<PAGE>
WADDELL & REED ADVISORS
TAX-MANAGED
EQUITY FUND,
INC.
SEMIANNUAL
REPORT
-------------
June 30, 2000
<PAGE>
PRESIDENT'S LETTER
JUNE 30, 2000
Dear Shareholder:
We are delighted to share with you this report on your Fund's operations for the
six months ended June 30, 2000.
The last six months marked an unusual and frenetic time for the markets and the
economy. While the first quarter of 2000 was quite strong, especially for
stocks in the technology sector, the second quarter brought a decline for those
same stocks and a slowdown in the overheated U.S. economy. The slowdown was
engineered by the Federal Reserve, which raised interest rates 25 basis points
in both February and March, followed by a 50-basis-point increase in May.
The efforts at slowing the economy have apparently worked, although a parallel
acceleration in inflation remains a possibility. As a result of the Fed's
actions, the stock market didn't make much progress during the first half of the
year - in fact, it receded a bit. While the first few months of this year were
strong, the last few months saw negative returns -- especially April and May.
Year-to-date, the technology-heavy Nasdaq Composite Index was down 2.54 percent,
while the Nasdaq Industrial Index was down 5.91 percent. The performance of the
two major indices was also down from January through June, as the Dow Jones
Industrial Average declined 8.55 percent and the Standard & Poor's 500 was down
0.47 percent. One of the broadest indices, the Wilshire 5000, was also down for
the first half of this year, declining 1.41 percent. The one positive return
came in the smaller-company index, the Russell 2000 Index, which was up 3.07
percent.
Looking ahead, the market is still trying to find direction. Currently,
statistics suggest that the economy has slowed significantly since the beginning
of the year. The question remains, however, whether it has slowed enough to
prevent any further interest rate increases by the Federal Reserve. Other
factors that may affect the market during the remainder of the year include the
presidential election, the high trade deficit and the implications of that
deficit for the value of the U.S. dollar abroad.
Overall, investors have been rewarded well in recent years. Those who continue
a structured and consistent investment program remain well positioned to take
advantage of opportunities, including those presented by the market's occasional
downdrafts. Just as we urge you not to become unduly concerned if the market
moves downward in the near term, we would urge that you not become too exuberant
when it moves higher in similarly short time periods.
It is impossible to predict with certainty where markets will go next, but one
thing that remains certain is that a well-thought-out investment plan is
essential. Remember, a plan that is appropriate for you is appropriate
regardless of inevitable market changes. You have a partnership with your
Waddell & Reed financial advisor, and that partnership is built upon a
customized program based on your specific needs. Focusing on that plan, despite
market fluctuations, could be your key to a sound financial future. Thank you
for your ongoing commitment and support.
Respectfully,
Robert L. Hechler
President
<PAGE>
SHAREHOLDER SUMMARY
------------------------------------------------------------------
Waddell & Reed Advisors Tax-Managed Equity Fund, Inc.
PORTFOLIO STRATEGY:
Common stock of large to GOAL: To seek long-term growth of capital
medium sized companies while minimizing taxable gains and
income to shareholders.
STRATEGY: Designed for investors seeking long-term
capital appreciation, but who are also
seeking to reduce Federal income taxes
resulting from their investment. The
portfolio will primarily be invested in
common stocks of large to medium sized
companies.
FOUNDED: 2000
SCHEDULED DIVIDEND FREQUENCY: Annually (December)
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Period Ended June 30, 2000
----------------------------------
NET ASSET VALUE ON
6/30/00 $10.60
3/31/00 10.00
------
CHANGE PER SHARE $ 0.60
======
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Aggregate Total Return
-----------------------
With Without
Period Sales Load* Sales Load**
------ ----------- ------------
For the period from 3-31-00***
through 6/30/00 -0.10% 6.00%
*Performance data quoted represents past performance and is based on deduction
of 5.75% sales load on the initial purchase.
*Performance data quoted in this column represents past performance without
taking into account the sales load deducted on an initial purchase.
*Commencement of operations.
Investment return and principal value will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On June 30, 2000, Waddell & Reed Advisors Tax-Managed Equity Fund, Inc. had net
assets totaling $17,185,094 invested in a diversified portfolio of:
62.50% Common Stocks
37.50% Cash and Cash Equivalents
As a shareholder of Waddell & Reed Advisors Tax-Managed Equity Fund, Inc., for
every $100 you had invested on June 30, 2000, your Fund owned:
$37.50 Cash and Cash Equivalents
25.52 Manufacturing Stocks
19.75 Services Stocks
6.61 Transportation, Communication, Electric
and Sanitary Services Stocks
5.49 Wholesale and Retail Trade Stocks
3.49 Mining Stocks
1.64 Finance, Insurance and Real Estate Stocks
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
JUNE 30, 2000
Shares Value
COMMON STOCKS
Business Services - 16.18%
Amdocs Limited* ........................ 4,500 $ 345,375
CheckFree Holdings Corporation* ........ 7,500 387,422
Citrix Systems, Inc.* .................. 14,000 265,562
Clear Channel Communications, Inc.* .... 3,500 262,500
GO.com* ................................ 15,500 185,031
Intuit Inc.* ........................... 1,700 70,231
Microsoft Corporation* ................. 5,200 415,838
Oracle Corporation* .................... 2,500 210,078
Siebel Systems, Inc.* .................. 1,900 310,828
Veritas Software Corp.* ................ 2,900 327,609
Total ................................. 2,780,474
Chemicals and Allied Products - 12.28%
Amgen Inc.* ............................ 2,400 168,675
Forest Laboratories, Inc.* ............. 3,200 323,200
Merck & Co., Inc. ...................... 2,700 206,888
Pfizer Inc. ............................ 4,400 211,200
Pharmacyclics, Inc.* ................... 3,900 237,534
QLT Inc.* .............................. 4,600 357,219
Schering-Plough Corporation ............ 3,200 161,600
Smith International, Inc.* ............. 6,100 444,156
Total ................................. 2,110,472
Communication - 4.49%
AT&T Wireless Group* ................... 10,000 278,750
Nextel Communications, Inc.* ........... 4,800 293,550
SBC Communications Inc. ................ 4,600 198,950
Total ................................. 771,250
Electronic and Other Electric Equipment - 4.80%
Intel Corporation ...................... 2,300 307,409
LSI Logic Corporation* ................. 3,900 211,088
Nortel Networks Corporation ............ 4,500 307,125
Total ................................. 825,622
Food Stores - 1.09%
Kroger Co. (The)* ...................... 8,500 187,531
General Merchandise Stores - 4.40%
Kohl's Corporation* .................... 6,500 361,563
Target Corporation ..................... 6,800 394,400
Total ................................. 755,963
Health Services - 1.98%
HCA - The Healthcare Company ........... 11,200 340,200
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
JUNE 30, 2000
Shares Value
COMMON STOCKS (Continued)
Industrial Machinery and Equipment - 6.06%
Cisco Systems, Inc.* ................... 6,100 $ 387,541
EMC Corporation* ....................... 4,600 353,912
Hewlett-Packard Company ................ 2,400 299,700
Total ................................. 1,041,153
Instruments and Related Products - 1.47%
Agilent Technologies, Inc.* ............ 915 67,508
Medtronic, Inc. ........................ 3,700 184,306
Total ................................. 251,814
Insurance Carriers - 1.64%
American International Group, Inc. .... 2,400 282,000
Motion Pictures - 1.59%
Time Warner Incorporated ............... 3,600 273,600
Oil and Gas Extraction - 3.49%
Apache Corporation ..................... 7,000 411,688
Burlington Resources Incorporated ...... 4,900 187,425
Total ................................. 599,113
Petroleum and Coal Products - 0.91%
Exxon Mobil Corporation ................ 2,000 157,000
Transportation by Air - 2.12%
Northwest Airlines Corporation,
Class A* .............................. 12,000 364,500
TOTAL COMMON STOCKS - 62.50% $10,740,692
(Cost: $9,939,860)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Food and Kindred Products - 4.07%
General Mills, Inc.,
6.5288%, Master Note .................. $700 700,000
Nondepository Institutions - 4.07%
Paccar Financial Corp.,
6.57%, Master Note .................... 700 700,000
Total Commercial Paper - 8.14% 1,400,000
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
JUNE 30, 2000
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (continued)
Repurchase Agreement - 26.87%
J.P. Morgan Securities Inc., 6.2% Repurchase
Agreement dated 6-30-00, to be
repurchased at $4,619,385 on
7-3-00** .............................. $4,617 $ 4,617,000
TOTAL SHORT-TERM SECURITIES - 35.01% $ 6,017,000
(Cost: $6,017,000)
TOTAL INVESTMENT SECURITIES - 97.51% $16,757,692
(Cost: $15,956,860)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 2.49% 427,402
NET ASSETS - 100.00% $17,185,094
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
**Collateralized by $4,012,000 U.S. Treasury Notes, 7.5% due 11-15-2024; market
value and accrued interest aggregate $4,713,684.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 4 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities - at value
(Notes 1 and 4) ................................. $16,758
Cash ............................................ 1
Receivables:
Fund shares sold ................................ 371
Dividends and interest .......................... 7
Prepaid registration fees ........................ 59
-------
Total assets .................................. 17,196
-------
Liabilities
Accrued service fee (Note 3) ..................... 2
Accrued accounting services fee (Note 3) ......... 1
Accrued distribution fee (Note 3) ................ 1
Accrued transfer agency and dividend
disbursing (Note 3) ............................. 1
Other ............................................ 6
-------
Total liabilities ............................. 11
-------
Total net assets ............................. $17,185
=======
Net Assets
$0.001 par value capital stock
Capital stock ................................... $ 2
Additional paid-in capital ...................... 16,437
Accumulated undistributed income (loss):
Accumulated undistributed net investment income . 67
Accumulated undistributed net realized loss
on investment transactions .................... (122)
Net unrealized appreciation in value of
investments ................................... 801
-------
Net assets applicable to outstanding
units of capital ............................. $17,185
=======
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $10.60
Class B .......................................... $10.56
Class C .......................................... $10.56
Class Y .......................................... $10.60
Capital shares outstanding
Class A .......................................... 1,408
Class B .......................................... 147
Class C .......................................... 66
Class Y .......................................... 2
Capital shares authorized ........................ 1,000,000
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
STATEMENT OF OPERATIONS
For the Period Ended JUNE 30, 2000
(In Thousands)
Investment Income
Income (Note 1B):
Interest and amortization........................ $ 89
Dividends ....................................... 4
----
Total income .................................. 93
----
Expenses (Note 3):
Investment management fee ....................... 18
Registration fees ............................... 8
Service fee:
Class A ...................................... 3
Class B ....................................... 1
Class C ....................................... ---*
Audit fees ...................................... 3
Distribution fee:
Class A ...................................... 1
Class B....................................... 1
Class C....................................... 1
Transfer agency and dividend disbursing:
Class A....................................... 2
Class B....................................... ---*
Class C....................................... ---*
Accounting services fee ......................... 2
Custodian fees .................................. 2
Legal fees ...................................... 2
Shareholder servicing - Class Y ................. ---*
----
Total ......................................... 44
Less expenses in excess of voluntary waiver of
management fee (Note 3) ...................... (18)
----
Total expenses ............................... 26
----
Net investment income ...................... 67
----
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 4)
Realized net loss on securities .................. (122)
Unrealized appreciation in value of investments
during the period ............................... 801
----
Net gain on investments ......................... 679
---
Net increase in net assets resulting from
operations ................................... $746
====
*Not shown due to rounding.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period from MARCH 31, 2000* through JUNE 30, 2000
(In Thousands)
Increase in Net Assets
Operations:
Net investment income ............ $ 67
Realized net loss on investments . (122)
Unrealized appreciation .......... 801
-------
Net increase in net assets
resulting from operations ..... 746
-------
Distributions to shareholders from (Note 1E):**
Net investment income:
Class A ---
Class B ---
Class C ---
Class Y ---
Realized gains on securities transactions:
Class A ---
Class B ---
Class C ---
Class Y ---
-------
---
-------
Capital share transactions
(Note 5) ......................... 16,339
-------
Total increase .............. 17,085
Net Assets
Beginning of period ............... 100
-------
End of period, including undistributed
net investment income of $67...... $17,185
=======
*Commencement of operations.
**See "Financial Highlights" on pages 16 - 19.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period from
3/31/00*
through
6/30/00
--------
Net asset value,
beginning of
period ........... $10.00
------
Income from investment
operations:
Net investment
income .......... 0.04
Net realized and
unrealized gain
on investments .. 0.56
------
Total from investment
operations ...... 0.60
------
Less distributions:
From net investment
income .......... (0.00)
From capital gains (0.00)
------
Total distributions (0.00)
------
Net asset value,
end of period .... $10.60
======
Total return** ..... 6.00%
Net assets, end of
period (in
millions) ........ $15
Ratio of expenses
to average net
assets ........... 0.84%***
Ratio of net investment
income to average
net assets ....... 2.50%***
Portfolio turnover
rate ............. 4.41%
*Commencement of operations.
**Total return calculated without taking into account the sales load deducted
on an initial purchase.
***Annualized.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period from
3/31/00*
through
6/30/00
--------
Net asset value,
beginning of
period ........... $10.00
------
Income from investment
operations:
Net investment
income .......... 0.02
Net realized and
unrealized gain
on investments .. 0.54
------
Total from investment
operations ...... 0.56
------
Less distributions:
From net investment
income .......... (0.00)
From capital gains (0.00)
------
Total distributions (0.00)
------
Net asset value,
end of period .... $10.56
======
Total return ....... 5.60%
Net assets, end of
period (in
millions) ........ $1
Ratio of expenses
to average net
assets ........... 1.88%**
Ratio of net investment
income to average
net assets ....... 1.34%**
Portfolio turnover
rate ............. 4.41%
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period from
3/31/00*
through
6/30/00
--------
Net asset value,
beginning of
period ........... $10.00
------
Income from investment
operations:
Net investment
income .......... 0.01
Net realized and
unrealized gain
on investments .. 0.55
------
Total from investment
operations ...... 0.56
------
Less distributions:
From net investment
income .......... (0.00)
From capital gains (0.00)
------
Total distributions (0.00)
------
Net asset value,
end of period .... $10.56
======
Total return* ...... 5.60%
Net assets, end of
period (in
millions) ........ $1
Ratio of expenses
to average net
assets ........... 1.97%**
Ratio of net investment
income to average
net assets ....... 1.22%**
Portfolio turnover
rate ............. 4.41%
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period from
4/19/00*
through
6/30/00
--------
Net asset value,
beginning of
period ........... $10.07
------
Income from investment
operations:
Net investment
income .......... 0.00
Net realized and
unrealized gain
on investments .. 0.53
------
Total from investment
operations ...... 0.53
------
Less distributions:
From net investment
income .......... (0.00)
From capital gains (0.00)
------
Total distributions (0.00)
------
Net asset value,
end of period .... $10.60
======
Total return ....... 5.26%
Net assets, end of
period (in
thousands) ....... $16
Ratio of expenses
to average net
assets ........... 2.02%**
Ratio of net investment
income to average
net assets ....... 0.67%**
Portfolio turnover
rate ............. 4.41%***
*Commencement of operations.
**Annualized.
***For the period from March 31, 2000 through June 30, 2000.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS TAX-MANAGED EQUITY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 -- Significant Accounting Policies
Waddell & Reed Advisors Tax-Managed Equity Fund, Inc. (the "Fund"),
formerly United Tax-Managed Equity Fund, Inc., is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. Its investment objective is to seek growth of capital. The following
is a summary of significant accounting policies consistently followed by the
Fund in the preparation of its financial statements. The policies are in
conformity with accounting principles generally accepted in the United States of
America.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a pricing service or dealer in bonds.
Convertible bonds are valued using this pricing system only on days when
there is no sale reported. Stocks which are traded over-the-counter are
priced using the Nasdaq Stock Market, which provides information on bid and
asked prices quoted by major dealers in such stocks. Short-term debt
securities are valued at amortized cost, which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined in the Internal
Revenue Code), premiums on the purchase of bonds and post-1984 market
discount are amortized for both financial and tax reporting purposes.
Dividend income is recorded on the ex-dividend date. Interest income is
recorded on the accrual basis. See Note 4 -- Investment Securities
Transactions.
C. Foreign currency translations -- All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars daily. Purchases and
sales of investment securities and accruals of income and expenses are
translated at the rate of exchange prevailing on the date of the
transaction. For assets and liabilities other than investments in
securities, net realized and unrealized gains and losses from foreign
currency translations arise from changes in currency exchange rates. The
Fund combines fluctuations from currency exchange rates and fluctuations in
market value when computing net realized and unrealized gain or loss from
investments.
D. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under Subchapter M of the Internal
Revenue Code. In addition, the Fund intends to pay distributions as
required to avoid imposition of excise tax. Accordingly, provision has not
been made for Federal income taxes.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the business day following record date. Net
investment income dividends and capital gains distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These
differences are due to differing treatments for items such as deferral of
wash sales and post-October losses, foreign currency transactions, net
operating losses and expiring capital loss carryovers.
F. Repurchase agreements -- Repurchase agreements are collateralized by the
value of the resold securities which, during the entire period of the
agreement, remains at least equal to the value of the loan, including
accrued interest thereon. The collateral for the repurchase agreement is
held by the Fund's custodian bank.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
NOTE 2 -- Organization
The Fund, a Maryland corporation, was organized on November 30, 1999 and
was inactive (except for matters relating to its organization and registration
as an investment company under the Investment Company Act of 1940 and the
registration of its shares under the Securities Act of 1933) until March 31,
2000 (the date of the initial public offering).
On March 2, 2000, Waddell & Reed, Inc. ("W&R") purchased for investment
10,000 Class A shares of the Fund at their net asset value of $10.00 per share.
Prepaid registration expenses in the amount of $63,905 were paid by the
Fund and are being amortized over the twelve months following the initial public
offering.
NOTE 3 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee to Waddell & Reed Investment Management Company
("WRIMCO"), the Fund's investment manager and a wholly owned subsidiary of
W&R, for investment management services. The fee is computed daily based on the
net asset value at the close of business. The fee is payable by the Fund at the
annual rates of: 0.65% of net assets up to $1 billion, 0.60% of net assets over
$1 billion and up to $2 billion, 0.55% of net assets over $2 billion and up to
$3 billion, and 0.50% of net assets over $3 billion. However, WRIMCO has
voluntarily agreed to waive its management fee on any day if the Fund's net
assets are less than $25 million, subject to WRIMCO's right to change or modify
this waiver. The Fund accrues and pays this fee daily.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A, Class B and Class C shares, the Fund pays WARSCO a monthly per
account charge for transfer agency and dividend disbursement services of $1.3125
for each shareholder account which was in existence at any time during the prior
month, plus $0.30 for each account on which a dividend or distribution of cash
or shares had a record date in that month. With respect to Class Y shares, the
Fund pays WARSCO a monthly fee at an annual rate of 0.15% of the average daily
net assets of the class for the preceding month. The Fund also reimburses W&R
and WARSCO for certain out-of-pocket costs.
As principal underwriter for the Fund's shares, W&R received gross sales
commissions for Class A shares (which are not an expense of the Fund) of
$205,979. During the period ended June 30, 2000, no deferred sales charges were
collected. With respect to Class A, Class B and Class C shares, W&R paid sales
commissions of $155,927 and all expenses in connection with the sale of Fund
shares, except for registration fees and related expenses.
Under a Distribution and Service Plan for Class A shares adopted by the
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
may pay monthly a distribution and/or service fee to W&R in an amount not to
exceed 0.25% of the Fund's average annual net assets. The fee is to be paid to
reimburse W&R for amounts it expends in connection with the distribution of the
Class A shares and/or provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
Under the Distribution and Service Plan adopted by the Fund for Class B and
Class C shares, respectively, the Fund may pay W&R, on an annual basis, a
service fee of up to 0.25% of the average daily net assets of the class to
compensate W&R for providing services to shareholders of that class and/or
maintaining shareholder accounts for that class and a distribution fee of up to
0.75% of the average daily net assets of the class to compensate W&R for
distributing the shares of that class. The Class B Plan and the Class C Plan
each permit W&R to receive compensation, through the distribution and service
fee, respectively, for its distribution activities for that class, which are
similar to the distribution activities described with respect to the Class A
Plan, and for its activities in providing personal services to shareholders of
that class and/or maintaining shareholder accounts of that class, which are
similar to the corresponding activities for which it is entitled to compensation
under the Class A Plan.
The Fund paid no Directors' fees during the period ended June 30, 2000.
W&R is a subsidiary of Waddell & Reed Financial, Inc., a holding company,
and a direct subsidiary of Waddell & Reed Financial Services, Inc., a holding
company.
NOTE 4 -- Investment Securities Transactions
Purchases of investment securities, other than U.S. Government obligations
and short-term securities, aggregated $10,354,856 while proceeds from maturities
and sales aggregated $292,912. Purchases of short-term securities aggregated
$357,239,000 while proceeds from maturities and sales aggregated $351,222,000.
No U.S. Government obligations were purchased or sold during the period.
For Federal income tax purposes, cost of investments owned at June 30, 2000
was $15,956,860, resulting in net unrealized appreciation of $800,832, of which
$1,193,669 related to appreciated securities and $392,837 related to depreciated
securities.
NOTE 5 -- Multiclass Operations
The Fund is authorized to offer four classes of shares, Class A, Class B,
Class C and Class Y, each of which have equal rights as to assets and voting
privileges. Class Y shares are not subject to a sales charge on purchases, are
not subject to a Rule 12b-1 Distribution and Service Plan and are subject to a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of each class are
offered is contained in the Prospectus and the Statement of Additional
Information for the Fund.
Income, non-class specific expenses, and realized and unrealized gains and
losses are allocated daily to each class of shares based on the value of their
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
Transactions in capital stock are summarized below. Amounts are in
thousands.
For the
period
ended
June 30,
2000
------------
Shares issued from sale
of shares:
Class A ............ 1,416
Class B ............. 147
Class C ............. 66
Class Y ............ 2
Shares redeemed:
Class A ............ (18)
Class B ............. ---
Class C ............. ---
Class Y ............ ---
-----
Increase in
outstanding capital
shares .............. 1,613
=====
Value issued from sale
of shares:
Class A ............ $14,334
Class B ............. 1,504
Class C ............. 665
Class Y ............ 16
Value redeemed:
Class A ............ (180)
Class B ............. ---
Class C ............. ---
Class Y ............ ---
-------
Increase in
outstanding capital . $16,339
=======
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Waddell & Reed Advisors Tax-Managed Equity Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Waddell & Reed Advisors Tax-Managed Equity Fund,
Inc. (formerly United Tax-Managed Equity Fund, Inc.) (the "Fund"), as of June
30, 2000, and the related statements of operations and changes in net assets for
the period March 31, 2000 (inception) through June 30, 2000, and the financial
highlights for the period March 31, 2000 through June 30, 2000. These
financial statements and the financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of June 30, 2000, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Waddell & Reed
Advisors Tax-Managed Equity Fund, Inc. as of June 30, 2000, the results of its
operations and the changes in its net assets for the period then ended, and the
financial highlights for the period then ended, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
August 4, 2000
<PAGE>
DIRECTORS
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, San Mateo, California
Linda K. Graves, Topeka, Kansas
Joseph Harroz, Jr., Norman, Oklahoma
John F. Hayes, Hutchinson, Kansas
Robert L. Hechler, Overland Park, Kansas
Henry J. Herrmann, Overland Park, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald C. Reimer, Mission Hills, Kansas
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
OFFICERS
Robert L. Hechler, President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Cynthia P. Prince-Fox, Vice President
Kristen A. Richards, Vice President and Secretary
Daniel C. Schulte, Vice President
This report is submitted for the general information of the shareholders of
Waddell & Reed Advisors Tax-Managed Equity Fund, Inc. It is not authorized for
distribution to prospective investors in the Fund unless accompanied with or
preceded by the Waddell & Reed Advisors Tax-Managed Equity Fund, Inc. current
prospectus.
<PAGE>
THE WADDELL & REED ADVISORS GROUP OF MUTUAL FUNDS
Waddell & Reed Advisors Accumulative Fund
Waddell & Reed Advisors Asset Strategy Fund, Inc.
Waddell & Reed Advisors Bond Fund
Waddell & Reed Advisors Cash Management, Inc.
Waddell & Reed Advisors Continental Income Fund, Inc.
Waddell & Reed Advisors Government Securities Fund, Inc.
Waddell & Reed Advisors High Income Fund, Inc.
Waddell & Reed Advisors High Income Fund II, Inc.
Waddell & Reed Advisors Income Fund
Waddell & Reed Advisors International Growth Fund, Inc.
Waddell & Reed Advisors Municipal Bond Fund, Inc.
Waddell & Reed Advisors Municipal High Income Fund, Inc.
Waddell & Reed Advisors New Concepts Fund, Inc.
Waddell & Reed Advisors Retirement Shares, Inc.
Waddell & Reed Advisors Science and Technology Fund
Waddell & Reed Advisors Small Cap Fund, Inc.
Waddell & Reed Advisors Tax-Managed Equity Fund, Inc.
Waddell & Reed Advisors Vanguard Fund, Inc.
------------------------------------
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(888)-WADDELL
(888)-923-3355
Our INTERNET address is:
http://www.waddell.com
NUR1019SA(6-00)
