Waddell & Reed
Advisors
Municipal
Bond Fund,
Inc.
ANNUAL
REPORT
--------------------------------------------
For the fiscal year ended September 30, 2000
<PAGE>
CONTENTS
3 Manager's Letter
6 Performance Summary
8 Portfolio Highlights
9 Investments
28 Statement of Assets and Liabilities
29 Statement of Operations
30 Statement of Changes in Net Assets
31 Financial Highlights
35 Notes to Financial Statements
41 Independent Auditors' Report
42 Income Tax Information
46 Directors & Officers
This report is submitted for the general information of the shareholders of
Waddell & Reed Advisors Municipal Bond Fund, Inc. It is not authorized for
distribution to prospective investors in the Fund unless accompanied with or
preceded by the Waddell & Reed Advisors Municipal Bond Fund, Inc. current
prospectus and current Fund performance information.
<PAGE>
MANAGER'S LETTER OF MUNICIPAL BOND FUND
-----------------------------------------------------------------
SEPTEMBER 30, 2000
Dear Shareholder:
This report relates to the operation of Waddell & Reed Advisors Municipal Bond
Fund, Inc. for the fiscal year ended September 30, 2000. The following
discussion, graphs and tables provide you with information regarding the Fund's
performance during that period.
The Federal Reserve's shift to a tighter monetary policy, which began June 30,
1999, remained in place over the last year. The federal funds rate increased 125
basis points over the fiscal year, and Alan Greenspan cited concerns of
supply/demand imbalances that could potentially result in growth in excess of
the economy's non-inflationary speed limit. The U.S. current account deficit
widened, as impressive export growth was overwhelmed by a huge demand for
imports by U.S. consumers, but the dollar maintained its attractiveness on
relative economic growth fundamentals.
Preparation for Y2K provided a huge stimulus to an already robust U.S. economy.
The Fed injected large amounts of liquidity into the banking system to deal with
any Y2K-related problems. These funds ultimately provided additional stimulus
through increased consumption, bank lending and equity market speculation. High
levels of corporate spending on information technology (IT) paved the way for a
huge increase in productivity. To date, productivity and intense competition
have kept inflation relatively in check. Tight policy and escalating energy
prices have moderated consumer demand, but the future inflation outlook remains
cloudy.
The robust U.S. economy has produced record budget surpluses, of which
approximately $30 billion the Treasury directed to buy back long-maturity
treasury debt. This technically-driven demand on the long-end of the U.S.
Treasury market caused the yield curve to invert. Resulting benchmark problems
slowed capital formation and trading activity as broker/dealers found it
increasingly difficult to effectively manage interest rate risks in an inverted
yield curve environment.
The Fund's above average year-to-date performance helped offset below average
results in the first quarter of our fiscal year. Heading into the fourth quarter
of 1999, our fiscal first quarter, Y2K was a major issue. We felt that the high
level of Y2K uncertainty, and a belief in U.S. preparedness relative to other
nations, presented a logical backdrop for an increase in foreign capital flows
to the safety of the U.S. treasury market. This flight to quality would be
expected to benefit municipals to some degree. However, Y2K proved to be a
nonevent. A strengthening U.S. economy, a Fed in tightening mode, accelerating
global growth trends, and early signs of inflationary pressures caused long
interest rates to increase. As a result, Waddell & Reed Advisors Municipal Bond
Fund underperformed, declining 0.19 percent for the fiscal year, compared with
the Lipper General Municipal Debt Funds Universe Average return of 4.72 percent
(which reflects the performance of the universe of funds with similar investment
objectives) and the Lehman Brothers Municipal Bond Index return of 6.18 percent
(which represents the performance of securities that generally represent the
municipal bond market). Both indexes are charted on the following page.
At present, the treasury market reflects expectations that the Fed is done with
its tightening policy. There is still much liquidity in the system, consumer
confidence is near record levels, and fiscal policy is expected to continue to
be stimulative. In addition, the treasury yield curve has begun to disinvert,
which has stimulated corporate bond issuance, tightening credit spreads, re-
invigorating trading activity, and therefore increasing the efficiency of
capital allocation. Eventually, we expect to see some pass-through of higher
labor and energy costs into core inflation. Therefore, we expect the Fed to
resume tightening monetary policy slightly during the first half of 2001. If we
are correct in our projections, the bond market should be very surprised.
Corporate earnings, while under pressure currently, are expected to produce high
single-digit growth in 2001. With absolute yields at very low levels by
historical standards, bonds are in a difficult position. Equity market return
expectations will likely be scaled back, but we expect investor sentiment to
remain in favor of equity investments over bonds. We therefore intend to take a
defensive posture in the short run.
We anticipate that the Fund will continue to bear an average to below-average
level of interest rate risk. We intend to hold a larger than historical cash
position to fund anticipated redemptions. Eventually, we feel that investors
will once again recognize the merits of portfolio diversification as a tool to
reduce risk while enhancing returns. We also believe that municipal bonds
continue to be an attractive investment vehicle to satisfy a fixed income
portfolio allocation, providing taxable equivalent yields that often far exceed
comparable credit corporate bonds and treasuries.
In closing, I would like to thank you for your investment, your continued
confidence and your support of Waddell & Reed Advisors Municipal Bond Fund.
Sincerely,
Bryan Bailey
Manager, Waddell & Reed Advisors Municipal Bond Fund, Inc.
<PAGE>
Comparison of Change in Value of $10,000 Investment
==== Waddell & Reed Advisors Municipal Bond Fund, Inc., Class A Shares* --
$19,471
++++ Lehman Brothers Municipal Bond Index -- $20,263
---- Lipper General Municipal Debt Funds Universe Average - $18,825
Waddell Lipper
& Reed General
Advisors Lehman Municipal
MunicipalBrothers Debt
Bond Municipal Funds
Fund, Bond Universe
Inc. Index Average
------------------ ----------
09/30/90 Purchase$ 9,575$10,000 $10,000
09/30/91 11,009 11,318 11,311
09/30/92 12,264 12,502 12,489
09/30/93 14,123 14,095 14,147
09/30/94 13,570 13,751 13,590
09/30/95 15,133 15,290 14,916
09/30/96 16,218 16,214 15,755
09/30/97 17,803 17,678 17,130
09/30/98 19,348 19,219 18,539
09/30/99 18,679 19,084 17,976
09/30/00 19,471 20,263 18,825
*The value of the investment in the Fund is impacted by the sales load at the
time of the investment and by the ongoing expenses of the Fund.
Average Annual Total Return+
Class A Class B Class C Class Y
----------------------------------------------
Year Ended
9-30-00 -0.19% --- --- 4.32%
5 Years Ended
9-30-00 4.26% --- --- ---
10 Years Ended
9-30-00 6.89% --- --- ---
Since inception of
Class++ through
9-30-00 --- -1.35% 2.58% 0.55%
+Performance data quoted represents past performance and is based on deduction
of the maximum applicable sales load for each of the periods. Class A shares
carry a maximum front-end sales load of 4.25%. Class B and Class C shares
carry maximum contingent deferred sales charges of 5% and 1%, respectively.
Total returns reflect share price appreciation, including reinvestment of all
income and capital gains distributions. Investment return and principal value
will fluctuate and an investor's shares, when redeemed, may be worth more or
less than their original cost.
++10-5-99 for Class B shares, 10-7-99 for Class C shares and 12-30-98 for Class
Y shares (the date on which shares were first acquired by shareholders).
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
--------------------------------------------------------------
Waddell & Reed Advisors Municipal Bond Fund, Inc.
PORTFOLIO STRATEGY:
Normally, at least 80% of GOAL: To seek to provide income that
assets in investment grade is not subject to Federal
Municipal Bonds income tax. (Income may be
subject to state and local
Maximum 10% Non-Municipal taxes and a significant
Debt Securities portion may be subject to the
Federal alternative minimum
May own 25% or more tax.)
Industrial Revenue Bonds
STRATEGY: Invests primarily in tax-exempt
municipal bonds, mainly of investment
grade. The Fund diversifies its
holdings among two main types of
municipal bonds: general obligation
bonds and revenue bonds.
FOUNDED: 1976
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
<PAGE>
PERFORMANCE SUMMARY - Class A Shares
PER SHARE DATA
For the Fiscal Year Ended September 30, 2000
--------------------------------------------
DIVIDENDS PAID $0.35
=====
CAPITAL GAINS DISTRIBUTION $0.07
=====
NET ASSET VALUE ON
9-30-00 $6.75 adjusted to: $6.82 (A)
9-30-99 6.90
------
CHANGE PER SHARE $(0.08)
======
(A) This number includes the capital gains distribution of $0.07 paid in
December 1999 added to the actual net asset value on September 30, 2000.
Past performance is not necessarily indicative of future results.
<PAGE>
AVERAGE ANNUAL TOTAL RETURN (1)
Class A Class B
----------------------- ------------------------
With Without With Without
Period Sales Load(2) Sales Load(3) CDSC(4) CDSC(5)
------ ---------- ---------- ----------- ----------
1-year period
ended 9-30-00 -0.19% 4.24% --- ---
5-year period
ended 9-30-00 4.26% 5.17% --- ---
10-year period
ended 9-30-00 6.89% 7.36% --- ---
Cumulative return
since inception
of Class (6) --- --- -1.35% 3.56%
(1)Performance data represents share price appreciation, including reinvestment
of all income and capital gains distributions. Performance data represents
past performance and is no guarantee of future results. Share price,
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2)Performance data is based on deduction of 4.25% sales load on the initial
purchase in the periods.
(3)Performance data does not take into account the sales load deducted on an
initial purchase.
(4)Performance data reflects the effect of paying the applicable contingent
deferred sales charge (CDSC) at a maximum of 5.00% upon redemption at the end
of the period.
(5)Performance data does not reflect the effect of paying the applicable CDSC
upon redemption at the end of the period.
(6)10/5/99 for Class B shares (the date on which shares were first acquired by
shareholders).
AVERAGE ANNUAL TOTAL RETURN(1)
Class C Class Y(2)
----------------------- ----------
With Without
Period CDSC(3) CDSC(4)
------ ---------- ----------
1-year period
ended 9-30-00 --- --- 4.32%
5-year period
ended 9-30-00 --- --- ---
10-year period
ended 9-30-00 --- --- ---
Cumulative return
since inception
of Class(3) 2.58% 3.56% ---
Since inception
of Class(3) --- --- 0.55%
(1)Performance data represents share price appreciation, including reinvestment
of all income and capital gains distributions. Performance data represents
past performance and is no guarantee of future results. Share price,
investment return and principal value of an investment will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
(2)Performance data does not include the effect of sales charges, as Class Y
shares are not subject to these charges.
(3)Performance data reflects the effect of paying the applicable contingent
deferred sales charge (CDSC) at a maximum of 1.00% which declines to zero at
the end of the first year after investment.
(4)Performance data does not reflect the effect of paying the applicable CDSD
upon redemption at the end of the period.
(5)10-7-99 for Class C shares and 12-30-98 for Class Y shares (the date on which
shares were first acquired by shareholders).
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 2000, Waddell & Reed Advisors Municipal Bond Fund, Inc. had net
assets totaling $741,375,192 invested in a diversified portfolio.
As a shareholder of Waddell & Reed Advisors Municipal Bond Fund, Inc., for every
$100 you had invested on September 30, 2000, your Fund owned:
$12.15 Public Power Revenue Bonds
11.91 Hospital Revenue Bonds
11.43 Housing Revenue Bonds
10.81 Industrial Revenue/Pollution Control Revenue Bonds
10.72 Cash and Cash Equivalents and Options
10.17 Derivative Bonds
9.37 Other Municipal Bonds
8.31 Airport Revenue Bonds
4.80 Student Loan Bonds
4.29 Transportation Revenue Bonds
3.57 Resource Recovery Bonds
2.47 Lease/Certificates of Participation Bonds
2000 TAX YEAR TAXABLE EQUIVALENT YIELDS*
---------------------------------------------------------------------------
If your Taxable Income is:
Your Equivalent
Marginal Tax Free Yields
Joint Single Tax---------------------------
return Return Bracket Is 5% 6% 7% 8%
$ 0- 43,850 $ 0- 26,250 15% 5.88 7.06 8.24 9.41
$ 43,851-105,950 $ 26,251- 63,550 28% 6.94 8.33 9.72 11.11
$105,951-161,450 $ 63,551-132,600 31% 7.25 8.70 10.14 11.59
$161,451-288,350 $132,601-288,350 36% 7.81 9.38 10.94 12.50
$288,351 and above$288,351 and above 39.6% 8.28 9.93 11.59 13.25
*Table is for illustration only and does not represent the actual performance of
Waddell & Reed Advisors Municipal Bond Fund, Inc.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS
ALABAMA - 0.24%
BMC Special Care Facilities Financing
Authority of the City of Montgomery,
Revenue Bonds, Series 1998-B (Baptist
Health),
4.875%, 11-15-18 ...................... $ 2,000 $ 1,787,500
ALASKA - 3.32%
City of Valdez, Alaska, Marine
Terminal Revenue Refunding Bonds
(BP Pipelines (Alaska) Inc. Project),
Series 1993A,
5.85%, 8-1-25 ......................... 17,650 17,473,500
State of Alaska, International Airports
System Revenue Bonds, Series 1999A,
5.0%, 10-1-19 ......................... 3,000 2,703,750
Alaska Housing Finance Corporation,
Housing Development Bonds, 1997
Series B (AMT),
5.8%, 12-1-29 ......................... 2,390 2,327,263
Alaska Energy Authority, Power Revenue
Refunding Bonds, Fifth Series (Bradley
Lake Hydroelectric Project),
5.0%, 7-1-21 .......................... 2,350 2,141,437
Total ................................. 24,645,950
CALIFORNIA - 8.88%
California Statewide Communities Development Authority:
Special Facilities Lease Revenue Bonds,
1997 Series A (United Air Lines, Inc. - San
Francisco International Airport Projects),
5.7%, 10-1-33 ......................... 20,900 18,940,625
Hospital Revenue Certificates of Participation,
Series 1992, Cedars-Sinai Medical Center,
6.5%, 8-1-12 .......................... 5,200 5,687,500
Hospital Refunding Revenue Certificates of
Participation, Series 1993, Cedars-Sinai Medical
Center, Inverse Floating Rate Securities (INFLOS),
6.342%, 11-1-15 (A) ................... 3,300 3,172,125
East Bay Municipal Utility District (Alameda
and Contra Costa Counties, California),
Wastewater System Subordinated Revenue
Refunding Bonds, Series 1993B-2,
Inverse Floating Securities:
6.52%, 6-1-20 (A) ..................... 7,250 7,240,938
6.42%, 6-1-13 (A) ..................... 5,450 5,627,125
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
CALIFORNIA (Continued)
Southern California Public Power Authority:
Multiple Project Revenue Bonds, 1989 Series,
6.75%, 7-1-12 ......................... $ 3,455 $ 4,025,075
Mead-Adelanto Project Revenue Bonds,
1994 Series A,
Special Linked Auction Rate Securities
(ACES) and Inverse Floaters,
5.01%, 7-1-15 ......................... 2,800 2,775,500
Mead-Phoenix Project Revenue Bonds, 1994 Series A
Special Linked Auction Rate Securities
(ACES) and Inverse Floaters,
5.01%, 7-1-15 ......................... 2,600 2,577,250
Transmission Agency of Northern California,
California-Oregon Transmission Project
Revenue Bonds, 1990 Series A,
7.0%, 5-1-13 .......................... 5,500 6,641,250
California Rural Home Mortgage Finance
Authority, Single Family Mortgage
Revenue Bonds (Mortgage-Backed Securities
Program):
1997 Series C,
6.75%, 3-1-29 ......................... 2,050 2,260,125
1998 Series B,
6.35%, 12-1-29 ........................ 1,940 2,039,425
Foothill/Eastern Transportation Corridor Agency,
Toll Road Refunding Revenue Bonds, Series 1999,
Capital Appreciation Bonds,
0.0%, 1-15-17 ......................... 7,500 2,990,625
Delta Counties Home Mortgage Finance Authority
(California), Single Family Mortgage Revenue
Bonds (Mortgage-Backed Securities Program),
1998 Series A,
5.2%, 12-1-14 ......................... 1,865 1,841,687
Total ................................. 65,819,250
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
COLORADO - 2.40%
Colorado Housing and Finance Authority,
Single Family Program Senior and Subordinate
Bonds:
1997 Series C-2 Senior Bonds,
6.875%, 11-1-28 ....................... $ 2,500 $ 2,662,500
1999 Series A-2 Senior Bonds,
6.45%, 4-1-30 ......................... 2,185 2,275,131
1999 Series C-2 Senior Bonds,
7.05%, 4-1-31 ......................... 2,000 2,177,500
1997 Series A-2 Senior Bonds,
7.25%, 5-1-27 ......................... 1,710 1,863,900
2000 Series D-2 Senior Bonds,
6.9%, 4-1-29 .......................... 1,500 1,631,250
2000 Series B-3 Senior Bonds,
6.7%, 10-1-16 ......................... 1,000 1,088,750
2000 Series D-3 Senior Bonds,
6.75%, 4-1-32 ......................... 1,000 1,088,750
1998 Series A-3,
6.5%, 5-1-16 .......................... 1,000 1,056,250
City and County of Denver, Colorado,
Airport System Revenue Bonds,
Series 1996D,
5.5%, 11-15-25 ........................ 2,000 1,937,500
Highlands Ranch Metropolitan District No. 3,
Douglas County, Colorado, General
Obligation Bonds, Series 1999,
5.3%, 12-1-19 ......................... 1,250 1,137,500
University of Colorado Hospital Authority,
Revenue Bonds, Series 1999A,
5.0%, 11-15-19 ........................ 1,000 908,750
Total ................................. 17,827,781
CONNECTICUT - 2.60%
Eastern Connecticut Resource Recovery
Authority, Solid Waste Revenue Bonds
(Wheelabrator Lisbon Project),
Series 1993A,
5.5%, 1-1-14 .......................... 13,700 12,004,625
Bristol Resource Recovery Facility Operating
Committee, Solid Waste Revenue Refunding
Bonds (Ogden Martin Systems of Bristol,
Inc. Project - 1995 Series),
6.5%, 7-1-14 .......................... 7,000 7,271,250
Total ................................. 19,275,875
See Notes to Schedule of Investments on page 29.<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
FLORIDA - 0.79%
Housing Finance Authority of Lee County, Florida,
Single Family Mortgage Revenue Bonds:
Series 1998A, Subseries 6,
6.45%, 3-1-31 ......................... $ 2,175 $ 2,281,031
Series 1999A, Subseries 2,
5.0%, 9-1-30 .......................... 1,495 1,444,544
City of Miami, Florida, Health Facilities
Authority, Health Facilities Revenue Refunding
Bonds (Mercy Hospital Project), Series 1994A,
Inverse Floating Rate Security (INFLOS),
5.97%, 8-15-15 (A) .................... 2,200 2,139,500
Total ................................. 5,865,075
GEORGIA - 4.06%
Municipal Electric Authority of Georgia:
Project One Special Obligation Bonds,
Fifth Crossover Series,
6.4%, 1-1-13 .......................... 15,500 17,263,125
General Power Revenue Bonds,
1992B Series,
8.25%, 1-1-11 ......................... 8,700 10,951,125
Private Colleges and Universities Authority,
Revenue and Refunding Bonds (Mercer University
Project), Tax-Exempt Series 1999A,
5.25%, 10-1-20 ........................ 2,000 1,865,000
Total ................................. 30,079,250
HAWAII - 0.49%
Department of Budget and Finance of the State
of Hawaii, Special Purpose Revenue Bonds (Citizens
Utilities Company Project), Series 1991, Linked
Residual Interest Bonds (RIBS) and Select
Auction Variable Rate Securities (SAVRS),
6.5%, 11-1-21 ......................... 3,500 3,605,070
IDAHO - 0.92%
Idaho Health Facilities Authority, Hospital
Revenue Refunding Bonds, Series 1992
(IHC Hospitals, Inc.),
6.632%, 2-15-21 ....................... 6,000 6,825,000
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
ILLINOIS - 2.62%
City of Chicago, Collateralized Single Family
Mortgage Revenue Bonds:
Series 1998C-1,
6.3%, 9-1-29 .......................... $ 3,980 $ 4,179,000
Series 1998A-1,
6.45%, 9-1-29 ......................... 2,480 2,635,000
Series 1999A,
6.35%, 10-1-30 ........................ 2,500 2,596,875
Series 1999C,
7.05%, 10-1-30 ........................ 2,000 2,147,500
Series 1997-B,
6.95%, 9-1-28 ......................... 1,740 1,842,225
Series 2000C,
7.0%, 3-1-32 .......................... 1,000 1,092,500
Illinois Health Facilities Authority, Revenue Bonds:
Series 1997A (Victory Health Services),
5.375%, 8-15-16 ....................... 3,000 2,658,750
Series 1999 (Alexian Brothers Health System),
5.0%, 1-1-19 .......................... 1,500 1,366,875
School District Number 116, Champaign County,
Illinois (Urbana), General Obligation School
Building Bonds, Series 1999C,
0.0%, 1-1-12 .......................... 1,695 904,706
Total ................................. 19,423,431
INDIANA - 5.15%
Indiana State Office Building Commission,
Capitol Complex Revenue Bonds:
Series 1990B (State Office Building I Facility),
7.4%, 7-1-15 .......................... 8,000 9,590,000
Series 1990A (Senate Avenue Parking Facility),
7.4%, 7-1-15 .......................... 4,775 5,700,156
Indiana Transportation Finance Authority,
Highway Revenue Bonds, Series 1990A,
7.25%, 6-1-15 ......................... 9,000 10,620,000
Indianapolis Airport Authority,
Special Facility Revenue Bonds, Series 1995 A
(United Air Lines, Inc., Indianapolis
Maintenance Center Project),
6.5%, 11-15-31 ........................ 10,850 10,416,000
Indiana Health Facility Financing Authority,
Hospital Revenue Bonds, Series 1999A
(Deaconess Hospital Obligated Group),
5.75%, 3-1-19 ......................... 2,000 1,835,000
Total ................................. 38,161,156
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
KANSAS - 1.58%
Sedgwick County, Kansas and Shawnee County,
Kansas, Single Family Mortgage Revenue Bonds
(Mortgage-Backed Securities Program):
1998 Series A-1 (AMT),
6.5%, 12-1-22 ......................... $ 7,760 $ 8,274,100
1999 Series A-1 (AMT),
6.875%, 12-1-26 ....................... 1,990 2,139,250
Unified School District No. 204, Wyandotte
County, Kansas (Bonner Springs - Edwardsville),
General Obligation Improvement and Refunding
Bonds, Series 2000A,
5.2%, 9-1-13 .......................... 1,305 1,311,525
Total ................................. 11,724,875
KENTUCKY - 0.07%
County of Jefferson, Kentucky, Insured
Hospital Revenue Bonds, Series 1992 (Alliant
Health System, Inc. Project), Inverse Floaters,
8.52%, 10-23-14 (A) ................... 500 540,000
LOUISIANA - 0.77%
Parish of East Baton Rouge, State of
Louisiana, Refunding Revenue Bonds
(Georgia-Pacific Corporation Project),
Series 1998,
5.35%, 9-1-11 ......................... 3,000 2,782,500
Louisiana Public Facilities Authority,
Hospital Revenue and Refunding Bonds
(Pendleton Memorial Methodist Hospital
Project), Series 1998,
5.25%, 6-1-17 ......................... 2,000 1,550,000
Parish of Webster, Louisiana, Pollution
Control Revenue Refunding Bonds,
1998 Series B (Non-AMT),
5.2%, 3-1-13 .......................... 1,435 1,348,900
Total ................................. 5,681,400
MASSACHUSETTS - 1.68%
City of Quincy, Massachusetts, Revenue Refunding
Bonds, Quincy Hospital Issue, Series 1993,
Inverse Floating Rate Security (INFLOS),
5.904%, 1-15-11 (A) ................... 5,700 5,778,375
See Notes to Schedule of Investments on page 29.<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MASSACHUSETTS (Continued)
Massachusetts Housing Finance Agency,
Single Family Housing Revenue Bonds,
Series 57 (AMT),
5.6%, 6-1-30 .......................... $ 4,540 $ 4,313,000
Massachusetts Municipal Wholesale Electric
Company, Power Supply System Revenue Bonds,
1993 Series A, ...Inverse Floating Rate
Security (INFLOS),
6.27%, 7-1-18 (A) ..................... 2,500 2,340,625
Total ................................. 12,432,000
MICHIGAN - 2.29%
Michigan Strategic Fund:
Limited Obligation Refunding Revenue Bonds,
The Detroit Edison Company Pollution Control
Bonds Project, Collateralized Series 1991 AA,
6.95%, 5-1-11 ......................... 8,000 9,340,000
Limited Obligation Revenue Bonds, WMX
Technologies, Inc. Project, Series 1993,
6.0%, 12-1-13 ......................... 4,000 3,630,000
City of Detroit, Michigan, Sewage Disposal
System Revenue and Revenue Refunding Bonds,
Series 1993-A, Inverse Floating Rate Security
(INFLOS),
6.637%, 7-1-23 (A) .................... 2,600 2,554,500
Michigan State Hospital Finance Authority,
Hospital Revenue Bonds (The Detroit Medical
Center Obligated Group), Series 1998A,
5.125%, 8-15-18 ....................... 2,000 1,430,000
Total ................................. 16,954,500
MINNESOTA - 0.79%
City of Rochester, Minnesota, Health
Care Facilities Revenue Bonds (Mayo
Foundation/Mayo Medical Center),
Series 1992D, Floating Inverse
Rate Securities (FIRS),
7.011%, 11-15-09 (A) .................. 4,500 4,871,250
HealthSystem Minnesota, The Healthcare
Network, City of St. Louis Park,
Minnesota, Health Care Facilities Revenue
Bonds (HealthSystem Minnesota Obligated
Group), Series 1993, Inverse Floater,
4.907%, 7-1-13 (A) .................... 1,000 986,250
Total ................................. 5,857,500
See Notes to Schedule of Investments on page 29.<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MISSISSIPPI - 2.84%
Lowndes County, Mississippi, Solid Waste
Disposal and Pollution Control
Refunding Revenue Bonds (Weyerhaeuser
Company Project), Series 1992B,
6.7%, 4-1-22 .......................... $11,000 $ 11,962,500
Mississippi Higher Education Assistance
Corporation, Student Loan Revenue Bonds,
Subordinate Series 1996-C:
6.75%, 9-1-14 ......................... 5,500 5,568,750
6.7%, 9-1-12 .......................... 1,470 1,486,537
Mississippi Home Corporation, Single Family
Mortgage Revenue Bonds, Series 1999A,
6.3%, 6-1-31 .......................... 1,995 2,044,875
Total ................................. 21,062,662
MISSOURI - 1.98%
Health and Educational Facilities Authority
of the State of Missouri, Health Facilities
Revenue Bonds:
Barnes-Jewish, Inc./Christian Health
Services, Series 1993A,
6.0%, 5-15-11 ......................... 3,000 3,165,000
Lake of the Ozarks General Hospital, Inc.,
Series 1998,
5.1%, 2-15-18 ......................... 2,220 2,036,850
Freeman Health System Project, Series 1998,
5.25%, 2-15-18 ........................ 2,460 2,029,500
Missouri Housing Development Commission,
Single Family Mortgage Revenue Bonds
(Homeownership Loan Program):
1997 Series C-1 (Non-AMT),
6.55%, 9-1-28 ......................... 1,960 2,080,050
1998 Series D-2 (AMT),
6.3%, 3-1-29 .......................... 1,145 1,176,487
1998 Series B-2 (AMT),
6.4%, 3-1-29 .......................... 950 997,500
1997 Series A-2 (AMT),
7.3%, 3-1-28 .......................... 840 922,950
Missouri Higher Education Loan Authority
(A Public Instrumentality and Body
Corporate and Politic of the State of
Missouri), Student Loan Revenue Bonds,
Subordinate Series 1994A,
5.45%, 2-15-09 ........................ 1,500 1,458,750
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
MISSOURI (Continued)
The Industrial Development Authority of the
County of Taney, Missouri, Hospital Revenue
Bonds (The Skaggs Community Hospital Association),
Series 1998,
5.3%, 5-15-18 ......................... $ 1,000 $ 832,500
Total ................................. 14,699,587
MONTANA - 0.44%
Montana Higher Education Student Assistance
Corporation, Student Loan Revenue Bonds,
Subordinate Series 1998-B,
5.5%, 12-1-31 ......................... 3,500 3,263,750
NEBRASKA - 2.10%
Nebraska Higher Education Loan Program, Inc.,
1993-2 Series A-6 Junior Subordinate Bonds,
6.4%, 6-1-13 .......................... 14,500 15,533,125
NEVADA - 1.26%
Clark County, Nevada:
Industrial Development Refunding Revenue
Bonds (Nevada Power Company Project),
Series 1995B,
5.9%, 10-1-30 ......................... 5,500 4,915,625
Industrial Development Revenue Bonds (Nevada
Power Company Project), Series 1997A,
5.9%, 11-1-32 ......................... 2,000 1,785,000
Nevada Housing Division, Single Family
Mortgage Bonds:
1998 Series A-1 Mezzanine Bonds,
5.35%, 4-1-16 ......................... 1,905 1,854,994
1996 Series C Subordinate Bonds,
6.35%, 4-1-09 ......................... 775 807,937
Total ................................. 9,363,556
NEW HAMPSHIRE - 2.45%
State of New Hampshire, Turnpike System Revenue
Bonds, 1994 Series C, Linked Select Auction
Variable Rate Securities (SAVRS) and Residual
Interest Bonds (RIBS),
5.226%, 2-1-24 ........................ 20,000 18,200,000
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
NEW JERSEY - 0.12%
New Jersey Health Care Facilities Financing
Authority, Revenue Bonds, Englewood Hospital
and Medical Center Issue, Series 1994,
6.75%, 7-1-24 ......................... $ 1,000 $ 913,750
NEW MEXICO - 1.06%
New Mexico Hospital Equipment Loan Council,
Hospital Revenue Bonds (Memorial Medical
Center, Inc. Project), Series 1998,
5.5%, 6-1-28 .......................... 5,750 4,542,500
New Mexico Educational Assistance Foundation,
Student Loan Program Bonds:
Second Subordinate 1996 Series A-3,
6.75%, 11-1-08 ........................ 2,175 2,245,688
Second Subordinate 1995 Series A-3,
6.6%, 11-1-10 ......................... 1,105 1,095,331
Total ................................. 7,883,519
NEW YORK - 3.10%
New York State Medical Care Facilities Finance Agency,
Mental Health Services Facilities Improvement
Revenue Bonds, 1993 Series F Refunding,
5.375%, 2-15-14 ....................... 9,750 9,737,813
The City of New York, General Obligation Bonds,
Fiscal 1994 Series C, Inverse Floaters,
18.24%, 9-30-03 (B) ................... 3,250 4,155,938
Dormitory Authority of the State of New York:
State University Educational Facilities,
Revenue Bonds, Series 1990B,
7.5%, 5-15-11 ......................... 2,000 2,325,000
Nyack Hospital, Revenue Bonds, Series 1996,
6.25%, 7-1-13 ......................... 1,000 990,000
New York State Urban Development Corporation,
Correctional Capital Facilities Revenue Bonds,
1993A Refunding Series,
5.25%, 1-1-14 ......................... 3,000 3,018,750
New York City Transitional Finance Authority,
Future Tax Secured Bonds, Fiscal 1999 Series C
Tax-Exempt Bonds,
5.0%, 5-1-19 .......................... 3,000 2,752,500
Total ................................. 22,980,001
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
NORTH CAROLINA - 2.59%
County of Cumberland, North Carolina, Hospital
Facility Revenue Bonds (Cumberland County
Hospital System, Inc.), Series 1999:
5.25%, 10-1-14 ........................ $ 4,830 $ 4,588,500
5.25%, 10-1-19 ........................ 2,500 2,240,625
5.25%, 10-1-11 ........................ 1,200 1,185,000
The Columbus County Industrial Facilities
and Pollution Control Financing Authority
(North Carolina), Environmental Improvement
Revenue Bonds, 1996 Series A,
5.85%, 12-1-20 ........................ 5,000 4,762,500
North Carolina Medical Care Commission,
Hospital Revenue Bonds:
Gaston Health Care, Series 1998,
5.0%, 2-15-19 ......................... 2,500 2,196,875
Halifax Regional Medical Center, Series 1998,
5.0%, 8-15-18 ......................... 2,170 1,727,863
Rex Healthcare, Series 1998,
5.0%, 6-1-17 .......................... 750 697,500
The Martin County Industrial Facilities and
Pollution Control Financing Authority (North
Carolina), Solid Waste Disposal Revenue Bonds
(Weyerhaeuser Company Project), Series 1993,
5.65%, 12-1-23 ........................ 2,000 1,837,500
Total ................................. 19,236,363
NORTH DAKOTA - 0.73%
City of Fargo, North Dakota, Health System
Revenue Bonds (Meritcare Obligated Group),
Series 1996A,
5.55%, 6-1-16 ......................... 2,350 2,347,062
County of Burleigh, North Dakota, Healthcare
Revenue Refunding Bonds, Series 1999
(Medcenter One, Inc.),
5.25%, 5-1-13 ......................... 1,800 1,791,000
State of North Dakota, North Dakota Housing
Finance Agency, Housing Finance Program Bonds,
Home Mortgage Finance Program, 1998 Series A,
5.25%, 7-1-18 ......................... 1,335 1,258,238
Total ................................. 5,396,300
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
OHIO - 0.74%
County of Erie, Ohio, Franciscan Services
Corporation, Revenue Refunding Bonds,
Series 1993 A (Providence Hospital, Inc.),
6.0%, 1-1-13 .......................... $ 4,000 $ 3,965,000
State of Ohio, Air Quality Development Revenue
Bonds (Columbus Southern Power Company
Project), Series 1985 B,
6.25%, 12-1-20 ........................ 1,500 1,501,875
Total ................................. 5,466,875
OKLAHOMA - 0.77%
Oklahoma Housing Finance Agency, Single
Family Mortgage Revenue Bonds
(Homeownership Loan Program):
1995 Series B, Subseries B-2 (AMT),
7.625%, 9-1-26 ........................ 4,385 4,768,688
1996 Series A,
7.05%, 9-1-26 ......................... 880 931,700
Total ................................. 5,700,388
OREGON - 0.94%
State of Oregon, Housing and Community
Services Department, Mortgage Revenue
Bonds, Single-Family Mortgage Program:
1992 Series B,
6.875%, 7-1-28 ........................ 3,990 4,134,638
1996 Series D,
6.375%, 7-1-27 ........................ 2,785 2,844,181
Total ................................. 6,978,819
PENNSYLVANIA - 3.44%
City of Philadelphia, Pennsylvania, Water
and Wastewater Revenue Bonds, Series 1993,
Inverse Rate Securities,
6.52%, 6-15-12 (A) .................... 7,100 7,428,375
Allegheny County Hospital Development Authority
(Pennsylvania), UPMC Health System Revenue
Refunding Bonds, Series 1999B,
5.0%, 12-15-17 ........................ 5,000 4,550,000
The Philadelphia Parking Authority, Airport
Parking Revenue Bonds, Series of 1999,
5.25%, 9-1-20 ......................... 3,000 2,868,750
City of Philadelphia, Pennsylvania, General
Obligation Bonds, Series 1998:
4.75%, 3-15-17 ........................ 1,615 1,455,519
4.75%, 3-15-18 ........................ 1,000 895,000
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
PENNSYLVANIA (Continued)
Pennsylvania Intergovernmental Cooperation
Authority, Special Tax Revenue Refunding
Bonds (City of Philadelphia Funding Program),
Series of 1999,
5.0%, 6-15-21 ......................... $ 2,500 $ 2,271,875
Pennsylvania Higher Education Assistance Agency,
Student Loan Revenue Bonds, Fixed Rate Bonds,
1991 Series C,
7.15%, 9-1-21 ......................... 2,190 2,269,869
Falls Township Hospital Authority, Refunding
Revenue Bonds, The Delaware Valley Medical Center
Project (FHA Insured Mortgage), Series 1992,
7.0%, 8-1-22 .......................... 2,000 2,110,000
Pennsylvania Higher Educational Facilities Authority,
Revenue Bonds (Thomas Jefferson University),
1999 Series A,
5.0%, 7-1-19 .......................... 1,750 1,629,688
Total ................................. 25,479,076
SOUTH CAROLINA - 1.85%
South Carolina Jobs - Economic Development
Authority, Hospital Revenue Refunding and
Improvement Bonds (South Carolina Baptist
Hospital), Series 1993D, Intermediate Longs,
Inverse Floating Securities,
6.22%, 8-1-21 (A) ..................... 14,550 13,713,375
TENNESSEE - 1.06%
The Health and Educational Facilities Board
of the Metropolitan Government of Nashville
and Davidson County, Tennessee:
Multi-Modal Interchangeable Rate, Health Facility
Revenue Bonds (Richland Place, Inc. Project),
Series 1993,
5.5%, 5-1-23 .......................... 2,825 2,644,906
Health Facility Revenue Refunding Bonds (Open
Arms Developmental Centers Project), Series 1998,
5.1%, 8-1-16 .......................... 2,745 2,556,281
Volunteer State Student Funding Corporation,
Educational Loan Revenue Bonds,
Junior Subordinate Series 1993C Bonds,
5.85%, 12-1-08 ........................ 2,700 2,666,250
Total ................................. 7,867,437
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
TEXAS - 7.91%
AllianceAirport Authority, Inc.,
Special Facilities Revenue Bonds,
Series 1991 (American Airlines, Inc.
Project),
7.0%, 12-1-11 ......................... $14,400 $ 15,462,000
Dallas-Fort Worth International Airport, Facility
Improvement Corporation, American Airlines,
Inc., Revenue Refunding Bonds, Series 2000B,
6.05%, 5-1-29 ......................... 9,500 9,547,500
Trinity River Authority of Texas (Tarrant
County Water Project), Improvement and Refunding
Revenue Bonds, Series 1999,
5.25%, 2-1-20 ......................... 7,415 7,072,056
Amarillo Health Facilities Corporation,
Hospital Revenue Bonds (Baptist St. Anthony's
Hospital Corporation Project), Series 1998,
5.5%, 1-1-15 .......................... 6,320 6,383,200
City of Austin, Texas, Subordinate Lien
Revenue Refunding Bonds, Series 1998,
5.25%, 5-15-19 ........................ 5,000 4,868,750
Texas Department of Housing and Community
Affairs, Single Family Mortgage Revenue
Bonds, 1997 Series D (AMT) TEAMS Structure:
5.65%, 3-1-29 ......................... 2,500 2,396,875
5.7%, 9-1-29 .......................... 1,500 1,438,125
Gulf Coast Waste Disposal Authority,
Multi-Modal Interchangeable Rate Revenue
Bonds (Champion International Corporation
Project), Series 1992A,
6.875%, 12-1-28 ....................... 3,220 3,240,125
Lufkin Health Facilities Development
Corporation, Health System Revenue and
Refunding Bonds (Memorial Health System
of East Texas), Series 1995,
6.875%, 2-15-26 ....................... 2,960 2,767,600
City of Houston, Texas, Airport System,
Special Facilities Revenue Bonds
(Continental Airlines, Inc. Terminal
Improvement Projects), Series 1997B,
6.125%, 7-15-17 ....................... 2,850 2,593,500
Midland County Hospital District, Hospital
Revenue Refunding Bonds, Series 1997,
5.375%, 6-1-16 ........................ 2,000 1,952,500
Collin County Housing Finance Corporation,
Student Housing Revenue Bonds (Collin
County Community College District Foundation,
Inc. Project), Series 1998A,
5.25%, 6-1-31 ......................... 1,000 886,250
Total ................................. 58,608,481
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
UTAH - 4.50%
Tooele County, Utah, Hazardous Waste Treatment
Revenue Bonds (Union Pacific Corporation/
USPCI, Inc. Project), Series A,
5.7%, 11-1-26 ......................... $38,200 $ 33,377,250
WASHINGTON - 8.86%
Washington Public Power Supply System:
Nuclear Project No. 3, Refunding Revenue Bonds:
Series 1989B,
7.125%, 7-1-16 ........................ 20,750 24,121,875
Series 1993C, Inverse Floating Rate Security,
5.771%, 7-1-12 (A) .................... 7,000 6,956,250
Nuclear Project No. 1, Refunding Revenue Bonds:
Series 1989B,
7.125%, 7-1-16 ........................ 8,200 9,532,500
Series 1993A, Inverse Floating Rate Security,
6.82%, 7-1-11 (A) ..................... 7,500 8,193,750
Nuclear Project No. 2, Refunding Revenue
Bonds, Series 1994A, Inverse Floating Rate
Securities,
5.771%, 7-1-12 (A) .................... 2,500 2,506,250
State of Washington, Various Purpose General
Obligation Bonds, Series 1990A,
6.75%, 2-1-15 ......................... 4,995 5,694,300
Public Utility District No. 1 of Douglas County,
Washington, Wells Hydroelectric Revenue Bonds,
Series of 1965,
3.7%, 9-1-18 .......................... 3,945 3,382,837
Pilchuck Development Public Corporation (State
of Washington), Special Facilities Airport
Revenue Bonds, Series 1993 (TRAMCO, INC. Project),
6.0%, 8-1-23 .......................... 3,500 3,351,250
Housing Authority of the City of Seattle,
Low-Income Housing Assistance Revenue Bonds,
1995 (GNMA Collateralized Mortgage
Loan - Kin On Project),
7.4%, 11-20-36 ........................ 1,750 1,953,438
Total ................................. 65,692,450
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
MUNICIPAL BONDS (Continued)
WEST VIRGINIA - 0.75%
Braxton County, West Virginia, Solid Waste
Disposal Revenue Bonds (Weyerhaeuser Company
Project), Series 1995A,
6.5%, 4-1-25 .......................... $ 3,500 $ 3,535,000
The County Commission of Monongalia County, West
Virginia, Pollution Control Revenue Bonds (The
Potomac Edison Company Fort Martin Station Project),
1993 Series B,
5.95%, 4-1-13 ......................... 2,000 2,042,500
Total ................................. 5,577,500
WISCONSIN - 1.14%
Wisconsin Public Power Incorporated SYSTEM
(The), Power Supply System Revenue Bonds,
Series 1993B-2, Yield Curve Notes (YCNs),
6.183%, 7-1-14 (A) .................... 5,500 5,520,625
Wisconsin Housing and Economic Development
Authority, Home Ownership Revenue Bonds,
1997 Series H,
5.75%, 9-1-28 ......................... 3,000 2,906,250
Total ................................. 8,426,875
TOTAL MUNICIPAL BONDS - 89.28% $661,926,752
(Cost: $666,611,920)
Number of
Contracts
OPTION - 0.22%
December 96 Put Options on 2000
Treasury Bond Futures ................. 4,100 $ 1,601,562
(Cost: $2,339,209)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Electric, Gas and Sanitary Services - 0.71%
Reliant Energy Inc.,
7.0%, 10-2-00 ......................... 5,270 5,268,975
Food and Kindred Products - 0.18%
General Mills, Inc.,
6.67%, Master Note .................... 1,302 1,302,000
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Miscellaneous Retail - 0.86%
Toys ` `R' ' Us Inc.,
6.72%, 11-3-00 ........................ $ 6,400 $ 6,360,576
Paper and Allied Products - 0.40%
Westvaco Corp.,
6.7%, 11-16-00 ........................ 3,000 2,974,317
Total Commercial Paper - 2.15% 15,905,868
Municipal Obligations
California - 1.95%
City of Azusa, California, Multifamily
Housing Revenue Refunding Bonds (Pacific
Glen Apartments Project), Series 1994
(Federal National Mortgage Association),
4.5%, 10-5-00 ....................... 5,000 5,000,000
California Pollution Control Financing Authority,
Pollution Control Refunding Revenue Bonds (Pacific
Gas and Electric Company), 1996 Series E Bonds
(Morgan Guaranty Trust Company of New York),
5.0%, 10-2-00 ....................... 9,500 9,500,000
Total ............................... 14,500,000
District of Columbia - 0.33%
District of Columbia (Washington D.C.),
General Obligation Variable Rate General
Fund Recovery Bonds, Series 1991B Subseries
B-2 (Bank of America, N.A.),
5.6%, 10-2-00 ....................... 2,500 2,500,000
Illinois - 0.75%
Illinois Health Facilities Authority, Variable
Rate Demand Revenue Bonds, Series 1995
(Northwest Community Hospital), (First National
Bank of Chicago),
5.85%, 10-4-00 ...................... 1,285 1,285,000
City of Naperville, Illinois, Variable/Fixed Rate
Demand Revenue Bonds, Series 1999 (Heritage YMCA
Group, Inc.), (Harris Trust and Savings Bank),
5.85%, 10-4-00 ...................... 4,300 4,300,000
Total ............................... 5,585,000
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Montana - 0.22%
Montana Health Facility Authority,
Health Care Revenue Bonds (Pooled
Loan Program), 1985 Series A (Norwest Bank
Minnesota, National Association),
5.7%, 10-5-00 ....................... $1,625 $1,625,000
New York - 1.04%
Port Authority New York and New Jersey (The),
Versatile Structure Obligations, Series 3
(Morgan Guaranty Trust Company of New York),
5.45%, 10-2-00 ...................... 7,700 7,700,000
North Dakota - 0.48%
City of Fargo, North Dakota, Commercial
Development Revenue Bonda ("Cass Oil Co."
Project), Series 1984 (U.S. Bank, N.A.)
5.75%, 10-5-00 ...................... 3,600 3,600,000
South Carolina - 1.43%
University of South Carolina School of Medicine
Educational Trust (The), Tax Exempt Adjustable Mode
Healthcare Facilities Revenue Bonds,
Series 2000 (Wachovia Bank, N.A.),
4.20%, 10-5-00 ...................... 10,600 10,600,000
Washington - 1.09%
Housing Authority of the City of
Seattle, Low-Income Housing & Assistance
Revenue Bonds, 1994 (Bayview Manor Project),
(Variable Rate Demand Bonds),(U.S. Bank of
Washington, National Association),
5.65%, 10-5-00 ...................... 2,550 2,550,000
Washington Health Care Facilities Authority,
Variable Rate Demand Revenue Bonds (Fred
Hutchinson Cancer Research Center, Seattle),
Series 1991B (Morgan Guaranty Trust Company
of New York),
5.55%, 10-2-00 ...................... 4,050 4,050,000
Washington Health Care Facilities Authority,
Variable Rate Demand Revenue Bonds (Fred
Hutchinson Cancer Research Center, Seattle),
Series 1991B, (Banc of America Securities LLC),
5.55%, 10-2-00 ...................... 1,400 1,400,000
Total ............................... 8,000,000
See Notes to Schedule of Investments on page 29.
<PAGE>
THE INVESTMENTS OFWADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
SEPTEMBER 30, 2000
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Wisconsin - 0.19%
Redevelopment Authority of the City of
Milwaukee (Wisconsin), Variable Rate
Demand Revenue Bonds, Series 1999
(Wisconsin Humane Society, Inc.
Project), (U.S. Bank, N.A.),
5.7%, 10-5-00 ....................... $1,400 $ 1,400,000
Total Municipal Obligations - 7.48% 55,510,000
TOTAL SHORT-TERM SECURITIES - 9.63% $ 71,415,868
(Cost: $71,415,868)
TOTAL INVESTMENT SECURITIES - 99.13% $734,944,182
(Cost: $740,366,997)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.87% 6,431,010
NET ASSETS - 100.00% $741,375,192
Notes to Schedule of Investments
(A) The interest rate is subject to change periodically and inversely based
upon prevailing market rates. The interest rate shown is the rate in
effect at September 30, 2000.
(B) The interest rate is subject to change periodically and inversely based
upon prevailing market rates with a leverage factor of three. The interest
rate shown is the rate in effect at September 30, 2000.
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
WADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2000
(In Thousands, Except for Per Share and Share Amounts)
Assets
Investment securities--at value (Notes 1 and 3) $734,944
Cash ........................................... 3
Receivables:
Interest ...................................... 10,372
Fund shares sold .............................. 330
Prepaid insurance premium ...................... 29
--------
Total assets ................................ 745,678
--------
Liabilities
Payable to Fund shareholders ................... 2,953
Payable for investment securities purchased ..... 1,090
Accrued service fee (Note 2) ................... 139
Accrued transfer agency and dividend
disbursing (Note 2) ........................... 62
Accrued management fee (Note 2) ................ 21
Accrued distribution fee (Note 2) .............. 15
Accrued accounting services fee (Note 2) ........ 7
Other .......................................... 16
--------
Total liabilities ........................... 4,303
--------
Total net assets ........................... $741,375
========
Net Assets
$0.001 par value capital stock
Capital stock ................................. $ 110
Additional paid-in capital .................... 761,440
Accumulated undistributed income (loss):
Accumulated undistributed net investment income 617
Accumulated undistributed net realized loss on
investment transactions ..................... (11,338)
Distributions in excess of net realized loss on
investment transactions ..................... (4,031)
Net unrealized depreciation in value of
investments ................................. (5,423)
--------
Net assets applicable to outstanding units
of capital ................................. $741,375
========
Net asset value per share (net assets divided
by shares outstanding)
Class A ........................................ $6.75
Class B ........................................ $6.74
Class C ........................................ $6.74
Class Y ........................................ $6.75
Capital shares outstanding
Class A ........................................ 109,636,564
Class B ........................................ 157,353
Class C ........................................ 85,501
Class Y ........................................ 300
Capital shares authorized ........................ 600,000,000
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.STATEMENT OF OPERATIONS
For the Fiscal Year Ended SEPTEMBER 30, 2000
(In Thousands)
Investment Income
Interest and amortization (Note 1B) .............. $48,118
-------
Expenses (Note 2):
Investment management fee ....................... 4,065
Service fee:
Class A ........................................ 1,775
Class B ........................................ 1
Class C ........................................ 1
Transfer agency and dividend disbursing:
Class A ........................................ 728
Class B ........................................ 1
Class C ........................................ 1
Distribution fee:
Class A ........................................ 82
Class B ........................................ 3
Class C ........................................ 2
Accounting services fee ......................... 84
Custodian fees .................................. 29
Audit fees ...................................... 22
Legal fees ...................................... 12
Shareholder servicing - Class Y ................. 5
Other ........................................... 181
-------
Total expenses ................................ 6,992
-------
Net investment income ........................ 41,126
-------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net loss on securities .................. (4,463)
Realized net gain on put options purchased ....... 76
Realized net loss on futures contracts closed .... (6,472)
-------
Realized net loss on investments ................ (10,859)
-------
Net unrealized appreciation in value of
securities during the period .................... 2
Net unrealized depreciation in value of
options during the period (738)
-------
Net unrealized depreciation in value of
investments during the period .................. (736)
-------
Net loss on investments ....................... (11,595)
-------
Net increase in net assets resulting
from operations ............................ $29,531
=======
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands)
For the fiscal year
ended September 30,
-----------------------------
2000 1999
-------------- ------------
Decrease in Net Assets
Operations:
Net investment income.............. $41,126 $47,065
Realized net gain (loss) on
investments ..................... (10,859) 9,001
Unrealized depreciation ........... (736) (86,742)
-------- --------
Net increase (decrease) in net assets
resulting from operations ...... 29,531 (30,676)
-------- --------
Distributions to shareholders (Note 1D):*
From net investment income:
Class A ......................... (41,036) (47,791)
Class B ......................... (18) ---
Class C ......................... (11) ---
Class Y ......................... (145) ---**
From realized gains on securities transactions:
Class A ......................... (5,032) (14,339)
Class B ......................... (1) ---
Class C ......................... (1) ---
Class Y ......................... ---* ---
In excess of realized gains on securities transactions:
Class A ......................... (4,030) ---
Class B ......................... (1) ---
Class C ......................... ---* ---
Class Y ......................... ---* ---
-------- --------
(50,275) (62,130)
-------- --------
Capital share transactions
(Note 7) .......................... (111,963) (30,001)
--------- --------
Total decrease ............... (132,707) (122,807)
Net Assets
Beginning of period ................ 874,082 996,889
--------- --------
End of period, including undistributed
net investment income of $617 and
$701, respectively ................ $741,375 $874,082
======== ========
*See "Financial Highlights" on pages 33 - 36.
**Not shown due to rounding.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the fiscal year ended
September 30,
------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Net asset value,
beginning of period $6.90 $7.63 $7.47 $7.32 $7.25
----- ----- ----- ----- -----
Income (loss) from investment
operations:
Net investment
income .......... 0.35 0.36 0.37 0.38 0.39
Net realized and
unrealized gain
(loss) on
investments ..... (0.08) (0.61) 0.25 0.30 0.12
----- ----- ----- ----- -----
Total from investment
operations ....... 0.27 (0.25) 0.62 0.68 0.51
----- ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.35) (0.37) (0.37) (0.37) (0.39)
From capital gains (0.03) (0.11) (0.09) (0.16) (0.05)
In excess of capital
gains ........... (0.04) (0.00) (0.00) (0.00) (0.00)
----- ----- ----- ----- -----
Total distributions (0.42) (0.48) (0.46) (0.53) (0.44)
----- ----- ----- ----- -----
Net asset value,
end of period .... $6.75 $6.90 $7.63 $7.47 $7.32
===== ===== ===== ===== =====
Total return* ...... 4.24% -3.46% 8.67% 9.77% 7.16%
Net assets, end of
period (in
millions) ........ $739 $874 $997 $994 $997
Ratio of expenses to
average net assets 0.89% 0.79% 0.72% 0.67% 0.68%
Ratio of net investment
income to average
net assets ....... 5.23% 4.98% 4.95% 5.14% 5.23%
Portfolio
turnover rate .... 15.31% 30.93% 50.65% 47.24% 74.97%
*Total return calculated without taking into account the sales load deducted on
an initial purchase.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10-5-99*
through
9-30-00
-------
Net asset value,
beginning of period $6.87
----
Income from investment
operations:
Net investment income 0.28
Net realized and
unrealized loss
on investments .. (0.05)
----
Total from investment
operations ....... 0.23
----
Less distributions:
From net investment
income .......... (0.29)
From capital gains (0.03)
In excess of capital
gains ........... (0.04)
----
Total distributions (0.36)
----
Net asset value,
end of period .... $6.74
====
Total return ....... 3.56%
Net assets, end of
period (in millions) $1
Ratio of expenses to
average net assets 1.86%**
Ratio of net investment
income to average
net assets ....... 4.17%**
Portfolio turnover
rate ............. 15.31%***
*Commencement of operations.
**Annualized.
***For the fiscal year ended September 30, 2000.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10-7-99*
through
9-30-00
-------
Net asset value,
beginning of period $6.87
----
Income from investment
operations:
Net investment income 0.29
Net realized and
unrealized loss
on investments .. (0.06)
----
Total from investment
operations ....... 0.23
----
Less distributions:
From net investment
income .......... (0.29)
From capital gains (0.03)
In excess of capital
gains ........... (0.04)
----
Total distributions (0.36)
----
Net asset value,
end of period .... $6.74
====
Total return ....... 3.56%
Net assets, end of
period (in millions) $1
Ratio of expenses to
average net assets 1.84%**
Ratio of net investment
income to average
net assets ....... 4.18%**
Portfolio turnover
rate ............. 15.31%***
*Commencement of operations.
**Annualized.
***For the fiscal year ended September 30, 2000.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
For the period
fiscal from
year 12-30-98*
ended through
9-30-00 9-30-99
------- -------
Net asset value,
beginning of period $6.90 $7.41
----- -----
Income (loss) from investment
operations:
Net investment
income .......... 0.36** 0.28
Net realized and
unrealized loss
on investments .. (0.08)** (0.51)
----- -----
Total from investment
operations ....... 0.28 (0.23)
----- -----
Less distributions
From net investment
income .......... (0.36) (0.28)
From capital gains (0.03) (0.00)
In excess of capital
gains ........... (0.04) (0.00)
----- -----
Total distributions. (0.43) (0.28)
----- -----
Net asset value,
end of period .... $6.75 $6.90
===== =====
Total return ....... 4.32% -3.21%
Net assets, end of
period (000 omitted) $2 $2
Ratio of expenses
to average net
assets ........... 0.71% 0.67%***
Ratio of net
investment income
to average net
assets ........... 5.38% 5.08%***
Portfolio
turnover rate .... 15.31% 30.93%****
*Commencement of operations.
**Based on average weekly shares outstanding.
***Annualized.
***For the fiscal year ended September 30, 1999.
See notes to financial statements.
<PAGE>
WADDELL & REED ADVISORS MUNICIPAL BOND FUND, INC.NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 -- Significant Accounting Policies
Waddell & Reed Advisors Municipal Bond Fund, Inc. (the "Fund"), formerly
United Municipal Bond Fund, Inc., is registered under the Investment Company Act
of 1940 as a diversified, open-end management investment company. Its
investment objective is to provide income not subject to Federal income tax.
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 -- Municipal bonds and the taxable obligations in the
Fund's investment portfolio are not listed or traded on any securities
exchange. Therefore, municipal bonds are valued using a pricing system
provided by a pricing service or dealer in bonds. Short-term debt
securities, whether taxable or nontaxable, 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) and premiums on the purchase of bonds are amortized for both
financial and tax reporting purposes over the remaining lives of the bonds.
Interest income is recorded on the accrual basis. See Note 3 -- Investment
Security Transactions.
C. Federal income taxes -- The Fund intends to distribute all of its net
investment income and capital gains to its shareholders and otherwise
qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code. The Fund intends to pay distributions as required
to avoid imposition of excise tax. Accordingly, provision has not been
made for Federal income taxes. In addition, the Fund intends to meet
requirements of the Internal Revenue Code which will permit it to pay
dividends from net investment income, substantially all of which will be
exempt from Federal income tax. See Note 4 -- Federal Income Tax Matters.
D. 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, net operating losses and expiring
capital loss carryovers.
E. Futures -- See Note 5 -- Futures.
F. Options -- See Note 6 -- Options.
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 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
is payable by the Fund at the annual rate of 0.525% of net assets up to $500
million, 0.50% of net assets over $500 million and up to $1 billion, 0.45% of
net assets over $1 billion and up to $1.5 billion, and 0.40% of net assets over
$1.5 billion. The Fund accrues and pays the fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 11,000
From $ 25 to $ 50 $ 22,000
From $ 50 to $ 100 $ 33,000
From $ 100 to $ 200 $ 44,000
From $ 200 to $ 350 $ 55,000
From $ 350 to $ 550 $ 66,000
From $ 550 to $ 750 $ 77,000
From $ 750 to $1,000 $ 93,500
$1,000 and Over $110,000
In addition, for each class of shares in excess of one, the Fund pays
WARSCO a monthly per-class fee equal to 2.5% of the monthly base fee.
Prior to September 1, 2000, the Accounting Services Agreement was as 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 $1.6125
for each shareholder account which was in existence at any time during the prior
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.
Prior to September 1, 2000, for Class A, Class B and Class C shares, the
Fund paid 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.
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
$393,458. During the period ended September 30, 2000, W&R received $204 and $21
in deferred sales charges for Class B shares and Class C shares, respectively.
With respect to Class A, Class B and Class C shares, W&R paid sales commissions
of $254,400 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 Class A 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
reimbursement under the Class A Plan.
The Fund paid Directors' fees of $26,000, which are included in other
expenses.
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 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $108,829,770 while proceeds from maturities and
sales aggregated $271,281,123. Purchases of options aggregated $11,714,273
while proceeds from options aggregated $9,451,688. Purchases of short-term
securities aggregated $1,713,425,745 while proceeds from maturities and sales
aggregated $1,678,257,395. No long-term U.S. Government securities were bought
or sold during the period ended September 30, 2000.
For Federal income tax purposes, cost of investments owned at September 30,
2000 was $744,479,023, resulting in net unrealized depreciation of $9,534,841,
of which $19,231,934 related to appreciated securities and $28,766,775 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $245,103 during its fiscal year ended September 30, 2000, which included the
effect of certain losses deferred into the next fiscal year (see discussion
below). A portion of capital gain net income was paid to Fund shareholders.
Remaining capital gain net income will be distributed to the Fund's
shareholders.
Internal Revenue Code regulations permit the Fund to defer into its next
fiscal year net capital losses or net long-term capital losses incurred between
each November 1 and the end of its fiscal year ("post-October losses"). From
November 1, 1999 through September 30, 2000, the Fund incurred net capital
losses of $11,322,610, which has been deferred to the fiscal year ending
September 30, 2001.
NOTE 5 -- Futures
The Fund may engage in buying and selling interest rate futures contracts,
but only Debt Futures and Municipal Bond Index Futures. Upon entering into a
futures contract, the Fund is required to deposit, in a segregated account, an
amount of cash or U.S. Treasury Bills equal to a varying specified percentage of
the contract amount. This amount is known as the initial margin. Subsequent
payments ("variation margins") are made or received by the Fund each day,
dependent on the daily fluctuations in the value of the underlying debt security
or index. These changes in the variation margins are recorded by the Fund as
unrealized gains or losses. Upon the closing of the contracts, the cumulative
net change in the variation margin is recorded as realized gain or loss. The
Fund uses futures to attempt to reduce the overall risk of its investments.
NOTE 6 -- Options
Options purchased by the Fund are accounted for in the same manner as
marketable portfolio securities. The cost of portfolio securities acquired
through the exercise of call options is increased by the premium paid to
purchase the call. The proceeds from securities sold through the exercise of
put options are decreased by the premium paid to purchase the put. The Fund
uses options to attempt to reduce the overall risk of its investments.
NOTE 7 -- 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 fiscal
year ended September 30,
------------------------
2000 1999
---------- ----------
Shares issued from sale
of shares:
Class A ............ 8,242 25,267
Class B ............. 175 ---
Class C ............. 86 ---
Class Y ............ 3,935 ---*
Shares issued from reinvestment
of dividends and/or capital gains
distribution:
Class A ............ 6,136 7,013
Class B ............. 2 ---
Class C ............. 2 ---
Class Y ............ 22 ---*
Shares redeemed:
Class A ............ (31,337) (36,372)
Class B ............. (20) ---
Class C ............. (2) ---
Class Y ............ (3,957) ---
------- ------
Decrease in outstanding
capital shares ...... (16,716) (4,092)
======= ======
Value issued from sale
of shares:
Class A ............ $54,649 $185,060
Class B ............. 1,165 ---
Class C ............. 574 ---
Class Y ............ 25,848 2
Value issued from reinvestment
of dividends and/or capital gains
distribution:
Class A ............ 40,755 51,386
Class B ............. 17 ---
Class C ............. 12 ---
Class Y ............ 145 ---*
Value redeemed:
Class A ............ (208,374) (266,449)
Class B ............. (132) ---
Class C ............. (16) ---
Class Y ............ (26,606) ---
--------- --------
Decrease in outstanding
capital ............ $(111,963) $(30,001)
========= ========
*Not shown due to rounding.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Waddell & Reed Advisors Municipal Bond Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Waddell & Reed Advisors Municipal Bond Fund,
Inc. (formerly United Municipal Bond Fund, Inc.) (the "Fund") as of September
30, 2000, and the related statement of operations for the fiscal year then
ended, the statements of changes in net assets for each of the two fiscal years
in the period then ended, and the financial highlights for each of the five
fiscal years in the period then ended. 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 audits.
We conducted our audits 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 September 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
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Waddell & Reed Advisors Municipal Bond Fund, Inc. as of September 30, 2000, the
results of its operations for the fiscal year then ended, the changes in its net
assets for each of the two fiscal years in the period then ended, and the
financial highlights for each of the five fiscal years in the period then ended
in conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Kansas City, Missouri
November 3, 2000
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends and long-term capital gains shown in the table
below, multiplied by the number of shares owned by you on the record dates, will
give you the total amounts to be reported in your Federal income tax return for
the years in which they were received or reinvested.
Exempt Interest Dividends - The per-share amounts shown as Exempt Interest
represents the distribution of state and municipal bond interest and are exempt
from Federal income tax.
PER-SHARE AMOUNTS REPORTABLE AS:
--------------------------------------------------------
For Individuals For Corporations
------------------------------------------------------------------
--
Record OrdinaryLong-TermExempt Non-Long-Term Exempt
Date Total IncomeCapital GainInterestQualifyingCapital GainInterest
------------- ------------------------------------------------------
Class A
10-13-99$0.0300$0.0015 $--- $0.0285 $0.0015 $---$0.0285
11-10-99 .0300 .0015 --- .0285 .0015 --- .0285
12-15-99 .1033 .0015 0.0733 .0285 .0015 0.0733 .0285
1-12-00 .0290 .0016 --- .0274 .0016 --- .0274
2-9-00 .0290 .0016 --- .0274 .0016 --- .0274
3-15-00 .0290 .0016 --- .0274 .0016 --- .0274
4-12-00 .0290 .0016 --- .0274 .0016 --- .0274
5-10-00 .0290 .0016 --- .0274 .0016 --- .0274
6-14-00 .0290 .0016 --- .0274 .0016 --- .0274
7-12-00 .0290 .0016 --- .0274 .0016 --- .0274
8-9-00 .0290 .0016 --- .0274 .0016 --- .0274
9-13-00 .0280 .0016 --- .0264 .0016 --- .0264
---------------------------- ------- ------- -------
Total $0.4233$0.0189$0.0733$0.3311 $.0189 $0.0733 $0.3311
============================ ======= ======= =======
Class B
10-13-99 $0.0290$0.0015 $--- $0.0275 $0.0015 $--- $0.0275
11-10-99 .0220 .0011 --- .0209 .0011 --- .0209
12-15-99 .0963 .0012 0.0733 .0218 .0012 0.0733 .0218
1-12-00 .0240 .0013 --- .0227 .0013 --- .0227
2-9-00 .0240 .0013 --- .0227 .0013 --- .0227
3-15-00 .0230 .0013 --- .0217 .0013 --- .0217
4-12-00 .0240 .0013 --- .0227 .0013 --- .0227
5-10-00 .0240 .0013 --- .0227 .0013 --- .0227
6-14-00 .0240 .0013 --- .0227 .0013 --- .0227
7-12-00 .0240 .0013 --- .0227 .0013 --- .0227
8-9-00 .0240 .0013 --- .0227 .0013 --- .0227
9-13-00 .0220 .0012 --- .0208 .0012 --- .0208
---------------------------- ------- ------- -------
Total $0.3603$0.0154$0.0733$0.2716 $0.0154 $0.0733 $0.2716
============================ ======= ======= =======
Class C
10-13-99 $0.0290$0.0015 $--- $0.0275 $0.0015 $--- $0.0275
11-10-99 .0220 .0011 --- .0209 .0011 --- .0209
12-15-99 .0963 .0012 0.0733 .0218 .0012 0.0733 .0218
1-12-00 .0240 .0013 --- .0227 .0013 --- .0227
2-9-00 .0240 .0013 --- .0227 .0013 --- .0227
3-15-00 .0230 .0013 --- .0217 .0013 --- .0217
4-12-00 .0240 .0013 --- .0227 .0013 --- .0227
5-10-00 .0240 .0013 --- .0227 .0013 --- .0227
6-14-00 .0240 .0013 --- .0227 .0013 --- .0227
7-12-00 .0240 .0013 --- .0227 .0013 --- .0227
8-9-00 .0240 .0013 --- .0227 .0013 --- .0227
9-13-00 .0220 .0012 --- .0208 .0012 --- .0208
---------------------------- ------- ------- -------
Total $0.3603$0.0154$0.0733$0.2716 $0.0154 $0.0733 $0.2716
============================ ======= ======= =======
Class Y
10-13-99 $0.0300$0.0015 $---$0.0285$0.0015 $--- $0.0285
11-10-99 .0300 .0015 --- .0285 .0015 --- .0285
12-15-99 .1033 .0015 0.0733 .0285 .0015 0.0733 .0285
1-12-00 .0290 .0016 --- .0274 .0016 --- .0274
2-9-00 .0290 .0016 --- .0274 .0016 --- .0274
3-15-00 .0300 .0017 --- .0283 .0017 --- .0283
4-12-00 .0300 .0017 --- .0283 .0017 --- .0283
5-10-00 .0290 .0016 --- .0274 .0016 --- .0274
6-14-00 .0300 .0017 --- .0283 .0017 --- .0283
7-12-00 .0290 .0016 --- .0274 .0016 --- .0274
8-9-00 .0300 .0017 --- .0283 .0017 --- .0283
9-13-00 .0290 .0016 --- .0274 .0016 --- .0274
---------------------------- ------- ------- -------
Total $0.4283$0.0193$0.0733$0.3357 $0.0193 $0.0733 $0.3357
============================ ======= ======= =======
NON-QUALIFYING DIVIDENDS - The non-qualifying portion of distributions
represents the taxable portion of dividends paid and does not qualify for the
dividends received deduction for corporations.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Income from the Fund may be subject to the alternative minimum tax.
Shareholders are advised to consult with their tax adviser concerning the tax
treatment of dividends and distributions from the Fund.
<PAGE>
DIRECTORSKeith 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
Bryan J. Bailey, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Kristen A. Richards, Vice President and Secretary
Daniel C. Schulte, Vice President
<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 Core Investment Fund
Waddell & Reed Advisors Continental Income Fund, Inc.
Waddell & Reed Advisors Global Bond Fund, Inc.
Waddell & Reed Advisors Government Securities Fund, Inc.
Waddell & Reed Advisors High Income Fund, Inc.
Waddell & Reed Advisors International Growth Fund, Inc.
Waddell & Reed Advisors Municipal Bond Fund, Inc.
Waddell & Reed Advisors Municipal High Income Fund, Inc.
Waddell & Reed Advisors 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
For more complete information regarding any of the mutual funds in Waddell &
Reed Advisors Funds, including charges and expenses, please obtain the Fund's
prospectus by calling or writing to the number or address listed above. Please
read the prospectus carefully before investing.
NUR1008A(9-00)
