File No. 33-98358
                                                         Rule 497(c)

                             VAN WAGONER FUNDS, INC.

                       STATEMENT OF ADDITIONAL INFORMATION

                                    for the

                              Emerging Growth Fund

                                 Micro-Cap Fund

                                  Mid-Cap Fund







        This Statement of Additional Information dated December 31, 1995, is
   meant to be read in conjunction with the Van Wagoner Funds' Prospectus
   dated December 31, 1995, for the Emerging Growth Fund, Micro-Cap Fund, and
   Mid-Cap Fund (collectively referred to as the "Funds") and is incorporated
   by reference in its entirety into the Prospectus.  Because this Statement
   of Additional Information is not itself a prospectus, no investment in
   shares of these Funds should be made solely upon the information contained
   herein.  Copies of the Prospectus for the Funds may be obtained by writing
   Van Wagoner Funds, Inc., P.O. Box 1628, Milwaukee, Wisconsin 53201-1628. 
   Capitalized terms used but not defined herein have the same meanings as in
   the Prospectus.

   

                                TABLE OF CONTENTS
                                                               Page

   ADDITIONAL INVESTMENT INFORMATION . . . . . . . . . .         3
   INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . .        12
   ADDITIONAL COMPANY INFORMATION  . . . . . . . . . . .        15
        Directors and Officers . . . . . . . . . . . . .        15
        Principal Shareholder  . . . . . . . . . . . . .        16
        Investment Adviser . . . . . . . . . . . . . . .        16
        Administrator  . . . . . . . . . . . . . . . . .        17
        Custodian, Transfer Agent and 
          Dividend Paying Agent  . . . . . . . . . . . .        18
        Legal Counsel  . . . . . . . . . . . . . . . . .        18
        Independent Accountants  . . . . . . . . . . . .        18
   DISTRIBUTION OF SHARES  . . . . . . . . . . . . . . .        18
   PORTFOLIO TRANSACTIONS AND BROKERAGE  . . . . . . . .        19
   TAXES . . . . . . . . . . . . . . . . . . . . . . . .        20
   DESCRIPTION OF SHARES . . . . . . . . . . . . . . . .        23
   SHAREHOLDER MEETINGS  . . . . . . . . . . . . . . . .        24
   INDIVIDUAL RETIREMENT ACCOUNTS  . . . . . . . . . . .        25
   PERFORMANCE INFORMATION . . . . . . . . . . . . . . .        25
   PURCHASE, EXCHANGE AND REDEMPTION OF SHARES;
   DETERMINATION OF NET ASSET VALUE  . . . . . . . . . .        28
   OTHER INFORMATION . . . . . . . . . . . . . . . . . .        28
   FINANCIAL STATEMENTS  . . . . . . . . . . . . . . . .        29
   APPENDIX A (Description of Securities Ratings)  . . .       A-1

   ________________

        No person has been authorized to give any information or to make any
   representations not contained in this Statement of Additional Information
   or in the Prospectus in connection with the offering made by the
   Prospectus and, if given or made, such information or representations must
   not be relied upon as having been authorized by the Funds.  The Prospectus
   does not constitute an offering by the Funds in any jurisdiction in which
   such offering may not lawfully be made.

   

                        ADDITIONAL INVESTMENT INFORMATION

        The following supplements the investment objectives and policies of
   the Funds as set forth in the Prospectus.

        Van Wagoner Emerging Growth Fund seeks long-term capital
   appreciation.  The Emerging Growth Fund invests primarily in equity
   securities of companies believed by the Adviser to have the potential for
   above-average long-term growth in market value.  The Emerging Growth Fund
   may invest in companies of all sizes.

        Van Wagoner Micro-Cap Fund seeks capital appreciation.  The Micro-Cap
   Fund invests primarily in equity securities of companies with market
   capitalizations of less than $350 million.

        Van Wagoner Mid-Cap Fund seeks capital appreciation.  The Mid-Cap
   Fund invests primarily in equity securities of companies with market
   capitalizations between $500 million and $5 billion.

        Money Market Instruments.  Each Fund may invest in a variety of money
   market instruments for temporary defensive purposes, pending investment,
   to meet anticipated redemption requests and/or to retain the flexibility
   to respond promptly to changes in market and economic conditions. 
   Commercial paper represents short-term unsecured promissory notes issued
   in bearer form by banks or bank holding companies, corporations and
   finance companies.  Certificates of deposit are generally negotiable
   certificates issued against funds deposited in a commercial bank for a
   definite period of time and earning a specified return.  Bankers 
   acceptances are negotiable drafts or bills of exchange, normally drawn by
   an importer or exporter to pay for specific merchandise, which are
   "accepted" by a bank, meaning, in effect, that the bank unconditionally
   agrees to pay the face value of the instrument on maturity.  Fixed time
   deposits are bank obligations payable at a stated maturity date and
   bearing interest at a fixed rate.  Fixed time deposits may be withdrawn on
   demand by the investor, but may be subject to early withdrawal penalties
   that vary depending upon market conditions and the remaining maturity of
   the obligation.  There are no contractual restrictions on the right to
   transfer a beneficial interest in a fixed time deposit to a third party,
   although there is no market for such deposits.  Bank notes and bankers'
   acceptances rank junior to deposit liabilities of the bank and pari passu
   with other senior, unsecured obligations of the bank.  Bank notes are
   classified as "other borrowings" on a bank's balance sheet, while deposit
   notes and certificates of deposit are classified as deposits.  Bank notes
   are not insured by the Federal Deposit Insurance Corporation or any other
   insurer.  Deposit notes are insured by the Federal Deposit Insurance
   Corporation only to the extent of $100,000 per depositor per bank.

        Repurchase Agreements.  Each Fund may agree to purchase portfolio
   securities from financial institutions subject to the seller's agreement
   to repurchase them at a mutually agreed upon date and price ("repurchase
   agreements").  Although the securities subject to a repurchase agreement
   may bear maturities exceeding one year, settlement for the repurchase
   agreement will never be more than one year after a Fund's acquisition of
   the securities and normally will be within a shorter period of time. 
   Securities subject to repurchase agreements are held either by the Funds'
   custodian or subcustodian (if any), or in the Federal Reserve/Treasury
   Book-Entry System.  The seller under a repurchase agreement will be
   required to maintain the value of the securities subject to the agreement
   in an amount exceeding the repurchase price (including accrued interest). 
   Repurchase agreements may be considered loans to the seller,
   collateralized by the underlying securities.  The risk to a Fund is
   limited to the ability of the seller to pay the agreed upon sum on the
   repurchase date; in the event of default, the repurchase agreement
   provides that a Fund is entitled to sell the underlying collateral.  If
   the value of the collateral declines after the agreement is entered into,
   however, and if the seller defaults under a repurchase agreement when the
   value of the underlying collateral is less than the repurchase price, a
   Fund could incur a loss of both principal and interest.  The Adviser
   monitors the value of the collateral at the time the agreement is entered
   into and at all times during the term of the repurchase agreement in an
   effort to determine that the value of the collateral always equals or
   exceeds the agreed upon repurchase price to be paid to a Fund.  If the
   seller were to be subject to a federal bankruptcy proceeding, the ability
   of a Fund to liquidate the collateral could be delayed or impaired because
   of certain provisions of the bankruptcy laws.

        United States Government Obligations.  Each of the Funds may invest
   in Treasury securities which differ only in their interest rates,
   maturities and times of issuance.  Treasury Bills have initial maturities
   of one year or less; Treasury Notes have initial maturities of one to ten
   years; and Treasury Bonds generally have initial maturities of greater
   than ten years.

        Illiquid Securities.  Each of the Funds may invest up to 5% of its
   net assets in illiquid securities (i.e., securities that cannot be
   disposed of within seven days in the normal course of business at
   approximately the amount at which the Fund has valued the securities). 
   The Board of Directors or its delegate has the ultimate authority to
   determine which securities are liquid or illiquid for purposes of this
   limitation.  Certain securities exempt from registration or issued in
   transactions exempt from registration ("restricted securities") under the
   Securities Act of 1933, as amended ("Securities Act") that may be resold
   pursuant to Rule 144A or Regulation S under the Securities Act, may be
   considered liquid.  The Board has delegated to the Adviser the day-to-day
   determination of the liquidity of a security, although it has retained
   oversight and ultimate responsibility for such determinations.  Although
   no definite quality criteria are used, the Board has directed the Adviser
   to consider such factors as (i) the nature of the market for a security
   (including the institutional private or international resale market), (ii)
   the terms of these securities or other instruments allowing for the
   disposition to a third party or the issuer thereof (e.g., certain
   repurchase obligations and demand instruments), (iii) the availability of
   market quotations (e.g., for securities quoted in PORTAL system), and (iv)
   other permissible relevant factors.  Certain securities are deemed
   illiquid by the Securities and Exchange Commission including repurchase
   agreements maturing in greater than seven days and options not listed on a
   securities exchange or not issued by the Options Clearing Corporation. 
   These securities will be treated as illiquid and subject to the Funds 
   limitation on illiquid securities.

        Restricted securities may be sold in privately negotiated or other
   exempt transactions, qualified non-U.S. transactions, such as under
   Regulation S, or in a public offering with respect to which a registration
   statement is in effect under the Securities Act.  Where registration is
   required, a Fund may be obligated to pay all or part of the registration
   expenses and a considerable time may elapse between the decision to sell
   and the sale date.  If, during such period, adverse market conditions were
   to develop, a Fund might obtain a less favorable price than prevailed when
   it decided to sell.  Restricted securities will be priced at fair value as
   determined in good faith by the Board.

        If through the appreciation of illiquid securities or the
   depreciation of illiquid securities, a Fund should be in a position where
   more than 5% of the value of its net assets are invested in illiquid
   assets, including restricted securities which are not readily marketable,
   the Fund will take such steps as it deems advisable, if any, to reduce the
   percentage of such securities to 5% or less of the value of its net
   assets.

        Hedging Strategies.  The Funds may engage in hedging activities. 
   They may utilize a variety of financial instruments, including options, in
   an attempt to reduce the investment risks of the Funds.

        Hedging instruments on securities generally are used to hedge against
   price movements in one or more particular securities positions that a Fund
   owns or intends to acquire.  Hedging instruments on stock indices, in
   contrast, generally are used to hedge against price movements in broad
   equity market sectors in which a Fund has invested or expects to invest. 
   The use of hedging instruments is subject to applicable regulations of the
   Securities and Exchange Commission (the "SEC"), the several options
   exchanges upon which they are traded and various state regulatory
   authorities.  In addition, a Fund's ability to use hedging instruments
   will be limited to tax considerations.

        Options.  General.  Each Fund may purchase and write (i.e. sell) put
   and call options.  Such options may relate to particular securities or
   stock indices, and may or may not be listed on a domestic or foreign
   securities exchange and may or may not be issued by the Options Clearing
   Corporation.  Options trading is a highly specialized activity that
   entails greater than ordinary investment risk.  Options may be more
   volatile than the underlying instruments, and therefore, on a percentage
   basis, an investment in options may be subject to greater fluctuation than
   an investment in the underlying instruments themselves.

        A call option for a particular security gives the purchaser of the
   option the right to buy, and the writer (seller) the obligation to sell,
   the underlying security at the stated exercise price at any time prior to
   the expiration of the option, regardless of the market price of the
   security.  The premium paid to the writer is in consideration for
   undertaking the obligation under the option contract.  A put option for a
   particular security gives the purchaser the right to sell the security at
   the stated exercise price at any time prior to the expiration date of the
   option, regardless of the market price of the security.  

        Stock index options are put options and call options on various stock
   indexes.  In most respects, they are identical to listed options on common
   stocks.  The primary difference between stock options and index options
   occurs when index options are exercised.  In the case of stock options,
   the underlying security, common stock, is delivered.  However, upon the
   exercise of an index option, settlement does not occur by delivery of the
   securities comprising the index.  The option holder who exercises the
   index option receives an amount of cash if the closing level of the stock
   index upon which the option is based is greater than, in the case of a
   call, or less than, in the case of a put, the exercise price of the
   option.  This amount of cash is equal to the difference between the
   closing price of the stock index and the exercise price of the option
   expressed in dollars times a specified multiple.  A stock index fluctuates
   with changes in the market value of the stocks included in the index.  For
   example, some stock index options are based on a broad market index, such
   as the Standard & Poor's 500 or the Value Line Composite Index or a
   narrower market index, such as the Standard & Poor's 100.  Indexes may
   also be based on an industry or market segment, such as the AMEX Oil and
   Gas Index or the Computer and Business Equipment Index.  Options on stock
   indexes are currently traded on the following exchanges:  the Chicago
   Board Options Exchange, the New York Stock Exchange, the American Stock
   Exchange, the Pacific Stock Exchange, and the Philadelphia Stock Exchange.

        A Fund's obligation to sell an instrument subject to a call option
   written by it, or to purchase an instrument subject to a put option
   written by it, may be terminated prior to the expiration date of the
   option by the Fund's execution of a closing purchase transaction, which is
   effected by purchasing on an exchange an option of the same series (i.e.,
   same underlying instrument, exercise price and expiration date) as the
   option previously written.  A closing purchase transaction will ordinarily
   be effected to realize a profit on an outstanding option, to prevent an
   underlying instrument from being called, to permit the sale of the
   underlying instrument or to permit the writing of a new option containing
   different terms on such underlying instrument.  The cost of such a
   liquidation purchase plus transactions costs may be greater than the
   premium received upon the original option, in which event the Fund will
   have incurred a loss in the transaction.  There is no assurance that a
   liquid secondary market will exist for any particular option.  An option
   writer, unable to effect a closing purchase transaction, will not be able
   to sell the underlying instrument or liquidate the assets held in the
   segregated account until the option expires or the optioned instrument is
   delivered upon exercise with the result that the writer in such
   circumstances will be subject to the risk of market decline or
   appreciation in the instrument during such period.  

        If an option purchased by a Fund expires unexercised, the Fund
   realizes a loss equal to the premium paid.  If a Fund enters into a
   closing sale transaction on an option purchased by it, the Fund will
   realize a gain if the premium received by the Fund on the closing
   transaction is more than the premium paid to purchase the option, or a
   loss if it is less.  If an option written by a Fund expires on the
   stipulated expiration date or if a Fund enters into a closing purchase
   transaction, it will realize a gain (or loss if the cost of a closing
   purchase transaction exceeds the net premium received when the option is
   sold).   If an option written by a Fund is exercised, the proceeds of the
   sale will be increased by the net premium originally received and the Fund
   will realize a gain or loss.

        Federal Tax Treatment of Options.  Certain option transactions have
   special tax results for the Funds.  Expiration of a call option written by
   a Fund will result in short-term capital gain.  If the call option is
   exercised, the Fund will realize a gain or loss from the sale of the
   security covering the call option and, in determining such gain or loss,
   the option premium will be included in the proceeds of the sale.

        If a Fund writes options other than "qualified covered call options,"
   as defined in Section 1092 of the Internal Revenue Code of 1986, as
   amended (the "Code"), or purchases puts, any losses on such options
   transactions, to the extent they do not exceed the unrealized gains on the
   securities covering the options, may be subject to deferral until the
   securities covering the options have been sold.

        In the case of transactions involving "nonequity options," as defined
   in Code Section 1256, the Funds will treat any gain or loss arising from
   the lapse, closing out or exercise of such positions as 60% long-term and
   40% short-term capital gain or loss as required by Section 1256 of the
   Code.  In addition, such positions must be marked-to-market as of the last
   business day of the year, and gain or loss must be recognized for federal
   income tax purposes in accordance with the 60%/40% rule discussed above
   even though the position has not been terminated.  A "nonequity option"
   includes options involving stock indexes such as the Standard & Poor's 500
   and 100 indexes.

        Certain Risks Regarding Options.  There are several risks associated
   with transactions in options.  For example, there are significant
   differences between the securities and options markets that could result
   in an imperfect correlation between these markets, causing a given
   transaction not to achieve its objectives.  In addition, a liquid
   secondary market for particular options, whether traded over-the-counter
   or on an exchange, may be absent for reasons which include the following: 
   there may be insufficient trading interest in certain options;
   restrictions may be imposed by an exchange on opening transactions or
   closing transactions or both; trading halts, suspensions or other
   restrictions may be imposed with respect to particular classes or series
   of options or underlying securities or currencies; unusual or unforeseen
   circumstances may interrupt normal operations on an exchange; the
   facilities of an exchange or the Options Clearing Corporation may not at
   all times be adequate to handle current trading value; or one or more
   exchanges could, for economic or other reasons, decide or be compelled at
   some future date to discontinue the trading of options (or a particular
   class or series of options), in which event the secondary market on that
   exchange (or in that class or series of options) would cease to exist,
   although outstanding options that had been issued by the Options Clearing
   Corporation as a result of trades on that exchange would continue to be
   exercisable in accordance with their terms.

        Successful use by the Funds of options on stock indexes will be
   subject to the ability of the Adviser to correctly predict movements in
   the directions of the stock market.  This requires different skills and
   techniques than predicting changes in the prices of individual securities. 
   In addition, a Fund's ability to effectively hedge all or a portion of the
   securities in its portfolio, in anticipation of or during a market
   decline, through transactions in put options on stock indexes, depends on
   the degree to which price movements in the underlying index correlate with
   the price movements of the securities held by a Fund.  Inasmuch as a
   Fund's securities will not duplicate the components of an index, the
   correlation will not be perfect.  Consequently, each Fund will bear the
   risk that the prices of its securities being hedged will not move in the
   same amount as the prices of its put options on the stock indexes.  It is
   also possible that there may be a negative correlation between the index
   and a Fund's securities which would result in a loss on both such
   securities and the options on stock indexes acquired by the Fund.

        The hours of trading for options may not conform to the hours during
   which the underlying securities are traded.  To the extent that the
   options markets close before the markets for the underlying securities,
   significant price and rate movements can take place in the underlying
   markets that cannot be reflected in the options markets.  The purchase of
   options is a highly specialized activity which involves investment
   techniques and risks different from those associated with ordinary
   portfolio securities transactions.  The purchase of stock index options
   involves the risk that the premium and transaction costs paid by a Fund in
   purchasing an option will be lost as a result of unanticipated movements
   in prices of the securities comprising the stock index on which the option
   is based.

        There is no assurance that a liquid secondary market on an options
   exchange will exist for any particular option, or at any particular time,
   and for some options no secondary market on an exchange or elsewhere may
   exist.  If a Fund is unable to close out a call option on securities that
   it has written before the option is exercised, the Fund may be required to
   purchase the optioned securities in order to satisfy its obligation under
   the option to deliver such securities.  If a Fund is unable to effect a
   closing sale transaction with respect to options on securities that is has
   purchased, it would have to exercise the option in order to realize any
   profit and would incur transaction costs upon the purchase and sale of the
   underlying securities.

        Cover for Options Positions.  Transactions using options (other than
   options that a Fund has purchased) expose a Fund to an obligation to
   another party.  A Fund will not enter into any such transactions unless it
   owns either (1) an offsetting ("covered") position in securities or other
   options or (2) cash, receivables and short-term debt securities with a
   value sufficient at all times to cover its potential obligations not
   covered as provided in (1) above.  Each Fund will comply with Securities
   and Exchange Commission (the "SEC") guidelines regarding cover for these
   instruments and, 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.  Under
   current SEC guidelines, the Funds will segregate assets to cover
   transactions in which the Funds write or sell options.

        Assets used as cover or held in a segregated account cannot be sold
   while the position in the corresponding futures contract or option is
   open, unless they are replaced with similar assets.  As a result, the
   commitment of a large portion of a 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.

        Investment Companies.  Each Fund currently intends to limit its
   investments in securities issued by other investment companies so that, as
   determined immediately after a purchase of such securities is made:  (a)
   not more than 5% of the value of the Fund's total assets will be invested
   in the securities of any one investment company; (b) not more than 10% of
   the value of its total assets will be invested in the aggregate in
   securities of investment companies as a group; and (c) not more than 3% of
   the outstanding voting stock of any one investment company will be owned
   by the Fund or by the Company as a whole.

        Warrants.  The Funds may purchase warrants and similar rights, which
   are privileges issued by corporations enabling the owners to subscribe to
   and purchase a specified number of shares of the corporation at a
   specified price during a specific period of time.  The purchase of
   warrants involves the risk that a Fund could lose the purchase value of a
   warrant if the right to subscribe to additional shares is not exercised
   prior to the warrant's expiration.  Also, the purchase of warrants
   involves the risk that the effective price paid for the warrant added to
   the subscription price of the related security may exceed the value of the
   subscribed security's market price such as when there is no movement in
   the level of the underlying security.  A Fund will not invest more than 5%
   of its total assets, taken at market value, in warrants, or more than 2%
   of its total assets, taken at market value, in warrants not listed on the
   New York or American Stock Exchanges or a major foreign exchange. 
   Warrants attached to other securities acquired by a Fund are not subject
   to this restriction.

        Convertible Securities.  Convertible securities entitle the holder to
   receive interest paid or accrued on debt or the dividend paid on preferred
   stock until the convertible securities mature or are redeemed, converted
   and exchanged.  Prior to conversion, convertible securities have
   characteristics similar to ordinary debt securities or preferred stock in
   that they normally provide a stable stream of income with generally higher
   yields than those of common stock of the same or similar issuers. 
   Convertible securities rank senior to common stock in a corporation s
   capital structure and therefore generally entail less risk of loss of
   principal than the corporation's common stock.

        In selecting convertible securities for the Funds, the Adviser will
   consider among other factors, its evaluation of the creditworthiness of
   the issuers of the securities; the interest or dividend income generated
   by the securities; the potential for capital appreciation of the
   securities and the underlying common stocks; the prices of the securities
   relative to other comparable securities and to the underlying common
   stocks; whether the securities are entitled to the benefits of sinking
   funds or other protective conditions; diversification of the Fund s
   portfolio as to issuers; and whether the securities are rated by a rating
   agency and, if so, the ratings assigned.

        The value of convertible securities is a function of their investment
   value (determined by yield in comparison with the yields of other
   securities of comparable maturity and quality that do not have a
   conversion privilege) and their conversion value (their worth, at market
   value, if converted into the underlying common stock).  The investment
   value of convertible securities is influenced by changes in interest
   rates, with investment value declining as interest rates increase and
   increasing as interest rates decline, and by the credit standing of the
   issuer and other factors.  The conversion value of convertible securities
   is determined by the market price of the underlying common stock.  If the
   conversion value is low relative to the investment value, the price of the
   convertible securities is governed principally by their investment value. 
   To the extent the market price of the underlying common stock approaches
   or exceeds the conversion price, the price of the convertible securities
   will be increasingly influenced by their conversion value.  In addition,
   convertible securities generally sell at a premium over their conversion
   value determined by the extent to which investors place value on the right
   to acquire the underlying common stock while holding fixed income
   securities.

        Capital appreciation for a Fund may result from an improvement in the
   credit standing of an issuer whose securities are held in the Fund or from
   a general lowering of interest rates, or a combination of both. 
   Conversely, a reduction in the credit standing of an issuer whose
   securities are held by a Fund or a general increase in interest rates may
   be expected to result in capital depreciation to the Fund.

        Typically, the convertible debt securities in which the Funds will
   invest will be of a quality less than investment grade (so-called "junk
   bonds").  The Funds will, however, limit their investment in non-
   investment grade convertible debt securities to no more than 5% of the
   respective net assets at the time of purchase and will not acquire
   convertible debt securities rated below B by Moody's or S&P, or unrated
   securities deemed by the Adviser to be of comparable quality.  Junk bonds,
   while generally offering higher yields than investment grade securities
   with similar maturities, involve greater risks, including the possibility
   of default or bankruptcy.  They are regarded as predominantly speculative
   with respect to the issuer's capacity to pay interest and repay principal. 
   The special risk considerations in connection with investments in these
   securities are discussed below.  Refer to Appendix A of this Statement of
   Additional Information for a discussion of securities ratings.

        Effect on Interest Rates and Economic Changes.  The junk bond market
   is relatively new and its growth has paralleled a long economic expansion. 
   As a result, it is not clear how this market may withstand a prolonged
   recession or economic downturn.  Such an economic downturn could severely
   disrupt the market for and adversely affect the value of such securities.

        All interest-bearing securities typically experience appreciation
   when interest rates decline and depreciation when interest rates rise. 
   The market values of junk bond securities tend to reflect individual
   corporate developments to a greater extent than do higher rated
   securities, which react primarily to fluctuations in the general level of
   interest rates.  Junk bond securities also tend to be more sensitive to
   economic conditions than are higher-rated categories.  During an economic
   downturn or a sustained period of rising interest rates, highly leveraged
   issuers of junk bond securities may experience financial stress and may
   not have sufficient revenues to meet their payment obligations.  The risk
   of loss due to default by an issuer of these securities is significantly
   greater than issuers of higher-rated securities because such securities
   are generally unsecured and are often subordinated to other creditors. 
   Further, if the issuer of a junk bond security defaulted, a Fund might
   incur additional expenses to seek recovery.  Periods of economic
   uncertainty and changes would also generally result in increased
   volatility in the market prices of these securities and thus in a Fund's
   net asset value.

        As previously stated, the value of a junk bond security will
   generally decrease in a rising interest rate market, and accordingly so
   will a Fund's net asset value.  If a Fund experiences unexpected net
   redemptions in such a market, it may be forced to liquidate a portion of
   its portfolio securities without regard to their investment merits.  Due
   to the limited liquidity of junk bond securities, a Fund may be forced to
   liquidate these securities at a substantial discount.  Any such
   liquidation would reduce a Fund's asset base over which expenses could be
   allocated and could result in a reduced rate of return for the Fund.

        Payment Expectations.  Junk bond securities typically contain
   redemption, call or prepayment provisions which permit the issuer of such
   securities containing such provisions to redeem the securities at its
   discretion.  During periods of falling interest rates, issuers of these
   securities are likely to redeem or prepay the securities and refinance
   them with debt securities with a lower interest rate.  To the extent an
   issuer is able to refinance the securities, or otherwise redeem them, a
   Fund may have to replace the securities with a lower yielding security,
   which could result in a lower return for the Fund.

        Credit Ratings.  Credit ratings issued by credit-rating agencies
   evaluate the safety of principal and interest payments of rated
   securities.  They do not, however, evaluate the market value risk of junk
   bond securities and, therefore may not fully reflect the true risks of an
   investment.  In addition, credit rating agencies may or may not make
   timely changes in a rating to reflect changes in the economy or in the
   condition of the issuer that affect the market value of the security. 
   Consequently, credit ratings are used only as a preliminary indicator of
   investment quality.  Investments in junk bond securities will be more
   dependent on the Adviser's credit analysis than would be the case with
   investments in investment grade debt securities.  The Adviser employs its
   own credit research and analysis, which includes a study of existing debt,
   capital structure, ability to service debt and to pay dividends, the
   issuer's sensitivity to economic conditions, its operating history and the
   current trend of earnings.  The Adviser continually monitors each Fund's
   investments and carefully evaluates whether to dispose of or to retain
   junk bond securities whose credit ratings or credit quality may have
   changed.

        Liquidity and Valuation.  A Fund may have difficulty disposing of
   certain junk bond securities because there may be a thin trading market
   for such securities.  Because not all dealers maintain markets in all junk
   bond securities there is no established retail secondary market for many
   of these securities.  The Funds anticipate that such securities could be
   sold only to a limited number of dealers or institutional investors.  To
   the extent a secondary trading market does exist, it is generally not as
   liquid as the secondary market for higher-rated securities.  The lack of a
   liquid secondary market may have an adverse impact on the market price of
   the security.  The lack of a liquid secondary market for certain
   securities may also make it more difficult for a Fund to obtain accurate
   market quotations for purposes of valuing the Fund.  Market quotations are
   generally available on many junk bond issues only from a limited number of
   dealers and may not necessarily represent firm bids of such dealers or
   prices for actual sales.  During periods of thin trading, the spread
   between bid and asked prices is likely to increase significantly.  In
   addition, adverse publicity and investor perceptions, whether or not based
   on fundamental analysis, may decrease the values and liquidity of junk
   bond securities, especially in a thinly traded market.

        New and Proposed Legislation.  Recent legislation has been adopted,
   and from time to time, proposals have been discussed, regarding new
   legislation designed to limit the use of certain junk bond securities by
   certain issuers.  It is not currently possible to determine the impact of
   the recent legislation or the proposed legislation on the junk bond
   securities market.  However, it is anticipated that if additional
   legislation is enacted or proposed, it could have a material affect on the
   value of these securities and the existence of a secondary trading market
   for the securities.

        In general, investments in non-investment grade convertible
   securities are subject to a significant risk of a change in the credit
   rating or financial condition of the issuing entity.  Investments in
   convertible securities of medium or lower quality are also likely to be
   subject to greater market fluctuations and to greater risk of loss of
   income and principal due to default than investments of higher-rated fixed
   income securities.  Such lower-rated securities generally tend to reflect
   short-term corporate and market developments to a greater extent than
   higher-rated securities, which react more to fluctuations in the general
   level of interest rates.  A Fund will generally reduce risk to the
   investor by diversification, credit analysis and attention to current
   developments in trends of both the economy and financial markets. 
   However, while diversification reduces the effect on a Fund of any single
   investment, it does not reduce the overall risk of investing in lower-
   rated securities.

        Calculation of Portfolio Turnover Rate.  The portfolio turnover rate
   for the Funds is calculated by dividing the lesser of purchases or sales
   of portfolio investments for the reporting period by the monthly average
   value of the portfolio investments owned during the reporting period.  The
   calculation excludes all securities, including options, whose maturities
   or expiration dates at the time of acquisition are one year or less. 
   Portfolio turnover may vary greatly from year to year as well as within a
   particular year, and may be affected by cash requirements for redemption
   of shares and by requirements which enable the Funds to receive favorable
   tax treatment.  The Funds are not restricted by policy with regard to
   portfolio turnover and will make changes in their investment portfolios
   from time to time as business and economic conditions as well as market
   prices may dictate.  It is anticipated the portfolio turnover rate for the
   Micro-Cap, Emerging Growth and Mid-Cap Funds generally will not exceed
   150%, 125%, and 150%, respectively.  However, these should not be
   considered as limiting factors.

                          INVESTMENT RESTRICTIONS

        Consistent with each Fund's investment objective, each Fund has
   adopted certain investment restrictions.  The following restrictions
   supplement those set forth in the Prospectus.  Unless otherwise noted,
   whenever an investment restriction states a maximum percentage of a Fund's
   assets that may be invested in any security or other asset, such
   percentage restriction will be determined immediately after and as a
   result of the Fund's acquisition of such security or other asset. 
   Accordingly, any subsequent change in values, net assets, or other
   circumstances will not be considered when determining whether the
   investment complies with the Fund's investment limitations except with
   respect to the Fund's restrictions on borrowings as set forth in
   restriction 8 below.

        A Fund's fundamental restrictions cannot be changed without the
   approval of the holders of the lesser of:  (i) 67% of the Fund's shares
   present or represented at a shareholders meeting at which the holders of
   more than 50% of such shares are present or represented; or (ii) more than
   50% of the outstanding shares of the Fund.

        The following are the Funds' fundamental investment restrictions.

        Each Fund may not:

        1.   Issue senior securities, except as permitted under the
   Investment Company Act of 1940 (the "Investment Company Act"); provided,
   however, a Fund may engage in transactions involving options, futures and
   options on futures contracts.

        2.   Lend money or securities (except by purchasing debt securities
   or entering into repurchase agreements or lending portfolio securities).

        3.   With respect to seventy-five percent (75%) of its total assets,
   purchase (a) the securities of any issuer (except securities of the U.S.
   government or any agency or instrumentality thereof), if such purchase
   would cause more than five percent (5%) of the value of the Fund's total
   assets to be invested in securities of any one issuer or (b) more than ten
   percent (10%) of the outstanding voting securities of any one issuer.

        4.   Purchase the securities of any issuer if, as a result, 25% or
   more of the value of its total assets, determined at the time an
   investment is made, exclusive of U.S. government securities, are in
   securities issued by companies primarily engaged in the same industry.

        5.   Act as an underwriter or distributor of securities other than
   shares of the Funds except to the extent that a Fund's participation as
   part of a group in bidding or by bidding alone, for the purchase or
   permissible investments directly from an issuer or selling shareholders
   for the Fund's own portfolio may be deemed to be an underwriting, and
   except to the extent that a Fund may be deemed an underwriter under the
   Securities Act, by virtue of disposing of portfolio securities.

        6.   Purchase or sell real estate (but this shall not prevent the
   Fund from investing in securities that are backed by real estate or issued
   by companies that invest or deal in real estate or in participation
   interests in pools of real estate mortgage loans exclusive of investments
   in real estate limited partnerships).

        7.   Borrow money, except that a Fund may borrow money from a bank
   for temporary or emergency purposes (not for leveraging) in an amount not
   exceeding 33 1/3% of the value of its total assets (including the amount
   borrowed) less liabilities (other than borrowings).  Any borrowings that
   exceed 33 1/3% of the Fund's total assets by reason of a decline in net
   asset value will be reduced within three days to the extent necessary to
   comply with the 33 1/3% limitation.  Transactions involving options,
   futures and options on futures, will not be deemed to be borrowings if
   properly covered by a segregated account where appropriate.

        8.   Purchase or sell physical commodities or commodities contracts
   unless acquired as a result of ownership of securities or other
   instruments (but this shall not prevent the Fund from engaging in
   transactions involving foreign currencies, futures contracts, options on
   futures contracts or options, or from investing in securities or other
   instruments backed by physical commodities).

        The following investment restrictions are not fundamental, and may be
   changed without shareholder approval.

        Each Fund may not:

        1.   Purchase warrants, valued at the lower of cost or market, in
   excess of 5% of a Fund's net assets.  Included in that amount, but not to
   exceed 2% of net assets, are warrants whose underlying securities are not
   traded on principal domestic or foreign exchanges.  Warrants acquired by
   the Fund in units or attached to securities are not subject to these
   restrictions.

        2.   Purchase securities of other investment companies except to the
   extent permitted by the Investment Company Act and the rules and
   regulations thereunder.  

        3.   Make investments for the purpose of exercising control or
   management of any company except that a Fund may vote portfolio securities
   in the Fund's discretion.

        4.   Invest in securities of issuers which have a record of less than
   three (3) years continuous operation, including the operation of any
   predecessor business of a company which came into existence as a result of
   a merger, consolidation, reorganization or purchase of substantially all
   of the assets of such predecessor business, if such purchase would cause
   the value of the Fund's investments in all such companies to exceed 5% of
   the value of its total assets.

        5.   Acquire illiquid securities if, as a result of such investments,
   more than five percent (5%) of the Fund's net assets (taken at market
   value at the time of each investment) would be invested in illiquid
   securities.  "Illiquid securities" means securities that cannot be
   disposed of within seven days in the normal course of business at
   approximately the amount at which the Fund has valued the securities.

        6.   Purchase securities on margin (except to obtain such short-term
   credits as are necessary for the clearance of purchases and sales of
   securities) or participate in a joint trading account; provided, however,
   the Fund may (i) purchase or sell futures contracts, (ii) make initial and
   variation margin payments in connection with purchases or sales of futures
   contracts or options on futures contracts, (iii) write or invest in put or
   call options on securities and indexes, and (iv) engage in foreign
   currency transactions.  (The "bunching" of orders for the sale or purchase
   of marketable portfolio securities with other accounts under the
   management of the Adviser to save brokerage costs or average prices among
   them is not deemed to result in a securities trading account.)

        7.   Borrow money except for temporary bank borrowings (not in excess
   of five percent (5%) of the value of its total assets) for emergency or
   extraordinary purposes, or engage in reverse repurchase agreements, or
   pledge any of its assets except to secure borrowings and only to an extent
   not greater than ten percent (10%) of the value of the Fund's net assets;
   provided, however, a Fund may engage in transactions involving options. 
   Each Fund will not purchase any security while borrowings representing
   more than 5% of its total assets are outstanding.  

        8.   Purchase any interest in any oil, gas or any other mineral
   exploration or development program, including any oil, gas or mineral
   leases.

             Each Fund may make commitments more restrictive than the
   restrictions listed above so as to permit the sale of shares of the Fund
   in certain states.  Should a Fund determine that a commitment is no longer
   in the best interest of the Fund and its shareholders, the Fund reserves
   the right to revoke the commitment by terminating the sale of Fund shares
   in the state involved.

             In determining industry classification with respect to the
   Funds, the Adviser intends to use the industry classification titles in
   the Standard Industrial Classification Manual.

             A guarantee of a security is not deemed to be a security issued
   by the guarantor when the value of all securities issued and guaranteed by
   the guarantor, and owned by a Fund, does not exceed 10% of the value of
   the Fund's total assets.

                         ADDITIONAL COMPANY INFORMATION

        Directors and Officers.  Information regarding the Board of Directors
   and officers of the Funds, including their principal business occupations
   during at least the last five years, is set forth below.  Each director
   who is an "interested person," as defined in the 1940 Act, is indicated by
   an asterisk.  Except where otherwise indicated, each of the individuals
   below has served in his or her present capacity with the Company since
   November 1995.  The address of each of the officers and directors is c/o
   Van Wagoner Funds, 1 Bush Street, Suite 1150, San Francisco, California,
   94104.

     *Garrett R. Van Wagoner, President, Treasurer, Secretary and Director

        Mr. Van Wagoner is the President, Treasurer, Secretary, Director and
   sole shareholder of the Adviser, and has served in such capacities since
   the organization of the Adviser in October 1995.  He was the portfolio
   manager of the Govett Smaller Companies Fund, a portfolio of The Govett
   Funds, Inc., from March 1993 until December 31, 1995.  Prior thereto, he
   was Senior Vice President at Bessemer Trust, N.A., since 1982, where he
   was responsible for its emerging growth stock investment program.

                            Larry P. Arnold, Director

        Larry P. Arnold, c/o Sunstone Financial Group, Inc., 207 East Buffalo
   Street, Suite 400, Milwaukee, WI 53202.  Private investor since 1993. 
   Founder and Managing General Partner of Wessels Arnold & Henderson from
   June 1986 to January 1993.  Senior Vice President of Piper Jaffray &
   Hopwood from 1979 to March 1986.

                           Robert S. Colman, Director

        Robert S. Colman, c/o Sunstone Financial Group, Inc., 207 East
   Buffalo Street, Suite 400, Milwaukee, WI 53202.  Founding Partner of
   Colman Furlong & Co. from February 1991 to present.  Partner of Colman
   Helfet & Co. from August 1989 to January 1991.  Sole proprietor of R.S.
   Colman Company from January 1989 until July 1989.  Partner of Robertson,
   Colman & Stephens from November 1978 to December 1988.  Director of Access
   HealthNet, Inc., Cleveland-Cliffs, Inc., HealthCare COMPARE Corp. and New
   Image Industries, Inc.

        The Director of the Company who is an officer of the Adviser receives
   no remuneration from the Funds.  Each of the other Directors is paid a fee
   of $500 for each meeting attended and is reimbursed for the expenses of
   attending meetings.

        Principal Shareholder.  As of November 30, 1995, the Adviser owned
   all of the outstanding shares of each of the Funds.  Shareholders with a
   controlling interest could effect the outcome of proxy voting or the
   direction of management of the Company.

        Investment Adviser.  The investment adviser to the Funds is Van
   Wagoner Capital Management, Inc. (the "Adviser").  Mr. Van Wagoner is the
   founder and President of the Adviser and owns all of the outstanding
   common stock of the Adviser.  As such, he controls the Adviser.  Pursuant
   to  Investment Advisory Agreements entered into between the Company on
   behalf of each of the Funds and the Adviser (the "Investment Advisory
   Agreements"), the Adviser provides continuous investment advisory services
   to the Funds.  The Adviser also provides the Funds with office space,
   equipment and personnel necessary to operate and administer the Funds'
   business and to supervise the provision of services by third parties.  
   The Investment Advisory Agreements are dated as of December 31, 1995. 
   The Investment Advisory Agreements have an initial term of two years and
   thereafter are required to be approved annually by the Board of Directors
   of the Company or by vote of a majority of the respective Fund's
   outstanding voting securities (as defined in the 1940 Act).  Each annual
   renewal must also be approved by the vote of a majority of the respective
   Fund's directors who are not parties to the Investment Advisory Agreement
   or interested persons of any such party, cast in person at a meeting
   called for the purpose of voting on such approval.  Each Investment
   Advisory Agreement was approved by the vote of a majority of the Directors
   who are not parties to the respective Investment Advisory Agreement or
   interested persons of any such party on December 8, 1995 and by the
   initial shareholder of each Fund on December 8, 1995.  The Investment
   Advisory Agreements are terminable without penalty with respect to a Fund,
   on 60 days' written notice by the Directors, by vote of a majority of a
   Fund's outstanding voting securities, or by the Adviser, and will
   terminate automatically in the event of its assignment.

        As compensation for its services, each Fund pays to the Adviser a
   monthly advisory fee at the annual rate specified in the Prospectus.  From
   time to time, the Adviser may voluntarily waive all or a portion of its
   fee for one or more Funds.  The organizational expenses of the Funds were
   advanced by the Adviser and will be reimbursed by each Fund over a period
   of not more than 60 months.

        The Investment Advisory Agreements require the Adviser to reimburse a
   Fund in the event that the expenses and charges payable by the Fund in any
   fiscal year, including the advisory fee but excluding taxes, interest,
   brokerage commissions, and similar fees, exceed a percentage of the
   average net asset value of the Fund for such year which is the most
   restrictive percentage provided by the state laws of the various states in
   which the Funds' common stock is qualified for sale.  As of the date of
   this Statement of Additional Information, the percentage applicable to
   each Fund is 2 1/2% on the first $30,000,000 of its average net assets, 2%
   on the next $70,000,000 of its average net assets and 1 1/2% on net assets
   in excess of $100,000,000.  Additionally, the Adviser voluntarily agreed
   to reimburse each Fund to the extent aggregate annual operating expenses
   as described above exceeded 1.95% of the average daily net assets of the
   Micro-Cap, Emerging Growth and Mid-Cap Funds, respectively, for each
   Fund's first twelve months of operation.  The Adviser may voluntarily
   continue to waive all or a portion of the advisory fees otherwise payable
   by the Funds.  Such a waiver may be terminated at any time in the
   Adviser's discretion.  Reimbursement of expenses in excess of the
   applicable limitation will be made on a monthly basis and will be paid to
   each Fund by reducing the Adviser's fee, subject to later adjustment,
   month by month, for the remainder of each Fund's fiscal year.  The Adviser
   may from time to time voluntarily absorb expenses for one or more Funds in
   addition to the reimbursement of expenses in excess of the foregoing.

        Each Investment Advisory Agreement provides that the Adviser shall
   not be liable to the respective Fund or its shareholders for any error of
   judgment or mistake of law or for anything other than willful misfeasance,
   bad faith, gross negligence or reckless disregard of its obligations or
   duties.  The Investment Advisory Agreements also provide that nothing
   therein shall limit the freedom of the Adviser and its affiliates to
   render investment supervisory and corporate administrative services to
   other investment companies, to act as investment adviser or investment
   counselor to other persons, firms or corporations, or to engage in other
   business activities.

        Administrator.  Sunstone Financial Group, Inc. (the "Administrator"
   or "Sunstone") provides various administrative and fund accounting
   services to the Funds (which includes clerical, compliance, regulatory,
   fund accounting and other services) pursuant to an Administration and Fund
   Accounting Agreement with the Company on behalf of the Funds.  The
   Administration and Fund Accounting Agreement will remain in effect for an
   initial 1 year term ending December 31, 1996 and thereafter as long as its
   continuance is specifically approved at least annually by the Board of
   Directors of the Company and the Administrator.  The Administration and
   Fund Accounting Agreement may be terminated on not less than 90 days 
   notice after the expiration of the initial term, without the payment of
   any penalty, by the Board of Directors of the Company or by the
   Administrator.  Under the Administration and Fund Accounting Agreement,
   the Administrator is not liable for any loss suffered by the Funds or
   their shareholders in connection with the performance of the
   Administration and Fund Accounting Agreement, except a loss resulting from
   bad faith or gross negligence on the part of the Administrator in the
   performance of its duties.  The Administration and Fund Accounting
   Agreement also provides that the Funds will indemnify the Administrator
   against certain liabilities under certain circumstances and that the
   Administrator may provide similar services to others including other
   investment companies.

        Custodian, Transfer Agent and Dividend Paying Agent.  United Missouri
   Bank, n.a. serves as the custodian and Sunstone serves as the transfer and
   dividend paying agent for the Funds.  Under the terms of the respective
   agreements, United Missouri Bank, n.a. is responsible for the receipt and
   delivery of each Fund's securities and cash, and Sunstone is responsible
   for processing purchase and redemption requests for the securities of each
   Fund as well as the recordkeeping of ownership of each Fund's securities,
   payment of dividends as declared by the Directors and the issuance of
   confirmations of transactions and annual statements to shareholders. 
   United Missouri Bank, n.a. and Sunstone do not exercise any supervisory
   functions over the management of the Funds or the purchase and sale of
   securities.  

        Legal Counsel.  Foley & Lardner, with offices at 777 East Wisconsin
   Avenue, Milwaukee, Wisconsin 53202, serves as counsel to the Funds.

        Independent Accountants.  Price Waterhouse LLP are the independent
   accountants for the Funds.  They are responsible for performing an audit
   of each Fund's year-end financial statements as well as providing
   accounting and tax advice to the management of the Funds.

                             DISTRIBUTION OF SHARES

        Sunstone acts as distributor for the Funds pursuant to a Distribution
   Agreement.  The Distribution Agreement, which may be terminated by either
   party, without penalty, on 60 days notice, provides that the Funds will
   indemnify Sunstone against certain liabilities under certain circumstances
   and that Sunstone may provide similar services to others including other
   investment companies.  

        As set forth in the Prospectus, the Funds have adopted a Service and
   Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. 
   The Plan authorizes payments by the Funds in connection with the
   distribution of their shares at an annual rate, as determined from time to
   time by the Board of Directors, of up to 0.25% of each Fund's average
   daily net assets.  

        The Plan was adopted in anticipation that the Funds will benefit from
   the Plan through increased sales of shares of each Fund, thereby reducing
   each Fund's expense ratio and providing an asset size that allows the
   Adviser greater flexibility in management.  The Plan may be terminated at
   any time by a vote of the directors of the Funds who are not interested
   persons of the Funds and who have no direct or indirect financial interest
   in the Plan or any agreement related thereto (the "Rule 12b-1 Directors")
   or by a vote of a majority of the outstanding shares of Common Stock. 
   Messrs. Arnold and Colman are currently the Rule 12b-1 Directors.  Any
   change in the Plan that would materially increase the distribution
   expenses of the Funds provided for in the Plan requires approval of the
   shareholders and the Board of Directors, including the Rule 12b-1
   Directors.

        While the Plan is in effect, the selection and nomination of
   directors who are not interested persons of the Funds will be committed to
   the discretion of the directors of the Funds who are not interested
   persons of the Funds.  The Board of Directors must review the amount and
   purposes of expenditures pursuant to the Plan quarterly as reported to it
   by the officers of the Company.  Unless otherwise terminated, the Plan
   will continue in effect for as long as its continuance is specifically
   approved at least annually by the Board of Directors, including the Rule
   12b-1 Directors.

                      PORTFOLIO TRANSACTIONS AND BROKERAGE

        The Adviser is responsible for decisions to buy and sell securities
   for each Fund, for the placement of its portfolio business and the
   negotiation of the commissions to be paid on such transactions, subject to
   the supervision of the Company's Board of Directors.  It is the policy of
   the Adviser to seek the best execution at the best security price
   available with respect to each transaction, in light of the overall
   quality of brokerage and research services provided to the Adviser.

        The Adviser will place orders pursuant to its investment
   determination for the Funds either directly with the issuer or with any
   broker or dealer.  In executing portfolio transactions and selecting
   brokers or dealers, the Adviser will use its best effort to seek on behalf
   of a Fund the best overall terms available.  In selecting brokers and
   assessing the best overall terms available for any transaction, the
   Adviser shall consider all factors that it deems relevant, including the
   breadth of the market in the security, the price of the security, the
   financial condition and execution capability of the broker or dealer, and
   reasonableness of the commission, if any, both for the specific
   transaction and on a continuing basis.  The most favorable price to a Fund
   means the best net price without regard to the mix between purchase or
   sale price and commission, if any.  Over-the-counter securities are
   generally purchased or sold directly with principal market makers who
   retain the difference in their cost in the security and its selling price. 
   In some instances, the Adviser may determine that better prices are
   available from non-principal market makers who are paid commissions
   directly. 

        In evaluating the best overall terms available, and in selecting the
   broker-dealer to execute a particular transaction, the Adviser may also
   consider the brokerage and research services (as those terms are defined
   in Section 28(e) of the Securities Exchange Act of 1934) provided to the
   Funds and/or other accounts over which the Adviser or an affiliate of the
   Adviser exercises investment discretion.  While the Adviser believes these
   services have substantial value, they are considered supplemental to its
   own efforts in the performance of its duties.  Other clients of the
   Adviser may indirectly benefit from the availability of these services to
   the Adviser, and the Funds may indirectly benefit from services available
   to the Adviser as a result of transactions for other clients.  The Adviser
   is authorized to pay to a broker or dealer who provides such brokerage and
   research services a commission for executing a portfolio transaction for a
   Fund which is in excess of the amount of commission another broker or
   dealer would have charged for effecting that transaction if, but only if,
   the Adviser determines in good faith that such commission was reasonable
   in relation to the value of the brokerage and research services provided
   by such broker or dealer - viewed in terms of that particular transaction
   or in terms of the overall responsibilities the Adviser has to the Funds. 
   In no instance, however, will portfolio securities be purchased from or
   sold to the Adviser, or any affiliated person of either the Company or the
   Adviser, acting as principal in the transaction, except to the extent
   permitted by the Securities and Exchange Commission through rules,
   regulations, decisions and no-action letters.

        The Adviser may retain advisory clients in addition to the Funds and
   place portfolio transactions for these accounts.  Research services
   furnished by firms through which the Funds effect their securities
   transactions may be used by the Adviser in servicing all of its accounts;
   not all of such services may be used by the Adviser in connection with the
   Funds.  In the opinion of the Adviser, it will not be possible to
   separately measure the benefits from research services to each of the
   accounts (including the Funds) to be managed by the Adviser.  Because the
   volume and nature of the trading activities of the accounts will not be
   uniform, the amount of commissions in excess of those charged by another
   broker paid by each account for brokerage and research services will vary. 
   However, such costs to the Funds will not, in the opinion of the Adviser,
   be disproportionate to the benefits to be received by the Funds on a
   continuing basis.  

        The Adviser intends to seek to allocate portfolio transactions
   equitably among its accounts whenever concurrent decisions are made to
   purchase or sell securities by a Fund and another advisory account.  In
   some cases, this procedure could have an adverse effect on the price or
   the amount of securities available to a Fund.  In making such allocations
   between a Fund and other advisory accounts, if any, the main factors to be
   considered by the Adviser will be the respective investment objectives,
   the relative size of portfolio holdings of the same or comparable
   securities, the availability of cash for investment, the size of
   investment commitments generally held, and the opinions of the persons
   responsible for recommending the investment.

                                      TAXES

   General

        In order to qualify for treatment as a regulated investment company
   ("RIC") under the Code, each 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
   gain and net gains from certain foreign currency transactions)
   ("Distribution Requirement") and must meet several additional
   requirements.  With respect to each Fund, 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 -- options, futures or forward contracts
   (other than those on foreign currencies), or 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
   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, with these other securities limited, with respect to 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; 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.

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

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

        If shares of a Fund 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 capital gain distributions
   received on those shares.  Investors also should be aware that if shares
   are purchased shortly before the record date for any distribution, the
   shareholder will pay full price for the shares and receive some portion of
   the price back as a taxable dividend or capital gain distribution.

        Each Fund will be subject to a nondeductible 4% 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.

   Foreign Taxes

        Dividends and interest received by the Funds may be subject to
   income, withholding, or other taxes imposed by foreign countries that
   would reduce the yield on each Fund's portfolio 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.  If more than 50% of the value of a Fund's total assets at the
   close of its taxable year consists of securities of foreign corporations,
   the Fund will be eligible to, and may, file an election with the Internal
   Revenue Service that will enable its shareholders, in effect, to receive
   the benefit of the foreign tax credit with respect to any foreign income
   taxes paid by it.  Pursuant to the election, the Fund will treat those
   taxes as dividends paid to its shareholders and each shareholder will be
   required to (1) include in gross income, and treat as paid by him, his
   proportionate share of those taxes, (2) treat his share of those taxes and
   of any dividend paid by the Fund that represents income from foreign
   sources as his own income from those sources, and (3) either deduct the
   taxes deemed paid by him in computing his taxable income or,
   alternatively, use the foregoing information in calculating the foreign
   tax credit against his federal income tax.  Each Fund will report to its
   shareholders shortly after each taxable year their respective shares of
   the Fund's income from sources within, and taxes paid to, foreign
   countries if it makes this election.

   Passive Foreign Investment Companies

        If a Fund acquires stock in certain non-U.S. corporations that
   receive at least 75% of their annual gross income from passive sources
   (such as sources that produce interest, dividends, rental, royalty or
   capital gain income) or hold at least 50% of their assets in such passive
   sources ("passive foreign investment companies"), the Fund could be
   subject to federal income tax and additional interest charges on "excess
   distributions" received from such companies or gains from the sale of
   stock in such companies, even if all income or gain actually received by
   the Fund is timely distributed to its shareholders.  The Fund would not be
   able to pass through to its shareholders any credit or deduction for such
   tax.  In some cases, elections may be available that would ameliorate
   these adverse tax consequences, but such elections would require the Fund
   to include certain amounts as income or gain (subject to the distribution
   requirements described above) without a concurrent receipt of cash and
   could result in the conversion of capital gain to ordinary income.  A Fund
   may limit its investments in passive foreign investment companies or
   dispose of such investments if potential adverse tax consequences are
   deemed material in particular situations.

   Non U.S. Shareholders

        Distributions of net investment income by a Fund to a shareholder
   who, as to the United States, is a nonresident alien individual,
   nonresident alien fiduciary of a trust or estate, foreign corporation, or
   foreign partnership ("foreign shareholder") will be subject to U.S.
   withholding tax at a rate of 30% (or lower treaty rate).  Withholding will
   not apply if a dividend paid by a Fund to a foreign shareholder is
   "effectively connected with the conduct of a U.S. trade or business," in
   which case the reporting and withholding requirements applicable to
   domestic taxpayers will apply.  Distributions of net capital gain are not
   subject to withholding, but in the case of a foreign shareholder who is a
   nonresident alien individual, such distributions ordinarily will be
   subject to U.S. income tax at a rate of 30% (or lower treaty rate) if the
   individual is physically present in the United States for more than 182
   days during the taxable year and the distributions are attributable to a
   fixed place of business maintained by an individual in the United States.

        The foregoing is a general and abbreviated summary of certain U.S.
   federal income tax considerations affecting such Fund and its
   shareholders.  Investors are urged to consult their own tax advisers for
   more detailed information and for information regarding any foreign, state
   and local taxes applicable to distributions received from a Fund.

                              DESCRIPTION OF SHARES

        The Fund is an open-end management investment company organized as a
   Maryland corporation on October 18, 1995.  The Company's Charter
   authorizes the Board of Directors to issue up to 500,000,000 shares of
   common stock, par value $0.0001 per share. One hundred million shares of
   the Company's authorized common stock have been initially allocated to
   each of the Funds.  Each share of the Funds has equal voting, dividend,
   distribution and liquidation rights.

        Shares of the Funds have no preemptive rights and only such
   conversion or exchange rights as the Board may grant in its discretion. 
   When issued for payment as described in the Prospectus, the Company s
   shares will be fully paid and non-assessable.

        Shareholders are entitled to one vote for each full share held, and
   fractional votes for fractional shares held, and will vote in the
   aggregate and not by class or series except as otherwise required by the
   1940 Act or the Maryland General Corporation Law.

        Rule 18f-2 under the 1940 Act provides that any matter required to be
   submitted to the holders of the outstanding voting securities of an
   investment company such as the Funds shall not be deemed to have been
   effectively acted upon unless approved by a majority of the outstanding
   shares of each fund affected by the matter.  A Fund is affected by a
   matter unless it is clear that the interests of each Fund in the matter
   are substantially identical or that the matter does not affect any
   interest of the Funds.  Under Rule 18f-2 the approval of an investment
   advisory agreement or 12b-1 distribution plan or any change in a
   fundamental investment policy would be effectively acted upon with respect
   to a Fund only if approved by a majority of the outstanding shares of such
   Fund.  However, the rule also provides that the ratification of
   independent public accountants, the approval of principal underwriting
   contracts and the election of directors may be effectively acted upon by
   shareholders of the Company voting without regard to particular Funds.

        Notwithstanding any provision of the Maryland General Corporation Law
   requiring for any purpose the concurrence of a proportion greater than a
   majority of all votes entitled to be cast at a meeting at which a quorum
   is present, the affirmative vote of the holders of a majority of the total
   number of shares of the Funds outstanding (or of a class or series of the
   Funds, as applicable) will be effective, except to the extent otherwise
   required by the 1940 Act and rules thereunder.  In addition, the Articles
   of Incorporation provide that, to the extent consistent with the General
   Corporation Law of Maryland and other applicable law, the By-Laws may
   provide for authorization to be given by the affirmative vote of the
   holders of less than a majority of the total number of shares of the Funds
   outstanding (or of a class or series).

                              SHAREHOLDER MEETINGS

        The Maryland Statutes permit registered investment companies, such as
   the Funds, to operate without an annual meeting of shareholders under
   specified circumstances if an annual meeting is not required by the 1940
   Act.  The Company has adopted the appropriate provisions in its By-Laws
   and may, at its discretion, not hold an annual meeting in any year in
   which the election of directors is not required to be acted on by
   shareholders under the 1940 Act.

        The Company's By-Laws also contain procedures for the removal of
   directors by its shareholders.  At any meeting of shareholders, duly
   called and at which a quorum is present, the shareholders may, by the
   affirmative vote of the holders of a majority of the votes entitled to be
   cast thereon, remove any director or directors from office and may elect a
   successor or successors to fill any resulting vacancies for the unexpired
   terms of removed directors.

        Upon the written request of the holders of shares entitled to not
   less than ten percent (10%) of all the votes entitled to be cast at such
   meeting, the Secretary of the Fund shall promptly call a special meeting
   of shareholders for the purpose of voting upon the question of removal of
   any director.  Whenever ten or more shareholders of record who have been
   such for at least six months preceding the date of application, and who
   hold in the aggregate either shares having a net asset value of at least
   $25,000 or at least one percent (1%) of the total outstanding shares,
   whichever is less, shall apply to the Company's Secretary in writing,
   stating that they wish to communicate with other shareholders with a view
   to obtaining signatures to submit a request for a meeting as described
   above and accompanied by a form of communication and request which they
   wish to transmit, the Secretary shall within five business days after such
   application either:  (1) afford to such applicants access to a list of the
   names and addresses of all shareholders as recorded on the books of the
   Funds; or (2) inform such applicants as to the approximate number of
   shareholders of record and the approximate cost of mailing to them the
   proposed communication and form of request.

        If the Secretary elects to follow the course specified in clause (2)
   of the last sentence of the preceding paragraph, the Secretary, upon the
   written request of such applicants, accompanied by a tender of the
   material to be mailed and of the reasonable expenses of mailing, shall,
   with reasonable promptness, mail such material to all shareholders of
   record at their addresses as recorded on the books unless within five
   business days after such tender the Secretary shall mail to such
   applicants and file with the SEC, together with a copy of the material to
   be mailed, a written statement signed by at least a majority of the Board
   of Directors to the effect that in their opinion either such material
   contains untrue statements of fact or omits to state facts necessary to
   make the statements contained therein not misleading, or would be in
   violation of applicable law, and specifying the basis of such opinion.

        After opportunity for hearing upon the objections specified in the
   written statement so filed, the SEC may, and if demanded by the Board of
   Directors or by such applicants shall, enter an order either sustaining
   one or more of such objections or refusing to sustain any of them.  If the
   SEC shall enter an order refusing to sustain any of such objections, or
   if, after the entry of an order sustaining one or more of such objections,
   the SEC shall find, after notice and opportunity for hearing, that all
   objections so sustained have been met, and shall enter an order so
   declaring, the Secretary shall mail copies of such material of all
   shareholders with reasonable promptness after the entry of such order and
   the renewal of such tender.

                         INDIVIDUAL RETIREMENT ACCOUNTS

        Individuals who receive compensation or earned income, even if they
   are active participants in a qualified retirement plan (or certain similar
   retirement plans), may establish their own tax-sheltered Individual
   Retirement Account ("IRA").  The Funds offer a prototype IRA plan which
   may be adopted by individuals.  There is currently no charge for
   establishing an account, although there is an annual maintenance fee.

        Earnings on amounts held in an IRA are not taxed until withdrawal. 
   However, the amount of deduction, if any, allowed for IRA contributions is
   limited for individuals who are active participants in an employer-
   maintained retirement plan and whose incomes exceed specific limits.

        A description of applicable service fees and certain limitations on
   contributions and withdrawals, as well as application forms, are available
   from the transfer agent upon request at 1-800-228-2121.  The IRA documents
   contain a disclosure statement which the Internal Revenue Service requires
   to be furnished to individuals who are considering adopting the IRA. 
   Because a retirement program involves commitments covering future years,
   it is important that the investment objective of the Funds be consistent
   with the participant's retirement objectives.  Premature withdrawals from
   a retirement plan will result in adverse tax consequences.  Consultation
   with a competent financial and tax adviser regarding the foregoing
   retirement plans is recommended.

                             PERFORMANCE INFORMATION

        The Funds may from time to time advertise performance data such as
   "average annual total return" and "total return."  To facilitate the
   comparability of historical performance data from one mutual fund to
   another, the SEC has developed guidelines for the calculation of average
   annual total return.

        The average annual total return for a Fund for a specific period is
   found by first taking a hypothetical $10,000 investment ("initial
   investment") in the Fund's shares on the first day of the period and
   computing the "redeemable value" of that investment at the end of the
   period.  The redeemable value is then divided by the initial investment,
   and this quotient is taken to the Nth root (N representing the number of
   years in the period) and 1 is subtracted from the result, which is then
   expressed as a percentage.  The calculation assumes that all income and
   capital gains dividends paid by the Fund have been reinvested at net asset
   value on the reinvestment dates during the period.  This calculation can
   be expressed as follows:

                N
        P(1 + T)  = ERV

        Where:    T= average annual total return.

        ERV =     ending redeemable value at the end of the period covered by
                  the computation of a hypothetical $1,000 payment made at
                  the beginning of the period.

        P =       hypothetical initial payment of $1,000.

        N =       period covered by the computation, expressed in terms of
                  years.

        Total return performance for a specific period is calculated by first
   taking an investment ("initial investment") in a Fund's shares on the
   first day of the period and computing the "ending value" of that
   investment at the end of the period.  The total return percentage is then
   determined by subtracting the initial investment from the ending value and
   dividing the remainder by the initial investment and expressing the result
   as a percentage.  The calculation assumes that all income and capital
   gains dividends paid by the Fund have been reinvested at net asset value
   on the reinvestment dates during the period.  Total return may also be
   shown as the increased dollar value of the investment over the period or
   as a cumulative total return which represents the change in value of an
   investment over a stated period and may be quoted as a percentage or as a
   dollar amount.

        The calculations of average annual total return and aggregate total
   return assume the reinvestment of all dividends and capital gain
   distributions on the reinvestment dates during the period.  The ending
   redeemable value is determined by assuming complete redemption of the
   hypothetical investment and the deduction of all nonrecurring charges at
   the end of the period covered by the computations.

        The Funds' performance figures will be based upon historical results
   and will not necessarily be indicative of future performance.  The Funds'
   returns and net asset value will fluctuate and the net asset value of
   shares when sold may be more or less than their original cost.  Any
   additional fees charged by a dealer or other financial services firm would
   reduce the returns described in this section.

        From time to time, in marketing and other literature, the Funds'
   performance may be compared to the performance of other mutual funds in
   general or to the performance of particular types of mutual funds with
   similar investment goals, as tracked by independent organizations.  Among
   these organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely
   used independent research firm which ranks mutual funds by overall
   performance, investment objective and assets, may be cited.  Lipper
   performance figures are based on changes in net asset value, with all
   income and capital gains dividends reinvested.  Such calculations do not
   include the effect of any sales charges imposed by other funds.  The Funds
   will be compared to Lipper's appropriate fund category, that is, by fund
   objective and portfolio holdings.

        The Funds' performance may also be compared to the performance of
   other mutual funds by Morningstar, Inc., which ranks funds on the basis of
   historical risk and total return.  Morningstar's rankings range from five
   stars (highest) to one star (lowest) and represent Morningstar's
   assessment of the historical risk level and total return of a fund as a
   weighted average for 3, 5, and 10 year periods.  Ranking are not absolute
   or necessarily predictive of future performance.

        Evaluations of Fund performance made by independent sources may also
   be used in advertisements concerning the Funds, including reprints of or
   selections from, editorials or articles about the Funds.  Sources for Fund
   performance and articles about the Funds may include publications such as
   Money, Forbes, Kiplinger's, Financial World, Business Week, U.S. News and
   World Report, the Wall Street Journal, Barron's and a variety of
   investment newsletters.

        The Funds may compare their performance to a wide variety of indices
   and measures of inflation including the Standard & Poor's Index of 500
   Stocks and the NASDAQ Over-the-Counter Composite Index.  There are
   differences and similarities between the investments that the Funds may
   purchase for their respective portfolios and the investments measured by
   these indices.

        Occasionally statistics may be used to specify a Fund's volatility or
   risk.  Measures of volatility or risk are generally used to compare a
   Fund's net asset value or performance relative to a market index.  One
   measure of volatility is beta.  Beta is the volatility of a fund relative
   to the total market as represented by the Standard & Poor's 500 Stock
   Index.  A beta of more than 1.00 indicates volatility greater than the
   market, and a beta of less than 1.00 indicates volatility less than the
   market.  Another measure of volatility or risk is standard deviation. 
   Standard deviation is used to measure variability of net asset value or
   total return around an average, over a specified period of time.  The
   premise is that greater volatility connotes greater risk undertaken in
   achieving performance.

        Marketing and other Company literature may include a description of
   the potential risks and rewards associated with an investment in the
   Funds.  The description may include a "risk/return spectrum" which
   compares a Fund to other Van Wagoner Funds or broad categories of funds,
   such as money market, bond or equity funds, in terms of potential risks
   and returns. Risk/return spectrums also may depict funds that invest in
   both domestic and foreign securities or a combination of bond and equity
   securities.  Money market funds are designed to maintain a constant $1.00
   share price and have a fluctuating yield.  Share price, yield and total
   return of a bond fund will fluctuate.  The share price and return of an
   equity fund also will fluctuate.  The description may also compare a Fund
   to bank products, such as certificates of deposit.  Unlike mutual funds,
   certificates of deposit are insured up to $100,000 by the U.S. government
   and offer a fixed rate of return.

                  PURCHASE, EXCHANGE AND REDEMPTION OF SHARES;
                        DETERMINATION OF NET ASSET VALUE

        As set forth in the Prospectus, the net asset value of the Funds will
   be determined as of the close of trading on each day the New York Stock
   Exchange is open for trading.  The New York Stock Exchange is open for
   trading Monday through Friday except New Year's Day, Presidents' Day, Good
   Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
   Christmas Day.  Additionally, if any of the aforementioned holidays falls
   on a Saturday, the New York Stock Exchange will not be open for trading on
   the preceding Friday, and when any such holiday falls on a Sunday, the New
   York Stock Exchange will not be open for trading on the following Monday
   unless unusual business conditions exist, such as the ending of a monthly
   or the yearly accounting period.

        Shares of the Funds may be exchanged for shares of the Northern U.S.
   Government Money Market Fund as provided in the Prospectus.  Sunstone
   Financial Group, Inc. receives a service fee from the Northern U.S.
   Government Money Market Fund at the annual rate of 0.25 of 1% of the
   average daily net asset value of the shares of the Fund exchanged into the
   Northern U.S. Government Money Market Fund.

                                OTHER INFORMATION

        It is possible that conditions may exist in the future which would,
   in the opinion of the Board of Directors, make it undesirable for a Fund
   to pay for redemptions in cash.  In such cases the Board may authorize
   payment to be made in portfolio securities of a Fund.  However, the Funds
   have obligated themselves under the 1940 Act to redeem for cash all shares
   presented for redemption by any one shareholder up to $250,000 (or 1% of a
   Fund's net assets if that is less) in any 90-day period.  Securities
   delivered in payment of redemptions are valued at the same value assigned
   to them in computing the net asset value per share.  Shareholders
   receiving such securities generally will incur brokerage costs when
   selling such securities.

        Payment for shares of a Fund may, in the discretion of the Adviser,
   be made in the form of securities that are permissible investments for the
   Fund as described in the Prospectus.  For further information about this
   form of payment, contact the Transfer Agent.  In connection with an in-
   kind securities payment, the Funds will require, among other things, that
   the securities be valued on the day of purchase in accordance with the
   pricing methods used by the Fund and that the Fund receive satisfactory
   assurances that it will have good and marketable title to the securities
   received by it; that the securities be in proper form for transfer to the
   Fund; and that adequate information be provided concerning the basis and
   other tax matters relating to the securities.  In addition, so long as
   shares in a Fund are offered or sold in Texas, any securities that are
   accepted as payment for the shares of the Fund will be limited to
   securities that are issued in transactions that involve a bona fide
   reorganization or statutory merger, or will be limited to other
   acquisitions of portfolio securities that:  (a) meet the investment
   objective and policies of the Funds; (b) are acquired for investment and
   not for resale; (c) are liquid securities that are not restricted as to
   transfer either by law or liquidity of market; and (d) have a value that
   is readily ascertainable (and not established only by valuation
   procedures) as evidenced by a listing on the American Stock Exchange, New
   York Stock Exchange or NASDAQ or as evidenced by their status as U.S.
   Government Securities, bank certificates of deposit, banker's acceptances,
   corporate and other debt securities that are actively traded, money market
   securities and other like securities with a readily ascertainable value.

        The Prospectus and this Statement of Additional Information do not
   contain all the information included in the Registration Statement filed
   with the Commission under the Securities Act with respect to the
   securities offered by the Funds' Prospectus.  Certain portions of the
   Registration Statement have been omitted from the Prospectus and this
   Statement of Additional Information, pursuant to the rules and regulations
   of the Commission.  The Registration Statement including the exhibits
   filed therewith may be examined at the office of the Commission in
   Washington, D.C.

        Statements contained in the Prospectus or in this Statement of
   Additional Information as to the contents of any contract or other
   documents referred to are not necessarily complete, and in each instance
   reference is made to the copy of such contract or other document filed as
   an exhibit to the Registration Statement of which the Prospectus and this
   Statement of Additional Information form a part, each such statement being
   qualified in all respects by such reference.

                              FINANCIAL STATEMENTS

   The following financial statement has been audited and is attached hereto:

        1.   Report of Independent Accountants.
        2.   Statement of Assets and Liabilities as of November 27, 1995.
        3.   Notes to Financial Statement.




                        REPORT OF INDEPENDENT ACCOUNTANTS


   To the Shareholder and Board of Directors of
        Van Wagoner Funds, Inc.

   In our opinion, the accompanying statement of assets and liabilities
   presents fairly, in all material respects, the financial position of Van
   Wagoner Funds, Inc. (the "Fund") at November 27, 1995, in conformity with
   generally accepted accounting principles.  This financial statement is the
   responsibility of the Fund's management; our responsibility is to express
   an opinion on this financial statement based on our audit.  We conducted
   our audit of this financial statement in accordance with generally
   accepted auditing standards which require that we plan and perform the
   audit to obtain reasonable assurance about whether the financial statement
   is free of material misstatement.  An audit includes examining, on a test
   basis, evidence supporting the amounts and disclosures in the financial
   statement, assessing the accounting principles used and significant
   estimates made by management, and evaluating the overall financial
   statement presentation.  We believe that our audit provides a reasonable
   basis for the opinion expressed above.


   Price Waterhouse LLP
   Milwaukee, Wisconsin
   November 30, 1995

   

                             Van Wagoner Funds, Inc.

                       Statement of Assets and Liabilities

                                November 27, 1995


                                        Micro-Cap     Emerging      Mid-Cap
    ASSETS                                 Fund      Growth Fund      Fund

    Cash                                 $33,333      $33,334       $33,333

    Unamortized organization costs        22,420       22,420        22,420

    Prepaid initial registration          
    expenses                              13,818       13,819        13,818
                                         -------       ------        ------
       Total Assets                       69,571       69,573        69,571
                                         -------       ------        ------
    LIABILITIES

    Accrued professional fees             21,170       21,170        21,170
    Accounts payable                      14,318       14,319        14,318
    Payable to Adviser                       750          750           750
                                         -------      -------        ------
       Total Liabilities                  36,238       36,239        36,238
                                         -------      -------       -------
    NET ASSETS                           $33,333      $33,334       $33,333
                                         =======      =======       =======
    Capital shares, $0.0001 par value;
    100,000,000 shares authorized 
    per portfolio                        $33,333      $33,334       $33,333
                                         =======      =======       =======

    Shares outstanding                     3,333        3,333         3,333
                                           -----        -----         -----
    Net asset value, redemption price
    and offering price per share (net
    assets/shares outstanding)            $10.00       $10.00        $10.00
                                          ------       ------        ------

   The accompanying notes to financial statement are an integral part of this
   statement

   

                             Van Wagoner Funds, Inc.

                          Notes to Financial Statement

                                November 27, 1995


   (1)  Organization

        Van Wagoner Funds, Inc. (the "Funds") was organized in October, 1995
        as a Maryland corporation and is registered under the Investment
        Company Act of 1940, as amended (the "1940 Act"), as an open-end
        management investment company issuing its shares in series, each
        series representing a distinct portfolio with its own investment
        objectives and policies.  The only series presently authorized are
        the Micro-Cap Fund, the Emerging Growth Fund and the Mid-Cap Fund. 
        The Funds have had no operations other than those relating to
        organizational matters, including the sale of 10,000 shares to
        capitalize the Funds, which were sold to Van Wagoner Capital
        Management, Inc. (the "Adviser") on November 27, 1995 for cash in the
        amount of $100,000.

   (2)  Significant Accounting Policies

        (a)  Organization Costs

             Costs incurred by the Funds in connection with their
             organization, registration and the initial public offering of
             shares have been deferred and will be amortized over the period
             of benefit, but not to exceed five years from the date upon
             which the Funds commence their investment activities.  If any of
             the original shares of a Fund purchased by the Adviser are
             redeemed by any holder thereof prior to the end of the
             amortization period, the redemption proceeds will be reduced by
             the pro rata share of the unamortized expenses as of the date of
             redemption.  The pro rata share by which the proceeds are
             reduced will be derived by dividing the number of original
             shares of the Funds being redeemed by the total number of
             original shares outstanding at the time of redemption.

        (b)  Federal Income Taxes

             Each Fund intends to comply with the requirements of the
             Internal Revenue Code necessary to qualify as a regulated
             investment company and to make the requisite distributions of
             income to its shareholders which will be sufficient to relieve
             it from all or substantially all Federal income taxes.

   (3)  Investment Adviser

        The Funds have an agreement with the Adviser to furnish investment
        advisory services to the Funds.  Under the terms of this agreement,
        the Adviser is compensated at the following percentage of average
        daily net assets for each Fund:  1.50% for the Micro-Cap Fund, 1.25%
        for the Emerging Growth Fund and 1.00% for the Mid-Cap Fund.  The
        Adviser has agreed to voluntarily reduce fees for expenses (exclusive
        of brokerage, interest, taxes and extraordinary expenses) that exceed
        the expense limitation of 1.95% for each Fund until January 1, 1997.

   (4)  Service and Distribution Plan

        Pursuant to Rule 12b-1 under the 1940 Act, the Funds have adopted a
        Service and Distribution Plan (the "Plan").  Under the Plan, each
        Fund is authorized to pay expenses incurred for the purpose of
        financing activities intended to result in the sale of shares of the
        Funds at an annual rate of up to 0.25% of each Fund's average daily
        net assets.


                                   APPENDIX A

   Commercial Paper Ratings

        A Standard & Poor's commercial paper rating is a current assessment
   of the likelihood of timely payment of debt having an original maturity of
   no more than 365 days.  The following summarizes the rating categories
   used by Standard & Poor's for commercial paper in which the Funds may
   invest:

        "A-1" - Issue's degree of safety regarding timely payment is strong. 
   Those issues determined to possess extremely strong safety characteristics
   are denoted "A-1+."

        "A-2" - Issue's capacity for timely payment is satisfactory. 
   However, the relative degree of safety is not as high as for issues
   designated "A-1."

        Moody's commercial paper ratings are opinions of the ability of
   issuers to repay punctually promissory obligations not having an original
   maturity in excess of 9 months.  The following summarizes the rating
   categories used by Moody's for commercial paper in which the Funds may
   invest:

        "Prime-1" - Issuer or related supporting institutions are considered
   to have a superior capacity for repayment of short-term promissory
   obligations.  Prime-1 repayment capacity will normally be evidenced by the
   following capacities:  leading market positions in well-established
   industries; high rates of return on funds employed; conservative
   capitalization structures with moderate reliance on debt and ample asset
   protection; broad margins in earning coverage of fixed financial charges
   and high internal cash generation; and well-established access to a range
   of financial markets and assured sources of alternate liquidity.

        "Prime-2" - Issuer or related supporting institutions are considered
   to have a strong capacity for repayment of short-term promissory
   obligations.  This will normally be evidenced by many of the
   characteristics cited above but to a lesser degree.  Earnings trends and
   coverage ratios, while sound, will be more subject to variation. 
   Capitalization characteristics, while still appropriate, may be more
   affected by external conditions.  Ample alternative liquidity is
   maintained.

        The three rating categories of Duff & Phelps for investment grade
   commercial paper are "Duff 1," "Duff 2" and "Duff 3."  Duff & Phelps
   employs three designations, "Duff 1+," "Duff 1" and "Duff 1-," within the
   highest rating category.  The following summarizes the rating categories
   used by Duff & Phelps for commercial paper in which the Funds may invest:

        "Duff 1+" - Debt possesses highest certainty of timely payment. 
   Short-term liquidity, including internal operating factors and/or access
   to alternative sources of funds, is outstanding, and safety is just below
   risk-free U.S. Treasury short-term obligations.

        "Duff 1" - Debt possesses very high certainty of timely payment. 
   Liquidity factors are excellent and supported by good fundamental
   protection factors.  Risk factors are minor.

        "Duff 1-" - Debt possesses high certainty of timely payment. 
   Liquidity factors are strong and supported by good fundamental protection
   factors.  Risk factors are very small.

        "Duff 2" - Debt possesses good certainty of timely payment. 
   Liquidity factors and company fundamentals are sound.  Although ongoing
   funding need may enlarge total financing requirements, access to capital
   markets is good.

        Fitch short-term ratings apply to debt obligations that are payable
   on demand or have original maturities of up to three years.  The highest
   rating category of Fitch for short-term obligations is "F-1."  Fitch
   employs two designations, "F-1+" and "F-1," within the highest category. 
   The following summarizes the rating categories used by Fitch for short-
   term obligations in which the Funds may invest:

        "F-1+" - Securities possess exceptionally strong credit quality. 
   Issues assigned this rating are regarded as having the strongest degree of
   assurance for timely payment.

        "F-1" - Securities possess very strong credit quality.  Issues
   assigned this rating reflect an assurance of timely payment only slightly
   less in degree than issues rated "F-1+."

   Fitch may also use the symbol "LOC" with its short-term ratings to
   indicate that the rating is based upon a letter of credit issued by a
   commercial bank.

        Thomson BankWatch short-term ratings assess the likelihood of an
   untimely or incomplete payment of principal or interest of unsubordinated
   instruments having a maturity of one year or less which are issued by a
   bank holding company or an entity within the holding company structure. 
   The following summarizes the ratings used by Thomson BankWatch in which
   the Funds may invest:

        "TBW-1" - This designation represents Thomson BankWatch's highest
   rating category and indicates a very high degree of likelihood that
   principal and interest will be paid on a timely basis.

        "TBW-2" - this designation indicates that while the degree of safety
   regarding timely payment of principal and interest is strong, the relative
   degree of safety is not as high as for issues rated "TBW-1."

        IBCA assesses the investment quality of unsecured debt with an
   original maturity of less than one year which is issued by bank holding
   companies and their principal bank subsidiaries.  The following summarizes
   the rating categories used by IBCA for short-term debt ratings in which
   the Funds may invest:

        "A1" - Obligations are supported by the highest capacity for timely
   repayment.  Where issues possess a particularly strong credit feature, a
   rating of A1+ is assigned.

        "A2" - Obligations are supported by a good capacity for timely
   repayment.

   Corporate Long-Term Debt Ratings

   Standard & Poor's Debt Ratings

        A Standard & Poor's corporate or municipal debt rating is a current
   assessment of the creditworthiness of an obligor with respect to a
   specific obligation.  This assessment may take into consideration obligors
   such as guarantors, insurers, or lessees.  The debt rating is not a
   recommendation to purchase, sell, or hold a security, inasmuch as it does
   not comment as to market price or suitability for a particular investor.

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

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

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

             2.   Nature of and provisions of the obligation.

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

   Investment Grade

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

        AA -  Debt rated 'AA' has a very strong capacity to pay interest and
   repay principal and differs from the highest rated issues only in small
   degree.

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

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

   Speculative Grade

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

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

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

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

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

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

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

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

   Moody's Long-Term Debt Ratings

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

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

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

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

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

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

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

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

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

   Fitch Investors Service, Inc. Bond Ratings

        Fitch investment grade bond ratings provide a guide to investors in
   determing the credit risk associated with a particular security.  The
   ratings represent Fitch's assessment of the issuer's ability to meet the
   obligations of a specific debt issue or class of debt in a timely manner.

        The rating takes into consideration special features of the issue,
   its relationship to other obligations of the issuer, the current and
   prospective financial condition and operating performance of the issuer
   and any guarantor, as well as the economic and political environment that
   might affect the issuer's future financial strength and credit quality.

        Fitch ratings do not reflect any credit enhancement that may be
   provided by insurance policies or financial guaranties unless otherwise
   indicated.

        Bonds that have the same rating are of similar but not necessarily
   identical credit quality since the rating categories do not fully reflect
   small differences in the degrees of credit risk.

        Fitch ratings are not recommendations to buy, sell, or hold any
   security.  Ratings do not comment on the adequacy of market price, the
   suitability of any security for a particular investor, or the tax-exempt
   nature of taxability of payments made in respect of any security.

        Fitch ratings are based on information obtained from issuers, other
   obligors, underwriters, their experts, and other sources Fitch believes to
   be reliable.  Fitch does not audit or verify the truth or accuracy of such
   information.  Ratings may be changed, suspended, or withdrawn as a result
   of changes in, or the unavailability of, information or for other reasons.

        AAA  Bonds considered to be investment grade and of the highest
             credit quality.  The obligor has an exceptionally strong ability
             to pay interest and repay principal, which is unlikely to be
             affected by reasonably foreseeable events.

        AA   Bonds considered to be investment grade and of very high credit
             quality.  The obligor's ability to pay interest and repay
             principal is very strong, although not quite as strong as bonds
             rated 'AAA.'  Because bonds rated in the 'AAA' and 'AA'
             categories are not significantly vulnerable to foreseeable
             future developments, short-term debt of the issuers is generally
             rated 'F-1+.'

        A    Bonds considered to be investment grade and of high credit
             quality.  The obligor's ability to pay interest and repay
             principal is considered to be strong, but may be more vulnerable
             to adverse changes in economic conditions and circumstances than
             bonds with higher ratings.

        BBB  Bonds considered to be investment grade and of satisfactory
             credit quality.  The obligor's ability to pay interest and repay
             principal is considered to be adequate.  Adverse changes in
             economic conditions and circumstances, however, are more likely
             to have adverse impact on these bonds, and therefore impair
             timely payment.  The likelihood that the ratings of these bonds
             will fall below investment grade is higher than for bonds with
             higher ratings.

        Fitch speculative grade bond ratings provide a guide to investors in
   determining the credit risk associated with a particular security.  The
   ratings ('BB to 'C') represent Fitch's assessment of the likelihood of
   timely payment of principal and interest in accordance with the terms of
   obligation for bond issues not in default.  For defaulted bonds, the
   rating ('DDD' to 'D') is an assessment of the ultimate recovery value
   through reorganization or liquidation.

        The rating takes into consideration special features of the issue,
   its relationship to other obligations of the issuer, the current and
   prospective financial condition and operating performance of the issuer
   and any guarantor, as well as the economic and political environment that
   might affect the issuer's future financial strength.

        Bonds that have the same rating are of similar but not necessarily
   identical credit quality since the rating categories cannot fully reflect
   the differences in the degrees of credit risk.  Moreover, the character of
   the risk factor varies from industry to industry and between corporate,
   health care and municipal obligations.

        BB   Bonds are considered speculative.  The obligor's ability to pay
             interest and repay principal may be affected over time by
             adverse economic changes.  However, business and financial
             alternatives can be identified which could assist the obligor in
             satisfying its debt service requirements.

        B    Bonds are considered highly speculative.  While bonds in this
             class are currently meeting debt service requirements, the
             probability of continued timely payment of principal and
             interest reflects the obligor's limited margin of safety and the
             need for reasonable business and economic activity throughout
             the life of the issue.

        CCC  Bonds have certain identifiable characteristics which, if not
             remedied, may lead to default.  The ability to meet obligations
             requires an advantageous business and economic environment.

        CC   Bonds are minimally protected.  Default in payment of interest
             and/or principal seems probable over time.

        C    Bonds are in imminent default in payment of interest or
             principal.

        DDD, DD
        and D     Bonds are in default on interest and/or principal payments. 
                  Such bonds are extremely speculative and should be valued
                  on the basis of their ultimate recovery value in
                  liquidation or reorganization of the obligor.  

   Duff & Phelps, Inc. Long-Term Debt Ratings

        These ratings represent a summary opinion of the issuer's long-term
   fundamental quality.  Rating determination is based on qualitative and
   quantitative factors which may vary according to the basic economic and
   financial characteristics of each industry and each issuer.  Important
   considerations are vulnerability to economic cycles as well as risks
   related to such factors as competition, government action, regulation,
   technological obsolescence, demand shifts, cost structure, and management
   depth and expertise.  The projected viability of the obligor at the trough
   of the cycle is a critical determination.

        Each rating also takes into account the legal form of the security
   (e.g., first mortgage bonds, subordinated debt, preferred stock, etc.). 
   The extent of rating dispersion among the various classes of securities is
   determined by several factors including relative weightings of the
   different security classes in the capital structure, the overall credit
   strength of the issuer, and the nature of covenant protection.  Review of
   indenture restrictions is important to the analysis of a company s
   operating and financial constraints.

        The Credit Rating Committee formally reviews all ratings once per
   quarter (more frequently, if necessary).  Ratings of  BBB-  and higher
   fall within the definition of investment grade securities, as defined by
   bank and insurance supervisory authorities.

    Rating Scale         Definition

    AAA                  Highest credit quality.   The risk factors are
                         negligible, being only slightly more than for risk-
                         free U.S. Treasury debt.

    AA+                  High credit quality.   Protection factors are
    AA                   strong.  Risk is modest, but may vary slightly from
    AA-                  time to time because of economic conditions.

    A+                   Protection factors are average but adequate.
    A                    However, risk factors are more variable and greater
    A-                   in periods of economic areas.

    BBB+                 Below average protection factors but still
    BBB                  considered sufficient for prudent investment.
    BBB-                 Considerable variability in risk during economic
                         cycles.

    BB+                  Below investment grade but deemed likely to meet
    BB                   obligations when due.  Present  or prospective
    BB-                  financial protection factors fluctuate according
                         to industry conditions or company fortunes.
                         Overall quality may move up or down frequently
                         within this category.

    B+                   Below  investment grade and possessing risk that
    B                    obligations will not be met when due.  Financial
    B-                   protection factors will fluctuate widely according
                         to economic cycles.  

    CCC                  Well below investment grade securities.
                         Considerable uncertainty exists as to timely
                         payment of principal, interest or preferred
                         dividends.  Protection factors are narrow and risk
                         can be substantial with unfavorable
                         economic/industry conditions, and/or with
                         unfavorable company developments.

    DD                   Default debt obligations.  Issuer failed to meet
                         scheduled principal and/or interest payments.

    DP                   Preferred stock with dividend arrearages.