Waddell & Reed

Quarterly Fund Commentary

WRA Science and Technology Fund (prospectus)
June 30, 2015

Zachary H. Shafran

Market Sector Update

  • U.S. technology stocks posted slight gains during the period and performed in the top half of all Standard & Poor’s sectors. Software and services performed well, while semiconductors and semiconductor equipment dragged down overall sector performance.
  • Broad U.S. markets posted mixed results for the quarter despite the overall economy continuing to move forward. As with last quarter, markets seem to be in a holding pattern waiting on an inevitable rate hike from the U.S. Federal Reserve, which may be as early as the fall.
  • The eurozone negotiations on the debt crisis in Greece preoccupied global equity markets, although an agreement reached just after the quarter ended appeared to establish a framework for what needs to be done to secure a roughly 85 billion euro bailout.

Portfolio Strategy

  • The Fund underperformed the benchmark for the quarter primarily due to both poor stock selection and an underweight allocation to the relatively strong-performing consumer discretionary sector.
  • Stock selection in information technology contributed to performance, but chipmaker Micron Technology Inc. (4.9% of Fund net assets) was the greatest detractor for the period. Micron’s performance was impacted by disappointing earnings and guidance during the quarter.
  • Top contributors to performance included Aspen Technology Inc. and Tenet Healthcare Corp (5.1% and 2.9% of Fund net assets, respectively).
  • At quarter-end, the Fund had approximately 75% of assets in U.S. equities, 21% of assets in international stocks, and the residual in cash.


  • We believe global economic growth is fragile and is being buoyed by extremely aggressive global monetary policy. We think eventual improvement in economic growth will lead to tighter monetary and, to a lesser extent, fiscal policy across the globe.
  • In mixed economic environments, we believe there are many innovativedriven investment opportunities – especially in scarce resources, data, mobility and health care – around the world. As we look at the securities of such companies, we are attracted by what we believe are good growth prospects and sound capital structures.
  • We believe there will be a modest improvement in capital spending trends, and we are looking for a continuation of an active mergersand- acquisition environment in the sectors in which we invest. As always, we will carefully monitor the macroeconomic environment, but our focus remains primarily on securityspecific fundamental research..


The opinions expressed in this commentary are those of the Fund’s manager and are current through June 30, 2015. The manager’s views are subject to change at any time based on market and other conditions, and no forecasts can be guaranteed. Past performance is no guarantee of future results.

Risk factors. The value of the Fund’s shares will change, and you could lose money on your investment. Because the Fund invests more than 25% of its total assets in the science and technology industry, the Fund’s performance may be more susceptible to a single economic, regulatory or technological occurrence than a fund that does not concentrate its investments in this industry. Securities of companies within specif c industries or sectors of the economy may periodically perform differently than the overall market. In addition, the Fund’s performance may be i more volatile than an investment in a portfolio of broad market securities and may underperform the market as a whole, due to the relatively limited number of issuers of science and technology related securities. Investment risks associated with investing in science and technology securities, in addition to other risks, include: operating in rapidly changing fields, abrupt or erratic market movements, limited product lines, markets or financial resources, management that is dependent on a limited number of people, short product cycles, aggressive pricing of products and services, new market entrants and obsolescence of existing technology. These and other risks are more fully described in the Fund’s prospectus.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus, or if available, a summary prospectus, containing this and other information for the mutual funds offered by Waddell & Reed, call your financial advisor or visit us online at www.waddell.com. Please read the prospectus or summary prospectus carefully before investing.

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