<PAGE>
UNITED
INTERNATIONAL
GROWTH FUND,
INC.
ANNUAL
REPORT
---------------------------------------
For the fiscal year ended June 30, 1996
<PAGE>
FUND MANAGER'S LETTER
JUNE 30, 1996
Dear Shareholder:
This report relates to the operation of United International Growth Fund for the
fiscal year ended June 30, 1996. The following discussion, graphs and tables
provide you with information regarding the Fund's performance during that
period.
Despite declining interest rates during much of the past fiscal year, global
economic growth generally continued to slow. Economic stagnation was especially
evident in Europe and Canada, while the economies of Mexico and Japan showed
signs of recovering from their respective economic crises. During the past
fiscal year, the U.S. Dollar grew in strength relative to most foreign
currencies. General elections in many foreign countries during the past fiscal
year contributed to global economic uncertainty.
Since assuming management of the Fund on May 1, 1996, I have pursued investment
strategies consistent with those of previous management. The Fund continued its
strategy during the past fiscal year of investing in interest-sensitive European
stocks, and also those of Scandinavian, British and German exporters. In the
Pacific Basin, we concentrated on companies that offered low cost alternatives
to expensive Japanese products. In emerging markets, the Fund emphasized
infrastructure and technology stocks in countries with strong government
spending plans.
The strategies and techniques we applied resulted in the Fund slightly
underperforming the indexes charted on the following page. Those indexes
generally reflect the performance of the international securities market as
charted by the Morgan Stanley E.A.FE. Index (Europe, Australia, Far East Index)
and the universe of funds with similar investment objectives (the Lipper
International Fund Universe Average). The Fund's performance was negatively
impacted by its exposure to stocks of Latin American companies.
We expect global inflation to remain subdued during the next fiscal year. The
U.S. Dollar should remain strong relative to world currencies. The economies of
Japan and Latin American countries are positioned to continue their gradual
recoveries, while Europe and Canada should experience some growth . During the
next fiscal year, we expect to continue emphasizing stocks in economically and
politically stable countries that have the potential for growth.
Thank you very much for your continued support and confidence in our
organization.
Respectfully,
Thomas A. Mengel
Manager, United International Growth Fund, Inc.
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
UNITED INTERNATIONAL GROWTH FUND, INC.,
THE MORGAN STANLEY E.A.FE. INDEX (WITH NET DIVIDENDS),
AND THE LIPPER INTERNATIONAL FUND UNIVERSE AVERAGE
Lipper
United Morgan International
InternationalStanley Fund
Growth E.A.FE. Universe
Fund Index Average
------------------ ----------
06/30/86 Purchase 9,425 10,000 10,000
06/30/87 13,029 15,833 14,205
06/30/88 12,813 16,476 13,920
06/30/89 12,817 18,046 15,414
06/30/90 14,796 18,633 18,678
06/30/91 13,243 16,484 16,807
06/30/92 16,102 16,377 18,456
06/30/93 16,523 19,699 19,922
06/30/94 22,029 23,048 24,256
06/30/95 23,787 23,429 24,543
06/30/96 26,570 26,541 28,356
===== United International Growth Fund* -- $26,570
+++++ Morgan Stanley E.A.FE. Index -- $26,541
- ----------- Lipper International Fund Universe Average -- $28,356
*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.
Annual Average Total Return +
Class A++ Class Y
-----------------------------
Year Ended
6/30/96 5.28% N/A
5 Years Ended
6/30/96 13.59% N/A
10 Years Ended
6/30/96 10.26% N/A
Aggregate Total
Return for Life
of Class Y +++ N/A 5.44%
+ Total return for the Class Y shares may be greater than that of the Class A
shares because the Fund's Class Y shares are not subject to a sales load or
12b-1 fees.
++ Performance data quoted represents past performance and is based on
deduction of a 5.75% sales load on the initial purchase in each of the
three periods. Investment return and principal value will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their
original cost.
+++ 9/27/95 (the date on which Fund Class Y shares were first acquired by
shareholders) through 6/30/96.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
UNITED INTERNATIONAL GROWTH FUND, INC.
PORTFOLIO STRATEGY:
Normally at least 80% in OBJECTIVE: Long-term appreciation of
foreign securities. Not capital with realization of
more than 75% in securities income as a secondary
in any one country. consideration.
Maximum of 15% in currency STRATEGY: Invests in securities
exchange contracts (common stocks and/or
debt securities) issued
Cash Reserves by companies or
governments of any
nation. (May purchase
securities subject to
repurchase agreements.
May invest in certain
options.)
The use of cash reserves (often invested
in money market securities) for defensive
purposes is a strategy that may be
utilized by the International Growth Fund
from time to time.
Moving into cash reserve positions at
times thought to be near a major stock
market peak allows the Fund the
opportunity to capture profits and
attempts to cushion the impact of market
declines. The added flexibility provided
by our CASH RESERVES STRATEGY has from
time to time been an important element in
our past success and, when deemed
appropriate, may be used in the
management of the portfolio in the
future.
FOUNDED: 1970
SCHEDULED DIVIDEND FREQUENCY: SEMIANNUALLY (June and
December)
PERFORMANCE SUMMARY - Class A Shares
PER SHARE DATA
For the Fiscal Year Ended June 30, 1996
---------------------------------------
DIVIDENDS PAID $0.07
=====
CAPITAL GAINS DISTRIBUTION $0.60
=====
NET ASSET VALUE ON
6/30/96 $8.95 adjusted to:$9.55(A)
6/30/95 8.68
-----
CHANGE PER SHARE $0.87
=====
(A)This number includes the capital gains distribution of $0.60 paid in December
1995 added to the actual net asset value on June 30, 1996.
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
- ------ ----------- ------------
1-year period ended 6-30-96 5.28% 11.70%
5-year period ended 6-30-96 13.59% 14.94%
10-year period ended 6-30-96 10.26% 10.92%
*Performance data quoted represents past performance and is based on deduction
of 5.75% sales load on the initial purchase in each of the three periods.
**Performance data quoted in this column represents past performance without
taking into account the sales load deducted on an initial purchase.
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, 1996, United International Growth Fund, Inc. had net assets totaling
$776,187,817 invested in a diversified portfolio of:
92.21% Common Stocks and Rights
6.00% Cash and Cash Equivalents and Open
Forward Currency Contracts
1.79% Preferred Stocks
As a shareholder of United International Growth Fund, Inc., for every $100 you
had invested on June 30, 1996, your Fund owned $6.00 in cash and cash
equivalents and open forward currency contracts; the remainder was invested by
country and by industry, respectively, as follows:
$38.82 Europe
24.72 Pacific Basin
22.05 Scandinavia
6.44 Mexico
6.00 Cash and Cash Equivalents and Open Forward Currency Contracts
1.97 South America
$33.67 Manufacturing
20.14 Finance, Insurance and Real Estate
13.26 Transportation, Communication, Electric,
Gas and Sanitary Services
10.42 Wholesale and Retail Trade
9.40 Miscellaneous Investing Institutions
6.00 Cash and Cash Equivalents and Open Forward Currency Contracts
3.81 Services
2.86 Contract Construction
0.44 Mining
The Manufacturing segment shown above is comprised of the following industries:
$9.16 Electronic and Other Electiic Equipment
6.79 Chemicals and Allied Products
3.95 Transportation Equipment
3.49 Printing and Publishing
2.44 Industrial Machinery and Equipment
2.26 Fabricated Metal Products
1.74 Food and Kindred Products
1.64 Instruments and Related Products
2.20 Other
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1996
Shares Value
COMMON STOCKS AND RIGHTS
Argentina - 0.32%
Ciadea, S.A.* .......................... 135,136 $ 939,195
Corcemar, Class B Rights* .............. 302,820 5,420
Corcemar S.A., Series B1* .............. 338,522 1,574,129
Total ................................. 2,518,744
Australia - 3.66%
Advance Bank Australia Ltd. ............ 982,587 4,075,741
John Fairfax Holdings Ltd. ............. 1,500,000 3,122,761
News Corporation Limited ............... 563,180 3,189,952
Publishing & Broadcasting PBL .......... 1,000,000 4,399,361
Westpac Banking Corp. .................. 1,887,894 8,350,022
Woolworths Ltd. ........................ 2,200,000 5,305,944
Total ................................. 28,443,781
Brazil - 0.54%
Telebras S.A., ADR ...................... 60,000 4,177,500
Denmark - 3.75%
Copenhagen Airports A/S ................ 82,000 8,120,059
Danske Traelast ......................... 54,975 4,045,385
Tele Danmark A/S ....................... 250,000 12,591,555
Thorkild Kristensen .................... 66,450 4,322,523
Total ................................. 29,079,522
Finland - 3.04%
Nokia Corporation, Series K ............ 512,200 18,783,840
Tampella OY* ........................... 2,503,167 4,787,360
Total ................................. 23,571,200
France - 4.94%
Christian Dior S.A. .................... 30,000 3,908,529
Guyenne et Gascogne .................... 18,780 6,723,054
Lapeyre S.A. ........................... 197,985 11,607,451
Societe Industrielle de Transports
Automobiles S.A. ...................... 42,100 10,405,067
Television Francais 1-TF1 S.A. ......... 50,000 5,716,953
Total ................................. 38,361,054
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1996
Shares Value
COMMON STOCKS AND RIGHTS (Continued)
Germany - 5.68%
Daimler-Benz AG* ....................... 13,000 $ 6,963,828
Daimler-Benz AG, Rights* ............... 10,000 1,381
Depfa Bank ............................. 300,000 11,857,941
GILDEMEISTER Aktiengesellschaft* ....... 59,750 2,554,258
Mannesmann AG .......................... 31,700 10,966,261
Metallgesellschaft AG* ................. 200,000 3,439,658
TRAUB AG (B)* .......................... 47,000 3,044,722
Vereinigter Baubeschlag-Handel
Aktiengesellschaft..................... 20,000 5,261,427
Total ................................. 44,089,476
Hong Kong - 6.24%
Dongfang Electrical Machinery
Co., Ltd. ............................. 9,106,000 2,282,972
First Pacific Company Limited ..........11,094,000 17,061,075
Guangdong Corporation Limited ..........10,000,000 6,332,386
Guangzhou Investment Company Ltd. ......26,000,000 6,552,081
HSBC Holdings Plc ...................... 400,000 6,048,074
Harbin Power Equipment Company Limited,
H Shares .............................. 598,000 89,646
Peregrine Investments Holdings, Ltd. ... 7,000,000 10,086,586
Total ................................. 48,452,820
Indonesia - 0.82%
PT Bimantara Citra, F .................. 1,700,000 2,137,340
PT Semen Cibinong, F ................... 600,000 1,308,839
Pt Steady Safe Transportation Service, F 2,126,500 2,924,921
Total ................................. 6,371,100
Ireland - 0.40%
Allied Irish Banks plc ................. 600,000 3,141,717
Italy - 2.47%
Mediolanum S.p.A.* ..................... 350,000 3,476,225
Parmalat Finanziaria SPA ............... 2,500,000 3,339,321
STET - Societa Financiaria
Telefonica p.a. ....................... 2,900,000 7,633,573
Telecom Italia Mobile Risp* ............ 3,500,000 4,757,348
Total ................................. 19,206,467
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1996
Shares Value
COMMON STOCKS AND RIGHTS (Continued)
Japan - 12.16%
Amway Japan ............................ 75,000 $ 3,770,222
Dai-ni Denden Corporation .............. 1,050 9,174,664
Daiichi Corporation .................... 150,000 4,359,748
Honda Motor Co., Ltd. .................. 350,000 9,085,093
Japan Airport Terminal Co. ............. 100,000 1,416,690
Matsushita Electric Industrial ......... 500,000 9,322,731
Mitsubishi Heavy Industries, Ltd. ...... 300,000 2,613,107
Mitsubishi Motors ...................... 500,000 4,387,168
Promise Co., Ltd. ...................... 60,000 2,961,338
Sankyo Co., Ltd. ....................... 600,000 15,574,445
Sony Corporation ....................... 220,000 14,497,761
TDK Corp. .............................. 225,000 13,449,410
Xebio Co., Ltd. ........................ 100,000 3,756,512
Total ................................. 94,368,889
Mexico - 6.44%
bufete industrial, s.a., ADR* .......... 337,500 5,864,063
Cemex, S.A., CPO Shares, Series A ...... 923,750 3,296,491
Desc-Sociedad de Fomento Industrial,
S.A. de C.V., Class B* ................ 1,297,000 7,011,274
Desc-Sociedad de Fomento Industrial,
S.A. de C.V., Class C* ............... 4,770 24,903
Empresas ICA Sociedad Controladora,
S.A. de C.V., ADS* .................... 728,000 10,101,000
Fomento Economico Mexicano,
S.A. de C.V., Class B ................. 1,760,000 5,001,322
Grupo Carso, S.A. de C.V., Series 1A* .. 750,000 5,333,069
Grupo Financiero Bancomer, S.A. de
C.V., B, CPO Shares* ..................15,279,600 6,664,377
Telefonos de Mexico, S.A. de C.V.,
ADR ................................... 200,000 6,700,000
Total ................................. 49,996,499
Netherlands - 4.66%
Koninklijke Boskalis Westminster N.V.* . 350,000 6,260,263
Koninklijke PTT Nederland NV ........... 350,000 13,259,442
Vendex International N.V. .............. 253,500 8,845,443
Verenigd Bezit VNU* .................... 500,000 7,770,350
Total ................................. 36,135,498
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1996
Shares Value
COMMON STOCKS AND RIGHTS (Continued)
Norway - 2.93%
Fokus Bank A.S.* ....................... 1,000,000 $ 5,455,134
Orkla, Series A ........................ 118,700 6,255,744
Schibsted AS ........................... 331,200 4,287,180
UNI Storebrand AS, Series A* ........... 1,500,000 6,749,572
Total ................................. 22,747,630
Philippines - 0.16%
Pilipino Telephone Corporation* ........ 800,500 1,222,604
Portugal - 0.34%
Portugal Telecom, S.A.,
Ordinary Shares* ...................... 100,000 2,617,175
Spain - 5.05%
Corporacion Bancaria de Espana, S.A. ... 303,000 13,236,715
Corporation Financiero Alba, S.A. ...... 147,250 12,266,998
Gas Natural SDG, S.A. .................. 15,211 3,197,686
Grupo Uralita S.A. ..................... 235,506 2,208,559
Iberdrola .............................. 450,000 4,624,492
Telefonica de Espana, S.A. ............. 200,000 3,688,653
Total ................................. 39,223,103
Sweden - 12.33%
Astra AB, Class A ...................... 500,165 22,135,875
Catena, Series A ....................... 700,000 6,661,229
Frontec AB, Class B* ................... 90,000 1,107,939
Kinnevik AB, B Shares .................. 400,000 12,144,281
NCC AB, Series B ....................... 358,000 3,677,119
NetCom Systems AB, Class B* ............ 400,000 4,531,448
Nobel Biocare AS ....................... 200,000 3,715,788
Skandia Enskilda Banken, Class A ....... 2,720,000 21,775,119
Skandia Group Insurance Company Ltd.* .. 150,000 3,976,346
Sparbanken Sverige AB, Series A ........ 500,000 6,495,076
Stadshypotek, Class A .................. 200,000 4,471,029
Tidnings AB Marieberg, Series A, F ..... 100,000 2,507,401
WM-data AB, Class B .................... 40,000 2,537,611
Total ................................. 95,736,261
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1996
Shares Value
COMMON STOCKS AND RIGHTS (Continued)
Switzerland - 5.98%
Adia SA, Bearer Shares ................. 26,500 $ 6,657,332
CS Holding, Registered Shares .......... 115,000 10,948,876
Ciba-Geigy AG, Registered .............. 12,300 15,007,201
SMH Swiss Corporation .................. 13,000 9,048,724
Societe Internationale Pirelli* ........ 40,000 4,736,379
Total ................................. 46,398,512
Thailand - 1.68%
Charoen Pokphand Feedmill .............. 900,000 5,147,929
Matichon Company Ltd. .................. 807,666 6,244,676
Thai Stanley Electric Co. Ltd. ......... 258,500 1,611,164
Total ................................. 13,003,769
United Kingdom - 8.62%
HSBC Holdings Plc ...................... 300,000 4,699,293
Kingfisher plc ......................... 750,000 7,534,953
Next plc ............................... 2,050,000 17,935,481
Shandwick PLC .......................... 1,450,000 1,171,715
Storehouse PLC ......................... 1,400,000 6,944,511
THORN EMI plc .......................... 275,000 7,666,655
Tomkins plc ............................ 2,000,000 7,521,356
Vodafone Group Plc ..................... 3,600,000 13,398,581
Total ................................. 66,872,545
TOTAL COMMON STOCKS AND RIGHTS - 92.21% $715,735,866
(Cost: $590,534,052)
PREFERRED STOCKS
Brazil - 1.11%
Banco Itau S.A. ........................21,200,000 8,594,024
Germany - 0.68%
Marschollek, Lautenschlager und
Partner AG............................. 5,000 5,261,427
TOTAL PREFERRED STOCKS - 1.79% $ 13,855,451
(Cost: $12,630,174)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1996
Face
Amount in
Thousands Value
UNREALIZED GAIN ON OPEN FORWARD
CURRENCY CONTRACTS - 0.34%
Deutsche Marks, 10-2-96 (B) ............ DM53,000 $ 1,272,998
Japanese Yen, 10-2-96 (B) ..............Y3,800,000 1,398,742
Total ................................. $ 2,671,740
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Chemicals and Allied Products - 1.97%
Air Products & Chemicals Inc.,
5.38%, 8-12-96 ........................ $1,675 1,664,487
Ciba-Geigy PLC,
5.35%, 7-10-96 ........................ 7,800 7,789,567
Procter & Gamble Company (The),
5.35%, 8-12-96 ........................ 5,875 5,838,330
Total ................................. 15,292,384
Communication - 0.94%
NYNEX Corporation,
5.32%, 7-16-96 ........................ 7,335 7,318,741
Depository Institutions - 0.51%
Commonwealth Bank of Australia,
5.31%, 7-5-96 ......................... 3,975 3,972,655
Food and Kindred Products - 0.01%
General Mills, Inc.,
Master Note ........................... 89 89,000
Instruments and Related Products - 0.10%
Raytheon Company,
5.3%, 7-8-96 .......................... 745 744,232
Nondepository Institutions - 1.14%
Island Finance Puerto Rico Inc.,
5.31%, 7-12-96 ........................ 8,850 8,835,641
Security and Commodity Brokers - 0.35%
Merrill Lynch & Co., Inc.,
5.36%, 7-31-96 ........................ 2,735 2,722,784
TOTAL SHORT-TERM SECURITIES - 5.02% $ 38,975,437
(Cost: $38,975,437)
TOTAL INVESTMENT SECURITIES - 99.36% $771,238,494
(Cost: $642,139,663)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.64% 4,949,323
NET ASSETS - 100.00% $776,187,817
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1996
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) Affiliate as defined by the Investment Company Act of 1940 by reason of
ownership by the Fund of 5% or more of its outstanding voting securities.
(B) Principal amounts are denominated in the indicated foreign currency where
applicable (DM - Deutsche Mark, Y - Japanese Yen).
See Note 1 to financial statements for security valuation and other significant
accounting policies concerning investments.
See Note 3 to financial statements for cost and unrealized appreciation and
depreciation of investments owned for Federal income tax purposes.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
Assets
Investment securities -- at value (Notes 1 and 3) . $771,238,494
Receivables:
Fund shares sold ................................ 6,151,181
Investment securities sold ...................... 5,373,193
Dividends and interest .......................... 2,956,879
Prepaid insurance premium ......................... 16,726
------------
Total assets .................................. 785,736,473
------------
Liabilities
Payable for investment securities purchased ...... 7,389,984
Payable for Fund shares redeemed ............ ..... 1,391,330
Accrued service fee .............................. 252,478
Accrued transfer agency and dividend disbursing .. 188,061
Due to custodian ................................. 25,626
Accrued accounting services fee ................... 7,083
Other ............................................ 294,094
------------
Total liabilities ............................. 9,548,656
------------
Total net assets ............................. $776,187,817
============
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 86,737,685
Additional paid-in capital ...................... 551,172,181
Accumulated undistributed income:
Accumulated undistributed net investment income . 3,434,116
Accumulated net realized gain on
investment transactions ....................... 5,736,725
Net unrealized appreciation in value
of investments at end of period ............... 126,427,091
Net unrealized appreciation in value of foreign
currency exchange at end of period ............ 2,680,019
------------
Net assets applicable to outstanding
units of capital ............................. $776,187,817
============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $8.95
Class Y .......................................... $8.95
Capital shares outstanding
Class A .......................................... 86,186,231
Class Y .......................................... 551,454
Capital shares authorized .......................... 400,000,000
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended JUNE 30, 1996
Investment Income
Income:
Dividends (net of foreign withholding
taxes of $1,567,766) .......................... $13,303,132
Interest ........................................ 2,217,375
-----------
Total income .................................. 15,520,507
-----------
Expenses (Note 2):
Investment management fee ....................... 5,147,703
Transfer agency and dividend
disbursing - Class A .......................... 1,607,898
Service fee - Class A ........................... 1,156,620
Custodian fees .................................. 792,933
Accounting services fee ......................... 72,500
Audit fees ...................................... 36,775
Legal fees ...................................... 9,485
Shareholder servicing - - Class Y ............... 2,704
Other ........................................... 215,900
-----------
Total expenses ................................ 9,042,518
-----------
Net investment income ....................... 6,477,989
-----------
Realized and Unrealized Gain (Loss) on Investments
Realized net gain on securities .................. 31,888,044
Realized net gain on forward currency contracts .. 4,379,792
Realized net loss on foreign currency
transactions .................................... (798,906)
-----------
Realized net gain on investments ................ 35,468,930
-----------
Unrealized appreciation in value of securities
during the period................................ 36,534,342
Unrealized appreciation on open forward
currency contracts during the period ............ 2,545,806
Unrealized depreciation in value of foreign
currency exchange at end of period .............. (39,286)
-----------
Unrealized appreciation on investments .......... 39,040,862
-----------
Net gain on investments ....................... 74,509,792
-----------
Net increase in net assets resulting from
operations ................................. $80,987,781
===========
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended
June 30,
-------------------------
1996 1995
Increase in Net Assets ------------ ------------
Operations:
Net investment income ...............$ 6,477,989 $ 5,413,297
Realized net gain on investments .... 35,468,930 24,452,115
Unrealized appreciation ............. 39,040,862 16,770,945
------------ ------------
Net increase in net assets
resulting from operations ........ 80,987,781 46,636,357
------------ ------------
Dividends to shareholders from:*
Net investment income
Class A ........................... (5,719,358) (3,007,607)
Class Y ........................... (22,311) ---
Realized gains on securities transactions
Class A ........................... (46,756,060) (64,022,607)
Class Y ........................... (4,319) ---
.................................. ------------ ------------
(52,502,048) (67,030,214)
------------ ------------
Capital share transactions
Proceeds from sale of shares:
Class A (47,085,595 and
17,238,289 shares,
respectively) .................... 410,226,754 152,187,285
Class Y (591,404 and 0
shares, respectively) ............ 5,052,415 ---
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (6,447,921 and 7,967,530
shares, respectively)............. 51,649,557 66,005,451
Class Y (3,058 and 0
shares, respectively) ............ 26,631 ---
Payments for shares redeemed:
Class A (45,588,818 and 10,746,945
shares, respectively) ............(398,231,010) (90,905,631)
Class Y (43,008 and 0
shares, respectively) ............ (371,574) ---
------------ ------------
Net increase in net assets
resulting from capital share
transactions .................... 68,352,773 127,287,105
------------ ------------
Total increase ................. 96,838,506 106,893,248
Net Assets
Beginning of period .................. 679,349,311 572,456,063
------------ ------------
End of period, including undistributed
net investment income of $3,434,116
and $3,496,702, respectively.........$776,187,817 $679,349,311
============ ============
*See "Financial Highlights" on pages 15 - 16.
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the fiscal year ended June 30,
----------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $8.68 $8.98 $7.16 $7.10 $5.94
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .08 0.07 .04 .07 .08
Net realized and
unrealized gain on
investments ..... .86 0.60 2.32 .11 1.20
----- ----- ----- ----- -----
Total from investment
operations ...... .94 0.67 2.36 .18 1.28
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income .......... (0.07) (0.04) (0.04) (0.07) (0.09)
Distribution from
capital gains ... (0.60) (0.93) (0.50) (0.05) (0.03)
----- ----- ----- ----- -----
Total distributions (0.67) (0.97) (0.54) (0.12) (0.12)
----- ----- ----- ----- -----
Net asset value,
end of period .... $8.95 $8.68 $8.98 $7.16 $7.10
===== ===== ===== ===== =====
Total return* ...... 11.70% 7.98% 33.31% 2.62% 21.59%
Net assets, end of
period (000
omitted) ......... $771,252$679,349$572,456$336,382$322,534
Ratio of expenses
to average net
assets ........... 1.25% 1.25% 1.20% 1.18% 1.18%
Ratio of net
investment income
to average net
assets ........... 0.89% 0.86% 0.57% 1.07% 1.17%
Portfolio turnover
rate ............. 58.64% 57.45% 83.76% 94.22% 112.82%
*Total return calculated without taking into account the sales load deducted on
an initial purchase.
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout the Period:
For the
period
from 9/27/95
through
6/30/96*
--------
Net asset value,
beginning of period $9.21
------
Income from investment
operations:
Net investment
income .......... .12
Net realized and
unrealized gain
on investments... .30
------
Total from investment
operations ........ .42
------
Less distributions:
Dividends from net
investment
income........... (0.08)
Distribution from
capital gains.... (0.60)
------
Total distributions. (0.68)
------
Net asset value,
end of period ..... $8.95
======
Total return ....... 5.44%
Net assets, end of
period (000
omitted) ......... $4,936
Ratio of expenses
to average net
assets ............ 0.98%**
Ratio of net
investment income
to average net
assets ............ 2.60%**
Portfolio
turnover rate ..... 58.64%**
*On July 4, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class A
shares.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 -- Significant Accounting Policies
United International Growth Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. Its investment objective is the long-term appreciation of your
investment. Realization of income is a secondary goal. The following is a
summary of significant accounting policies consistently followed by the Fund in
the preparation of its financial statements. The policies are in conformity
with generally accepted accounting principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a 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 Nasdaq (National Association of Securities Dealers Automated
Quotations System) which provides information on bid and asked or closing
prices quoted by major dealers in such stocks. Securities for which
quotations are not readily available are valued as determined in good faith
in accordance with procedures established by and under the general
supervision of the Fund's Board of Directors. Short-term debt securities
are valued at amortized cost, which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Original issue discount (as defined in the Internal
Revenue Code), premiums on the purchase of bonds and post-1984 market
discount are amortized for both financial and tax reporting purposes over
the remaining lives of the bonds. Dividend income is recorded on the ex-
dividend date except that certain dividends from foreign securities are
recorded as soon as the Fund is informed of the ex-dividend date. Interest
income is recorded on the accrual basis. See Note 3 -- Investment
Securities Transactions.
C. Foreign currency translations -- All assets and liabilities denominated in
foreign currencies are translated into U.S. dollars daily. Purchases and
sales of investment securities and accruals of income and expenses are
translated at the rate of exchange prevailing on the date of the
transaction. For assets and liabilities other than investments in
securities, 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. Forward foreign currency exchange contracts -- A forward foreign currency
exchange contract (Forward Contract) is an obligation to purchase or sell a
specific currency at a future date at a fixed price. Forward Contracts are
"marked-to-market" daily at the applicable translation rates and the
resulting unrealized gains or losses are reflected in the Fund's financial
statements. Gains or losses are realized by the Fund at the time the
forward contract is extinguished. Contracts may be extinguished by either
entry into a closing transaction or by delivery of the currency. Risks may
arise from the possibility that the other party will not complete the
obligations of the contract and from unanticipated movements in the value
of the foreign currency relative to the U.S. dollar. The Fund uses forward
contracts to attempt to reduce the overall risk of its investments.
E. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code. In
addition, the Fund intends to pay distributions as required to avoid
imposition of excise tax. Accordingly, provision has not been made for
Federal income taxes. See Note 4 -- Federal Income Tax Matters.
F. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards. At June 30, 1996, $798,906 was reclassified between
accumulated undistributed net investment income and accumulated
undistributed net realized gain on investment transactions.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .30% of net assets and (ii)
a "Group" fee computed each day on the combined net asset values of all of the
funds in the United Group of mutual funds (approximately $14.3 billion of
combined net assets at June 30, 1996) at annual rates of .51% of the first $750
million of combined net assets, .49% on that amount between $750 million and
$1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between $2.25
billion and $3 billion, .43% between $3 billion and $3.75 billion, .40% between
$3.75 billion and $7.5 billion, .38% between $7.5 billion and $12 billion, and
.36% of that amount over $12 billion. The Fund accrues and pays this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A shares, the Fund also 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
($1.0208 per account prior to April 1, 1996), 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 .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 direct and
indirect gross sales commissions for Class A shares (which are not an expense of
the Fund) of $3,741,932, out of which W&R paid sales commissions of $2,081,396
and all expenses in connection with the sale of Fund shares, except for
registration fees and related expenses.
Under a 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
fee to W&R in an amount not to exceed .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 provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
The Fund paid Directors' fees of $28,447.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Investment Securities Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $400,458,942 while proceeds from maturities and
sales aggregated $403,591,702. Purchases of short-term securities aggregated
$776,397,217 while proceeds from maturities and sales aggregated $750,850,741.
No U.S. Government securities were bought or sold during the period.
For Federal income tax purposes, cost of investments owned at June 30, 1996
was $642,585,979, resulting in net unrealized appreciation of $125,980,775, of
which $152,976,597 related to appreciated securities and $26,995,822 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $38,813,642 during its fiscal year ended June 30, 1996, of which a portion
was paid to shareholders during the period ended June 30, 1996. Remaining
capital gain net income will be distributed to Fund shareholders.
Internal Revenue Code regulations permit the Fund to defer into its next
fiscal year net foreign currency losses, 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, 1995 through June 30, 1996, the Fund
incurred foreign currency losses of $435,952, which will be deferred to the
fiscal year ending June 30, 1997.
NOTE 5 -- Commencement of Multiclass Operations
On July 4, 1995, the Fund was authorized to offer investors a choice of two
classes of shares, Class A and Class Y, each of which has equal rights as to
assets and voting privileges. Class Y shares are not subject to a sales charge
on purchases; they are not subject to a Rule 12b-1 Service Plan and have a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of either class are
offered is contained in the prospectus and the Statement of Additional
Information for the Fund. The Fund commenced multiclass operations on September
27, 1995.
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
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United International Growth Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United International Growth Fund,
Inc. (the "Fund") at June 30, 1996, the results of its operations for the year
then ended and the changes in its net assets and the financial highlights for
each of the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at June 30, 1996 by correspondence with the custodian
and brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Kansas City, Missouri
August 5, 1996
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends and long-term capital gains 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.
PER-SHARE AMOUNTS REPORTABLE AS:
----------------------------------------------
For Individuals For Corporations
---------------- ------------------------------
Record Ordinary Long-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
- --------------- ---------------------------------------------------
Class A
12-15-95 $0.635 $0.0574 $0.5776 $0.0000 $0.0574 $0.5776
6-14-96 0.030 0.0300 0.0000 0.0000 0.0300 0.0000
------- ------- ------- ------ ------- -------
Totals $0.665 $0.0874 $0.5776 $0.0000 $0.0874 $0.5776
======= ======= ======= ======= ======= =======
Class Y
12-15-95 $0.639 $0.0614 $0.5776 $0.0000 $0.0614 $0.5776
6-14-96 0.040 0.0400 0.0000 0.0000 0.0400 0.0000
------- ------- ------- ------ ------- -------
Totals $0.679 $0.1014 $0.5776 $0.0000 $0.1014 $0.5776
======= ======= ======= ======= ======= =======
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction in the
year received as provided by Section 243 of the Internal Revenue Code.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Shareholders are advised to consult with their tax advisor concerning the tax
treatment of dividends and distributions from the Fund.
<PAGE>
This report is submitted for the general information of the shareholders of
United International Growth Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United International Growth Fund, Inc. current prospectus.
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Doyle Patterson, Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Keith A. Tucker, President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Thomas A. Mengel, Vice President
Sharon K. Pappas, Vice President and Secretary
Carl E. Sturgeon, Vice President
<PAGE>
THE UNITED GROUP OF MUTUAL FUNDS
United Cash Management, Inc.
United Government Securities Fund, Inc.
United Bond Fund
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Continental Income Fund, Inc.
United Retirement Shares, Inc.
United Asset Strategy Fund, Inc.
United Income Fund
United Accumulative Fund
United Vanguard Fund, Inc.
United New Concepts Fund, Inc.
United Science and Technology Fund
United International Growth Fund, Inc.
United Gold & Government 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
(913) 236-1303
Our INTERNET address is:
http://www.waddell.com
NUR1002A(6-96)
printed on recycled paper
