the affected classes are entitled to vote, each as a separate
class.  Shares are fully paid and nonassessable when purchased.

WRIMCO and Its Affiliates

The Fund is managed by WRIMCO, subject to the authority of the Fund's Board of
Directors.  WRIMCO provides investment advice to the Fund and supervises the
Fund's investments.  Waddell & Reed, Inc. and its predecessors served as
investment manager to each of the registered investment companies in the United
Group of Mutual Funds, except United Asset Strategy Fund, Inc., since 1940 or
the inception of the company, whichever was later, and to TMK/United Funds, Inc.
since that fund's inception, until January 8, 1992, when it assigned its duties
as investment manager and assigned its professional staff for investment
management services to WRIMCO.  WRIMCO has also served as investment manager for
Waddell & Reed Funds, Inc. since its inception in September 1992, and United
Asset Strategy Fund, Inc. since it commenced operations in March 1995.

Michael D. Avery is primarily responsible for the day-to-day management of the
Fund.  Mr. Avery has held his Fund responsibilities since February 1, 1994.  He
is Vice President of WRIMCO, Vice President of Waddell & Reed Asset Management
Company, an affiliate of WRIMCO, and Vice President of the Fund.  Mr. Avery has
served as the portfolio manager for investment companies managed by Waddell &
Reed, Inc. and its successor, WRIMCO, since February 1, 1994, has served as the
director of research of Waddell & Reed, Inc. and its successor, WRIMCO, since
August 1987, and has been an employee of Waddell & Reed, Inc. and its successor,
WRIMCO, since June 1981.  Other members of WRIMCO's investment management
department provide input on market outlook, economic conditions, investment
research and other considerations relating to the Fund's investments.

Waddell & Reed, Inc. serves as the Fund's underwriter and as underwriter for
each of the other funds in the United Group of Mutual Funds and Waddell & Reed
Funds, Inc., and serves as the distributor for TMK/United Funds, Inc.

Waddell & Reed Services Company acts as transfer agent ("Shareholder Servicing
Agent") for the Fund and processes the payments of dividends.  Waddell & Reed
Services Company also acts as agent ("Accounting Services Agent") in providing
bookkeeping and accounting services and assistance to the Fund and pricing daily
the value of its shares.

WRIMCO and Waddell & Reed Services Company are subsidiaries of Waddell & Reed,
Inc.  Waddell & Reed, Inc. is a direct subsidiary of Waddell & Reed Financial
Services, Inc., a holding company, and an indirect subsidiary of United
Investors Management Company, a holding company, and Torchmark Corporation, a
holding company.

WRIMCO places transactions for the portfolio of the Fund and in doing so may
consider sales of shares of the Fund and other funds it manages as a factor in
the selection of brokers to execute portfolio transactions.

Breakdown of Expenses

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

The Fund pays a management fee to WRIMCO for providing investment advice and
supervising its investments.  The Fund also pays other expenses, which are
explained below.

Management Fee

The management fee of the Fund is calculated by adding a group fee to a specific
fee.  It is accrued and paid to WRIMCO daily.

The specific fee is computed on the Fund's net asset value as of the close of
business each day at the annual rate of .30 of 1% of its net assets.  The group
fee is a pro rata participation based on the relative net asset size of the Fund
in the group fee computed each day on the combined net asset values of all the
funds in the United Group at the annual rates shown in the following table:

Group Fee Rate

               Annual
Group Net      Group
Asset Level    Fee Rate
(all dollars   For Each
in millions)   Level
------------   --------

From $0
to $750       .51 of 1%

From $750
to $1,500     .49 of 1%

From $1,500
to $2,250     .47 of 1%

From $2,250
to $3,000     .45 of 1%

From $3,000
to $3,750     .43 of 1%

From $3,750
to $7,500     .40 of 1%

From $7,500
to $12,000    .38 of 1%

Over $12,000  .36 of 1%

Growth in assets of the United Group assures a lower group fee rate.

The combined net asset values of all of the funds in the United Group were
approximately $13.6 billion as of December 31, 1995.  Management fees for the
fiscal year ended December 31, 1995 were 0.71% of the Fund's average net assets.

Other Expenses

While the management fee is a significant component of the Fund's annual
operating costs, the Fund has other expenses as well.

The Fund pays the Accounting Services Agent a monthly fee based on the average
net assets of the Fund for accounting services.  With respect to its Class A
shares, the Fund pays the Shareholder Servicing Agent a monthly fee for each
Class A shareholder account that was in existence at any time during the month,
and a fee for each account on which a dividend or distribution had a record date
during the month.

The Fund has adopted a Service Plan pursuant to Rule 12b-1 of the 1940 Act with
respect to its Class A shares.  Under the Plan, the Fund may pay monthly a fee
to Waddell & Reed, Inc. in an amount not to exceed .25% of the Fund's average
annual net assets of its Class A shares.  The fee is to be paid to reimburse
Waddell & Reed, Inc. for amounts it expends in connection with the provision of
personal services to Class A shareholders and/or maintenance of Class A
shareholder accounts.  In particular, the Service Plan and a related Service
Agreement between the Fund and Waddell & Reed, Inc. contemplate that these
expenditures may include costs and expenses incurred by Waddell & Reed, Inc. and
its affiliates in compensating, training and supporting registered account
representatives, sales managers and/or other appropriate personnel in providing
personal services to Class A shareholders and/or maintaining Class A shareholder
accounts; increasing services provided to Class A shareholders by office
personnel located at field sales offices; engaging in other activities useful in
providing personal services to Class A shareholders and/or the maintenance of
Class A shareholder accounts; and in compensating broker-dealers who may
regularly sell Class A shares, and other third parties, for providing Class A
shareholder services and/or maintaining Class A shareholder accounts.

The total expenses for the fiscal year ended December 31, 1995 for the Fund's
Class A shares were 1.66% of the average net assets of the Fund's Class A
shares.

A portfolio 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 such securities during the year, excluding certain
short-term securities and bullion.  Since the turnover rate of the Fund will be
affected by a number of factors, the Fund is unable to predict what rate the
Fund will have in any particular period or periods, although such rate is not
expected to exceed 100%.  However, the rate could be substantially higher or
lower in any particular period.  The factors that may affect the rate include
moving from a position emphasizing gold and other minerals-related securities to
a position emphasizing U.S. Government Securities or vice versa and the possible
necessary sales of securities to meet redemptions.  The Fund may engage in
short-term trading and have a high portfolio turnover.

<PAGE>
United Gold & Government Fund, Inc.

Custodian                     Underwriter
  UMB Bank, n.a.                Waddell & Reed, Inc.
  Kansas City, Missouri         6300 Lamar Avenue
                                P. O. Box 29217
Legal Counsel                   Shawnee Mission, Kansas
  Kirkpatrick & Lockhart LLP       66201-9217
  1800 Massachusetts Avenue, N. W. (913) 236-2000
  Washington, D. C.  20036
                              Shareholder Servicing Agent
Independent Accountants         Waddell & Reed
  Price Waterhouse LLP             Services Company
  Kansas City, Missouri         6300 Lamar Avenue
                                P. O. Box 29217
Investment Manager              Shawnee Mission, Kansas
  Waddell & Reed Investment        66201-9217
     Management Company         (913) 236-1579
  6300 Lamar Avenue
  P. O. Box 29217             Accounting Services Agent
  Shawnee Mission, Kansas       Waddell & Reed
     66201-9217                    Services Company
  (913) 236-2000                6300 Lamar Avenue
                                P. O. Box 29217
                                Shawnee Mission, Kansas
                                    66201-9217
                                (913) 236-2000

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

<PAGE>
United Gold & Government Fund, Inc.
Class A Shares
PROSPECTUS
February 19, 1996

The United Group of Mutual Funds
United Asset Strategy Fund, Inc.
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Funds, Inc.
     United Bond Fund
     United Income Fund
     United Accumulative Fund
     United Science and Technology Fund
United Gold & Government Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Vanguard Fund, Inc.

NUP2013(2-96)

printed on recycled paper

<PAGE>
Please read this Prospectus before investing, and keep it on file for future
reference.  It sets forth concisely the information about the Fund that you
ought to know before investing.

Additional information has been filed with the Securities and Exchange
Commission and is contained in a Statement of Additional Information ("SAI")
dated February 19, 1996.  The SAI is available free upon request to the Fund or
Waddell & Reed, Inc., the Fund's underwriter, at the address or telephone number
below.  The SAI is incorporated by reference into this Prospectus and you will
not be aware of all facts unless you read both this Prospectus and the SAI.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.


United Gold & Government Fund, Inc.
Class Y Shares
This Fund seeks a high total return through investment s in precious metals,
minerals-related securities or U.S. Government securities.

This Prospectus describes one class of shares of the Fund -- Class Y Shares.

Prospectus
February 19, 1996

UNITED GOLD & GOVERNMENT FUND, INC.
6300 Lamar Avenue
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217
913-236-2000

<PAGE>
Table of Contents

AN OVERVIEW OF THE FUND.........................3

EXPENSES........................................5

FINANCIAL HIGHLIGHTS............................6

PERFORMANCE.....................................7
 Explanation of Terms ..........................7

ABOUT WADDELL & REED............................8

ABOUT THE INVESTMENT PRINCIPLES OF THE FUND.....9
 Investment Goals and Principles ...............9
   Risk Considerations ........................11
 Securities and Investment Practices ..........13

ABOUT YOUR ACCOUNT.............................26
 Buying Shares ................................26
 Minimum Investments ..........................28
 Adding to Your Account .......................28
 Selling Shares ...............................28
 Telephone Transactions .......................30
 Shareholder Services .........................30
   Personal Service ...........................30
   Reports ....................................30
   Exchanges ..................................31
 Dividends, Distributions and Taxes ...........31
   Distributions ..............................31
   Taxes ......................................31

ABOUT THE MANAGEMENT AND EXPENSES OF THE FUND..34
 WRIMCO and Its Affiliates ....................35
 Breakdown of Expenses ........................36
   Management Fee .............................36
   Other Expenses .............................37

<PAGE>
An Overview of the Fund

The Fund:  This Prospectus describes the Class Y shares of United Gold &
Government Fund, Inc., an open-end, diversified management investment company.

Goals and Strategies:  United Gold & Government Fund, Inc. (the "Fund") seeks a
high total return through investments in precious metals, minerals-related
securities or U.S. Government Securities.  The Fund's portfolio will generally
include minerals-related securities and gold, silver and platinum during periods
of actual or expected inflation or when the environment for investment in
precious metals appears to be favorable, and U.S. Government Securities during
periods of actual or expected disinflation or low inflation.  See "About the
Investment Principles of the Fund" for further information.

Management:  Waddell & Reed Investment Management Company ("WRIMCO") provides
investment advice to the Fund and manages the Fund's investments.  WRIMCO is a
wholly-owned subsidiary of Waddell & Reed, Inc.  WRIMCO, Waddell & Reed, Inc.
and its predecessors have provided investment management services to registered
investment companies since 1940.  See "About the Management and Expenses of the
Fund" for further information about management fees.

Distributor:  Waddell & Reed, Inc. acts as principal underwriter and distributor
of the shares of the Fund.

Purchases:  You may buy Class Y shares of the Fund through Waddell & Reed, Inc.
and its account representatives.  The price to buy a Class Y share of the Fund
is the net asset value of a Class Y share.  There is no sales charge incurred
upon purchase of Class Y shares of the Fund.  See "About Your Account" for
information on how to purchase Class Y shares.

Redemptions:  You may redeem your shares at net asset value.  When you sell your
shares, they may be worth more or less than what you paid for them.  See "About
Your Account" for a description of redemption procedures.

Who May Want to Invest:  The Fund is designed for investors who are willing to
accept significant risks with the opportunity to participate in potentially high
returns.  You should consider whether the Fund fits with your particular
investment objectives.

Risk Considerations

The Fund is subject to significant risks associated with gold and other
minerals-related securities, foreign securities and precious metals.  The value
of the Fund's investments and the income generated will vary from day to day,
generally reflecting changes in interest rates, market conditions and other
company and economic news.  Performance will also depend on WRIMCO's skill in
selecting investments.  See "About the Investment Principles of the Fund" for
information about the risks associated with the Fund's investments.

<PAGE>
Expenses

Shareholder transaction expenses are charges you pay when you buy or sell shares
of a fund.

Maximum sales load
on purchases   None

Maximum sales load
on reinvested
dividends      None

Deferred
sales load     None

Redemption fees     None

Exchange fee   None

Annual Fund operating expenses (as a percentage of average net assets).4

Management fees     0.71%
12b-1 fees     None
Other expenses 0.46%
Total Fund operating expenses      1.17%

Example:  You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return5 and (2) redemption at the end of each time period:

1 year    $12
3 years   $37

The purpose of this table is to assist you in understanding the various costs
and expenses that a shareholder of the Class Y shares of the Fund will bear
directly or indirectly.  The example should not be considered a representation
of past or future expenses; actual expenses may be greater or lesser than those
shown.  For a more complete discussion of certain expenses and fees, see
"Breakdown of Expenses."

                    
4Expense ratios are based on the management fees and other Fund-level expenses
of the Fund for the fiscal year ended December 31, 1995, and the expenses
attributable to the Class Y shares that are anticipated for the current year.
Actual expenses may be greater or lesser than those shown.
5Use of an assumed annual return of 5% is for illustration purposes only and is
not a representation of the Fund's future performance, which may be greater or
lesser.

<PAGE>

Financial Highlights

Financial Highlights for Class Y shares are not included because the Fund did
not offer Class Y shares during the fiscal year ended December 31, 1995.

<PAGE>
Performance

Mutual fund performance is commonly measured as total return.  The Fund may also
advertise its performance by showing performance rankings.  Performance
information is calculated and presented separately for each class of Fund
shares.

Explanation of Terms

Total Return is the overall change in value of an investment in the Fund over a
given period, assuming reinvestment of any dividends and distributions.  A
cumulative total return reflects actual performance over a stated period of
time.  An average annual total return is a hypothetical rate of return that, if
achieved annually, would have produced the same cumulative total return if
performance had been constant over the entire period.  Average annual total
returns smooth out variations in performance; they are not the same as actual
year-by-year results.  Non-standardized total return may be for periods other
than those required to be presented or may otherwise differ from standardized
total return.

Performance Rankings are comparisons of the Fund's performance to the
performance of other selected mutual funds, selected recognized market
indicators such as the Standard & Poor's 500 Stock Index and the Dow Jones
Industrial Average, or non-market indices or averages of mutual fund industry
groups.  The Fund may quote its performance rankings and/or other information as
published by recognized independent mutual fund statistical services or by
publications of general interest.  In connection with a ranking, the Fund may
provide additional information, such as the particular category to which it
relates, 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.

All performance information that the Fund advertises or includes in information
provided to present or prospective shareholders is historical in nature and is
not intended to represent or guarantee future results.  The value of the Fund's
shares when redeemed may be more or less than their original cost.

The Fund's recent performance and holdings will be detailed twice a year in the
Fund's annual and semiannual reports, which are sent to all Fund shareholders.

<PAGE>
About Waddell & Reed

Since 1937, Waddell & Reed has been helping people make the most of their
financial future by helping them take advantage of various financial services.
Today, Waddell & Reed has over 2500 account representatives located throughout
the United States.  Your primary contact in your dealings with Waddell & Reed
will be your local account representative.  However, the Waddell & Reed
shareholder services department, which is part of the Waddell & Reed
headquarters operations in Overland Park, Kansas, is available to assist you and
your Waddell & Reed account representative.  You may speak with a customer
service representative by calling 913-236-2000.

<PAGE>
About the Investment Principles of the Fund

Investment Goals and Principles

The goal of the Fund is to seek a high total return to investors.  The Fund
seeks to achieve this goal by investing in (i) minerals-related securities and
gold, silver and platinum during periods of actual or expected inflation, (ii)
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government Securities") during periods of actual or
expected disinflation or low inflation, and (iii) gold, silver and platinum
during periods when the environment for investment in precious metals appears to
be favorable.  Minerals-related securities are securities that offer an
investment participation in the mining, processing, production, exploration,
refining or sales of gold, platinum, silver or hydrocarbons.  There is no
assurance that the Fund will achieve its goal.

During past inflationary periods, minerals-related securities and precious
metals, such as gold, silver and platinum, generally have increased in value,
while the value of debt securities has tended to decrease due to rising interest
rates.  Conversely, during periods of disinflation or low inflation, the value
of debt securities has generally increased, while the value of minerals-related
securities and precious metals has decreased.  Low inflation is considered to be
generally in the 3% to 6% range, as measured by the Consumer Price Index.  Also,
during periods of declining stock prices, the prices of gold, silver and
platinum may increase or remain stable, while the value of minerals-related
securities may be subject to a general decline experienced by the stock market
as a whole.  Based on these historical trends, WRIMCO will attempt to anticipate
inflationary and disinflationary periods and manage the Fund's investments in a
manner designed to achieve the Fund's goal.

As a matter of fundamental policy, the Fund will not invest in other than (i)
those minerals-related securities that are related to the mining, processing,
production, exploration, refining or sales of gold, (ii) U.S. Government
Securities, and/or (iii) gold, silver and platinum if thereafter less than 65%
of its total assets would be invested in these investments.  The Fund may invest
in securities other than minerals-related securities, U.S. Government Securities
and gold, silver or platinum, subject to this 65% test and to the other
restrictions set forth in this Prospectus and the SAI.

It is a fundamental policy of the Fund to concentrate its investments (i.e.,
invest more than 25% of its assets) in an industry related to gold and other
minerals during periods of actual or anticipated inflation and up to 100% of its
assets may be so invested.  During periods of actual or expected disinflation or
low inflation, up to 100% of the Fund's assets may be invested in U.S.
Government Securities of varying maturities and not more than 25% of the Fund's
assets will be invested in gold and other minerals-related securities.  When the
Fund is invested in minerals-related securities, it is anticipated that a
substantial portion, and up to 100%, of its assets will be invested in foreign
securities.  See "Foreign Securities."  The securities that the Fund may own
include debt securities, preferred stock, common stock and convertible
securities.

WRIMCO believes that this strategy will allow the Fund to achieve a higher total
return than could be achieved if it remained invested in minerals-related
securities and precious metals during periods of low inflation or disinflation
because the income and value of minerals-related securities and precious metals
might decline during periods of disinflation or low inflation.  During such
periods, WRIMCO expects that higher income can be achieved and that capital will
be better preserved by investing in U.S. Government Securities.  It is expected
that, during periods of disinflation and low inflation, a greater portion of the
total return of the Fund will be attributable to income achieved through
investment in U.S. Government Securities.  It is expected that, during
inflationary periods, a greater portion of the total return of the Fund will be
attributable to appreciation from investment in minerals-related securities and
precious metals.

WRIMCO will evaluate numerous economic and monetary factors in making a
determination as to whether the economy is in or is likely to enter into an
inflationary or disinflationary period.  Among the factors WRIMCO will evaluate
are changes in governmental fiscal and monetary policy, rates of changes in the
Consumer Price Index, and actual and anticipated changes and rate of change in
the value of the U.S. dollar in relation to other key foreign currencies, short-
and long-term interest rates, and the money supply.  For example, when WRIMCO
believes that the economy is in an inflationary cycle or an inflationary cycle
is expected because of rising interest rates, a decline in the value of the U.S.
dollar, and a higher rate of change in the Consumer Price Index, the Fund
generally will concentrate in minerals-related securities.  On the other hand,
when interest rates are declining, the value of the U.S. dollar is increasing,
and the rate of change in the Consumer Price Index is declining, the Fund
generally will invest in U.S. Government Securities.  However, WRIMCO will take
into account factors other than those given in these examples and WRIMCO's
subjective judgment of all factors it deems relevant precludes the application
of any formulas or mechanical determinations in assessing the state of the
economy.  WRIMCO's evaluation takes into consideration political instability in
certain parts of the world as well as domestic and international economic
factors.

Risk Considerations

There are risks inherent in any investment.  The Fund is subject to varying
degrees of market risk, financial risk and, in some cases, prepayment risk.
Market risk is the potential for fluctuations in the price of the security or
other asset because of market factors.  Because of market risks, you should
anticipate that the share price of the Fund will fluctuate.  Financial risk is
based on the financial situation of the issuer.  The financial risk of the Fund
depends on the credit quality of the underlying securities.  Prepayment risk is
the possibility that, during periods of falling interest rates, a debt security
with a high stated interest rate will be prepaid prior to its expected maturity
date.

Because the Fund owns different types of investments, its performance will be
affected by a variety of factors.  The value of the Fund's investments and the
income it generates will vary from day to day, generally reflecting changes in
interest rates, market conditions, and other company and economic news.

The Fund may also invest in certain derivative instruments, including options,
futures contracts, options on futures contracts, forward currency contracts,
indexed securities, stripped securities and mortgage-backed securities.  The use
of derivative instruments involves special risks.  See "Risks of Derivative
Instruments" for further information on the risks of investing in these
instruments.

Investments in minerals-related securities and precious metals are considered
speculative and involve substantial risks and special considerations, including
the following:

Risk of Price Fluctuations.  Metals and minerals prices are affected by various
factors such as economic conditions, political events, monetary policies and
other factors.  As a result, prices of minerals-related securities and of gold,
silver and platinum may fluctuate sharply.

Concentration of Source of Gold Supply and Control of Gold Sales.  The six
largest producers of gold are the Republic of South Africa, the United States,
Australia, Commonwealth of Independent States (the "CIS," formerly the Union of
Soviet Socialist Republics), Canada and China.  Economic, social and political
conditions and objectives prevailing in these countries may have a direct effect
on the production and marketing of newly-produced gold and sales of central bank
gold holdings.  In South Africa, the activities of companies engaged in gold
mining are subject to the policies adopted by the Ministry of Mines.  The
Reserve Bank of South Africa, as the sole authorized sales agent for South
African gold, has an influence on the price and timing of sales of South African
gold.  As South Africa is the largest producer of gold, social upheaval and
related economic difficulties in South Africa may, from time to time, influence
the price of gold and the share values of mining companies involved in South
Africa and elsewhere.  Investors should understand the special considerations
and risks related to an investment emphasis in securities of South African
issuers and its potential effects on the Fund's per share value.  The Fund may
invest up to 100% of its assets in securities of South African issuers.

Unpredictable International Monetary Policies, Economic and Political
Conditions.  There is the possibility that, under unusual international monetary
or political conditions, the Fund's assets might be less liquid or that the
change in value of its assets might be more volatile than would be the case with
other investments.  In particular, the price of gold is affected by direct and
indirect use of it to settle net deficits and surpluses between nations.
Because the prices of metals and minerals may be affected by unpredictable
international monetary policies and economic conditions, there may be greater
likelihood of a more dramatic impact upon the market price of the Fund's
investments than of other investments.

Foreign Securities.  A major portion of the Fund's assets will usually be
invested in foreign securities during periods of actual or anticipated
inflation.  See "Foreign Securities" below.

Failure to Anticipate Changes in Economic Cycles.  In addition to the risks
discussed above, the Fund's investment success will be dependent to a high
degree on WRIMCO's ability to anticipate the onset and termination of
inflationary and disinflationary cycles.  A failure to anticipate a
disinflationary cycle could result in the Fund's assets being disproportionately
invested in minerals-related securities.  Conversely, a failure to predict an
inflationary cycle could result in the Fund's assets being disproportionately
invested in U.S. Government Securities.  The Fund's investment success will be
dependent to a high degree on the validity of the premise that the values of
minerals-related securities will move in a different direction than the values
of U.S. Government Securities during periods of inflation or disinflation.  If
the values of both types of securities move down during the same period of time,
the value of the shareholder's investment will decline rather than stabilize or
increase, as anticipated, regardless of whether the Fund is invested in
minerals-related securities or U.S. Government Securities.

Securities and Investment Practices

The following pages contain more detailed information about types of instruments
in which the Fund may invest, and strategies WRIMCO may employ in pursuit of the
Fund's goal.  A summary of risks associated with these instrument types and
investment practices is included as well.

WRIMCO might not buy all of these instruments or use all of these techniques to
the full extent permitted by the Fund's investment policies and restrictions
unless it believes that doing so will help the Fund achieve its goal.  As a
shareholder, you will receive annual and semiannual reports detailing the Fund's
holdings.

Certain of the investment policies and restrictions of the Fund are noted above;
others are stated below.  A fundamental policy of the Fund may not be changed
without the approval of the shareholders of the Fund.  Operating policies may be
changed by the Board of Directors without the approval of the affected
shareholders.  The goal of the Fund is a fundamental policy.  Unless otherwise
indicated, the types of securities and other assets in which the Fund may invest
and other policies are operating policies.

Policies and limitations are typically considered at the time of purchase; the
sale of instruments is usually not required in the event of a subsequent change
in circumstances.

Please see the SAI for further information concerning the following instruments
and associated risks and the Fund's investment policies and restrictions.

Precious Metals.  The ownership of precious metals may allow the Fund to take
advantage of those periods of time when the outlook for the price of gold,
silver and platinum is favorable while the outlook for the share prices of
minerals-related securities may be unfavorable.  For example, during periods of
declining stock prices, the price of gold may increase or remain stable, while
the value of gold-related securities may be subject to the same general decline
experienced by the stock market as a whole.  Under these or similar
circumstances, the ability of the Fund to purchase and hold gold, silver or
platinum will allow it to benefit from a potential increase in the price of
precious metals or stability in the price of such metals at a time when the
value of minerals-related securities may be declining.

The Fund's ability to purchase platinum may allow the Fund to invest in platinum
without the risks associated with owning shares of South African and CIS
companies engaged in the production of platinum.  While the Fund is authorized
to invest in South African and CIS issuers, investments in South Africa and in
the CIS are subject to the risks associated with the unsettled political and
social conditions prevailing in that country and neighboring countries.

The Fund anticipates that gold, silver and platinum will be purchased in the
form of bullion or coins or in the form of vault or other negotiable receipts
representing ownership of these metals.  The Fund may incur expenses for the
shipping, storage and insurance of precious metals it purchases.

Precious metals prices are affected by various factors, such as economic
conditions, political events and monetary policies.  As a result, the price of
gold, silver or platinum may fluctuate widely.  The sole source of return to the
Fund from such investments will be gains realized on sales; a negative return
will be realized if the metal is sold at a loss.  Investments in precious metals
do not provide a yield.

Ownership of gold, silver and platinum may be prohibited by any one or more of
the states in which shares of the Fund are sold.  In the event that any state
prohibits such investment, the Fund may elect not to make such investments.  In
addition, the Fund's direct investment in these precious metals may be limited
by tax considerations.  See "Taxes" in the SAI.

Policies and Restrictions:  As a fundamental policy, the Fund may not invest
more than 25% of its total assets in gold, silver and platinum.

Equity Securities.  Equity securities represent an ownership interest in an
issuer.  This ownership interest often gives an investor the right to vote on
measures affecting the issuer's organization and operations.  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 the Fund invests may include
preferred stock that converts to common stock either automatically or after a
specified period of time or at the option of the issuer.

Debt Securities.  Bonds and other debt instruments are used by issuers to borrow
money from investors.  The issuer pays the investor a fixed or variable rate of
interest, and must repay the amount borrowed at maturity.  Some debt securities,
such as zero coupon bonds, do not pay current interest, but are purchased at a
discount from their face values.  The debt securities in which the Fund invests
may include debt securities whose performance is linked to a specified equity
security or securities index.

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 debt securities fall and, conversely, when
interest rates fall, the values of fixed-rate debt securities rise.  The values
of floating and adjustable-rate debt securities are not as sensitive to changes
in interest rates as the values of fixed-rate debt securities.  Longer-term
bonds are generally more sensitive to interest rate changes than shorter-term
bonds.

U.S. Government Securities are high-quality instruments issued or guaranteed as
to principal or interest by the U.S. Treasury or by an agency or instrumentality
of the U.S. Government.  Not all U.S. Government Securities are backed by the
full faith and credit of the United States.  Some are backed by the right of the
issuer to borrow from the U.S. Treasury; others are backed by discretionary
authority of the U.S. Government to purchase the agencies' obligations; while
others are supported only by the credit of the instrumentality.  In the case of
securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment.

Zero coupon bonds do not make interest payments; instead, they are sold at a
deep discount from their face value and are redeemed at face value when they
mature.  Because zero coupon bonds do not pay current income, their prices can
be very volatile when interest rates change.  In calculating its dividends, the
Fund takes into account as income a portion of the difference between a zero
coupon bond's purchase price and its face value.

Subject to its investment restrictions, the Fund may invest in debt securities
rated in any rating category of the established rating services, including
securities in the lowest rating category (such as those rated D by Standard &
Poor's Ratings Services ("S&P") and C by Moody's Investors Service, Inc.
("MIS")).  In addition, the Fund will treat unrated securities judged by WRIMCO
to be of equivalent quality to a rated security to be equivalent to securities
having that rating.  Debt securities rated at least BBB by S&P or Baa by MIS are
considered to be investment grade securities.  Securities rated BBB or Baa may
have speculative characteristics.  Debt securities rated D by S&P or C by MIS
are in payment default and are regarded as having extremely poor prospects of
ever attaining any real investment standing.  Credit ratings for individual
securities may change from time to time, and the Fund may retain a portfolio
security whose rating has been changed.  See the SAI for additional information
about non-investment grade debt securities.

Policies and Restrictions:  In the case of U.S. Government Securities issued by
an agency or instrumentality that are not backed by the full faith and credit of
the United States, the Fund will invest in such securities only when WRIMCO is
satisfied that the credit risk with respect to such agency or instrumentality is
acceptable.

Preferred Stock.  The Fund may invest in preferred stock rated in any rating
category by an established rating service and unrated preferred stock judged by
WRIMCO to be of equivalent quality.

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 a different issuer within a
particular period of time at a specified price or formula.  A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged.  Convertible securities have unique investment
characteristics in that they generally have higher yields than those of 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.

Policies and Restrictions:  The Fund does not intend to invest more than 5% of
its assets in non-investment grade debt securities.  The Fund has no policy
limiting the maturity of the debt instruments in which it invests.

Foreign Securities and foreign currencies can involve significant risks in
addition to the risks inherent in U.S. investments.  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.  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 condition 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 a greater possibility
of default by foreign governments or foreign 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.  There is no assurance that WRIMCO will be able to
anticipate these potential events or counter their effects.

The considerations noted above generally are intensified for investments in
developing countries.  A developing country is a nation that, in WRIMCO's
opinion, is likely to experience long-term gross domestic product growth above
that expected to occur in the United States, the United Kingdom, France,
Germany, Italy, Japan and Canada.  Developing countries may have relatively
unstable governments, economies based on only a few industries and securities
markets that trade a small number of securities.

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.

When purchasing foreign securities, the Fund may purchase American Depository
Receipts, which are certificates issued by U.S. depositories representing the
right to receive securities of a foreign issuer deposited with that or another
depository, and may also purchase securities of a foreign issuer directly in the
foreign market.

Policies and Restrictions:  The Fund may purchase an unlimited amount of foreign
securities.  The Fund currently intends to limit its investment in obligations
of any single foreign government to less than 25% of its total assets.

Options, Futures and Other Strategies.  The Fund may use certain options and
indexed securities to attempt to enhance income or yield or may attempt to
reduce the overall risk of its investments by using certain options, futures
contracts, forward currency contracts and certain other strategies described
herein.  The strategies described below may be used in an attempt to manage
certain risks of the Fund's investments that can affect fluctuation in its net
asset value.

The Fund's ability to use these strategies may be limited by market conditions,
regulatory limits and tax considerations.  The Fund might not use any of these
strategies, and there can be no assurance that any strategy that is used will
succeed.  The risks associated with such strategies are described below.  Also
see the SAI for more information on these instruments and strategies and their
risk considerations.

Options.  The Fund may engage in certain strategies involving options to attempt
to enhance the Fund's income or yield or to attempt to reduce the overall risk
of its investments.  A call option gives the purchaser the right to buy, and
obligates the writer to sell, the underlying investment at the agreed upon
exercise 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 exercise 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.

Options offer large amounts of leverage, which will result in the Fund's net
asset value being more sensitive to changes in the value of the related
investment.  There is no assurance that a liquid secondary market will exist for
exchange-listed options. The market for options that are not listed on an
exchange may be less active than the market for exchange-listed options.  The
Fund will be able to close a position in an option it has written only if there
is a market for the put or call.  If the Fund is not able to enter into a
closing transaction on an option it has written, it will be required to maintain
the securities subject to the call or the collateral underlying the put until a
closing purchase transaction can be entered into or the option expires.

Policies and Restrictions:  As a fundamental policy, the Fund may purchase and
write (sell) put and call options only on U.S. Government Securities (except
that the Fund may write call options on securities whether or not they are U.S.
Government Securities) and the options on futures contracts described below,
subject to certain restrictions that are set forth in the SAI.

As a fundamental policy, the Fund may write calls on securities only if the
calls are covered calls (i.e., the Fund must own the related investments or
other investments acceptable for escrow arrangements).

As a fundamental policy, the Fund may only purchase or write options if they are
listed on a domestic securities or commodities exchange or quoted on Nasdaq,
except the Fund may purchase optional delivery standby commitments.

The Fund will only write puts on securities when it would be willing to purchase
the underlying security at the exercise price.

Futures Contracts and Options on Futures Contracts.  When the Fund purchases a
futures contract, it incurs an obligation to take delivery of a specified amount
of the obligation underlying the contract at a specified time in the future for
a specified price.  When the Fund sells a futures contract, it incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price.

When the Fund writes an option on a futures contract, it becomes obligated, in
return for the premium paid, to assume a position in a futures contract at a
specified exercise price at any time during the term of the option.  If the Fund
has written a call, it assumes a short futures position.  If it has written a
put, it assumes a long futures position.  When the Fund purchases an option on a
futures contract, it acquires a right in return for the premium it pays to
assume a position in a futures contract (a long position if the option is a call
and a short position if the option is a put).

Policies and Restrictions:  As a fundamental policy, the Fund may only buy and
sell futures contracts relating to U.S. Government Securities ("U.S. Government
Securities Futures") and options thereon.  As a fundamental policy, the Fund may
buy and sell only listed options on U.S. Government Securities Futures.

Forward Contracts and Currencies.  The Fund may enter into forward currency
contracts for the purchase or sale of a specified currency at a specified future
date either with respect to specific transactions or with respect to portfolio
positions in order to minimize the risk to the Fund from adverse changes in the
relationship between the U.S. dollar and foreign currencies.  For example, when
WRIMCO anticipates purchasing or selling a security, the Fund may enter into a
forward contract in order to set the exchange rate at which the transaction will
be made.  The Fund also may enter into a forward contract to sell an amount of a
foreign currency approximating the value of some or all of the Fund's securities
positions denominated in such currency.  The Fund may also use forward contracts
in one currency or a basket of currencies to attempt to hedge against
fluctuations in the value of securities denominated in a different currency if
WRIMCO anticipates that there will be a correlation between the two currencies.

Successful use of forward currency contracts will depend on WRIMCO's skill in
analyzing and predicting currency values.  Forward contracts may substantially
change the Fund's investment exposure to changes in currency exchange rates, and
could result in losses to the Fund if currencies do not perform as WRIMCO
anticipates.  There is no assurance that WRIMCO's use of forward currency
contracts will be advantageous to the Fund or that it will hedge at an
appropriate time.

Currency conversion involves dealer spreads and other costs, although
commissions usually are not charged.

Policies and Restrictions:  As a fundamental policy, the Fund may not have more
than 15% of the value of its assets committed to the consummation of forward
currency contracts.  As a fundamental policy, the Fund will not enter into
forward currency contracts or maintain a net exposure to forward currency
contracts where the consummation of such contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of its portfolio
securities or other assets denominated in that currency.

As a fundamental policy, the Fund may hold foreign currency only in connection
with forward currency contracts, only up to four business days, as well as in
connection with the purchase or sale of foreign securities, but not otherwise.

Generally, the Fund will not enter into a forward currency contract with a term
of greater than one year.

Indexed Securities.  The Fund may purchase and sell indexed securities, which
are securities whose prices are indexed to the prices of other securities,
securities indices, currencies, precious metals or other commodities, or other
financial indicators.  Indexed securities typically, but not always, are debt
securities or deposits whose value at maturity or 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 U.S. 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
underlying instruments.

Mortgage-Backed Securities may include pools of mortgages, such as
collateralized mortgage obligations, and stripped mortgage-backed securities.
The value of these securities may be significantly affected by changes in
interest rates, the market's perception of the issuers and the creditworthiness
of the parties involved.

The yield characteristics of mortgage-backed securities differ from those of
traditional debt securities.  Among the major differences are that interest and
principal payments are made more frequently on mortgage-backed securities and
that principal may be prepaid at any time because the underlying mortgage loans
generally may be prepaid at any time.  As a result, if the Fund purchases these
securities at a premium, a prepayment rate that is faster than expected will
reduce yield to maturity while a prepayment rate that is slower than expected
will have the opposite effect of increasing yield to maturity.  Conversely, if
the Fund purchases these securities at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity.  Accelerated prepayments on securities purchased by the Fund
at a premium also impose a risk of loss of principal because the premium may not
have been fully amortized at the time the principal is repaid in full.

Timely payment of principal and interest on pass-through securities of the
Government National Mortgage Association (but not the Federal Home Loan Mortgage
Corporation or the Federal National Mortgage Association) is guaranteed by the
full faith and credit of the United States.  This is not a guarantee against
market decline of the value of these securities or shares of the Fund.  It is
possible that the availability and marketability (i.e., liquidity) of these
securities could be adversely affected by actions of the U.S. Government to
tighten the availability of its credit.

Stripped Securities are the separate income or principal components of a debt
instrument.  These involve risks that are similar to those of other debt
securities, although they may be more volatile.  The prices of stripped
mortgage-backed securities may be particularly affected by changes in interest
rates.

Risks of Derivative Instruments.  The use of options, futures contracts, options
on futures contracts, and forward contracts, and the investment in indexed
securities, stripped securities and mortgage-backed securities involve special
risks, including (i) possible imperfect or no correlation between price
movements of the portfolio investments (held or intended to be purchased)
involved in the transaction and price movements of the instruments involved in
the transaction, (ii) possible lack of a liquid secondary market for any
particular instrument at a particular time, (iii) the need for additional
portfolio management skills and techniques, (iv) losses due to unanticipated
market price movements, (v) the fact that, while such strategies can reduce the
risk of loss, they can also reduce the opportunity for gain, or even result in
losses, by offsetting favorable price movements in investments involved in the
transaction, (vi) incorrect forecasts by WRIMCO concerning interest or currency
exchange rates or direction of price fluctuations of the investment involved in
the transaction, which may result in the strategy being ineffective, (vii) loss
of premiums paid by the Fund on options it purchases, and (viii) the possible
inability of the Fund to purchase or sell a portfolio security at a time when it
would otherwise be favorable for it to do so, or the possible need for the Fund
to sell a portfolio security at a disadvantageous time, due to the need for the
Fund to maintain "cover" or to segregate securities in connection with such
transactions and the possible inability of the Fund to close out or liquidate
its position.

For a hedging strategy to be completely effective, the price change of the
hedging instrument must equal the price change of the investment being hedged.
The risk of imperfect correlation of these price changes increases as the
composition of the Fund's portfolio diverges from instruments underlying a
hedging instrument.  Such equal price changes are not always possible because
the investment underlying the hedging instruments may not be the same investment
that is being hedged.  WRIMCO will attempt to create a closely correlated hedge
but hedging activity may not be completely successful in eliminating market
value fluctuation.

WRIMCO may use derivative instruments, including securities with embedded
derivatives, for hedging purposes to adjust the risk characteristics of the
Fund's portfolio of investments and may use some of these instruments to adjust
the return characteristics of the Fund's portfolio of investments.  An embedded
derivative is a derivative that is part of another financial instrument.
Embedded derivatives typically, but not always, are debt securities whose return
of principal or interest, in part, is determined by reference to something that
is not intrinsic to the security itself.  The use of derivative techniques for
speculative purposes can increase investment risk.  If WRIMCO judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Fund's investments, these techniques could result in a loss, regardless of
whether the intent was to reduce risk or increase return.  These techniques may
increase the volatility of the Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed.  In addition, these techniques
could result in a loss if the counterparty to the transaction does not perform
as promised or if there is not a liquid secondary market to close out a position
that the Fund has entered into.

The ordinary spreads between prices in the cash and futures markets, due to the
differences in the natures of those markets, are subject to distortion.  Due to
the possibility of distortion, a correct forecast of general interest rate,
foreign currency exchange rate or stock market trends by WRIMCO may still not
result in a successful transaction.  WRIMCO may be incorrect in its expectations
as to the extent of various interest or foreign currency exchange rate movements
or stock market movements or the time span within which the movements take
place.

Options and futures transactions may increase portfolio turnover rates, which
results in correspondingly greater commission expenses and transaction costs and
may result in certain tax consequences.

New financial products and risk management techniques continue to be developed.
The Fund may use these instruments and techniques to the extent consistent with
its goal, investment policies and regulatory requirements applicable to
investment companies.

When-Issued and Delayed-Delivery Transactions are trading practices in which
payment and delivery for the securities take place at a future date.  The market
value of a security could change during this period, which could affect the
Fund's yield.

When purchasing securities on a delayed-delivery basis, the Fund assumes the
rights and risks of ownership, including the risk of price and yield
fluctuations.  When the Fund has sold a security on a delayed-delivery basis,
the Fund does not participate in further gains or losses with respect to the
security.  If the other party to a delayed-delivery transaction fails to deliver
or pay for the securities, the Fund could miss a favorable price or yield
opportunity, or could suffer a loss.

Policies and Restrictions:  The Fund may only purchase U.S. Government
Securities on a when-issued or delayed-delivery basis, or sell them on a
delayed-delivery basis.

Repurchase Agreements.  In a repurchase agreement, the Fund buys a security at
one price and simultaneously agrees to sell it back at a higher price.  Delays
or losses could result if the other party to the agreement defaults or becomes
insolvent.

Restricted and Illiquid Securities.  Restricted securities are securities that
are subject to legal or contractual restrictions on resale.  Restricted
securities may be illiquid due to restrictions on their resale.  Certain
restricted securities may be determined to be liquid in accordance with
guidelines adopted by the Fund's Board of Directors.

Illiquid investments may be difficult to sell promptly at an acceptable price.
Difficulty in selling securities may result in a loss or may be costly to the
Fund.

Policies and Restrictions:  As a fundamental policy, the Fund may not purchase
restricted securities, except that the Fund may invest not more than 5% of its
total assets in restricted foreign securities.

The Fund may not purchase a security if, as a result, more than 10% of its net
assets would consist of illiquid investments.

Diversification.  Diversifying the Fund's investment portfolio can reduce the
risks of investing.  This may include limiting the amount of money invested in
any one issuer or, on a broader scale, in any one industry.  As described above,
however, the Fund intends to concentrate in gold and other minerals-related
securities.

Policies and Restrictions:  As a fundamental policy, the Fund may not buy a
security if, as a result, it would own more than 10% of the voting securities or
any class of securities of an issuer, or if more than 5% of the Fund's total
assets would be invested in securities of that issuer.

As a fundamental policy, the Fund may not buy a security if, as a result, more
than 25% of the Fund's total assets would then be invested in securities of
companies in any one industry; however, the Fund intends to concentrate in gold
and other minerals-related securities.

Borrowing.  If the Fund borrows money, its share price may be subject to greater
fluctuation until the borrowing is paid off.

If the Fund makes additional investments while borrowings are outstanding, this
may be considered a form of leverage.

Policies and Restrictions:  As a fundamental policy, the Fund may not borrow for
investment purposes.  As a fundamental policy, the Fund may borrow money only
from banks, as a temporary measure or for extraordinary or emergency purposes
but only up to 5% of its total assets.  The Fund does not intend to borrow for
temporary measures; however, it may borrow to cover redemptions or settlements
of securities transactions.

Lending.  Securities loans may be made on a short-term or long-term basis for
the purpose of increasing the Fund's income.  This practice could result in a
loss or a delay in recovering the Fund's securities.  Loans will be made only to
parties deemed by WRIMCO to be creditworthy.

Policies and Restrictions:  As a fundamental policy, the Fund may not lend more
than 30% of its assets at any one time, and such loans must be on a
collateralized basis in accordance with applicable regulatory requirements.

Other Instruments may include warrants and securities of closed-end investment
companies.  As a shareholder in an investment company, the Fund 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.

Policies and Restrictions:  The Fund may invest up to 2% of its assets in
warrants.  Warrants acquired in units or attached to other securities are not
considered for purposes of computing this limitation.

As a fundamental policy, the Fund may buy shares of other investment companies
that do not redeem their shares only if it does so in a regular transaction in
the open market and only if not more than 10% of the Fund's total assets would
be invested in these shares, or as part of a merger or consolidation.  The Fund
does not intend to invest more than 5% of its assets in such securities.

The Fund will not purchase securities of unseasoned issuers, including
predecessor companies, which have been in operation for less than three years,
if the value of its investment in such securities would exceed 5% of its total
assets.

<PAGE>
About Your Account

Class Y shares are designed for institutional investors.  Class Y shares are
available for purchase by:

  participants of employee benefit plans established under section 403(b) or
  section 457, or qualified under section 401, including 401(k) plans, of the
  Internal Revenue Code of 1986, as amended (the "Code"), when the plan has 100
  or more eligible employees and holds the shares in an omnibus account on the
  Fund's records;

  banks, trust institutions, investment fund administrators and other third
  parties investing for their own accounts or for the accounts of their
  customers where such investments for customer accounts are held in an omnibus
  account on the Fund's records;

  government entities or authorities and corporations whose investment within
  the first twelve months after initial investment is $10 million or more; and

  certain retirement plans and trusts for employees and account representatives
  of Waddell & Reed, Inc. and its affiliates.

Buying Shares

You may buy shares of the Fund through Waddell & Reed, Inc. and its account
representatives.  To open your account you must complete and sign an
application.  Your Waddell & Reed account representative can help you with any
questions you might have.

The price to buy a share of the Fund, called the offering price, is calculated
every business day.

The offering price of a Class Y share (price to buy one Class Y share) is the
Fund's Class Y net asset value ("NAV").  The Fund's Class Y shares are sold
without a sales charge.

To purchase by wire, you must first obtain an account number by calling 1-800-
366-2520, then mail a completed application to Waddell & Reed, Inc., P. O. Box
29217, Shawnee Mission, Kansas  66201-9217, or fax it to 913-236-5044.  Instruct
your bank to wire the amount you wish to invest to UMB Bank, n.a., ABA Number
101000695, W&R Underwriter Account Number 0007978, FBO Customer Name and Account
Number.

To purchase by check, make your check payable to Waddell & Reed, Inc.  Mail the
check, along with your completed application, to Waddell & Reed, Inc., P.O. Box
29217, Shawnee Mission, Kansas  66201-9217.

The Fund's Class Y NAV is the value of a single share.  The Class Y NAV is
computed by adding, with respect to that class, the value of the Fund's
investments, cash and other assets, subtracting its liabilities, and then
dividing the result by the number of Class Y shares outstanding.

The securities in the Fund's portfolio that are listed or traded on an exchange
are valued primarily using market quotations or, if market quotations are not
available, at their fair value in a manner determined in good faith by or at the
direction of the Board of Directors.  Bonds are generally valued according to
prices quoted by a dealer in bonds that offers a pricing service.  Short-term
debt securities are valued at amortized cost, which approximates market value.
Other assets are valued at their fair value by or at the direction of the Board
of Directors.

The Fund is open for business each day the New York Stock Exchange (the "NYSE")
is open.  The Fund normally calculates the net asset values of its shares as of
the later of the close of business of the NYSE, normally 4 p.m. Eastern time, or
the close of the regular session of any other securities or commodities exchange
on which an option held by the Fund is traded.

The Fund may invest in securities listed on foreign exchanges which may trade on
Saturdays or on customary U.S. national business holidays when the NYSE is
closed.  Consequently, the NAV of Fund shares may be significantly affected on
days when the Fund does not price its shares and when you have no access to the
Fund.

When you place an order to buy shares, your order will be processed at the next
offering price calculated after your order is received and accepted.  Note the
following:

  Orders are accepted only at the home office of Waddell & Reed, Inc.
  All of your purchases must be made in U.S. dollars.
  If you buy shares by check, and then sell those shares by any method other
  than by exchange to another fund in the United Group, the payment may be
  delayed for up to ten days to ensure that your previous investment has
  cleared.
  The Fund does not issue certificates representing Class Y shares of the Fund.

When you sign your account application, you will be asked to certify that your
Social Security or taxpayer identification number is correct and whether you are
subject to backup withholding for failing to report income to the IRS.

Waddell & Reed, Inc. reserves the right to reject any purchase orders, including
purchases by exchange, and it and the Fund reserve the right to discontinue
offering Fund shares for purchase.

Minimum Investments

To Open an Account

For a government entity or authority or for a corporation:  $10 million
              (within
              first
              twelve
              months)

For other
investors:    Any amount

Adding to Your Account

You can make additional investments of any amount at any time.

To add to your account by wire:  Instruct your bank to wire the amount you wish
to invest, along with the account number and registration, to UMB Bank, n.a.,
ABA Number 101000695, W&R Underwriter Account Number 0007978, FBO Customer Name
and Account Number.

To add to your account by mail:  Make your check payable to Waddell & Reed, Inc.
Mail the check along with a letter showing your account number, the account
registration and stating the fund whose shares you wish to purchase to:

Waddell & Reed, Inc.
P.O. Box 29217
Shawnee Mission, Kansas 66201-9217

Selling Shares

You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares.

The redemption price (price to sell one Class Y share) is the Fund's Class Y
NAV.

To sell shares by telephone or fax:  If you have elected this method in your
application or by subsequent authorization, call 1-800-366-5465 or fax your
request to 913-236-5044 and give your instructions to redeem shares and make
payment by wire to your pre-designated bank account or by check to you at the
address on the account.

To sell shares by written request:  Complete an Account Service Request form,
available from your Waddell & Reed account representative, or write a letter of
instruction with:

  the name on the account registration;
  the Fund's name;
  the Fund account number;
  the dollar amount or number of shares to be redeemed; and
  any other applicable requirements listed in the table below.

Deliver the form or your letter to your Waddell & Reed account representative,
or mail it to:

Waddell & Reed, Inc.
P. O. Box 29217
Shawnee Mission, Kansas
66201-9217

Unless otherwise instructed, Waddell & Reed will send a check to the address on
the account.

                    Special Requirements for Selling Shares

Account Type     Special Requirements
Retirement       The written instructions must
Account          be signed by a properly
                 authorized person.
Trust            The trustee must sign the
                 written instructions
                 indicating capacity as
                 trustee.  If the trustee's
                 name is not in the account
                 registration, provide a
                 currently certified copy of
                 the trust document.
Business or      At least one person authorized
Organization     by corporate resolution to act
                 on the account must sign the
                 written instructions.

When you place an order to sell shares, your shares will be sold at the next NAV
calculated after receipt of a written request in good order by Waddell & Reed,
Inc. at its home office.  Note the following:

  If more than one person owns the shares, each owner must sign the written
  request.
  If you recently purchased the shares by check, the Fund may delay payment of
  redemption proceeds.  You may arrange for the bank upon which the purchase
  check was drawn to provide to the Fund telephone or written assurance,
  satisfactory to the Fund, that the check has cleared and been honored.  If no
  such assurance is given, payment of the redemption proceeds on these shares
  will be delayed until the earlier of 10 days or the date the Fund is able to
  verify that your purchase check has cleared and been honored.
  Redemptions may be suspended or payment dates postponed on days when the NYSE
  is closed (other than weekends or holidays), when trading on the NYSE is
  restricted, or as permitted by the Securities and Exchange Commission.
  Payment is normally made in cash, although under extraordinary conditions
  redemptions may be made in portfolio securities.

The Fund reserves the right to require a signature guarantee on certain
redemption requests.  This requirement is designed to protect you and Waddell &
Reed from fraud.  The Fund may require a signature guarantee in certain
situations such as:

  the request for redemption is made by a corporation, partnership or
  fiduciary;
  the request for redemption is made by someone other than the owner of record;
  or
  the check is being made payable to someone other than the owner of record.

The Fund will accept a signature guarantee from a national bank, a federally
chartered savings and loan or a member firm of a national stock exchange or
other eligible guarantor in accordance with procedures of the Fund's transfer
agent.  A notary public cannot provide a signature guarantee.

The Fund reserves the right to redeem at NAV all shares of the Fund owned or
held by you having an aggregate NAV of less than $500.  The Fund will give you
notice of its intention to redeem your shares and a 60-day opportunity to
purchase a sufficient number of additional shares to bring the aggregate NAV of
your shares to $500.

Telephone Transactions

The Fund and its agents will not be liable for following instructions
communicated by telephone that they reasonably believe to be genuine.  The Fund
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine.  If the Fund fails to do so, the Fund may be liable for
losses due to unauthorized or fraudulent instructions.  Current procedures
relating to instructions communicated by telephone include tape recording
instructions, requiring personal identification and providing written
confirmations of transactions effected pursuant to such instructions.

Shareholder Services

Waddell & Reed provides a variety of services to help you manage your account.

Personal Service

Your local Waddell & Reed account representative is available to provide
personal service.  Additionally, the Waddell & Reed Customer Services staff is
available to respond promptly to your inquiries and requests.

Reports

Statements and reports sent to you include the following:

  confirmation statements (after every purchase, exchange, transfer or
  redemption)
  year-to-date statements (quarterly)
  annual and semiannual reports (every six months)

To reduce expenses, only one copy of most annual and semiannual reports will be
mailed to your household, even if you have more than one account with the Fund.
Call 913-236-2000 if you need copies of annual or semiannual reports or
historical account information.

Exchanges

You may sell your Class Y shares and buy Class Y shares of other funds in the
United Group.  You may exchange only into funds that are legally registered for
sale in your state of residence.  Note that exchanges out of the Fund may have
tax consequences for you.  Before exchanging into a fund, read its prospectus.

The Fund reserves the right to terminate or modify these exchange privileges at
any time, upon notice in certain instances.

Dividends, Distributions and Taxes

Distributions

The Fund distributes substantially all of its net investment income and net
capital gains to shareholders each year.  Ordinarily, dividends are distributed
from the Fund's net investment income, which includes accrued interest, earned
discount, dividends and other income earned on portfolio assets less expenses,
quarterly in March, June, September and December.

Net capital gains (and any net realized gains from foreign currency
transactions) ordinarily are distributed in December.  The Fund may make
additional distributions if necessary to avoid Federal income or excise taxes on
undistributed income and capital gains.

Distribution Options.  When you open an account, specify on your application how
you want to receive your distributions.  The Fund offers three options:

1.  Share Payment Option.  Your dividend and capital gains distributions will be
automatically paid in additional Class Y shares of the Fund.  If you do not
indicate a choice on your application, you will be assigned this option.

2.  Income-Earned Option.  Your capital gains distributions will be
automatically paid in Class Y shares, but you will be sent a check for each
dividend distribution.

3.  Cash Option.  You will be sent a check for your dividend and capital gains
distributions.

For retirement accounts, all distributions are automatically paid in Class Y
shares.

Taxes

The Fund has qualified and intends to continue to qualify for treatment as a
regulated investment company under the Code so that it will be relieved of
Federal income tax on that part of its investment company taxable income
(consisting generally of net investment income, net short-term capital gain and
net gains from certain foreign currency transactions) and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) that are
distributed to its shareholders.

There are certain requirements that the Fund must follow in order to avoid
Federal taxation.  In its effort to adhere to these requirements, the Fund may
have to limit its investment activity in some types of instruments.

As with any investment, you should consider how your investment in the Fund will
be taxed.  If your account is not a tax-deferred retirement account, you should
be aware of the following tax implications:

Taxes on distributions.  Dividends from the Fund's investment company taxable
income are taxable to you as ordinary income, whether received in cash or paid
in additional Fund shares.  Distributions of the Fund's net capital gains, when
designated as such, are taxable to you as long-term capital gains, whether
received in cash or paid in additional Fund shares and regardless of the length
of time you have owned your shares.  The Fund notifies you after each calendar
year-end as to the amounts of dividends and other distributions paid (or deemed
paid) to you for that year.  Under certain circumstances, the Fund may elect to
permit shareholders to take a credit or deduction for foreign income taxes paid
by the Fund.  The Fund will notify you of any such election.

A portion of the dividends paid by the Fund, whether received in cash or paid in
additional Fund shares, may be eligible for the dividends-received deduction
allowed to corporations.  The eligible portion may not exceed the aggregate
dividends received by the Fund from U.S. corporations.  However, dividends
received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction are subject indirectly to the alternative minimum
tax.

Withholding.  The Fund is required to withhold 31% of all dividends, capital
gains distributions and redemption proceeds payable to individuals and certain
other noncorporate shareholders who do not furnish the Fund with a correct
taxpayer identification number.  Withholding at that rate from dividends and
capital gains distributions also is required for such shareholders who otherwise
are subject to backup withholding.

Taxes on transactions.  Your redemption of Fund shares will result in taxable
gain or loss to you, depending on whether the redemption proceeds are more or
less than your adjusted basis for the redeemed shares (which normally includes
any sales charge paid).  An exchange of Fund shares for shares of any other fund
in the United Group generally will have similar tax consequences.  However,
special rules apply when you dispose of Fund shares through a redemption or
exchange within ninety days after your purchase thereof and subsequently
reacquire Fund shares or acquire shares of another fund in the United Group
without paying a sales charge due to the thirty-day reinvestment privilege or
exchange privilege.  See "About Your Account."  In these cases, any gain on the
disposition of the Fund shares would be increased, or loss decreased, by the
amount of the sales charge you paid when those shares were acquired, and that
amount will increase the adjusted basis of the shares subsequently acquired.  In
addition, if you purchase Fund shares within thirty days before or after
redeeming other Fund shares (regardless of class) at a loss, part or all of that
loss will not be deductible and will increase the basis of the newly purchased
shares.

The foregoing is only a summary of some of the important Federal tax
considerations generally affecting the Fund and its shareholders.  There may be
other Federal, state or local tax considerations applicable to a particular
investor.  You are urged to consult your own tax adviser.

<PAGE>
About the Management and Expenses of the Fund

United Gold & Government Fund, Inc. is a mutual fund:  an investment that pools
shareholders' money and invests it toward a specified goal.  In technical terms,
the Fund is an open-end diversified management investment company organized as a
corporation under Maryland law on February 28, 1985.

The Fund is governed by a Board of Directors, which has overall responsibility
for the management of its affairs.  The majority of directors are not affiliated
with Waddell & Reed, Inc.

The Fund has two classes of shares.  In addition to the Class Y shares offered
by this Prospectus, the Fund has issued and outstanding Class A shares, which
are offered by Waddell & Reed, Inc. through a separate prospectus.  Prior to
February 19, 1996, the Fund offered only one class of shares to the public.
Shares outstanding on that date were designated as Class A shares.  Class A
shares are subject to a sales charge on purchases but are not subject to
redemption fees.  Class A shares are subject to a Rule 12b-1 fee at an annual
rate of up to 0.25% of the Fund's average net assets attributable to Class A
shares.  Additional information about Class A shares may be obtained by calling
913-236-2000 or by writing to Waddell & Reed, Inc. at the address on the inside
back cover of this Prospectus.

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 of Directors 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 of the Fund 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 Investment
Company Act of 1940, as amended (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.

Each share (regardless of class) has one vote.  All shares of the Fund vote
together as a single class, except as to any matter for which a separate vote of
any class is required by the 1940 Act, and except as to any matter which affects
the interests of one or more particular classes, in which case only the
shareholders of the affected classes are entitled to vote, each as a separate
class.  Shares are fully paid and nonassessable when purchased.

WRIMCO and Its Affiliates

The Fund is managed by WRIMCO, subject to the authority of the Fund's Board of
Directors.  WRIMCO provides investment advice to the Fund and supervises the
Fund's investments.  Waddell & Reed, Inc. and its predecessors served as
investment manager to each of the registered investment companies in the United
Group of Mutual Funds, except United Asset Strategy Fund, Inc., since 1940 or
the inception of the company, whichever was later, and to TMK/United Funds, Inc.
since that fund's inception, until January 8, 1992, when it assigned its duties
as investment manager and assigned its professional staff for investment
management services to WRIMCO.  WRIMCO has also served as investment manager for
Waddell & Reed Funds, Inc. since its inception in September 1992, and United
Asset Strategy Fund, Inc. since it commenced operations in March 1995.

Michael D. Avery is primarily responsible for the day-to-day management of the
Fund.  Mr. Avery has held his Fund responsibilities since February 1, 1994.  He
is Vice President of WRIMCO, Vice President of Waddell & Reed Asset Management
Company, an affiliate of WRIMCO, and Vice President of the Fund.  Mr. Avery has
served as the portfolio manager for investment companies managed by Waddell &
Reed, Inc. and its successor, WRIMCO, since February 1, 1994, has served as the
director of research of Waddell & Reed, Inc. and its successor, WRIMCO, since
August 1987, and has been an employee of Waddell & Reed, Inc. and its successor,
WRIMCO, since June 1981.  Other members of WRIMCO's investment management
department provide input on market outlook, economic conditions, investment
research and other considerations relating to the Fund's investments.

Waddell & Reed, Inc. serves as the Fund's underwriter and as underwriter for
each of the other funds in the United Group of Mutual Funds and Waddell & Reed
Funds, Inc., and serves as the distributor for TMK/United Funds, Inc.

Waddell & Reed Services Company acts as transfer agent ("Shareholder Servicing
Agent") for the Fund and processes the payments of dividends.  Waddell & Reed
Services Company also acts as agent ("Accounting Services Agent") in providing
bookkeeping and accounting services and assistance to the Fund and pricing daily
the value of its shares.

WRIMCO and Waddell & Reed Services Company are subsidiaries of Waddell & Reed,
Inc.  Waddell & Reed, Inc. is a direct subsidiary of Waddell & Reed Financial
Services, Inc., a holding company, and an indirect subsidiary of United
Investors Management Company, a holding company, and Torchmark Corporation, a
holding company.

WRIMCO places transactions for the portfolio of the Fund and in doing so may
consider sales of shares of the Fund and other funds it manages as a factor in
the selection of brokers to execute portfolio transactions.

Breakdown of Expenses

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

The Fund pays a management fee to WRIMCO for providing investment advice and
supervising its investments.  The Fund also pays other expenses, which are
explained below.

Management Fee

The management fee of the Fund is calculated by adding a group fee to a specific
fee.  It is accrued and paid to WRIMCO daily.

The specific fee is computed on the Fund's net asset value as of the close of
business each day at the annual rate of .30 of 1% of its net assets.  The group
fee is a pro rata participation based on the relative net asset size of the Fund
in the group fee computed each day on the combined net asset values of all the
funds in the United Group at the annual rates shown in the following table:

Group Fee Rate

               Annual
Group Net      Group
Asset Level    Fee Rate
(all dollars   For Each
in millions)   Level
------------   --------

From $0
to $750       .51 of 1%

From $750
to $1,500     .49 of 1%

From $1,500
to $2,250     .47 of 1%

From $2,250
to $3,000     .45 of 1%

From $3,000
to $3,750     .43 of 1%

From $3,750
to $7,500     .40 of 1%

From $7,500
to $12,000    .38 of 1%

Over $12,000  .36 of 1%

Growth in assets of the United Group assures a lower group fee rate.

The combined net asset values of all of the funds in the United Group were
approximately $13.6 billion as of December 31, 1995.  Management fees for the
fiscal year ended December 31, 1995 were 0.71% of the Fund's average net assets,
which during that period consisted only of the Fund's Class A shares.

Other Expenses

While the management fee is a significant component of the Fund's annual
operating costs, the Fund has other expenses as well.

The Fund pays the Accounting Services Agent a monthly fee based on the average
net assets of the Fund for accounting services.  With respect to its Class Y
shares, the Fund pays the Shareholder Servicing Agent a monthly fee based on the
average daily net assets of the class for the preceding month.

The Fund also pays other expenses, such as fees and expenses of certain
directors, audit and outside legal fees, costs of materials sent to
shareholders, taxes, brokerage commissions, interest, insurance premiums,
custodian fees, fees payable by the Fund under Federal or other securities laws
and to the Investment Company Institute, and extraordinary expenses including
litigation and indemnification relative to litigation.

A portfolio 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 such securities during the year, excluding certain
short-term securities and bullion.  Since the turnover rate of the Fund will be
affected by a number of factors, the Fund is unable to predict what rate the
Fund will have in any particular period or periods, although such rate is not
expected to exceed 100%.  However, the rate could be substantially higher or
lower in any particular period.  The factors that may affect the rate include
moving from a position emphasizing gold and other minerals-related securities to
a position emphasizing U.S. Government Securities or vice versa and the possible
necessary sales of securities to meet redemptions.  The Fund may engage in
short-term trading and have a high portfolio turnover.

<PAGE>
United Gold & Government Fund, Inc.

Custodian                     Underwriter
  UMB Bank, n.a.                Waddell & Reed, Inc.
  Kansas City, Missouri         6300 Lamar Avenue
                                P. O. Box 29217
Legal Counsel                   Shawnee Mission, Kansas
  Kirkpatrick & Lockhart LLP       66201-9217
  1800 Massachusetts Avenue, N. W. (913) 236-2000
  Washington, D. C.  20036
                              Shareholder Servicing Agent
Independent Accountants         Waddell & Reed
  Price Waterhouse LLP             Services Company
  Kansas City, Missouri         6300 Lamar Avenue
                                P. O. Box 29217
Investment Manager              Shawnee Mission, Kansas
  Waddell & Reed Investment        66201-9217
     Management Company         (913) 236-1579
  6300 Lamar Avenue
  P. O. Box 29217             Accounting Services Agent
  Shawnee Mission, Kansas       Waddell & Reed
     66201-9217                    Services Company
  (913) 236-2000                6300 Lamar Avenue
                                P. O. Box 29217
                                Shawnee Mission, Kansas
                                    66201-9217
                                (913) 236-2000

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

<PAGE>
United Gold & Government Fund, Inc.
Class Y Shares
PROSPECTUS
February 19, 1996

The United Group of Mutual Funds
United Asset Strategy Fund, Inc.
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Funds, Inc.
     United Bond Fund
     United Income Fund
     United Accumulative Fund
     United Science and Technology Fund
United Gold & Government Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Vanguard Fund, Inc.

NUP2013-Y(2-96)

printed on recycled paper

<PAGE>
                      UNITED GOLD & GOVERNMENT FUND, INC.

                               6300 Lamar Avenue

                                P. O. Box 29217

                      Shawnee Mission, Kansas  66201-9217

                                 (913) 236-2000

                               February 19, 1996



                      STATEMENT OF ADDITIONAL INFORMATION


     This Statement of Additional Information (the "SAI") is not a prospectus.
Investors should read this SAI in conjunction with a prospectus ("Prospectus")
for the Class A shares or the Class Y shares, as applicable, of United Gold &
Government Fund, Inc. (the "Fund") dated February 19, 1996, which may be
obtained from the Fund or its underwriter, Waddell & Reed, Inc., at the address
or telephone number shown above.


                               TABLE OF CONTENTS

     Performance Information ..........................    2

     Goals and Investment Policies ....................    3

     Investment Management and Other Services .........   28

     Purchase, Redemption and Pricing of Shares .......   33

     Directors and Officers ...........................   49

     Payments to Shareholders .........................   55

     Taxes ............................................   56

     Portfolio Transactions and Brokerage .............   60

     Other Information ................................   63

<PAGE>
                            PERFORMANCE INFORMATION

     Waddell & Reed, Inc., the Fund's underwriter, or the Fund may, from time to
time, publish the Fund's total return information and/or performance rankings in
advertisements and sales materials.

Total Return

     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.
Standardized total return information is calculated by assuming an initial
$1,000 investment and, for Class A shares, from which the maximum sales load of
5.75% is deducted.  All dividends and distributions are assumed to be reinvested
in shares of the applicable class at net asset value for the class as of the day
the dividend or distribution is paid.  No sales load is charged on reinvested
dividends or distributions on Class A shares.  The formula used to calculate the
total return for a particular class of the Fund is

              n
      P(1 + T)  =   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.

     Non-standardized performance information may also be presented.  For
example, the Fund may also compute total return for its Class A shares without
deduction of the sales load in which case the same formula noted above will be
used but the entire amount of the $1,000 initial payment will be assumed to have
been invested.  If the sales charge applicable to Class A shares were reflected,
it would reduce the performance quoted for that class.

     The average annual total return quotations for Class A shares as of
December 31, 1995, which is the most recent balance sheet included in this SAI,
for the periods shown were as follows:

                                                With    Without
                                             Sales LoadSales Load
                                              Deducted  Deducted

One-year period from January 1, 1995 to
  December 31, 1995:                             3.49%     9.80%

Five-year period from January 1, 1990 to
  December 31, 1995:                             5.79      7.05

Period from January 1, 1986 to
  December 31, 1995:                             8.10      8.75

     Prior to February 19, 1996, the Fund offered only one class of shares to
the public.  Shares outstanding on that date were designated as Class A shares.
Since that date, Class Y shares of the Fund have been available to certain
institutional investors.

     The Fund may also quote unaveraged or cumulative total return for a class
which reflects the change in value of an investment in that class 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.

Performance Rankings

     Waddell & Reed, Inc. or the Fund also may from time to time publish in
advertisements or sales material 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 Forbes, Money, The Wall
Street Journal, Business Week, Barron's, Fortune, or Morningstar Mutual Fund
Values.  Each class of the Fund may also compare its performance to that of
other selected mutual funds or selected recognized market indicators such as the
Standard & Poor's 500 Stock Index and the Dow Jones Industrial Average.
Performance information may be quoted numerically or presented in a table, graph
or other illustration.

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

                          GOAL AND INVESTMENT POLICIES

     The goal and investment policies of the Fund are described in the
Prospectus, which refers to the following investment methods and practices.

Securities - General

     The Fund may invest in securities including common stock, preferred stock,
debt securities and convertible securities, as described in the Prospectus.
These securities may include the following described securities from time to
time.

     The Fund 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 Fund 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.

Risk Factors of High-Yield Investing

     As an operating (i.e., nonfundamental) policy, the Fund does not intend to
invest more than 5% of its assets in non-investment grade debt securities.
Lower-quality debt securities (commonly called "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.  While the market for high-yield, high-
risk corporate debt securities has been in existence for many years and has
weathered previous economic downturns, the 1980s brought a dramatic increase in
the use of such securities to fund highly leveraged corporate acquisitions and
restructurings.  Past experience may not provide an accurate indication of the
future performance of the high-yield, high-risk bond market, especially during
periods of economic recession.  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
research and credit analysis of Waddell & Reed Investment Management Company
("WRIMCO"), the Fund's investment manager, are an especially important part of
managing securities of this type held by the Fund.  WRIMCO continuously monitors
the issuers of lower-rated debt securities in the Fund's 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 to 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 Fund's shareholders.

     While credit ratings are only one factor WRIMCO 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.

Specific Securities and Investment Practices

U.S. Government Securities

     Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities ("U.S. Government 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 10 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,
Federal National Mortgage Association, Farmers Home Administration, Export-
Import Bank of the United States, Small Business Administration, Government
National Mortgage Association, General Services Administration, Central Bank for
Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
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.  Others, such as securities issued by the Federal National Mortgage
Association, are supported only by the credit of the instrumentality and not by
the Treasury.  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.

     U.S. Government Securities may include mortgage-backed securities of the
Government National Mortgage Association ("Ginnie Mae"), the Federal Home Loan
Mortgage Corporation ("Freddie Mac") and the Federal National Mortgage
Association ("Fannie Mae").  These mortgage-backed securities include "pass-
through" securities and "participation certificates."  Another type of mortgage-
backed security is a collateralized mortgage obligation ("CMO").  See "Mortgage-
Backed Securities."  Timely payment of principal and interest on Ginnie Mae
pass-throughs is guaranteed by the full faith and credit of the United States.
Freddie Mac and Fannie Mae are both instrumentalities of the U.S. Government,
but their obligations are not backed by the full faith and credit of the United
States.  It is possible that the availability and the marketability (i.e.,
liquidity) of the securities discussed in this section could be adversely
affected by actions of the U.S. Government to tighten the availability of its
credit.

Zero Coupon Bonds

     A broker-dealer creates a derivative zero by separating the interest and
principal components of a U.S. Treasury security and selling them as two
individual securities.  CATS (Certificates of Accrual on Treasury Securities),
TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury Receipts) are
examples of derivative zeros.

     The Federal Reserve Bank creates STRIPS (Separate Trading of Registered
Interest and Principal of Securities) by separating the interest and principal
components of an outstanding U.S. Treasury security and selling them as
individual securities.  Bonds issued by the Resolution Funding Corporation
(REFCORP) and the Financing Corporation (FICO) can also be separated in this
fashion.  Original issue zeros are zero coupon securities originally issued by
the U.S. Government, a government agency or a corporation in zero coupon form.

Mortgage-Backed Securities

     A mortgage-backed security may be an obligation of the issuer backed by a
mortgage or pool of mortgages or a direct interest in an underlying pool of
mortgages.  Mortgage-backed securities are based on different types of mortgages
including those on commercial real estate or residential properties.  Some
mortgage-backed securities, such as CMOs, make payments of both principal and
interest at a variety of intervals; others make semiannual interest payments at
a predetermined rate and repay principal at maturity (like a typical bond).
Pass-through securities and participation certificates represent pools of
mortgages that are assembled, with interests sold in the pool; the assembly is
made by an "issuer," such as a mortgage banker, commercial bank or savings and
loan association, which assembles the mortgages in the pool and passes through
payments of principal and interest for a fee payable to it.  Payments of
principal and interest by individual mortgagors are passed through to the
holders of the interest in the pool.  Monthly or other regular payments on pass-
through securities and participation certificates include payments of principal
(including prepayments on mortgages in the pool) rather than only interest
payments.

     The Fund may purchase mortgage-backed securities issued by both government
and non-government entities such as banks, mortgage lenders, or other financial
institutions.  The Fund may not invest more than 25% of its total assets in
mortgage-backed securities.  Other types of mortgage-backed securities will
likely be developed in the future, and the Fund may invest in them if WRIMCO
determines they are consistent with the Fund's goal and investment policies.

     The value of mortgage-backed securities may change due to shifts in the
market's perception of issuers.  In addition, regulatory or tax changes may
adversely affect the mortgage securities market as a whole.  Non-government
mortgage-backed securities may offer higher yields than those issued by
government entities, but also may be subject to greater price changes than
government issues.  Mortgage-backed securities are subject to prepayment risk.
Prepayment, which occurs when unscheduled or early payments are made on the
underlying mortgages, may shorten the effective maturities of these securities
and may lower their total returns.

Stripped Mortgage-Backed Securities

     Stripped mortgage-backed securities are created when a U.S. Government
agency or a financial institution separates the interest and principal
components of a mortgage-backed security and sells them as individual
securities.  The holder of the "principal-only" security ("PO") receives the
principal payments made by the underlying mortgage-backed security, while the
holder of the "interest-only" security ("IO") receives interest payments from
the same underlying security.

     The prices of stripped mortgage-backed securities may be particularly
affected by changes in interest rates.  As interest rates fall, prepayment rates
tend to increase, which tends to reduce prices of IOs and increase prices of
POs.  Rising interest rates can have the opposite effect.  The Fund intends to
invest less than 5% of its total assets in stripped securities.

Variable or Floating Rate Instruments

     Variable or floating rate instruments (including notes purchased directly
from issuers) bear variable or floating interest rates and carry rights that
permit holders to demand payment of the unpaid principal balance plus accrued
interest from the issuers or certain financial intermediaries.  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.

Foreign Securities and Currency

     WRIMCO believes 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.  WRIMCO believes that the Fund's ability to invest its assets
abroad might enable it to take advantage of these differences and strengths
where they are favorable.

     Further, an investment in foreign securities may also be affected by
changes in exchange control regulations (i.e., currency blockage).  The Fund may
bear a transaction charge in connection with the exchange of currency.  There
may be less publicly available information about a foreign company than about a
domestic company.  Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic companies.  Most foreign stock markets have substantially
less volume than the New York Stock Exchange (the "NYSE") and securities of some
foreign companies are less liquid and more volatile than securities of
comparable domestic companies.  There is generally less government regulation of
stock exchanges, brokers and listed companies than in the United States.  In
addition, with respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in securities of
issuers located in those countries.  If it should become necessary, the Fund
would normally encounter greater difficulties in commencing a lawsuit against
the issuer of a foreign security than it would against a U.S. issuer.

     When purchasing foreign securities, the Fund will ordinarily purchase
securities that are traded in the U.S. or purchase American Depository Receipts
("ADRs") which are certificates issued by U.S. depositories representing the
right to receive securities of a foreign issuer deposited with that depository
or a correspondent bank.  However, the Fund may purchase the securities of a
foreign issuer directly in foreign markets so long as, in WRIMCO's judgment, an
established public trading market exists.  Such investments may increase the
risk with respect to the liquidity of the Fund's portfolio and the Fund's
ability to meet a large number of shareholder redemption requests should there
be economic, political or social turmoil in a country in which the Fund has a
substantial portion of its assets invested or should relations between the
United States and the foreign country deteriorate markedly.

Restricted Securities

     The Fund may purchase foreign restricted securities.  However, it will not
purchase such restricted securities if as a result of such purchase more than 5%
of its total assets would consist of restricted securities.  This is a
fundamental policy that may only be changed with shareholder approval.
Restricted securities are subject to legal or contractual restrictions on resale
because they are not registered under the Securities Act of 1933, as amended
(the "1933 Act").

     Restricted securities generally can be sold in privately negotiated
transactions, pursuant to an exemption from registration under the 1933 Act, or
in a registered public offering.  Where registration is required, the Fund 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 Fund may be permitted to sell a security under an effective registration
statement.  If, during such a period, adverse market conditions were to develop,
the Fund might obtain a less favorable price than prevailed when it decided to
seek registration of the security.

     There are risks associated with investment in restricted securities in that
there can be no assurance of a ready market for resale.  Also, the contractual
restrictions on resale might prevent the Fund 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 the Fund 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.  See "Illiquid Investments."

Lending Securities

     One of the ways in which the Fund may try to realize income is by lending
its securities.  If the Fund does this, the borrower pays the Fund an amount
equal to the dividends or interest on the securities that the Fund would have
received if it had not loaned the securities.  The Fund also receives additional
compensation.

     Any securities loans that the Fund makes must be collateralized in
accordance with applicable regulatory requirements (the "Guidelines").  This
policy can only be changed by shareholder vote.  Under the present Guidelines,
the collateral must consist of cash, U.S. Government Securities or bank letters
of credit at least equal in value to the market value of the securities loaned
on each day that the loan is outstanding.  If the market value of the loaned
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 loaned.
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 Fund 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 the Fund may accept as collateral are agreements
by banks (other than the borrowers of the Fund'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 Fund, while the letter is in effect, amounts
demanded by the Fund if the demand meets the terms of the letter.  The Fund'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 Fund's custodian bank) must be satisfactory to the Fund.
Under the Fund's current securities lending procedure, the Fund may lend
securities only to broker-dealers and financial institutions deemed creditworthy
by WRIMCO.  The Fund will make loans only under rules of the NYSE, which
presently require the borrower to return the securities to the Fund within five
business days after the Fund gives notice to do so.  If the Fund loses its
voting rights on securities loaned, 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.  The Fund may pay reasonable finder's, administrative and custodian fees in
connection with loans of securities.

     There may be risks of delay in receiving additional collateral from the
borrower if the market value of the securities loaned goes up, risks of delay in
recovering the securities loaned or even loss of rights in the collateral should
the borrower of the securities fail financially.

     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: (i) whom securities may be loaned; (ii) the investment of cash collateral;
or (iii) voting rights.

Repurchase Agreements

     The Fund will not enter into a repurchase transaction that will cause more
than 10% of its net assets to be invested in illiquid investments, which include
repurchase agreements not terminable within seven days.  See "Illiquid
Investments."  A repurchase agreement is an instrument under which the Fund
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 the repurchase agreements in which the Fund would 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
the Fund 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 Fund.  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 and loss of interest.  The return on such collateral may be more
or less than that from the repurchase agreement.  The Fund's repurchase
agreements will be structured so as to fully collateralize the loans, i.e., the
value of the underlying securities, which will be held by the Fund'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 (the "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 on the basis of
criteria established by the Board of Directors.

When-Issued and Delayed-Delivery Transactions

     The Fund may purchase U.S. Government Securities on a when-issued or
delayed-delivery basis or sell them on a delayed-delivery basis.  The U.S.
Government Securities so purchased or sold by the Fund are subject to market
fluctuation; their value may be less or more when delivered than the purchase
price paid or received.  For example, delivery to the Fund and payment by the
Fund in the case of a purchase by it, or delivery by the Fund and payment to it
in the case of a sale by the Fund, may take place a month or more after the date
of the transaction.  The purchase or sale price are fixed on the transaction
date.  The Fund will enter into when-issued or delayed-delivery transactions in
order to secure what is considered to be an advantageous price and yield at the
time of entering into the transaction.  No interest accrues to the Fund until
delivery and payment is completed.  When the Fund makes a commitment to purchase
U.S. Government 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 net asset value per share.  The U.S. Government Securities so
sold by the Fund on a delayed-delivery basis are also subject to market
fluctuation; their value when the Fund delivers them may be more than the
purchase price the Fund receives.  When the Fund makes a commitment to sell U.S.
Government Securities on a delayed-delivery basis, it will record the
transaction and thereafter value the U.S. Government Securities at the sales
price in determining the Fund's net asset value per share.

     Ordinarily the Fund purchases U.S. Government Securities on a when-issued
or delayed-delivery basis with the intention of actually taking delivery of the
securities.  However, before the U.S. Government Securities are delivered to the
Fund and before it has paid for them (the "settlement date"), the Fund could
sell the U.S. Government Securities if WRIMCO decided it was advisable to do so
for investment reasons.  The Fund will hold aside or segregate cash or other
securities, other than those purchased on a when-issued or delayed-delivery
basis, at least equal 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.

Illiquid Investments

     The Fund has an operating policy, which may be changed without shareholder
approval, which provides that the Fund may not invest more than 10% of its net
assets in illiquid investments.  Investments currently considered to be illiquid
include:  (i) repurchase agreements not terminable within seven days; (ii) fixed
time deposits (including insured deposits) subject to withdrawal penalties other
than overnight deposits (other than deposits payable at principal amount plus
accrued interest on demand or within seven days after demand that, in the
opinion of WRIMCO, have minimal credit risk); (iii) restricted securities not
determined to be liquid pursuant to guidelines established by the Fund's Board
of Directors; (iv) securities for which market quotations are not readily
available; and (v) unlisted options and their underlying collateral.

Indexed Securities

     The Fund may purchase securities whose prices are indexed to the prices of
other securities, securities indices, currencies, precious metals or other
commodities or other financial indicators.  Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic.  Gold-
indexed securities, for example, typically provide for a maturity value that
depends on the price of gold, resulting in a security whose price tends to rise
and fall together with gold prices.  Currency-indexed securities typically are
short-term to intermediate-term debt securities whose maturity values or
interest rates are determined by reference to the values of one or more
specified foreign currencies, and may offer higher yields than U.S. dollar-
denominated securities of equivalent issuers.  Currency-indexed securities may
be positively or negatively indexed; that is, their maturity value may increase
when the specified currency value increases, resulting in a security that
performs similarly to a foreign-denominated instrument, or their maturity value
may decline when foreign currencies increase, resulting in a security whose
price characteristics are similar to a put on the underlying currency.
Currency-indexed securities may also have prices that depend on the values of a
number of different foreign currencies relative to each other.

     Recent issuers of indexed securities have included banks, corporations and
certain U.S. Government agencies.  Certain indexed securities that are not
traded on an established market may be deemed illiquid.  The Fund may not invest
more than 25% of its total assets in indexed securities.

Investment in Warrants

     The Fund may not invest more than 2% of its assets valued at the lower of
cost or market in warrants.  Warrants acquired in units or attached to other
securities are not considered for purposes of computing the 2% limitation.
Warrants are options to purchase equity securities at specific prices valid for
a specific period of time.  Their prices do not necessarily move parallel to the
prices of the underlying securities.  Warrants have no voting rights, receive no
dividends and have no rights with respect to the assets of the issuer.  Warrants
are highly volatile and, therefore, more susceptible to a sharp decline in value
than the underlying security might be.  They are also generally less liquid than
an investment in the underlying shares.

Securities of Other Investment Companies

     In order to comply with regulations of the State of Ohio, for so long as
such regulations are in effect and applicable to the Fund, the Fund will not
invest in securities of other investment companies, except by purchase in the
open market where no commission or profit to a sponsor or dealer results from
the purchase other than the customary broker's commission, or except when the
purchase is part of a plan of merger, consolidation, reorganization or
acquisition.

Options, Futures and Other Strategies

     General.  As discussed in the Prospectus, WRIMCO may use certain options to
attempt to enhance income or yield or may attempt to reduce overall risk of its
investments by using certain options, futures contracts (sometimes referred to
as "futures"), and forward contracts ("forward contracts").  Options, futures,
and forward contracts are sometimes referred to collectively as "Financial
Instruments."  The Fund's ability to use a particular Financial Instrument may
be limited by its investment limitations or operating policies.  See "Investment
Restrictions."

     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 the Fund's portfolio.  Thus, in a short hedge the Fund 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 Fund intends to acquire.  Thus, in a
long hedge the Fund 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 Fund does not own
a corresponding security and, therefore, the transaction does not relate to a
security the Fund owns.  Rather, it relates to a security that the Fund intends
to acquire.  If the Fund does not complete the hedge by purchasing the security
it anticipated purchasing, the effect on the Fund's portfolio 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 the
Fund owns or intends to acquire.  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 Securities and Exchange Commission (the "SEC"), the several exchanges upon
which they are traded, the Commodity Futures Trading Commission (the "CFTC") and
various state regulatory authorities.  In addition, the Fund's ability to use
Financial Instruments will be limited by tax considerations.  See "Taxes."

     In addition to the instruments, strategies and risks described below and in
the Prospectus, WRIMCO expects to discover additional opportunities in
connection with options, futures contracts, options on futures contracts,
forward contracts and other similar or related techniques.  These new
opportunities may become available as WRIMCO develops new techniques, as
regulatory authorities broaden the range of permitted transactions and as new
options, futures contracts, options on futures contracts, forward contracts or
other techniques are developed.  WRIMCO may utilize these opportunities to the
extent that they are consistent with the Fund's goal and permitted by the Fund's
investment limitations and applicable regulatory authorities.  The Fund's
Prospectus or SAI will be supplemented to the extent that new products or
techniques involve materially different risks 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.  Risks
pertaining to particular Financial Instruments are described in the sections
that follow.

     (1)  Successful use of most Financial Instruments depends upon WRIMCO'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.

     (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 speculative or other pressures on the markets in which Financial
Instruments are traded.

     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 the Fund's current or anticipated investments exactly.  The Fund 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 Fund's other investments.

     Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund'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.  The Fund 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 the Fund'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
the Fund entered into a short hedge because WRIMCO projected a decline in the
price of a security in the Fund's portfolio, 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 Fund could suffer a loss.  In either such case, the
Fund would have been in a better position had it not attempted to hedge at all.

     (4)  As described below, the Fund 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 Fund 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 Fund'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 Fund sell a portfolio
security at a disadvantageous time.  The Fund'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 Fund.

     Cover.  Transactions using Financial Instruments, other than purchased
options, expose the Fund to an obligation to another party.  The Fund will not
enter into any such transactions unless it owns either (1) an offsetting
("covered") position in securities or other options, futures contracts,
currencies or forward contracts, or (2) cash, receivables and short-term debt
securities, with a value sufficient at all times to cover its potential
obligations to the extent not covered as provided in (1) above.  The Fund will
comply with SEC guidelines regarding cover for these instruments and will, if
the guidelines so require, set aside cash, U.S. Government Securities or other
liquid, high-grade debt securities in a segregated account with its custodian in
the prescribed amount as determined daily on a mark-to-market basis.

     Assets used as cover or held in a segregated 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 the Fund's assets to cover or segregated accounts could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.

     Options.  The Fund may write (i.e., sell) call options ("calls") but only
if (i) the investments to which the call relates (the "related investments") are
either securities (whether or not they are U.S. Government Securities) or
futures contracts (see "Futures Contracts and Options Thereon" below) relating
to U.S. Government Securities ("Government Securities Futures"); (ii) the calls
are listed on a domestic securities or commodities exchange or quoted on the
Nasdaq Stock Market ("Nasdaq"); and (iii) the calls are covered, i.e., the Fund
owns the related investments (or other investments acceptable for escrow
arrangements) while the call is outstanding.

     The Fund may purchase calls but only if (i) the related investments are
either U.S. Government Securities or Government Securities Futures; and (ii) the
calls are listed on a domestic securities or commodities exchange or quoted on
Nasdaq.

     The Fund may purchase put options ("puts") but only if (i) the investments
to which the put relates (the "related investments") are U.S. Government
Securities or Government Securities Futures; and (ii) either (a) the puts are
listed on a domestic securities or commodities exchange or quoted on Nasdaq; or
(b) are "optional delivery standby commitments.

     The Fund may write (i.e., sell) puts but only if (i) the related
investments are U.S. Government Securities or Government Securities Futures; and
(ii) the puts are listed on a domestic securities or commodities exchange or
quoted on Nasdaq.

     The above limitations on the puts and calls the Fund may write or purchase
are fundamental policies, i.e., rules that may only be changed by a shareholder
vote.  The Fund has no fundamental policy as to percentage limitations on its
use of options.

     At the present time, no puts or calls of any kind are quoted on Nasdaq.
The Fund has undertaken to certain State Securities Commissions that it will not
engage in options trading on Nasdaq listed securities and that it will not
purchase put options or call options if after such purchase the aggregate
premium paid for all such options owned at that time would exceed 5% of the
Fund's total assets.

     The purchase of call options serves as a long hedge, and the purchase of
put options serves as a short hedge.  Writing put or call options can enable the
Fund 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 Fund would expect to suffer a loss.

     Writing call options can also 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
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 Fund will be obligated to
sell the security at less than its market value.

     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 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 Fund will be obligated to purchase the
security at more than its market value.

     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.

     The Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction.  For example, the Fund 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 Fund 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 Fund to realize profits or
limit losses on an option position prior to its exercise or expiration.

     A type of put that the Fund may purchase is an "optional delivery standby
commitment," which is entered into by parties selling U.S. Government Securities
to the Fund.  An optional delivery standby commitment gives the Fund 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.  The Fund is authorized to purchase and
sell listed options.  Exchange markets for options on debt securities exist, but
these instruments are primarily traded on the over-the-counter market.
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.

     The Fund'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.

     If the Fund 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 the Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.

     Futures Contracts and Options Thereon.  The Fund may buy and sell interest
rate futures contracts, but only those relating to U.S. Government Securities
("Government Securities Futures") and options thereon.  This limitation of the
Fund's engaging in interest rate futures contracts and options on futures
contracts to those relating to U.S. Government Securities is a fundamental
policy that may only be changed by a shareholder vote.  The Fund has no other
fundamental policies as to its use of futures contracts and options on futures
contracts and thus no fundamental policy as to a percentage limit thereon;
however, see below for limitations relating to the CFTC.

     The purchase of futures or call options on futures can serve as a long
hedge, and the sale of futures or the purchase of put options on futures 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 indices.  Similarly, writing put options on futures
contracts can serve as a limited long hedge.

     Futures strategies also can be used to manage the average duration of the
Fund's fixed-income portfolio.  If WRIMCO wishes to shorten the average duration
of the Fund's fixed-income portfolio, the Fund may sell a Government Securities
Future or a call option thereon, or purchase a put option on that Government
Security Future.  If WRIMCO wishes to lengthen the average duration of the
Fund's fixed-income portfolio, the Fund may buy a Government Security Future 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 Fund is required to deposit "initial margin"
consisting of cash or U.S. Government Securities 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 Fund at the
termination of the transaction if all contractual obligations have been
satisfied.  Under certain circumstances, such as periods of high volatility, the
Fund 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 Fund's obligations to or from a futures
broker.  When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk.  In contrast, when the Fund 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 Fund 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 can
enter into offsetting closing transactions, similar to closing transactions in
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold.  Positions in futures and options on futures may
be closed only on an exchange or board of trade that provides a secondary
market.  The Fund intends to enter into futures and options on futures only on
exchanges or boards of trade where there appears to be a liquid secondary
market.  However, there can be no assurance that such a 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 exchanges may establish daily limits
on the amount that the price of a futures 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 the Fund were unable to liquidate a futures contract or options on
futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses.  The Fund would
continue to be subject to market risk with respect to the position.  In
addition, except in the case of purchased options, the Fund would continue to be
required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain cash
or securities in a segregated account.

     As an operating policy, to the extent that the Fund enters into futures
contracts or options on futures contracts, 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 Fund's portfolio, after taking into account unrealized
profits and unrealized losses on any contracts the Fund 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 does not limit to 5% the percentage of the Fund's assets that are at risk
in futures contracts and options on futures contracts.

     Foreign Currency Hedging Strategies--Special Considerations.  The Fund may
use foreign currency forward contracts, as described below, to attempt to hedge
against movements in the values of the foreign currencies in which the Fund's
securities are denominated.  Such currency hedges can protect against price
movements in a security that the Fund 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.

     The Fund might seek to hedge against changes in the value of a particular
currency when no forward contracts on that currency are available or such
forward contracts are more expensive than certain other forward contracts.  In
such cases, the Fund may seek to hedge against price movements in that currency
by entering into transactions using forward contracts on another currency or a
basket of currencies, the values of which WRIMCO 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 forward contract 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 forward contracts 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 forward contracts, the Fund 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.

     Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency.
Thus, the Fund 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 Contracts.  The Fund may enter into forward contracts to purchase
or sell foreign currencies for a fixed amount of U.S. dollars or another foreign
currency.  A forward 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 contract agreed upon by the parties, at a price set
at the time of the forward contract.  These forward contracts are traded
directly between currency traders (usually large commercial banks) and their
customers.

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

     The Fund may also use forward contracts to hedge against a decline in the
value of existing investments denominated in foreign currency.  For example, if
the Fund owned securities denominated in pounds sterling, it could enter into a
forward contract to sell pounds sterling in return for U.S. dollars to hedge
against possible declines in the pound'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 Fund could also hedge the position by selling
another currency expected to perform similarly to the pound sterling, for
example, by entering into a forward contract to sell Deutsche Marks or European
Currency Units in return for U.S. dollars.  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 hedges may result in losses if the
currency used to hedge does not perform similarly to the currency in which the
hedged securities are denominated.

     The cost to the Fund of engaging in forward contracts varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing.  Because forward contracts are usually entered into
on a principal basis, no fees or commissions are involved.  When the Fund enters
into a forward 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
contracts can enter into offsetting closing transactions, similar to closing
transactions on futures contracts, by selling or purchasing, respectively, an
instrument identical to the instrument purchased or sold.  Secondary markets
generally do not exist for forward contracts, with the result that closing
transactions generally can be made for forward contracts only by negotiating
directly with the counterparty.  Thus, there can be no assurance that the Fund
will in fact be able to close out a forward contract at a favorable price prior
to maturity.  In addition, in the event of insolvency of the counterparty, the
Fund might be unable to close out a forward contract at any time prior to
maturity.  In either event, the Fund 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 securities in a segregated account.

     The precise matching of forward 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 foreign
currency contract has been established.  Thus, the Fund might need to purchase
or sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward 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.

     Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the longer term investment decisions made
with regard to overall diversification strategies.  However, WRIMCO believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the Fund will be served.

     The Fund will enter into forward contracts only for hedging purposes and
has made an undertaking to a State securities commission to this effect.

     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
future 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 speculators, 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 trends by WRIMCO may still
not result in a successful transaction.  WRIMCO may be incorrect in the
expectations as to the extent of various interest rate movements or the time
span within which the movements take place.

     Combined Positions.  The Fund may purchase and write options in combination
with each other, or in combination with futures contracts, to adjust the risk
and return characteristics of its overall position.  For example, the Fund 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.  The Fund's options and futures activities may affect its
turnover rate and brokerage commission payments.  The exercise of calls or puts
written by the Fund, and the sale or purchase of futures contracts, may cause it
to sell or purchase related investments, thus increasing its turnover rate.
Once the Fund 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 the Fund may also cause the sale of
related investments, also increasing turnover; although such exercise is within
the Fund'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.  The
Fund will pay a brokerage commission 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.

Investment Restrictions

     Certain of the Fund's investment restrictions are described in the
Prospectus.  The following are fundamental policies and, together with certain
restrictions described in the Prospectus, cannot be changed without shareholder
approval.  Under these additional restrictions the Fund may not:

    (i)  Buy real estate nor any nonliquid interest in real estate investment
         trusts;

   (ii)  Buy the securities of any company if it would then own more than 10% of
         its voting securities or any class of its securities; or buy the
         securities of any company if more than 5% of the Fund's total assets
         (valued at market value) would then be invested in that company; or buy
         the securities of companies in any one industry if more than 25% of the
         Fund's total assets would then be in companies in that industry,
         except, as stated in the Prospectus, the Fund intends to concentrate in
         gold and other minerals-related securities;

  (iii)  Buy shares of other investment companies that redeem their shares.  The
         Fund can buy shares of investment companies that do not redeem their
         shares if it does so in a regular transaction in the open market and
         then does not have more than one tenth (i.e., 10%) of its total assets
         in these shares;

   (iv)  Make loans other than certain limited types of loans; the Fund can also
         buy debt securities that have been sold to the public; it can also lend
         its portfolio securities (see "Lending Securities" above) and enter
         into repurchase agreements (see "Repurchase Agreements" above);

    (v)  Invest for the purpose of exercising control or management of other
         companies;

   (vi)  Buy or continue to hold securities if the Fund's Directors or officers
         or certain others own too much of the same securities; if any of these
         people owns more than one two-hundredths (i.e., .5 of 1%) of the shares
         of a company and if the people who own that much or more own one-
         twentieth (i.e., 5%) of that company's shares, the Fund cannot buy that
         company's shares or continue to own them;

  (vii)  Participate on a joint, or a joint and several, basis in any trading
         account in any securities;

 (viii)  Sell securities short or buy securities on margin, however, the Fund
         may make margin deposits in connection with Government Securities
         Futures contracts and options thereon; also, the Fund may not engage in
         arbitrage transactions;

   (ix)  Engage in the underwriting of securities or invest in restricted
         securities, except up to 5% of total assets taken at the time of
         purchase may be invested in restricted foreign securities;

    (x)  Buy commodities except that it may invest up to 25% of its total assets
         in gold, silver and platinum and may buy put and call options and
         Government Securities Futures.  Put and call options and Government
         Securities Futures may, for various purposes, be considered to be
         "commodities" or "securities" but the Fund may buy them whether they
         are "commodities" or "securities."  The Fund may also not buy any
         minerals-related programs or leases;

   (xi)  Borrow for investment purposes, that is, to purchase securities or
         mortgage or pledge any of its assets; this does not prohibit the escrow
         deposits required by put and call transactions.  The Fund may borrow
         money from banks as a temporary measure or for extraordinary or
         emergency purposes but only up to 5% of its total assets.

Portfolio Turnover

     A portfolio 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.  The Fund's turnover rate may
vary greatly from year to year as well as within a particular year and may be
affected by cash requirements for the redemption of its shares.

     The Fund's portfolio turnover rate  for the fiscal years ended December 31,
1995 and 1994 was 164.21% and _64.89%, respectively.  Due to economic conditions
in 1985, and in accordance with the Fund's fundamental policies, WRIMCO
determined that the portfolio of the Fund should be invested primarily in U.S.
Government Securities.  The increase in the portfolio turnover rate was due to a
shift in the Fund's concentration of investments from primarily gold and other
minerals-related securities to primarily U.S. Government Securities.  A high
turnover rate will increase transaction costs and commission costs that will be
borne by the Fund and could generate taxable income or loss.

                    INVESTMENT MANAGEMENT AND OTHER SERVICES

The Management Agreement

     The Fund has an Investment Management Agreement (the "Management
Agreement") with Waddell & Reed, Inc.  On January 8, 1992, subject to the
authority of the Fund's Board of Directors, Waddell & Reed, Inc. assigned the
Management Agreement and all related investment management duties (and related
professional staff) to WRIMCO, a wholly-owned subsidiary of Waddell & Reed, Inc.
Under the Management Agreement, WRIMCO is employed to supervise the investments
of the Fund and provide investment advice to the Fund.  The address of Waddell &
Reed, Inc. and WRIMCO is 6300 Lamar Avenue, P.O. Box 29217, Shawnee Mission,
Kansas 66201-9217.  Waddell & Reed, Inc. is the Fund's underwriter.

     The Management Agreement permits Waddell & Reed, Inc. or an affiliate of
Waddell & Reed, Inc. to enter into a separate agreement for transfer agency
services ("Shareholder Servicing Agreement") and 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 Board of Directors prior to approving any Shareholder
Servicing Agreement or Accounting Services Agreement.

Torchmark Corporation and United Investors Management Company

     WRIMCO is a wholly-owned subsidiary of Waddell & Reed, Inc.  Waddell &
Reed, Inc. is a wholly-owned subsidiary of Waddell & Reed Financial Services,
Inc., a holding company.  Waddell & Reed Financial Services, Inc. is a wholly-
owned subsidiary of United Investors Management Company.  United Investors
Management Company is a wholly-owned subsidiary of Torchmark Corporation.
Torchmark Corporation is a publicly-held company.  The address of Torchmark
Corporation and United Investors Management Company is 2001 Third Avenue South,
Birmingham, Alabama 35233.

     Waddell & Reed, Inc. and its predecessors served as investment manager to
each of the registered investment companies in the United Group of Mutual Funds,
except United Asset Strategy Fund, Inc., since 1940 or the company's inception
date, whichever was later, and to TMK/United Funds, Inc. since that fund's
inception, until January 8, 1992 when it assigned its duties as investment
manager for these funds (and the related professional staff) to WRIMCO.  WRIMCO
has also served as investment manager for Waddell & Reed Funds, Inc. since its
inception in September 1992 and United Asset Strategy Fund, Inc. since it
commenced operations in March 1995.  Waddell & Reed, Inc. serves as principal
underwriter for the investment companies in the United Group of Mutual Funds and
Waddell & Reed Funds, Inc. and serves as the distributor for TMK/United Funds,
Inc.

Shareholder Services

     Under the Shareholder Servicing Agreement entered into between the Fund and
Waddell & Reed Services Company (the "Agent"), a subsidiary of Waddell & Reed,
Inc., the Agent performs shareholder servicing functions, including the
maintenance of shareholder accounts, the issuance, transfer and redemption of
shares, distribution of dividends and payment of redemptions, the furnishing of
related information to the Fund and handling of shareholder inquiries.  A new
Shareholder Servicing Agreement, or amendments to the existing one, may be
approved by the Fund's Board of Directors without shareholder approval.

Accounting Services

    Under the Accounting Services Agreement entered into between the Fund and
the Agent, the Agent provides the Fund with bookkeeping and accounting services
and assistance, including maintenance of the Fund's records, pricing of the
Fund's shares, and preparation of prospectuses for existing shareholders, proxy
statements and certain 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, Accounting and Shareholder Services

     Under the Management Agreement, for WRIMCO's management services, the Fund
pays WRIMCO a fee as described in the Prospectus.

     The management fees paid by the Fund to WRIMCO during the Fund's fiscal
years ended December 31, 1995, 1994 and 1993 were $249,509, $312,911 and
$268,796, respectively.  For purposes of calculating the daily fee the Fund does
not include money owed to it by Waddell & Reed, Inc. for shares which it has
sold but not yet paid the Fund.  The Fund accrues and pays this fee daily.

     Under the Shareholder Servicing Agreement with respect to Class A shares,
the Fund pays the Agent a monthly fee of $1.0208 for each shareholder account
that was in existence at any time during the prior month, plus $0.30 for each
account on which dividend or distribution, of cash or shares, had a record date
in that month.  For Class Y shares, the Fund pays the Agent a monthly fee equal
to one-twelfth of .15 of 1% of the average daily net assets of that Class for
the preceding month.  The Fund also pays certain out-of-pocket expenses of the
Agent, including long distance telephone communications costs, microfilm and
storage costs for certain documents; forms, printing and mailing costs; and
costs of legal and special services not provided by Waddell & Reed, Inc., WRIMCO
or the Agent.

     Under the Accounting Services Agreement, the Fund pays the Agent a monthly
fee of one-twelfth of the annual fee shown in the following table.

                            Accounting Services Fee

                  Average
               Net Asset Level                Annual Fee
          (all dollars in millions)      Rate for Each Level
          -------------------------      -------------------

          From $    0 to $   10              $      0
          From $   10 to $   25              $ 10,000
          From $   25 to $   50              $ 20,000
          From $   50 to $  100              $ 30,000
          From $  100 to $  200              $ 40,000
          From $  200 to $  350              $ 50,000
          From $  350 to $  550              $ 60,000
          From $  550 to $  750              $ 70,000
          From $  750 to $1,000              $ 85,000
               $1,000 and Over               $100,000

      Fees paid to the Agent for each of the fiscal years ended December 31,
1995, 1994 and 1993 was $20,000.

     The State of California imposes limits on the amount of certain expenses
the Fund can pay.  If these expense limitations are exceeded, WRIMCO is required
to reduce the amount by which these expenses exceed the expense limitation.  In
the past, and for future fiscal periods, the state of California has granted the
Fund a variance from the expense limitation to allow the Fund to exclude from
its aggregate annual expenses transfer agency fees, professional fees, and
report costs attributable to the Fund's average account size being smaller than
the average account size for investment companies with an objective similar to
the Fund's and the amount by which its custodian fee ratio exceeds the average
custodian fee ratio for the domestic portion of portfolio securities of the
equity funds in the United Group.  Other expenses excluded from aggregate annual
expenses include interest, taxes, brokerage commissions and extraordinary
expenses, such as litigation.

     The Fund will notify shareholders of any change in the variance.  For the
fiscal years ended December 31, 1995, 1994 and 1993, no expense reimbursement by
WRIMCO was required.

     Since the Fund pays a management fee for investment supervision and an
accounting services fee for accounting services as discussed above, WRIMCO and
the Agent, respectively, pay all of their own expenses in providing these
services.  Amounts paid by the Fund under the Shareholder Servicing Agreement
are described above.  Waddell & Reed, Inc. and affiliates pay the Fund's
Directors and officers who are affiliated with WRIMCO and its affiliates.  The
Fund pays the fees and expenses of the Fund's other Directors.

     Waddell & Reed, Inc., under an agreement separate from the Management
Agreement, Shareholder Servicing Agreement and Accounting Services Agreement,
acts as the Fund's underwriter, i.e., sells its shares on a continuous basis.
Waddell & Reed, Inc. is not required to sell any particular number of shares,
and thus sells shares only for purchase orders received.  Under this agreement,
Waddell & Reed, Inc. pays the costs of sales literature, including the costs of
shareholder reports used as sales literature, and the costs of printing the
prospectus furnished to it by the Fund.  The aggregate dollar amounts of
underwriting commissions for Class A shares for the fiscal years ended December
31, 1995, 1994 and 1993 were $58,922, $153,080 and $180,359, respectively.  The
amounts retained by Waddell & Reed, Inc. for these same periods were $27,322,
$64,858 and $79,879, respectively.

     A major portion of the sales charge for Class A shares is paid to account
representatives and managers of Waddell & Reed, Inc.  Waddell & Reed. Inc. may
compensate its account representatives as to purchases for which there is no
sales charge.

     The Fund pays all of its other expenses.  These include the costs of
materials sent to shareholders, audit and outside legal fees, taxes, brokerage
commissions, interest, insurance premiums, custodian fees, fees payable by the
Fund under Federal or other securities laws and to the Investment Company
Institute and nonrecurring and extraordinary expenses, including litigation and
indemnification relating to litigation.

     Under a Service Plan for Class A shares (the "Plan") adopted by the Fund
pursuant to Rule 12b-1 under the 1940 Act, the Fund may pay Waddell & Reed,
Inc., the principal underwriter for the Fund, a fee not to exceed .25% of the
Fund's average annual net assets attributable to Class A shares, paid monthly,
to reimburse Waddell & Reed, Inc. for its costs and expenses in connection with
the provision of personal services to Class A shareholders of the Fund and/or
maintenance of Class A shareholder accounts.

     The Plan and a related Service Agreement between the Fund and Waddell &
Reed, Inc. contemplate that Waddell & Reed, Inc. may be reimbursed for amounts
it expends in compensating, training and supporting registered account
representatives, sales managers and/or other appropriate personnel in providing
personal services to Class A shareholders of the Fund and/or maintaining Class A
shareholder accounts; increasing services provided to Class A shareholders of
the Fund by office personnel located at field sales offices; engaging in other
activities useful in providing personal service to Class A shareholders of the
Fund and/or maintenance of Class A shareholder accounts; and in compensating
broker-dealers, and other third parties, who may regularly sell shares of the
Fund, and other third parties, for providing shareholder services and/or
maintaining shareholder accounts with respect to Class A shares.  Service fees
in the amount of $54,875 were paid (or accrued) by the Fund with respect to
Class A shares for the fiscal year ended December 31, 1995.

     The Plan and the Service Agreement were 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, the "Plan Directors").
The Plan was also approved by the affected shareholders of the Fund.

     Among other things, the Plan provides that (i) Waddell & Reed, Inc. 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, (ii) 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, (iii) amounts to be paid by the
Fund under the Plan may not be materially increased without the vote of the
holders of a majority of the outstanding Class A shares of the Fund, and (iv)
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 Fund's Custodian is UMB Bank, n.a., Kansas City, Missouri. In general,
it is responsible for holding the Fund's cash and securities.  Price Waterhouse
LLP, Kansas City, Missouri, the Fund's independent accountants, audits the
Fund's financial statements.

                   PURCHASE, REDEMPTION AND PRICING OF SHARES

Determination of Offering Price

     The net asset value of each class of the shares of the Fund is the value of
the assets of that class less the class's liabilities, divided by the total
number of outstanding shares of that class.

     Class A shares of the Fund are sold at their next determined net asset
value plus the sales charge described in the Prospectus. The price makeup as of
December 31, 1995 was as follows:

     Net asset value per Class A share (Class A net assets divided by Class A
shares outstanding) .....................................    8.75
     Add:  selling commission (5.75% of offering price)..     .53
                                                             ----
     Maximum offering price per Class A share (Class A net asset value divided
by 94.25%) ..............................................    9.28
                                                             ====

     The offering price of a Class A share is its net asset value next
determined following acceptance of a purchase order plus the sales charge.  The
offering price of a Class Y share is its net asset value next determined
following acceptance of a purchase order.  The number of shares you receive for
your purchase depends on the next offering price after Waddell & Reed, Inc.
receives and accepts your order at its principal business office at the address
shown on the cover of this SAI.  You will be sent a confirmation after your
purchase which will indicate how many shares you have purchased. Shares are
normally issued for cash only.

     Waddell & Reed, Inc. need not accept any purchase order, and it or the Fund
may determine to discontinue offering Fund shares for purchase.

     The net asset value per share and offering price are ordinarily computed
once daily on each day that the NYSE is open for trading as of the later of the
close of the regular session of the NYSE (ordinarily 4:00 p.m. Eastern time) or
the close of the regular session of any domestic securities or commodities
exchange on which an option or future held by the Fund is traded.  The NYSE
annually announces the days on which it will not be open for trading.  The most
recent announcement indicates that the NYSE will not be open on the following
days:  New Year's 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 net asset value will change every
business day, since the number of shares outstanding and the value of the assets
changes every business day.

     Except as otherwise noted, the securities in the Fund's portfolio that are
listed or traded on a national securities exchange are valued on the basis of
the last sale price on that day or, lacking any sales at a price that is the
mean between the closing bid and asked prices. Securities that are traded over-
the-counter are valued at the mean between bid and asked prices provided by
Nasdaq.  Bonds, other than U.S. Government Securities and convertible bonds, are
valued using a pricing system provided by a major dealer in bonds.  Convertible
bonds are valued using this pricing system only on days when there is no sale
reported.  Short-term debt securities are valued at amortized cost, which
approximates market.  Foreign securities that are listed or traded only on a
foreign securities exchange will be valued using the last sale price on that
exchange prior to the computation, or, if no sale is reported at that time, the
mean between the bid and asked prices.  Foreign securities represented by
American Depository Receipts listed or admitted to trading on a domestic
securities exchange or traded in the United States over-the-counter market will
be valued in the same manner as domestic exchange listed or over-the-counter
securities. Foreign securities issued or guaranteed by any foreign government or
any subdivision, agency or instrumentality thereof are valued by the same
methods indicated above for the valuation of bonds. As to foreign securities
that are quoted in foreign currencies, such quotation will be converted to U.S.
dollars using foreign exchange rates.  When market quotations are not readily
available, securities 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 Fund's Board of Directors.

     As to U.S. Government Securities, the Board of Directors has decided to use
the prices quoted by a dealer in bonds that offers a pricing service to value
U.S. Government Securities.  The Board of Directors believes that such a service
does quote their fair value.  The Board of Directors, however, may hereafter
determine to use another service or use the bid price quoted by dealers if it
should determine that such service or quotes more accurately reflect the fair
value of U.S. Government Securities held by the Fund.

     Gold and silver bullion will be valued at the last spot settlement price on
the Commodity Exchange, Inc., and platinum bullion will be valued at the last
spot settlement price or, if not available, the settlement price of the nearest
contract month on the New York Mercantile Exchange.  If prices are not available
on any of these exchanges, the relevant precious metal will be valued at prices
in the bullion market or markets approved by the Board of Directors for that
purpose; if there is no readily available market quotation, then bullion will be
valued at fair value as determined in good faith, by the Board of Directors.

     Puts, calls and Government Securities Futures purchased and held by the
Fund are valued at the last sales price thereof on the securities or commodities
exchanges on which they are traded, or, if there are no transactions, at the
mean between bid and asked prices.  Ordinarily, the close of option trading on
national securities exchanges is 4:10 P.M. Eastern time and the close of
commodities exchanges is 4:15 P.M. Eastern time.  Futures contracts will be
valued by reference to established futures exchanges.  The value of a futures
contract purchased by the Fund will be either the closing price of that contract
or the bid price.  Conversely, the value of a futures contract sold by the Fund
will be either the closing price or the asked price.

     When the Fund writes a put or call, an amount equal to the premium received
is included in the Fund'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
put or call.  If a call the Fund wrote is exercised, the proceeds received on
the sale of the related investment are increased by the amount of the premium
the Fund received.  If the Fund exercised a call it purchased, the amount paid
to purchase the related investment is increased by the amount of the premium
paid. If a put written by the Fund is exercised, the amount the Fund pays to
purchase the related investment is decreased by the amount of the premium it
received.  If the Fund exercises a put it purchased, the amount the Fund
receives from the sale of the related investment is reduced by the amount of the
premium it paid.  If a put or call written by the Fund expires, it has a gain in
the amount of the premium; if it enters into a closing purchase transaction, the
Fund will have a gain or loss depending on whether the premium was more or less
than the cost of the closing transaction.

     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 the Fund's net
asset value 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 the Fund 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
prevailing exchange rate in an amount generally less than one-tenth of one
percent due to the costs of converting from one currency to another.

     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.

Minimum Initial and Subsequent Investments

     For Class A shares, initial investments must be at least $500 with the
exceptions described in this paragraph.  A $100 minimum initial investment
pertains to certain exchanges of shares from another fund in the United Group.
A $50 minimum initial investment pertains to purchases for certain retirement
plan accounts.  A $50 minimum initial investment also pertains to accounts for
which an investor has arranged, at the time of initial investment, to make
subsequent purchases for the account by having regular monthly withdrawals of
$25 or more made from a bank account.  A minimum initial investment of $25 is
applicable to purchases made through payroll deduction for or by employees of
WRIMCO, Waddell & Reed, Inc., their affiliates, or certain retirement plan
accounts.  Except with respect to certain exchanges and automatic withdrawals
from a bank account, a shareholder may make subsequent investments of any
amount.  See "Exchanges for Shares of Other Funds in the United Group."

     For Class Y shares, investments by government entities or authorities or by
corporations must total at least $10 million within the first twelve months
after initial investment.  There is no initial investment minimum for other
Class Y investors.

Reduced Sales Charges (Applicable to Class A Shares Only)

Account Grouping

     Large purchases of Class A shares are subject to lower sales charges.  The
schedule of sales charges appears in the Prospectus for Class A shares.  For the
purpose of taking advantage of the lower sales charges available for large
purchases, a purchase in any of categories 1 through 7 listed below made by an
individual or deemed to be made by an individual may be grouped with purchases
in any other of these categories.

1.   Purchases by an individual for his or her own account (includes purchases
     under the United Funds Revocable Trust Form);

2.   Purchases by that individual's spouse purchasing for his or her own account
     (includes United Funds Revocable Trust Form of spouse);

3.   Purchases by that individual or his or her spouse in their joint account;

4.   Purchases by that individual or his or her spouse for the account of their
     child under age 21;

5.   Purchase by any custodian for the child of that individual or spouse in a
     Uniform Gift to Minors Act ("UGMA")or Uniform Transfers to Minors Act
     ("UTMA") account;

6.   Purchases by that individual or his or her spouse for his or her Individual
     Retirement Account ("IRA"), Section 457 of the Internal Revenue Code of
     1986, as amended (the "Code"), salary reduction plan account, provided that
     such purchases are subject to a sales charge (see "Net Asset Value
     Purchases"), tax sheltered annuity account ("TSA") or Keogh plan account,
     provided that the individual and spouse are the only participants in the
     Keogh plan; and

7.   Purchases by a trustee under a trust where that individual or his or her
     spouse is the settlor (the person who establishes the trust).

     Examples:

     A.   Grandmother opens an UGMA account for grandson A; Grandmother has an
          account in her own name; A's father has an account in his own name;
          the UGMA account may be grouped with A's father's account but may not
          be grouped with Grandmother's account;

     B.   H establishes a trust naming his children as beneficiaries and
          appointing himself and his bank as co-trustees; a purchase made in the
          trust account is eligible for grouping with an IRA account of W, H's
          wife;

     C.   H's will provides for the establishment of a trust for the benefit of
          his minor children upon H's death; his bank is named as trustee; upon
          H's death, an account is established in the name of the bank, as
          trustee; a purchase in the account may be grouped with an account held
          by H's wife in her own name.

     D.   X establishes a trust naming herself as trustee and R, her son, as
          successor trustee and R and S as beneficiaries; upon X's death, the
          account is transferred to R as trustee; a purchase in the account may
          not be grouped with R's individual account.  If X's spouse, Y, was
          successor trustee, this purchase could be grouped with Y's individual
          account.

     All purchases of Class A shares made for a participant in a multi-
participant Keogh plan may be grouped only with other purchases made under the
same plan; a multi-participant Keogh plan is defined as a plan in which there is
more than one participant where one or more of the participants is other than
the spouse of the owner/employer.

Example A: H has established a Keogh plan; he and his wife W are the only
           participants in the plan; they may group their purchases made under
           the plan with any purchases in categories 1 through 7 above.

Example B: H has established a Keogh plan; his wife, W, is a participant and
           they have hired one or more employees who also become participants in
           the plan; H and W may not combine any purchases made under the plan
           with any purchases in categories 1 through 7 above; however, all
           purchases made under the plan for H, W or any other employee will be
           combined.

     All purchases of Class A shares made under a "qualified" employee benefit
plan of an incorporated business will be grouped.  A "qualified" employee
benefit plan is established pursuant to Section 401 of the Code.  All qualified
employee benefit plans of any one employer or affiliated employers will also be
grouped. An affiliate is defined as an employer that directly or indirectly
controls or is controlled by or is under control with another employer.

Example:  Corporation X sets up a defined benefit plan; its subsidiary,
          Corporation Y, sets up a 401(k) plan; all contributions made under
          both plans will be grouped.

     All purchases of Class A shares made under a simplified employee pension
plan ("SEP"), payroll deduction plan or similar arrangement adopted by an
employer or affiliated employers (as defined above) may be grouped provided that
the employer elects to have all such purchases grouped at the time the plan is
set up.  If the employer does not make such an election, the purchases made by
individual employees under the plan may be grouped with the other accounts of
the individual employees described above in "Account Grouping."

     Account grouping as described above is available under the following
circumstances.

One-time Purchases

     A one-time purchase of Class A shares in accounts eligible for grouping may
be combined for purposes of determining the availability of a reduced sales
charge.  In order for an eligible purchase to be grouped, the investor must
advise Waddell & Reed, Inc. at the time the purchase is made that it is eligible
for grouping and identify the accounts with which it may be grouped.

Example: H and W open an account in the Fund and invest $75,000; at the same
         time, H's parents open up three UGMA accounts for H and W's three minor
         children and invest $10,000 in each child's name; the combined purchase
         of $105,000 of Class A shares is subject to a reduced sales load of
         4.75% provided that Waddell & Reed, Inc. is advised that the purchases
         are entitled to grouping.

Rights of Accumulation

     If Class A shares are held in any account and an additional purchase is
made in that account or in any account eligible for grouping with that account,
the additional purchase is combined with the net asset value of the existing
account as of the date the new purchase is accepted by Waddell & Reed, Inc. for
the purpose of determining the availability of a reduced sales charge.

Example: H is a current Class A shareholder who invested in the Fund three years
         ago.  His account has a net asset value of $80,000.  His wife, W, now
         wishes to invest $20,000 in Class A shares of the Fund.  W's purchase
         will be combined with H's existing account and will be entitled to a
         reduced sales charge of 4.75%.  H's original purchase was subject to a
         full sales charge and the reduced charge does not apply retroactively
         to that purchase.

     In order to be entitled to rights of accumulation, the purchaser must
inform Waddell & Reed, Inc. that the purchaser is entitled to a reduced charge
and provide Waddell & Reed, Inc. with the name and number of the existing
account with which the purchase may be combined.

     If a purchaser holds shares which have been purchased under a contractual
plan the shares held under the plan may be combined with the additional purchase
only if the contractual plan has been completed.

Statement of Intention

     The benefit of a reduced sales charge for larger purchases of Class A
shares is also available under a Statement of Intention.  By signing a Statement
of Intention form, which is available from Waddell & Reed, Inc., the purchaser
indicates an intention to invest, over a 13-month period, a dollar amount which
is sufficient to qualify for a reduced sales charge.  The 13-month period begins
on the date the first purchase made under the Statement of Intention is accepted
by Waddell & Reed, Inc.  Each purchase made from time to time under the
Statement of Intention is treated as if the purchaser were buying at one time
the total amount which he or she intends to invest.  The sales charge applicable
to all purchases of Class A shares made under the terms of the Statement of
Intention will be the sales charge in effect on the beginning date of the 13-
month period.

     In determining the amount which the purchaser must invest in
order to qualify for a reduced sales charge under a Statement of Intention, the
investor's Rights of Accumulation (see above) will be taken into account; that
is, Class A shares already held in the same account in which the purchase is
being made or in any account eligible for grouping with that account, as
described above, will be included.

Example:  H signs a Statement of Intention indicating his intent to invest in
          his own name a dollar amount sufficient to entitle him to purchase
          Class A shares at the sales charge applicable to a purchase of
          $100,000.  H has an IRA account and the Class A shares held under the
          IRA in the Fund have a net asset value as of the date the Statement of
          Intention is accepted by Waddell & Reed, Inc. of $15,000; H's wife, W,
          has an account in her own name invested in another fund in the United
          Group which charges the same sales load as the Fund, with a net asset
          value as of the date of acceptance of the Statement of Intention of
          $10,000; H needs to invest $75,000 in Class A shares over the 13-month
          period in order to qualify for the reduced sales load applicable to a
          purchase of $100,000.

     A copy of the Statement of Intention signed by a purchaser will be returned
to the purchaser after it is accepted by Waddell & Reed, Inc. and will set forth
the dollar amount of Class A shares which must be purchased within the 13-month
period in order to qualify for the reduced sales charge.

     If a purchaser holds shares which have been purchased under a contractual
plan, the shares held under the plan will be taken into account in determining
the amount which must be invested under the Statement of Intention only if the
contractual plan has been completed.

     The minimum initial investment under a Statement of Intention is 5% of the
dollar amount which must be invested under the Statement of Intention.  An
amount equal to 5% of the purchase required under the Statement of Intention
will be held "in escrow."  If a purchaser does not, during the period covered by
the Statement of Intention, invest the amount required to qualify for the
reduced sales charge under the terms of the Statement of Intention, he or she
will be responsible for payment of the sales charge applicable to the amount
actually invested.  The additional sales charge owed on purchases of Class A
shares made under a Statement of Intention which is not completed will be
collected by redeeming part of the shares purchased under the Statement of
Intention and held "in escrow" unless the purchaser makes payment of this amount
to Waddell & Reed, Inc. within 20 days of Waddell & Reed, Inc.'s request for
payment.

     If the actual amount invested is higher than the amount an investor intends
to invest, and is large enough to qualify for a sales charge lower than that
available under the Statement of Intention, the lower sales charge will apply.

     A Statement of Intention does not bind the purchaser to buy, or Waddell &
Reed, Inc. to sell, the shares covered by the Statement of Intention.

     With respect to Statements of Intention for $2,000,000 or purchases
otherwise qualifying for no sales charge under the terms of the Statement of
Intention, the initial investment must be at least $200,000, and the value of
any shares redeemed during the 13-month period which were acquired under the
Statement of Intention will be deducted in computing the aggregate purchases
under the Statement of Intention.

     Statements of Intention are not available for purchases made under a SEP
where the employer has elected to have all purchases under the SEP grouped.

Other Funds in the United Group

     Reduced sales charges for larger purchases of Class A shares apply to
purchases of any of the funds in the United Group which are subject to a sales
charge.  A purchase of, or shares held, in any of the funds in the United Group
which are subject to the same sales charge as the Fund will be treated as an
investment in the Fund for the purpose of determining the applicable sales
charge.  The following funds in the United Group have shares that are subject to
a maximum 5.75% ("full") sales charge as described in the prospectus of each
Fund:  United Funds, Inc., United International Growth Fund, Inc., United
Continental Income Fund, Inc., United Vanguard Fund, Inc., United Retirement
Shares, Inc., United High Income Fund, Inc., United New Concepts Fund, Inc.,
United Gold & Government Fund, Inc., United High Income Fund II, Inc. and United
Asset Strategy Fund, Inc.  The following funds in the United Group have shares
that are subject to a "reduced" sales charge as described in the prospectus of
each fund:  United Municipal Bond Fund, Inc., United Government Securities Fund,
Inc. and United Municipal High Income Fund, Inc. For the purposes of obtaining
the lower sales charge which applies to large purchases, purchases in a fund in
the United Group of shares that are subject to a full sales charge may not be
grouped with purchases of shares in a fund in the United Group that are subject
to a reduced sales charge; conversely, purchases of shares in a fund with a
reduced sales charge may not be grouped or combined with purchases of shares of
a fund that are subject to a full sales charge.

     United Cash Management, Inc. is not subject to a sales charge.  Purchases
in that fund are not eligible for grouping with purchases in any other fund.

Net Asset Value Purchases of Class A Shares

     As stated in the Prospectus, Class A shares of the Fund may be purchased at
net asset value by the Directors and officers of the Fund, employees of Waddell
& Reed, Inc., employees of their affiliates, account representatives of Waddell
& Reed, Inc. and the spouse, children, parents, children's spouse's and parents
of each such Director, officer, employee and account representative.  "Child"
includes stepchild; "parent" includes stepparent.  Purchases of Class A shares
in an IRA sponsored by Waddell & Reed, Inc. established for any of these
eligible purchasers may also be at net asset value.  Purchases in any tax
qualified retirement plan under which the eligible purchaser is the sole
participant may also be made at net asset value.  Trusts under which the grantor
and the trustee or a co-trustee are each an eligible purchaser are also eligible
for net asset value purchases of Class A shares.  "Employees" includes retired
employees.  A retired employee is an individual separated from service from
Waddell & Reed, Inc. or affiliated companies with a vested interest in any
Employee Benefit Plan sponsored by Waddell & Reed, Inc. or its affiliated
companies. "Account representatives" includes retired account representatives.
A "retired account representative" is any account representative who was, at the
time of separation from service from Waddell & Reed, Inc., a Senior Account
Representative.  A custodian under the Uniform Gifts (or Transfers) to Minors
Act purchasing for the child or grandchild of any employee or account
representative may purchase Class A shares at net asset value whether or not the
custodian himself is an eligible purchaser.

     Purchases in a 401(k) plan having 100 or more eligible employees and
purchases in a 457 plan having 100 or more eligible employees may be made at net
asset value.

Reasons for Differences in Public Offering Price of Class A Shares

     As described herein and in the Prospectus, there are a number of instances
in which the Fund's Class A shares are sold or issued on a basis other than the
maximum public offering price, that is, the net asset value plus the highest
sales charge.  Some of these relate to lower or eliminated sales charges for
larger purchases of Class A shares, whether made at one time or over a period of
time as under a Statement of Intention or right of accumulation.  See the table
of sales charges in the Prospectus.  The reasons for these quantity discounts
are, in general, that (i) they are traditional and have long been permitted in
the industry and are therefore necessary to meet competition as to sales of
shares of other funds having such discounts, (ii) certain quantity discounts are
required by rules of the National Association of Securities Dealers, Inc. (as
are elimination of sales charges on the reinvestment of dividends and
distributions), and (iii) they are designed to avoid an unduly large dollar
amount of sales charges on substantial purchases in view of reduced selling
expenses. Quantity discounts are made available to certain related persons for
reasons of family unity and to provide a benefit to tax-exempt plans and
organizations.

     The reasons for the other instances in which there are reduced or
eliminated sales charges for Class A shares are as follows.  Exchanges at net
asset value are permitted because a sales charge has already been paid on the
shares exchanged.  Sales of Class A shares without sales charge are permitted to
Directors, officers and certain others due to reduced or eliminated selling
expenses and since such sales may aid in the development of a sound employee
organization, encourage incentive, responsibility and interest in the United
Group and an identification with its aims and policies.  Limited reinvestments
of redemptions of Class A shares at no sales charge are permitted to attempt to
protect against mistaken or not fully informed redemption decisions.  Class A
shares may be issued at no sales charge in plans of reorganization due to
reduced or eliminated sales expenses and since, in some cases, such issuance is
exempted by the 1940 Act from the otherwise applicable restrictions as to what
sales charge must be imposed.  In no case in which there is a reduced or
eliminated sales charge are the interests of existing Class A shareholders
adversely affected since, in each case, the Fund receives the net asset value
per share of all shares sold or issued.

Flexible Withdrawal Service for Class A Shareholders

     If you qualify, you may arrange to receive regular monthly, quarterly,
semiannual or annual payments by redeeming Class A shares on a regular basis
through the Flexible Withdrawal Service (the "Service").  The Service is
available not only for Class A shares of the Fund but also for Class A shares of
any of the funds in the United Group.  It would be a disadvantage to an investor
to make additional purchases of Class A shares while a withdrawal program is in
effect as this would result in duplication of sales charges.

     To qualify for the Service, you must have invested at least $10,000 in
Class A shares which you still own of any of the funds in the United Group; or,
you must own Class A shares having a value of at least $10,000.  The value for
this purpose is not the net asset value but the value at the offering price,
i.e., the net asset value plus the sales charge.

     To start the Service, you must fill out a form (available from Waddell &
Reed, Inc.) advising Waddell & Reed, Inc. of the manner in which you want your
shares redeemed to make the payments.  You have three choices:

     First.  To get a monthly, quarterly, semiannual or annual payment of $50 or
more;

     Second.  To get a monthly payment, which will change each month, equal to
one-twelfth of a percentage of the value of the shares in the Account; you fix
the percentage; or

     Third.  To get a monthly or quarterly payment, which will change each month
or quarter, by redeeming a number of shares fixed by you (at least five shares).

     Shares are redeemed on the 20th day of the month in which the payment is to
be made, or on the prior business day if the 20th is not a business day.
Payments are made within five days of the redemption.

     Retirement plan accounts may be subject to a fee imposed by the plan
custodian for use of their service.

     If you have a share certificate for the shares you want to make available
for the Service, you must enclose the certificate with the form initiating the
Service.

     The dividends and distributions on shares you have made available for the
Service are reinvested in additional Class A shares.  All payments are made by
redeeming shares, which may involve a gain or loss for tax purposes.  To the
extent that payments exceed dividends and distributions, the number of shares
you own will decrease.  When all of the shares in an account are redeemed, you
will not receive any further payments.  Thus, the payments are not an annuity or
income or return on your investment.

     You may, at any time, change the manner in which you have chosen to have
shares redeemed.  You can change to any one of the other choices originally
available to you.  For example, if you started out with a $50 monthly payment,
you could change to a $200 quarterly payment.  You can at any time redeem part
or all of the shares in your account; if you redeem all of the shares, the
Service is terminated.  The Fund can also terminate the Service by notifying you
in writing.

     After the end of each calendar year, information on shares redeemed will be
sent to you to assist you in completing your Federal income tax return.

Exchanges for Shares of Other Funds in the United Group

Class A Share Exchanges

     Once a sales charge has been paid on Class A shares of a fund in the United
Group, these shares and any shares added to them from reinvestment of dividends
or distributions may be freely exchanged for Class A shares of another fund in
the United Group.  The shares you exchange must be worth at least $100 or you
must already own shares of the fund in the United Group into which you want to
exchange.

     You may exchange Class A shares you own in another fund in the United Group
for Class A shares of the Fund without charge if (i) a sales charge was paid on
these shares; or (ii) the shares were received in exchange for shares for which
a sales charge was paid; or (iii) the shares were acquired from reinvestment of
dividends and distributions paid on such shares.  There may have been one or
more such exchanges so long as a sales charge was paid on the shares originally
purchased.  Also, shares acquired without a sales charge because the purchase
was $2 million or more will be treated the same as shares on which a sales
charge was paid.

     United Municipal Bond Fund, Inc., United Government Securities Fund, Inc.
and United Municipal High Income Fund, Inc. shares are the exceptions and
special rules apply.  Class A shares of these funds may be exchanged for Class A
shares of the Fund only if (i) you have received those shares as a result of one
or more exchanges of shares on which a sales charge was originally paid, or (ii)
the shares have been held from the date of the original purchase for at least
six months.

     Subject to the above rules regarding sales charges, you may have a specific
dollar amount of Class A shares of United Cash Management, Inc. automatically
exchanged each month into Class A shares of the Fund or any other fund in the
United Group.  The shares of United Cash Management, Inc. which you designate
for automatic exchange must be worth at least $100 or you must own Class A
shares of the fund in the United Group into which you want to exchange.  The
minimum value of shares which you may designate for automatic exchange monthly
is $100, which may be allocated among the Class A shares of different funds in
the United Group so long as each fund receives a value of at least $25.  Minimum
initial investment and minimum balance requirements apply to such automatic
exchange service.

     You may redeem your Class A shares of the Fund and use the proceeds to
purchase Class Y shares of the Fund if you meet the criteria for purchasing
Class Y shares.

Class Y Share Exchanges

     Class Y shares of the Fund may be exchanged for Class Y shares of any other
fund in the United Group.

General Exchange Information

     When you exchange shares, the total shares you receive will have the same
aggregate net asset value as the total shares you exchange.  The relative values
are those next figured after we receive your exchange request in good order.

     These exchange rights and other exchange rights concerning the other funds
in the United Group can in most instances be eliminated or modified at any time
and any such exchange may not be accepted.

Retirement Plans

     As described in the Prospectus for Class A shares, your account may be set
up as a funding vehicle for a retirement plan.  For individual taxpayers meeting
certain requirements, Waddell & Reed, Inc. offers prototype documents for the
following retirement plans.  All of these plans involve investment in shares of
the Fund (or shares of certain other funds in the United Group).

     Individual Retirement Accounts (IRAs).  Investors having earned income may
set up a plan that is commonly called an IRA.  Under an IRA, an investor can
contribute each year up to 100% of his or her earned income, up to an annual
maximum of $2,000.  The annual maximum is $2,250 if an investor's spouse has
earned income of $250 or less in a taxable year.  If an investor's spouse has at
least $2,000 of earned income in a taxable year, the annual maximum is $4,000
($2,000 for each spouse).  The contributions are deductible unless the investor
(or, if married, either spouse) is an active participant in a qualified
retirement plan or if, notwithstanding that the investor or one or both spouses
so participate, their adjusted gross income does not exceed certain levels.

     An investor may also use an IRA to receive a rollover contribution which is
either (a) a direct rollover from an employer's plan or (b) a rollover of an
eligible distribution paid to the investor from an employer's plan or another
IRA.  To the extent a rollover contribution is made to an IRA, the distribution
will not be subject to Federal income tax until distributed from the IRA.  A
direct rollover generally applies to any distribution from an employer's plan
(including a custodial account under Section 403(b)(7) of the Code, but not an
IRA) other than certain periodic payments, required minimum distributions and
other specified distributions.  In a direct rollover, the eligible rollover
distribution is paid directly to the IRA, not to the investor.  If, instead, an
investor receives payment of an eligible rollover distribution, all or a portion
of that distribution generally may be rolled over to an IRA within 60 days after
receipt of the distribution.  Because mandatory Federal income tax withholding
applies to any eligible rollover distribution which is not paid in a direct
rollover, investors should consult their tax advisers or pension consultants as
to the applicable tax rules.  If you already have an IRA, you may have the
assets in that IRA transferred directly to an IRA offered by Waddell & Reed,
Inc.

     Simplified Employee Pension (SEP) plans and Salary Reduction SEP (SARSEP)
plans.  Employers can make contributions to SEP-IRAs established for employees.
An employer may contribute up to 15% of compensation, not to exceed $22,500, per
year for each employee.

     Keogh Plans.  Keogh plans, which are available to self-employed
individuals, are defined contribution plans that may be either a money purchase
plan or a profit sharing plan.  As a general rule, an investor under a defined
contribution Keogh plan can contribute each year up to 25% of his or her annual
earned income, with an annual maximum of $30,000.

     457 Plans.  If an investor is an employee of a state or local government or
of certain types of charitable organizations, he or she may be able to enter
into a deferred compensation arrangement in accordance with Section 457 of the
Code.

     TSAs - Custodial Accounts and Title I Plans.  If an investor is an employee
of a public school system or of certain types of charitable organizations, he or
she may be able to enter into a deferred compensation arrangement through a
custodian account under Section 403(b) of the Code.  Some organizations have
adopted Title I plans, which are funded by employer contributions in addition to
employee deferrals.

     401(k) Plans.  With a 401(k) plan, employees can make tax-deferred
contributions into a plan to which the employer may also contribute, usually on
a matching basis.  An employee may defer each year up to 25% of compensation,
subject to certain annual maximums, which may be increased each year based on
cost-of-living adjustments.

     More detailed information about these arrangements and applicable forms are
available from Waddell & Reed, Inc.  These plans may involve complex tax
questions as to premature distributions and other matters.  Investors should
consult their tax adviser or pension consultant.

Redemptions

     The Prospectus gives information as to redemption procedures.  Redemption
payments are made within seven days unless delayed because of certain emergency
conditions determined by the SEC, when the NYSE is closed other than for
weekends or holidays, or when trading on the NYSE is restricted.  Payment is
made in cash, although under extraordinary conditions redemptions may be made in
portfolio securities.  Payment for redemptions of shares of the Fund may be made
in portfolio securities when the Fund's Board of Directors determines that
conditions exist making cash payments undesirable.  Redemptions made in
securities will be made only in readily marketable securities.  Securities used
for payment of redemptions are valued at the value used in figuring net asset
value.  There would be brokerage costs to the redeeming shareholder in selling
such securities.  The Fund, however, 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 net asset value during any 90-day
period for any one shareholder.

Reinvestment Privilege

     The Prospectus for Class A shares discusses the reinvestment privilege for
Class A shares under which, if you redeem your Class A shares and then decide it
was not a good idea, you may reinvest.  If Class A shares of the Fund are then
being offered, you can put all or part of your redemption payment back into
Class A shares of the Fund without any sales charge at the net asset value next
determined after you have returned the amount.  Your written request to do this
must be received within 30 days after your redemption request was received.  You
can do this only once as to Class A shares of the Fund.  You do not use up this
privilege by redeeming Class A shares to invest the proceeds at net asset value
in a Keogh plan or an IRA.

Mandatory Redemption of Certain Small Accounts

     The Fund has the right to compel the redemption of shares held under any
account or any plan if the aggregate net asset value of such shares (taken at
cost or value as the Board of Directors may determine) is less than $500.  The
Board of Directors has no intent to compel redemptions in the foreseeable
future.  If it should elect to compel redemptions, shareholders who are affected
will receive prior written notice and will be permitted 60 days to bring their
accounts up to the minimum before this redemption is processed.

                             DIRECTORS AND OFFICERS

     The day-to-day affairs of the Fund are handled by outside organizations
selected by the Board of Directors.  The Board of Directors has responsibility
for establishing broad corporate policies for the Fund and for overseeing
overall performance of the selected experts.  It has the benefit of advice and
reports from independent counsel and independent auditors.

     The principal occupation during at least the past five years of each
Director and officer of the Fund is given below.  Each of the persons listed
through and including Mr. Wright is a member of the Fund's Board of Directors.
The other persons are officers but not members of the Board of Directors.  For
purposes of this section, the term "Fund Complex" includes each of the
registered investment companies in the United Group of Mutual Funds, TMK/United
Funds, Inc. and Waddell & Reed Funds, Inc.  Each of the Fund's Directors is also
a Director of each of the funds in the Fund Complex and each of the Fund's
officers, with the exception of Mr. Avery, is also an officer of one or more of
the funds in the Fund Complex.

RONALD K. RICHEY*
2001 Third Avenue South
Birmingham, Alabama 35233
     Chairman of the Board of Directors of the Fund and each of the other funds
in the Fund Complex; Chairman of the Board of Directors of Waddell & Reed
Financial Services, Inc., United Investors Management Company and United
Investors Life Insurance Company; Chairman of the Board of Directors and Chief
Executive Officer of Torchmark Corporation; Chairman of the Board of Directors
of Vesta Insurance Group, Inc.; formerly, Chairman of the Board of Directors of
Waddell & Reed, Inc.  Father of Linda Graves, Director of the Fund and each of
the other funds in the Fund Complex.

KEITH A. TUCKER*
     President of the Fund and each of the other funds in the Fund Complex;
President, Chief Executive Officer and Director of Waddell & Reed Financial
Services, Inc.; Chairman of the Board of Directors of WRIMCO, Waddell & Reed,
Inc., Waddell & Reed Services Company, Waddell & Reed Asset Management Company
and Torchmark Distributors, Inc., an affiliate of Waddell & Reed, Inc.; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; Director of Southwestern Life Corporation; formerly,
partner in Trivest, a private investment concern; formerly, Director of Atlantis
Group, Inc., a diversified company.

HENRY L. BELLMON
Route 1
P. O. Box 26
Red Rock, Oklahoma  74651
     Rancher; Professor, Oklahoma State University; formerly, Governor of
Oklahoma.

DODDS I. BUCHANAN
905 13th Street
Boulder, Colorado  80302
     Advisory Director, The Hand Companies; President, Buchanan Ranch
Corporation; formerly, Senior Vice President and Director of Marketing Services,
The Meyer Group of Management Consultants; formerly, Professor of Marketing,
College of Business, University of Colorado.

JAY B. DILLINGHAM
926 Livestock Exchange Building
Kansas City, Missouri  64102
     Retired.

LINDA GRAVES*
1 South West Cedar Crest Road
Topeka, Kansas 66606
     First Lady of Kansas; formerly, partner, Levy and Craig, P.C., a law firm.
Daughter of Ronald K. Richey, Chairman of the Board of the Fund and each of the
other funds in the Fund Complex.

JOHN F. HAYES*
335 N. Washington
P. O. Box 2977
Hutchinson, Kansas  67504-2977
     Director of Central Bank and Trust; Chairman of Gilliland & Hayes, P.A., a
law firm; formerly, President of Gilliland & Hayes, P.A.

GLENDON E. JOHNSON
7300 Corporate Center Drive
P. O. Box 020270
Miami, Florida  33126-1208
     Director and Chief Executive Officer of John Alden Financial Corporation
and subsidiaries.

JAMES B. JUDD
No. 1 Ward Parkway
Suite 138
Kansas City, Missouri 64112
     Retired; formerly, partner, KPMG Peat Marwick.  A petition relating to Mr.
Judd's property was filed under the Federal bankruptcy laws and is now final.

WILLIAM T. MORGAN*
1799 Westridge Road
Los Angeles, California 90049
     Retired; formerly, Chairman of the Board of Directors and President of the
Fund and each fund in the Fund Complex then in existence.  (Mr. Morgan retired
as Chairman of the Board of Directors and President of the funds in the Fund
Complex then in existence on April 30, 1993); formerly, President, Director and
Chief Executive Officer of WRIMCO and Waddell & Reed, Inc.; formerly, Chairman
of the Board of Directors of Waddell & Reed Services Company; formerly, Director
of Waddell & Reed Asset Management Company, United Investors Management Company
and United Investors Life Insurance Company, affiliates of Waddell & Reed, Inc.

DOYLE PATTERSON
1030 West 56th Street
Kansas City, Missouri  64113
     Associated with Republic Real Estate, engaged in real estate management and
investment; formerly, Director of The Vendo Company, a manufacturer and
distributor of vending machines.

ELEANOR B. SCHWARTZ
5100 Rockhill Road
Kansas City, Missouri 64113
     Chancellor, University of Missouri-Kansas City; formerly, Interim
Chancellor, University of Missouri-Kansas City; formerly, Vice Chancellor for
Academic Affairs, University of Missouri-Kansas City.

FREDERICK VOGEL III
1805 West Bradley Road
Milwaukee, Wisconsin  53217
     Retired.

PAUL S. WISE
P. O. Box 5248
8648 Silver Saddle Drive
Carefree, Arizona  85377
     Director of Potash Corporation of Saskatchewan.

LESLIE S. WRIGHT
2302 Brookshire Place
Birmingham, Alabama  35213
     Chancellor of Samford University; formerly, Director of City Federal
Savings and Loan.

Robert L. Hechler
     Vice President and Principal Financial Officer of the Fund and each of the
other funds in the Fund Complex; Vice President, Chief Operations Officer,
Director and Treasurer of Waddell & Reed Financial Services, Inc.; Executive
Vice President, Principal Financial Officer, Director and Treasurer of WRIMCO;
President, Chief Executive Officer, Principal Financial Officer, Director and
Treasurer of Waddell & Reed, Inc.; Director and Treasurer of Waddell & Reed
Asset Management Company; President, Director and Treasurer of Waddell & Reed
Services Company; Vice President, Treasurer and Director of Torchmark
Distributors, Inc.

Henry J. Herrmann
     Vice President of the Fund and each of the other funds in the Fund Complex;
Vice President, Chief Investment Officer and Director of Waddell & Reed
Financial Services, Inc.; Director of Waddell & Reed, Inc.; President, Chief
Executive Officer, Chief Investment Officer and Director of WRIMCO and Waddell &
Reed Asset Management Company; Senior Vice President and Chief Investment
Officer of United Investors Management Company.

Theodore W. Howard
     Vice President, Treasurer and Principal Accounting Officer of the Fund and
each of the other funds in the Fund Complex; Vice President of Waddell & Reed
Services Company.

Sharon K. Pappas
     Vice President, Secretary and General Counsel of the Fund and each of the
other funds in the Fund Complex; Vice President, Secretary and General Counsel
of Waddell & Reed Financial Services, Inc.; Senior Vice President, Secretary and
General Counsel of WRIMCO and Waddell & Reed, Inc.; Director, Senior Vice
President, Secretary and General Counsel of Waddell & Reed Services Company;
Director, Secretary and General Counsel of Waddell & Reed Asset Management
Company; Vice President, Secretary and General Counsel of Torchmark
Distributors, Inc.; formerly, Assistant General Counsel of WRIMCO, Waddell &
Reed Financial Services, Inc., Waddell & Reed, Inc., Waddell & Reed Asset
Management Company and Waddell & Reed Services Company.

Michael L. Avery
     Vice President of the Fund; Vice President of WRIMCO; formerly, Vice
President of Waddell & Reed, Inc.

John M. Holliday
     Vice President of the Fund and nine other funds in the Fund Complex; Senior
Vice President of WRIMCO and of Waddell & Reed Asset Management Company;
formerly, Senior Vice President of Waddell & Reed, Inc.

Carl E. Sturgeon
     Vice President of the Fund and eleven other funds in the Fund Complex; Vice
President of WRIMCO; formerly, Vice President of Waddell & Reed, Inc.

     The address of each person is 6300 Lamar Avenue, P.O. Box 29217, Shawnee
Mission, Kansas 66201-9217 unless a different address is given.

     As of the date of this SAI, five of the Fund's Directors may be deemed to
be "interested persons" as defined in the 1940 Act of its underwriter, Waddell &
Reed, Inc., or of WRIMCO.  The Directors who may be deemed to be "interested
persons" are indicated as such by an asterisk.

     The Board of Directors has created an honorary position of Director
Emeritus, which position a director may elect after resignation from the Board
provided the director has attained the age of 75 and has served as a director of
the funds in the United Group for a total of at least five years.  A Director
Emeritus receives fees in recognition of his past services whether or not
services are rendered in his capacity as Director Emeritus, but has no authority
or responsibility with respect to management of the Fund.  Currently no person
serves as Director Emeritus.

     The funds in the United Group (with exception of United Asset Strategy
Fund, Inc.), TMK/United Funds, Inc. and Waddell & Reed Funds, Inc. pay to each
Director a total of $40,000 per year, plus $1,000 for each meeting of the Board
of Directors attended (effective April 1, 1996, the fee will be $44,000 per
year, plus $1,000 for each meeting attended) and $500 for each committee meeting
attended which is not in conjunction with a Board of Directors meeting, other
than Directors who are affiliates of Waddell & Reed, Inc.  The fees to the
Directors who receive them are divided among the funds in the United Group,
TMK/United Funds, Inc. and Waddell & Reed Funds, Inc. based on their relative
size.  The officers are paid by WRIMCO or its affiliates.

     During the Fund's fiscal year ended December 31, 1995, the Fund's Directors
received the following fees for service as a director:

                               Compensation Table

                                         Pension
                                      or Retirement      Total
                         Aggregate       Benefits     Compensation
                        Compensation    Accrued As     From Fund
                            From       Part of Fund     and Fund
Director                    Fund         Expenses       Complex
                        ------------  --------------  ------------
Ronald K. Richey            $  0             $0        $     0
Keith A Tucker                 0              0              0
Henry L. Bellmon             125              0         45,000
Dodds I. Buchanan            125              0         45,000
Jay B. Dillingham            125              0         45,000
Linda Graves                  29              0         12,000
John F. Hayes                125              0         45,000
Glendon E. Johnson           125              0         45,000
James B. Judd                 26              0         11,000
William T. Morgan            125              0         45,000
Doyle Patterson              125              0         45,000
Eleanor B. Schwartz           29              0         12,000
Frederick Vogel III          125              0         45,000
Paul S. Wise                 125              0         45,000
Leslie S. Wright             117              0         42,000

Shareholdings

     As of January 31, 1996, all of the Fund's Directors and officers as a group
owned less than 1% of the outstanding shares of the Fund.  As of such date no
person owned of record or was known by the Fund to own beneficially 5% or more
of the Fund's outstanding shares.

                            PAYMENTS TO SHAREHOLDERS

General

     There are three sources for the payments the Fund makes to you as a
shareholder of a class of shares of the Fund, other than payments when you
redeem your shares.  The first source is net investment income, which is derived
from the dividends, interest and earned discount on the securities the Fund
holds, less expenses (which will vary by class).  The second source is realized
capital gains, which are derived from the proceeds received from the sale of
securities at a price higher than the Fund's tax basis (usually cost) in such
securities; these gains can be either long-term or short-term, depending on how
long the Fund has owned the securities before it sells them.  The third source
is net realized gains from foreign currency transactions.  The payments made to
shareholders from net investment income, net short-term capital gains and net
realized gains from certain foreign currency transactions are called dividends.
Payments, if any, from long-term capital gains are called distributions.

     The Fund pays distributions only if it has net realized capital gains (the
excess of net long-term capital gains over net short-term capital losses).  It
may or may not have such gains, depending on whether securities are sold and at
what price.  If the Fund has net realized capital gains, it will ordinarily pay
distributions once each year, in the latter part of the fourth calendar quarter.
Even if the Fund has capital gains for a year, the Fund does not pay out the
gains if it has applicable prior year losses to offset the gains.

Choices You Have on Your Dividends and Distributions

     On your application form, you can give instructions that (i) you want cash
for your dividends and distributions, (ii) you want your dividends and
distributions paid in shares of the Fund of the same class as that with respect
to which they were paid or (iii) you want cash for your dividends and want your
distributions paid in shares of the Fund of the same class as that with respect
to which they were paid.  You can change your instructions at any time.  If you
give no instructions, your dividends and distributions will be paid in shares of
the Fund of the same class as that with respect to which they were paid.  All
payments in shares are at net asset value without any sales charge.  The net
asset value used for this purpose is that computed as of the record date for the
dividend or distribution, although this could be changed by the Board of
Directors.

     Even if you get dividends and distributions on Class A shares in cash, you
can thereafter reinvest them (or distributions only) in Class A shares of the
Fund at net asset value (i.e., with no sales charge) next determined after
receipt by Waddell & Reed, Inc. of the amount clearly identified as a
reinvestment.  The reinvestment must be within 45 days after the payment.

                                     TAXES

General

     In order to continue to qualify for treatment as a regulated investment
company ("RIC") under the Code, the Fund must distribute to its shareholders for
each taxable year at least 90% of its investment company taxable income
(consisting generally of  net investment income, net short-term capital gains
and net gains from certain foreign currency transactions) and must meet several
additional requirements.  These requirements include the following:  (1) the
Fund 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 or forward contracts) derived with
respect to its business of investing in securities or those currencies ("Income
Requirement"); (2) the Fund must derive less than 30% of its gross income each
taxable year from the sale or other disposition of securities, or any of the
following, that were held for less than three months -- (i) options, futures or
forward contracts (other than those on foreign currencies), or (ii) foreign
currencies (or options, futures or forward contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
in options and futures with respect to securities) ("Short-Short Limitation");
(3) at the close of each quarter of the Fund'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 Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities ("50% Diversification
Requirement"); and (4) at the close of each quarter of the Fund'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.

     Investments in precious metals would have adverse tax consequences for the
Fund and its shareholders if it either (1) derived more than 10% of its gross
income in any taxable year from the disposition of precious metals and from
other income that does qualify under the Income Requirement or (2) held precious
metals in such quantities that the Fund failed to satisfy the 50%
Diversification Requirement for any quarter.  The Fund intends to manage its
portfolio so as to avoid failing to satisfy those requirements for these
reasons.

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

     If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any distributions received on those shares.  Investors also should
be aware that if shares are purchased shortly before the record date for a
dividend or distribution, the purchaser will receive some portion of the
purchase price back as a taxable dividend or distribution.

     The Fund 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 gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.

     It is the Fund's policy to pay sufficient dividends and distributions each
year to avoid imposition of the Excise Tax.  The Fund may defer into the next
calendar year net capital losses incurred between each November 1 and the end of
the current calendar year.

Income from Foreign Securities

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

     The Fund may invest in the stock of "passive foreign investment companies"
("PFICs").  A PFIC is a foreign corporation that, 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, the Fund 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 Fund distributes the PFIC income as
a taxable dividend to its shareholders.  The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders.

     If the Fund 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 Fund would be required to include in income each year its pro
rata share of the QEF's annual ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
would have to be distributed to satisfy the Distribution Requirement and to
avoid imposition of the Excise Tax -- even if those earnings and gain were not
received by the Fund.  In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.

     Proposed regulations have been published pursuant to which open-end RICs,
such as the Fund, would be entitled to elect to "mark-to-market" their stock in
certain PFICs.  "Marking-to-market," in this context, means recognizing as gain
for each taxable year the excess, as of the end of that year, of the fair market
value of such a PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).

Foreign Currency Gains and Losses

     Gains or losses (1) from the disposition of foreign currencies, (2) from
the disposition of a debt security denominated in a foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time
the Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally are treated
as ordinary income or loss.  These gains or losses, referred to under the Code
as "section 988" gains or losses, may increase or decrease the amount of the
Fund's investment company taxable income to be distributed to its shareholders.

Income from Options, Futures and Currencies

     The use of hedging strategies, such as writing (selling) and purchasing
options and futures and entering into forward contracts, involves complex rules
that will determine for income tax purposes the character and timing of
recognition of the gains and losses the Fund realizes in connection therewith.
Income from foreign currencies (except certain gains therefrom that may be
excluded by future regulations), and income from transactions in options,
futures and forward contracts derived by the Fund with respect to its business
of investing in securities, will qualify as permissible income under the Income
Requirement.  However, income from the disposition of options, futures and
forward contracts (other than those on foreign currencies) will be subject to
the Short-Short Limitation if they are held for less than three months.  Income
from the disposition of foreign currencies, and options, futures and forward
contracts thereon, that are not directly related to the Fund's principal
business of investing in securities (or options and futures with respect to
securities) also will be subject to the Short-Short Limitation if they are held
for less than three months.

     If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation.  Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation.  The
Fund intends that, when it engages in hedging transactions, they will qualify
for this treatment, but at the present time it is not clear whether this
treatment will be available for all the Fund's hedging transactions.  To the
extent this treatment is not available, the Fund may be forced to defer the
closing out of certain options, futures and forward contracts beyond the time
when it otherwise would be advantageous to do so, in order for the Fund to
continue to qualify as a RIC.

     Any income the Fund earns from writing options is taxed as short-term
capital gain.  If the Fund 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 the Fund expires without being
exercised, the premium it received also will be a short-term capital gain.  If
such an option is exercised and the Fund thus sells the securities subject to
the option, the premium the Fund receives will be added to the exercise price to
determine the gain or loss on the sale.  The Fund will not write so many options
that it could fail to continue to qualify as a RIC.

     Certain options and futures contracts in which the Fund may invest may be
"section 1256 contracts."  Section 1256 contracts held by the Fund at the end of
each taxable year, other than section 1256 contracts that are part of a "mixed
straddle" with respect to which the Fund has made an election not to have the
following rules apply, are "marked-to-market" (that is, treated as sold 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 gain or loss recognized on these deemed sales, and 60% of any
net realized gain or loss from any actual sales of section 1256 contracts, are
treated as long-term capital gain or loss, and the balance is treated as short-
term capital gain or loss.  Section 1256 contracts also may be marked-to-market
for purposes of the Excise Tax and for other purposes.

     Code section 1092 (dealing with straddles) also may affect the taxation of
options and futures contracts in which the Fund may invest.  Section 1092
defines a "straddle" as offsetting positions with respect to personal property;
for these purposes, options and futures 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.  Section 1092 also provides
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 the Fund 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 the Fund are not entirely clear.

     The Fund may acquire zero coupon or other securities issued with original
issue discount.  As a holder of those securities, the Fund must include in its
income any original issue discount that accrues on the securities during the
year.  Because the Fund annually must distribute substantially all of its
investment company taxable income, including any original issue discount, in
order to satisfy the distribution requirement required above and avoid
imposition of the Excise Tax, it may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives.  Those distributions will be made from the Fund's cash
assets or from the proceeds of sales of portfolio securities, if necessary.  The
Fund may realize capital gains or losses from those sales, which would increase
or decrease its investment company taxable income and/or net capital gain.  In
addition, any such gains may be realized on the disposition of securities held
for less than three months.  Because of the Short-Short Limitation, any such
gains would reduce the Fund's ability to sell other securities or certain
options, futures or forward contracts held for less than three months that it
might wish to sell in the ordinary course of its portfolio management.

                      PORTFOLIO TRANSACTIONS AND BROKERAGE

     One of the duties undertaken by WRIMCO pursuant to the Management Agreement
is to arrange the purchase and sale of securities for the portfolio of the Fund.
Transactions in securities other than those for which an exchange is the primary
market are generally done 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.  The individual who manages the Fund
may manage other advisory accounts with similar investment objectives.  It can
be anticipated that the manager will frequently place concurrent orders for all
or most accounts which the manager has responsibility.  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.

     To effect the portfolio transactions of the Fund, WRIMCO is authorized to
engage broker-dealers ("brokers") which, in its best judgment based on all
relevant factors, will implement the policy of the Fund to achieve "best
execution" (prompt and reliable execution at the best price obtainable) for
reasonable and competitive commissions.  WRIMCO 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 Fund.  Subject to
review by the Board of Directors, 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 ("brokerage services")
considered by WRIMCO to be useful or desirable for its investment management of
the Fund and/or the other funds and accounts over which WRIMCO or its affiliates
have investment discretion.

     Brokerage services are, in general, defined by reference to Section 28(e)
of the Securities Exchange Act of 1934 as including (i) 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; (ii) furnishing analyses
and reports; or (iii) 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 brokerage services may be
higher than another qualified broker would charge for effecting comparable
transactions if a good faith determination is made by WRIMCO that the commission
is reasonable in relation to the brokerage services provided. Subject to the
foregoing considerations WRIMCO may also consider the willingness of particular
brokers and dealers to sell shares of the Fund and other funds managed by WRIMCO
and its affiliates as a factor in its selection.  No allocation of brokerage or
principal business is made to provide any other benefits to WRIMCO 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 WRIMCO and its affiliates and
investment research received for the commissions of those other accounts may be
useful both to the Fund and one or more of such other accounts.  To the extent
that electronic or other products provided by such brokers to assist WRIMCO 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 by WRIMCO.

     Such investment research (which may be supplied by a third party at the
instance 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 WRIMCO;
serves to make available additional views for consideration and comparisons; and
enables WRIMCO to obtain market information on the price of securities held in
the Fund's portfolio or being considered for purchase.

     In placing transactions for the Fund's portfolio, WRIMCO may consider sales
of shares of the Fund and other funds managed by WRIMCO and its affiliates as a
factor in the selection of brokers to execute portfolio transactions.  WRIMCO
intends to allocate brokerage on the basis of this factor only if the sale is $2
million or more and there is no sales charge.  This results in the consideration
only of sales which by their nature would not ordinarily be made by Waddell &
Reed, Inc.'s direct sales force and is done in order to prevent the direct sales
force from being disadvantaged by the fact that it cannot participate in Fund
brokerage.

     During the Fund's fiscal years ended December 31, 1995, 1994 and 1993, the
Fund paid brokerage commissions of $195,904, $69,862 and $136,655, respectively.
These figures do not include principal transactions or spreads or concessions on
principal transactions, i.e., those in which the Fund sells securities to a
broker-dealer firm or buys from a broker-dealer firm securities owned by it.

     During the Fund's fiscal year ended December 31, 1995, the transactions,
other than principal transactions, which were directed to broker-dealers who
provided research as well as execution totaled $21,231,500 on which $87,980 in
brokerage commissions were paid.  These transactions were allocated to these
broker-dealers by the internal allocation procedures described above.

     The Fund, WRIMCO and Waddell & Reed, Inc. have adopted a Code of Ethics
which imposes restrictions on the personal investment activities of their
employees, officers and interested directors.

Buying and Selling With Other Funds

     The Fund and one or more of the other funds in the United Group, TMK/United
Funds, Inc. and Waddell & Reed Funds, Inc. or accounts over which Waddell & Reed
Asset Management Company exercises investment discretion frequently buy or sell
the same securities at the same time.  If this happens, the amount of each
purchase or sale is divided.  This is done on the basis of the amount of
securities each fund or account wanted to buy or sell.  Sharing in large
transactions could affect the price the Fund pays or receives or the amount it
buys or sells.  However, sometimes a better negotiated commission is available.

                               OTHER INFORMATION

The Shares of the Fund

     The Fund offers two classes of shares:  Class A and Class Y.  Prior to
February 19, 1996, the Fund offered only one class of shares to the public.
Shares outstanding on that date were designated as Class A shares.  Each class
represents an interest in the same assets of the Fund and differ as follows:
each class of shares has exclusive voting rights on matters pertaining to
matters appropriately limited to that class; Class A shares are subject to an
initial sales charge and to an ongoing service fee; each class may bear
differing amounts of certain class-specific expenses; and each class has a
separate exchange privilege.  The Fund does not anticipate that there will be
any conflicts between the interests of holders of the different classes of
shares of the Fund by virtue of those classes.  On an ongoing basis, the Board
of Directors will consider whether any such conflict exists and, if so, take
appropriate action.  Each share of the Fund is entitled to equal voting,
dividend, liquidation and redemption rights, except that due to the differing
expenses borne by the two classes, dividends and liquidation proceeds of Class A
shares are expected to be lower than for Class Y shares of the Fund.  Each
fractional share of a class has the same rights, in proportion, as a full share
of that class.

<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
DECEMBER 31, 1995

                                                Troy
                                              Ounces        Value

BULLION
 Gold*  ..................................     7,447  $ 2,890,449
 Platinum*  ..............................     2,145      854,139

TOTAL BULLION - 11.44%                                $ 3,744,588
 (Cost: $3,772,826)

                                              Shares

COMMON STOCKS
Gold
 Australia - 5.99%
 Acacia Resources Limited*  ..............   300,000      539,636
 Golden Shamrock Mines Limited*  .........   500,000      308,470
 Plutonic Resources Limited  .............   100,000      475,712
 PosGold Limited  ........................   213,000      424,305
 Ranger Minerals NL*  ....................   100,000      211,840
   Total .................................              1,959,963

 Canada - 7.66%
 Agnico-Eagle Mines Limited  .............    45,500      574,438
 Euro-Nevada Mining Corporation Limited  .    13,600      495,569
 Franco-Nevada Mining Corporation Limited      9,800      572,438
 Hemlo Gold Mines Inc.  ..................    35,000      328,125
 Placer Dome Inc.  .......................    15,000      361,875
 TVX Gold Inc.*  .........................    25,000      176,243
   Total .................................              2,508,688

 United States - 9.06%
 Battle Mountain Gold Company  ...........   100,000      850,000
 Homestake Mining Company  ...............    50,000      781,250
 Newmont Gold Company  ...................    30,500    1,334,375
   Total .................................              2,965,625

Total Gold - 22.71%                                     7,434,276

Metals - 1.29%
 United States
 Freeport-McMoRan Copper & Gold Inc.  ....    15,000      421,875


                See Notes to Schedule of Investments on page 66.

<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
DECEMBER 31, 1995

                                              Shares        Value

COMMON STOCKS (Continued)
Miscellaneous
 Domestic Oil - 0.26%
 Enron Oil & Gas Company  ................     3,500  $    84,000

 Public Utilities - Pipelines - 0.27%
 Sonat Inc.  .............................     2,500       89,063

Total Miscellaneous - 0.53%                               173,063

TOTAL COMMON STOCKS - 24.53%                          $ 8,029,214
 (Cost: $7,335,145)

                                           Principal
                                           Amount in
                                           Thousands

UNITED STATES GOVERNMENT SECURITIES
 United States Treasury:
   6.25%, 5-31-2000 ......................    $1,000    1,033,590
   5.875%, 6-30-2000 .....................     4,000    4,081,240
   7.25%, 8-15-2004 ......................     2,000    2,224,060
   7.875%, 11-15-2004 ....................     4,000    4,630,000
   8.875%, 8-15-2017 .....................     3,000    4,018,110
   8.875%, 2-15-2019 .....................     3,000    4,043,910

TOTAL UNITED STATES GOVERNMENT SECURITIES - 61.19%    $20,030,910
 (Cost: $18,320,775)

TOTAL SHORT-TERM SECURITIES - 1.99%
Repurchase Agreements
 J. P. Morgan Securities, 5.6%
   Repurchase Agreement dated
   12-29-95, to be repurchased
   at $650,404 on 1-2-96** ...............       650  $   650,000
 (Cost: $650,000)

TOTAL INVESTMENTS - 99.15%                            $32,454,712
 (Cost: $30,078,746)

CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.85%         277,916

NET ASSETS - 100.00%                                  $32,732,628


                See Notes to Schedule of Investments on page 66.

<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
DECEMBER 31, 1995


Notes To Schedule Of Investments

 *Non-income producing.

**Collateralized by $483,000 U.S. Treasury Notes, 8.875% due 2-15-2019, market
  value and accrued interest aggregate $667,211.

See Note 1 to financial statements for security valuation and other significant
  accounting policies concerning investments.

See Note 3 to financial statements for cost and unrealized appreciation and
  depreciation of investments owned for Federal income tax purposes.

<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995

Assets
 Investments -- at value (Notes 1 and 3):
   Bullion (cost -- $3,772,826) ....................  $ 3,744,588
   Securities (cost -- $26,305,920) ................   28,710,124
                                                      -----------
                                                       32,454,712
 Cash  .............................................        4,914
 Receivable for interest and dividends  ............      421,366
 Prepaid insurance premium  ........................        9,847
                                                      -----------
    Total assets  ..................................   32,890,839
                                                      -----------
Liabilities
 Payable for Fund shares redeemed  .................      114,199
 Accrued transfer agency and dividend disbursing  ..       14,145
 Accrued service fee ...............................        5,888
 Accrued accounting services fee  ..................        1,667
 Other  ............................................       22,312
                                                      -----------
    Total liabilities  .............................      158,211
                                                      -----------
      Total net assets .............................  $32,732,628
                                                      ===========
Net Assets
 $1.00 par value capital stock, authorized --
   100,000,000; shares outstanding -- 3,742,294
   Capital stock ...................................  $ 3,742,294
   Additional paid-in capital ......................   54,740,556
 Accumulated undistributed income (loss):
   Accumulated undistributed net investment income .          420
   Accumulated net realized loss on investment
    transactions  ..................................  (28,126,593)
   Net unrealized appreciation in value of
    investments at end of period  ..................    2,375,951
                                                      -----------
    Net assets applicable to outstanding units
      of capital....................................  $32,732,628
                                                      ===========
Net asset value per share (net assets divided by
 shares outstanding)  ..............................        $8.75
Sales load (offering price x 5.75%) ................          .53
                                                            -----
Offering price per share (net asset value
 divided by 94.25%)  ...............................        $9.28
                                                            =====
                  On sales of $100,000 or more the sales load
                   is reduced as set forth in the Prospectus.


                       See notes to financial statements.

<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended DECEMBER 31, 1995

Investment Income
 Income:
   Interest ........................................   $1,321,485
   Dividends .......................................      153,409
                                                       ----------
    Total income  ..................................    1,474,894
                                                       ----------
 Expenses (Note 2):
   Investment management fee .......................      249,509
   Transfer agency and dividend disbursing .........      167,663
   Service fee .....................................       54,875
   Accounting services fee .........................       20,000
   Custodian fees ..................................       17,488
   Audit fees ......................................       12,785
   Legal fees ......................................       11,210
   Other ...........................................       47,786
                                                       ----------
    Total expenses  ................................      581,316
                                                       ----------
      Net investment income ........................      893,578
                                                       ----------

Realized and Unrealized Gain (Loss) on Investments
 Realized net gain on bullion  .....................        3,044
 Realized net gain on securities  ..................    3,254,482
 Realized net gain on foreign
   currency transactions ...........................          322
                                                       ----------
   Realized net gain on investments ................    3,257,848
                                                       ----------
 Unrealized depreciation in value of bullion
   during the period ...............................       (7,421)
 Unrealized depreciation in value of securities
   during the period ...............................     (955,881)
                                                       ----------
   Unrealized depreciation in value of investments
    during the period  .............................     (963,302)
                                                       ----------
      Net gain on investments ......................    2,294,546
                                                       ----------
       Net increase in net assets resulting from
         operations ................................   $3,188,124
                                                       ==========


                       See notes to financial statements.

<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS

                                              For the fiscal year
                                               ended December 31,
                                          -----------------------
                                              1995        1994
                                         -----------  -----------
Decrease in Net Assets
 Operations:
   Net investment income ............... $   893,578  $   248,353
   Realized net gain on investments ....   3,257,848    3,604,960
   Unrealized depreciation .............    (963,302)(12,222,484)
                                         -----------  -----------
    Net increase (decrease) in net
      assets resulting from
      operations .......................   3,188,124   (8,369,171)
                                         -----------  -----------
 Dividends to shareholders from
   net investment income* ..............    (900,579)    (249,300)
                                         -----------  -----------
 Capital share transactions:
   Proceeds from sale of shares
    (3,052,102 and 1,361,695 shares,
    respectively) ......................  25,203,531   12,898,882
   Proceeds from reinvestment of
    dividends (102,634 and 28,118
    shares, respectively)  .............     885,915      245,912
   Payments for shares redeemed
    (3,983,888 and 1,522,587 shares,
    respectively) ...................... (33,066,367) (14,012,232)
                                         -----------  -----------
    Net decrease in net assets
      resulting from capital
      share transactions ...............  (6,976,921)    (867,438)
                                         -----------  -----------
      Total decrease ...................  (4,689,376)  (9,485,909)
Net Assets
 Beginning of period  ..................  37,422,004   46,907,913
                                         -----------  -----------
 End of period, including undistributed
   net investment income of $420 and
   $7,099, respectively ................ $32,732,628  $37,422,004
                                         ===========  ===========


                    *See "Financial Highlights" on page 70.

                       See notes to financial statements.

<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
FINANCIAL HIGHLIGHTS
For a Share of Capital Stock Outstanding
Throughout Each Period:

                             For the fiscal year ended December 31,
                           --------------------------------------
                               1995   1994    1993   1992    1991
                             ------ ------  ------ ------  ------
Net asset value,
 beginning of
 period  ...........          $8.19  $9.97   $5.70  $6.63   $6.68
                              -----  -----   -----  -----   -----
Income from investment
 operations:
 Net investment
   income...........           0.24   0.05    0.04   0.06    0.15
 Net realized and
   unrealized gain
   (loss) on
   investments .....           0.56  (1.78)   4.27  (0.93)  (0.05)
                              -----  -----   -----  -----   -----
Total from investment
 operations  .......           0.80  (1.73)   4.31  (0.87)   0.10
                              -----  -----   -----  -----   -----
Less dividends from
 net investment
 income  ...........          (0.24) (0.05)  (0.04) (0.06)  (0.15)
                              -----  -----   -----  -----   -----
Net asset value,
 end of period .....          $8.75  $8.19   $9.97  $5.70   $6.63
                              =====  =====   =====  =====   =====
Total return* ......           9.80%-17.36%  75.82%-13.18%   1.47%
Net assets, end
 of period (000
 omitted)  .........        $32,733$37,422 $46,908$27,136 $40,587
Ratio of expenses
 to average net
 assets  ...........           1.66%  1.59%   1.69%  1.88%   1.57%
Ratio of net invest-
 ment income to average
 net assets  .......           2.55%  0.57%   0.48%   .90%   2.11%
Portfolio turnover
 rate**  ...........         164.21% 64.89%  84.00% 61.50% 112.80%

   *Total return calculated without taking into account the sales
    load deducted on an initial purchase.
  **This rate is, in general, calculated by dividing the average
    value of the Fund's portfolio securities during the period into
    the lesser of its purchases or sales of securities in the period,
    excluding short-term securities and bullion.

                       See notes to financial statements.

<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

NOTE 1 -- Significant Accounting Policies

     United Gold & Government Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company.  Its investment objective is to seek a high total return through
investments in precious metals, minerals-related securities or U.S. Government
Securities.  The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.  The policies are in conformity with generally accepted accounting
principles.

A.   Security valuation -- Each stock and convertible bond is valued at the
     latest sale price thereof on the last business day of the fiscal period as
     reported by the principal securities exchange on which the issue is traded
     or, if no sale is reported for a stock, the average of the latest bid and
     asked prices.  Bonds, other than convertible bonds, are valued using a
     pricing system provided by a major dealer in bonds.  Convertible bonds are
     valued using this pricing system only on days when there is no sale
     reported.  Stocks which are traded over-the-counter are priced using Nasdaq
     (National Association of Securities Dealers Automated Quotations) which
     provides information on bid and asked or closing prices quoted by major
     dealers in such stocks.  Gold and silver bullion are valued at the last
     spot settlement price for current delivery as calculated by the Commodity
     Exchange, Inc. as of the close of that Exchange.  Platinum bullion is
     valued at the last spot settlement price for current delivery as calculated
     by the New York Mercantile Exchange as of the close of that Exchange.
     Securities for which quotations are not readily available are valued as
     determined in good faith in accordance with procedures established by and
     under the general supervision of the Fund's Board of Directors.  Short-term
     debt securities are valued at amortized cost, which approximates market.

B.   Security transactions and related investment income -- Security
     transactions are accounted for on the trade date (date the order to buy or
     sell is executed).  Securities gains and losses are calculated on the
     identified cost basis.  Original issue discount (as defined in the Internal
     Revenue Code), premiums on the purchase of bonds and post-1984 market
     discount are amortized for both financial and tax reporting purposes over
     the remaining lives of the bonds.  Dividend income is recorded on the ex-
     dividend date except that certain dividends from foreign securities are
     recorded as soon as the Fund is informed of the ex-dividend date.  Interest
     income is recorded on the accrual basis.  See Note 3 -- Investment
     Securities Transactions.

C.   Foreign currency translations -- All assets and liabilities denominated in
     foreign currencies are translated into U.S. dollars daily.  Purchases and
     sales of investment securities and accruals of income and expenses are
     translated at the rate of exchange prevailing on the date of the
     transaction.  For assets and liabilities other than investments in
     securities and bullion, net realized and unrealized gains and losses from
     foreign currency translations arise from changes in currency exchange
     rates.  The Fund combines fluctuations from currency exchange rates and
     fluctuations in market value when computing net realized and unrealized
     gain or loss from investments.

D.   Federal income taxes -- It is the Fund's policy to distribute all of its
     taxable income and capital gains to its shareholders and otherwise qualify
     as a regulated investment company under the Internal Revenue Code.  In
     addition, the Fund intends to pay distributions as required to avoid
     imposition of excise tax.  Accordingly, provision has not been made for
     Federal income taxes.  See Note 4 -- Federal Income Tax Matters.

E.   Dividends and distributions -- Dividends and distributions to shareholders
     are recorded by the Fund on the record date.  Net investment income
     distributions and capital gains distributions are determined in accordance
     with income tax regulations which may differ from generally accepted
     accounting principles.  These differences are due to differing treatments
     for items such as deferral of wash sales and post-October losses, foreign
     currency transactions, net operating losses and expiring capital loss
     carryforwards.

F.   Repurchase agreements -- Repurchase agreements are collateralized by the
     value of the resold securities which, during the entire period of the
     agreement, remains at least equal to the value of the loan, including
     accrued interest thereon.  The collateral for the repurchase agreement is
     held by the Fund's custodian bank.

G.   The preparation of financial statements in accordance with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts and disclosures in the
     financial statements.  Actual results could differ from those estimates.

NOTE 2 -- Investment Management and Payments to Affiliated Persons

     The Fund pays a fee for investment management services.  The fee is
computed daily based on the net asset value at the close of business.  The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .30% of net assets and (ii)
a "Group" fee computed each day on the combined net asset values of all of the
funds in the United Group of mutual funds (approximately $13.6 billion of
combined net assets at December 31, 1995) at annual rates of .51% of the first
$750 million of combined net assets, .49% on that amount between $750 million
and $1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between
$2.25 billion and $3 billion, .43% between $3 billion and $3.75 billion, .40%
between $3.75 billion and $7.5 billion, .38% between $7.5 billion and $12
billion, and .36% of that amount over $12 billion.  The Fund accrues and pays
this fee daily.

     Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.

     The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R.  Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund.  For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.

                            Accounting Services Fee
                  Average
               Net Asset Level            Annual Fee
          (all dollars in millions) Rate for Each Level
          ------------------------- -------------------
           From $    0 to $   10             $      0
           From $   10 to $   25             $ 10,000
           From $   25 to $   50             $ 20,000
           From $   50 to $  100             $ 30,000
           From $  100 to $  200             $ 40,000
           From $  200 to $  350             $ 50,000
           From $  350 to $  550             $ 60,000
           From $  550 to $  750             $ 70,000
           From $  750 to $1,000             $ 85,000
                $1,000 and Over              $100,000

     At present, the Fund operates under state expense requirements which limit
the amount of aggregate annual expenses, adjusted for certain excess expenses,
that the Fund may incur during its fiscal year.  The Manager will reimburse the
Fund for any expenses in excess of the limitation.  No such reimbursement is
required for the period ended December 31, 1995.

     The Fund pays WARSCO a per account charge for transfer agency and dividend
disbursement services of $1.0208 for each shareholder account which was in
existence at any time during the prior month, plus $0.30 for each account on
which a dividend or distribution of cash or shares had a record date in that
month.  The Fund also reimburses W&R and WARSCO for certain out-of-pocket costs.

     As principal underwriter for the Fund's shares, W&R received  direct and
indirect gross sales commissions (which are not an expense of the Fund) of
$58,922, out of which W&R paid sales commissions of $31,600 and all expenses in
connection with the sale of Fund shares, except for registration fees and
related expenses.

     Under a Service Plan adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund may pay monthly a fee to W&R in an
amount not to exceed .25% of the Fund's average annual net assets.  The fee is
to be paid to reimburse W&R for amounts it expends in connection with the
provision of personal services to Fund shareholders and/or maintenance of
shareholder accounts.

     The Fund paid Directors' fees of $1,405.

     W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.

NOTE 3 -- Investment Securities Transactions

     Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $17,108,702 while proceeds from maturities and sales
aggregated $36,577,729.  Purchases of bullion aggregated $2,347,061 while
proceeds from the sale of bullion aggregated $1,203,168.  Purchases of short-
term securities and U.S. Government securities aggregated $1,317,665,959 and
$28,487,500, respectively.  Proceeds from maturities and sales of short-term
securities and U.S. Government securities aggregated $1,325,820,000 and
$10,643,984, respectively.

     For Federal income tax purposes, cost of investments owned at December 31,
1995 was $30,078,746, resulting in net unrealized appreciation of $2,375,966, of
which $2,719,820 related to appreciated securities and $343,854 related to
depreciated securities.

NOTE 4 -- Federal Income Tax Matters

     For Federal income tax purposes, the Fund realized capital gains of
$3,257,525 during the year ended December 31, 1995.  These capital gains were
entirely offset by utilization of capital loss carryforwards.  Remaining prior
year capital loss carryforwards aggregated $28,126,593 at December 31, 1995 and
are available to offset future capital gain net income through December 31,
1996; $11,894,711 of this amount is available through December 31, 1997:
$11,331,322 is available through December 31, 1998; $6,823,792 is available
through December 31, 1999 and $4,958,441 is available through December 31, 2000.

<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of
  United Gold & Government Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United Gold & Government Fund, Inc.
(the "Fund") at December 31, 1995, the results of its operations for the year
then ended and the changes in its net assets and the financial highlights for
each of the periods indicated, in conformity with generally accepted accounting
principles.  These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits.  We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation.  We believe that our audits, which included
confirmation of portfolio positions at December 31, 1995 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above.



Price Waterhouse LLP
Kansas City, Missouri
February 8, 1996