UNITED
INTERNATIONAL
GROWTH FUND,
INC.
ANNUAL
REPORT
---------------------------------------
For the fiscal year ended June 30, 1997
<PAGE>
FUND MANAGER'S LETTER
JUNE 30, 1997
Dear Shareholder:
This report relates to the operation of United International Growth Fund for the
fiscal year ended June 30, 1997. The following discussion, graphs and tables
provide you with information regarding the Fund's performance during that
period.
The past fiscal year was characterized by low global inflation and varying rates
of economic growth in different regions of the world. Economic growth
accelerated in Great Britain, but remained slow in Continental Europe as the
trend of corporate and financial restructuring continued. Japan's economy was
boosted by a significant acceleration in exports, while its domestic economy
remained weak due to unresolved structural problems and a tighter fiscal policy.
Data suggests that Latin American economies are now in recovery. Asian
economies slowed notably in late 1996, but remained among the fastest growing in
the world. International investments were impacted during the fiscal year by
the growing strength of the U.S. Dollar relative to most foreign currencies.
During the past fiscal year, we continued to focus on stocks that presented
superior prospects for growth while remaining flexible to the changing
international investment environment. We concentrated our European investments
in quality companies that continued to restructure, as well as in competitive
exporters which benefited from the rising U.S. Dollar. We increased our
exposure to Latin American companies, with particular focus on Brazilian
companies involved in market reforms. In the Pacific Basin, we concentrated on
Hong Kong companies enjoying strong demand in China. We continued to carefully
select our investments in Japan as they address difficult structural problems.
At times during the year, we hedged our currency exposure to protect our foreign
assets from a rising U.S. Dollar.
The strategies and techniques we applied during the fiscal year resulted in the
Fund significantly outperforming 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).
Global inflation should remain subdued during the next fiscal year. We expect
European economies to recover slightly in the second half of this year, with
demand driven by exports. The move toward European unity will continue to
dominate public budgets and private consumption. We anticipate continued
improvement in Latin America, boosted by progress on privatization and
deregulation. The economic outlook for Japan remains clouded by fiscal
tightening and unresolved structural problems. We expect Hong Kong's unity with
China to create a major global economy. We will exercise caution in our Asian
investments due to the regional export slowdown and the risks accompanying
further potential increases in U.S. interest rates. However, Europe and Latin
America should be more insulated from U.S. interest rate increases. We will
continue to take advantage of unique opportunities presented by global
deregulation and privatization. As always, our primary focus will remain on
quality growth stocks.
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. Class A Shares,
The Morgan Stanley E.A.FE. Indes (with net dividends),
and The Lipper International Fund Universe Average
Lipper
United Morgan International
InternationalStanley Fund
Growth E.A.FE. Universe
Fund Index Average
------------------ ----------
06/30/87 Purchase$9,425 $10,000 $10,000
06/30/88 9,269 10,406 9,799
06/30/89 9,272 11,398 10,852
06/30/90 10,704 11,769 13,149
06/30/91 9,580 10,412 11,832
06/30/92 11,649 10,344 12,993
06/30/93 11,953 12,442 14,025
06/30/94 15,936 14,557 17,076
06/30/95 17,207 14,798 17,278
06/30/96 19,221 16,764 19,962
06/30/97 23,648 18,915 23,200
===== United International Growth Fund* -- $23,648
+++++ Morgan Stanley E.A.FE. Index -- $18,915
- ---- Lipper International Fund Universe Average -- $23,200
*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 Annuel Total Return +
Class A++ Class Y
-----------------------------
Year Ended
6/30/97 15.96% 23.45%
5 Years Ended
6/30/97 13.86% N/A
10 Years Ended
6/30/97 8.99% N/A
Life of
Class Y +++ N/A 16.17%
+ 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 6/30/97.
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
more than 75% in securities of 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, 1997
----------------------------------------
DIVIDENDS PAID $0.09
=====
CAPITAL GAINS DISTRIBUTION $0.26
=====
NET ASSET VALUE ON
6/30/97 $10.61 adjusted to:$10.87(A)
6/30/96 8.95
-----
CHANGE PER SHARE $1.92
=====
(A)This number includes the capital gains distribution of $0.26 paid in December
1996 added to the actual net asset value on June 30, 1997.
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 6-30-97 15.96% 23.03%
5-year period ended 6-30-97 13.86% 15.21%
10-year period ended 6-30-97 8.99% 9.63%
*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, 1997, United International Growth Fund, Inc. had net assets totaling
$985,154,539 invested in a diversified portfolio of:
87.00% Common Stocks and Rights
6.22% Cash and Cash Equivalents and open Forward
Currency Contracts
6.78% Convertible Preferred Stocks
As a shareholder of United International Growth Fund, Inc., for every $100 you
had invested on June 30, 1997, your Fund owned $6.22 in cash and cash
equivalents and open Foreign Currency Contracts; the remainder was invested by
country and by industry, respectively, as follows:
$53.43 Europe
20.60 Pacific Basin
11.17 Scandinavia
6.22 Cash and Cash Equivalents and Open Foreign Currency
Contracts
4.40 South America
3.19 Mexico
0.99 United States
$33.18 Manufacturing
17.33 Finance, Insurance and Real Estate
Contracts
15.63 Transportation, Communication, Electric,
Gas and Sanitary Services
11.86 Miscellaneous Investing Institutions
10.57 Services
6.22 Cash and Cash Equivalents and Open Foreign Currency
1.80 Contract Construction
1.80 Wholesale and Retail Trade
1.61 Agriculture, Forestry and Fisheries
The Manufacturing segment shown above is comprised of the following industries:
$9.91 Electronic and Other Electric Equipment
9.89 Chemicals and Allied Products
3.04 Industrial Machinery and Equipment
2.81 Instruments and Related Products
2.12 Miscellaneous Manufacturing Industries
1.49 Primary Metal Industries
1.47 Transportation Equipment
0.99 Furniture and Fixtures
0.79 Printing and Publishing
0.45 Fabricated Metal Products
0.22 Stone, Clay and Glass Products
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1997
Shares Value
COMMON STOCKS AND RIGHTS
Argentina - 0.22%
Corcemar S.A., Series B1* .............. 338,522 $ 2,149,615
Australia - 2.32%
News Corporation Limited ............... 1,200,000 5,756,909
Publishing & Broadcasting PBL .......... 1,000,000 5,764,464
Westpac Banking Corporation Limited .... 1,887,894 11,367,640
Total ................................. 22,889,013
Brazil - 0.64%
Telecomunicacoes do Rio de Janeiro
S.A., Rights .......................... 3,023,262 27,970
Telecomunicacoes de Sao Paulo
S.A., Rights .......................... 1,089,444 14,111
Uniao de Bancos Brasileiros S.A.* ...... 170,000 6,311,250
Total ................................. 6,353,331
Denmark - 0.51%
Thorkild Kristensen .................... 66,450 5,004,820
Finland - 2.65%
Nokia Corporation, Series K ............ 350,000 26,121,418
France - 6.23%
Accor S.A. ............................. 60,000 8,984,634
Cap Gemini Sogeti S.A. ................. 140,000 7,385,097
Compagnie Generale de Eaux ............. 140,000 17,938,639
Compagnie Generale de Geophysique, ADR* 340,000 6,545,000
Group Axime* ........................... 45,000 5,321,864
Societe Industrielle de Transports
Automobiles S.A. ...................... 42,100 8,037,878
Usinor Sacilor ......................... 400,000 7,214,933
Total ................................. 61,428,045
Germany - 7.05%
Deutsche Lufthansa AG .................. 570,000 10,932,626
GILDEMEISTER Aktiengesellschaft* ....... 30,000 1,763,188
Hoechst AG ............................. 480,000 20,361,468
K&M Mobel AG* .......................... 175,000 2,057,053
Siemens AG ............................. 265,000 15,734,375
VBH Holding AG ......................... 205,000 4,390,338
VEBA AG ................................ 253,900 14,267,317
Total ................................. 69,506,365
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1997
Shares Value
COMMON STOCKS AND RIGHTS (Continued)
Hong Kong - 4.92%
Cheung Kong Infrastructure
Holdings Limited ...................... 680,000 $ 6,715,031
Dongfang Electrical Machinery
Co., Ltd. ............................. 9,106,000 2,938,633
Founder Hong Kong Limited .............. 4,800,000 3,252,956
Guangdong Kelon Electrical Holdings
Company Limited ....................... 491,000 469,019
Guangzhou Investment Company Ltd. ......23,000,000 12,692,337
HSBC Holdings plc ...................... 285,000 8,571,926
Hutchison Whampoa Ltd. ................. 1,000,000 8,681,004
JCG Holdings Ltd. ...................... 4,000,000 3,252,956
New World Infrastructure Ltd.* ......... 670,000 1,902,721
Total ................................. 48,476,583
Indonesia - 0.58%
PT Bimantara Citra, F .................. 1,500,000 2,623,457
Pt Steady Safe Transportation Service, F 2,597,034 3,045,904
Total ................................. 5,669,361
Italy - 1.17%
Istituto Bancario San Paolo di
torino S.p.A. ......................... 392,286 2,858,652
STET - Societa Financiaria
Telefonica p.a.* ...................... 2,500,000 8,675,195
Total ................................. 11,533,847
Japan - 12.02%
Alps Electric Co., Ltd. ................ 50,000 698,019
Banyu Pharmaceutical Company, Ltd. ..... 294,000 5,156,095
Eisai Co., Ltd. ........................ 400,000 7,573,510
Fujitsu Ltd. ........................... 1,021,000 14,164,471
Murata Manufacturing Co. Ltd. .......... 145,000 5,769,130
NEC Corporation ........................ 1,200,000 16,752,465
Nintendo Corp., Ltd. ................... 250,000 20,940,581
Promise Co., Ltd. ...................... 80,000 4,579,007
Rohm Company ........................... 102,000 10,501,701
Sankyo Co., Ltd. ....................... 446,000 14,982,113
Sony Corporation ....................... 198,500 17,302,286
Total ................................. 118,419,378
Malaysia - 0.46%
Multi-Purpose Hldgs Bhd ................ 3,200,000 4,488,470
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1997
Shares Value
COMMON STOCKS AND RIGHTS (Continued)
Mexico - 3.19%
Empresas ICA Sociedad Controladora,
S.A. de C.V., ADS ..................... 477,000 $ 7,661,574
Gruma, S.A., Class B* .................. 936,938 4,364,435
Grupo Elektra, S.A. de C.V., CPO ....... 300,000 3,282,135
Grupo Financiero Bancomer, S.A. de
C.V., B, CPO Shares* ..................15,279,600 7,367,603
Grupo Financiero Inbursa, S.A. de
C.V., Class B ......................... 531,168 2,260,289
Grupo Televisa, S.A., GDR* ............. 213,000 6,469,875
Total ................................. 31,405,911
Netherlands - 9.47%
ASM Lithography Holdings NV* ........... 300,000 17,521,800
Fugro N.V. ............................. 38,500 990,398
Getronics N.V. ......................... 360,000 11,626,509
Hunter Douglas N.V. .................... 90,000 7,656,258
Internatio-Muller N.V. ................. 205,000 6,464,011
Koninklijke Boskalis Westminster N.V. .. 515,000 10,100,097
Koninklijke Pakhoed NV ................. 257,576 9,079,649
Philips Electronics N.V., N.Y. Shares .. 300,000 21,562,500
Randstad Holding nv .................... 28,500 3,005,196
Stork N.V. ............................. 129,700 5,285,518
Total ................................. 93,291,936
Norway - 0.79%
Schibsted AS ........................... 392,000 7,762,270
Philippines - 0.30%
Belle Corporation* .....................10,000,000 2,918,878
Portugal - 1.05%
Electricidade De PT, ADR* .............. 63,130 2,272,680
Portugal Telecom, S.A.,
Ordinary Shares ....................... 200,000 8,067,036
Total ................................. 10,339,716
Spain - 2.86%
Acerinox, S.A. ......................... 40,000 7,495,588
Catalana Occidenta, sociedad Anonimade
Seguros y Reaseguros .................. 19,200 956,482
Corporation Financiero Alba, S.A. ...... 120,000 15,221,936
Union Electrica Fenosa, S.A. ........... 500,000 4,547,306
Total ................................. 28,221,312
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1997
Shares Value
COMMON STOCKS AND RIGHTS (Continued)
Sweden - 7.22%
Biacore International AB, ADR* ......... 100,000 $ 1,181,200
Frontec AB, Class B* ................... 275,000 2,315,175
Kinnevik AB, B Shares .................. 300,000 8,373,485
NCC AB, Series B ....................... 358,000 4,196,327
Nobel Biocare AS ....................... 200,000 2,823,542
Scania Aktiebolag, Class B ............. 300,000 9,170,034
Skandia Enskilda Banken, Class A ....... 2,275,000 24,603,992
Skandia Group Insurance Company Ltd. ... 500,000 18,456,637
Total ................................. 71,120,392
Switzerland - 11.87%
Baloise Holdings* ...................... 3,750 8,934,684
Clariant AG ............................ 25,000 16,174,860
Credit Suisse Group, Registered Shares . 260,000 33,376,694
Novartis AG ............................ 22,001 35,157,014
SMH Swiss Corporation .................. 20,700 11,819,663
Union Bank of Switzerland .............. 10,000 11,433,657
Total ................................. 116,896,572
United Kingdom - 10.49%
Avis Europe plc* ....................... 400,000 909,254
COLT Telecom Group plc, ADR* ........... 65,000 1,332,500
Corporate Services Group plc ........... 2,500,000 7,847,731
Dr Solomon's Group PLC, ADR* ........... 60,000 1,533,720
Freepages Group plc* ................... 1,000,000 611,332
Hays plc ............................... 1,500,000 14,263,304
Imperial Chemical Industries PLC ....... 400,000 5,565,436
Johnson Matthey plc .................... 960,000 9,256,410
Misys plc .............................. 627,510 14,238,031
National Westminster Bank .............. 500,000 6,723,653
Rolls-Royce plc ........................ 1,400,000 5,350,613
Siebe plc .............................. 700,000 11,855,279
Storehouse PLC ......................... 2,000,000 6,278,185
Vodafone Group Plc ..................... 3,600,000 17,535,621
Total ................................. 103,301,069
United States - 0.99%
Manpower Inc. .......................... 220,000 9,790,000
TOTAL COMMON STOCKS AND RIGHTS - 87.00% $857,088,302
(Cost: $702,274,426)
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1997
Shares Value
CONVERTIBLE PREFERRED STOCKS
Brazil - 3.54%
Telebras S.A., ADR ..................... 150,000 $ 22,762,500
Telecomunicacoes de Sao Paulo S.A. .....25,000,000 8,141,364
Telecomunicacoes do Rio de Janeiro S.A.* 25,500,000 3,916,181
Total ................................. 34,820,045
Germany - 3.24%
Marschollek, Lautenschlager und
Partner AG ............................ 56,190 13,370,900
SAP Aktiengesellschaft ................. 90,000 18,577,982
Total ................................. 31,948,882
TOTAL CONVERTIBLE PREFERRED STOCKS - 6.78% $ 66,768,927
(Cost: $42,233,627)
Face
Amount in
Thousands
UNREALIZED GAIN ON OPEN FORWARD CURRENCY CONTRACTS _ 0.05%
Deutsche Marks, 6-4-98 (A) ............. DM31,682 203,849
French Francs, 6-4-98 (A) .............. F241,502 315,988
Total ................................. $ 519,837
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Auto Repair, Services and Parking _ 0.62%
Hertz Corp (The),
5.54%, 7-7-97 ......................... $ 6,100 6,094,368
Chemicals and Allied Products _ 0.52%
PPG Industries Inc.,
5.5%, 7-29-97 ......................... 5,105 5,083,162
Depository Institutions _ 0.46%
U.S. Bancorp,
5.47%, Master Note .................... 4,585 4,585,000
Electric, Gas and Sanitary Services _ 2.18%
Pacific Gas and Electric Company:
5.55%, 7-8-97 ......................... 6,775 6,767,689
5.56%, 7-11-97 ........................ 2,450 2,446,216
Pacificorp,
5.55%, 7-8-97 ......................... 6,000 5,993,525
Tampa Electric Co.,
5.52%, 7-3-97 ......................... 5,275 5,273,382
Western Resources, Inc.,
5.8%, 7-7-97 .......................... 1,000 999,033
Total ................................. 21,479,845
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Food and Kindred Products _ 1.46%
General Mills, Inc.,
5.495%, Master Note ................... $9,062 $ 9,062,000
Ralston Purina Co.:
5.8%, 7-14-97 ......................... 1,865 1,861,094
5.78%, 7-29-97 ........................ 3,435 3,419,558
Total ................................. 14,342,652
Instruments and Related Products _ 0.30%
Hughes Electronics Corp.,
5.78%, 7-11-97 ........................ 3,000 2,995,183
Nondepository Institutions _ 0.30%
Island Finance Puerto Rico Inc.,
5.57%, 7-7-97 ......................... 2,090 2,088,060
Textron Financial Corp.,
5.75%, 7-2-97 ......................... 900 899,856
Total ................................. 2,987,916
Oil and Gas Extraction _ 0.07%
Enron Corp.,
5.77%, 7-7-97 ......................... 655 654,370
Textile Mill Products _ 1.25%
Sara Lee Corporation,
5.5%, Master Note ..................... 12,354 12,354,000
Tobacco Products _ 0.72%
B.A.T. Capital Corp.,
5.56%, 7-22-97 ........................ 7,100 7,076,972
Transportation Equipment _ 0.22%
Dana Credit Corporation,
5.77%, 7-24-97 ........................ 2,170 2,162,001
Total Commercial Paper _ 8.10% 79,815,469
Municipal Obligation
California _ 1.53%
Oakland-Alameda County Coliseum Lease Revenue
Bonds (Oakland Coliseum Project), 1995 Series
B-1 (Canadian Imperial Bank of Commerce),
5.57%, 7-2-97 ......................... 15,000 15,000,000
TOTAL SHORT-TERM SECURITIES - 9.63% $ 94,815,469
(Cost: $94,815,469)
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1997
Value
TOTAL INVESTMENT SECURITIES - 103.46% $1,019,192,535
(Cost: $839,323,522)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (3.46%) (34,037,996)
NET ASSETS - 100.00% $ 985,154,539
Notes to Schedule of Investments
*No dividends were paid during the preceding 12 months.
(A) Principal amounts are denominated in the indicated foreign currency where
applicable (DM _ Deutsche Mark, F _ French Franc).
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, 1997
Assets
Investment securities -- at value (Notes 1 and 3) $1,019,192,535
Receivables:
Investment securities sold ..................... 61,220,925
Dividends and interest ......................... 4,115,289
Fund shares sold ............................... 1,410,742
Prepaid insurance premium ........................ 16,726
--------------
Total assets ................................. 1,085,956,217
--------------
Liabilities
Payable for investment securities purchased ..... 86,540,997
Payable to Fund shareholders ............ ........ 13,052,384
Accrued service fee (Note 2) .................... 265,368
Due to custodian ................................ 252,959
Accrued transfer agency and dividend
disbursing (Note 2) ............................ 246,061
Accrued management fee (Note 2) ................. 18,480
Accrued accounting services fee (Note 2) ........ 7,083
Other ........................................... 418,346
--------------
Total liabilities ............................ 100,801,678
--------------
Total net assets ............................$ 985,154,539
==============
Net Assets
$1.00 par value capital stock
Capital stock ..................................$ 92,810,944
Additional paid-in capital ..................... 596,915,950
Accumulated undistributed income:
Accumulated undistributed net investment income 1,655,262
Accumulated net realized gain on
investment transactions ...................... 113,966,307
Net unrealized appreciation in value
of investments ............................... 179,349,176
Net unrealized appreciation in value of foreign
currency exchange ............................ 456,900
--------------
Net assets applicable to outstanding
units of capital ............................$ 985,154,539
==============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $10.61
Class Y .......................................... $10.62
Capital shares outstanding
Class A .......................................... 92,172,413
Class Y .......................................... 638,531
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, 1997
Investment Income
Income (Note 1B):
Dividends (net of foreign withholding
taxes of $1,353,108) .......................... $ 12,927,692
Interest and amortization ....................... 4,533,538
------------
Total income .................................. 17,461,230
------------
Expenses (Note 2):
Investment management fee ....................... 5,965,040
Transfer agency and dividend
disbursing - Class A .......................... 2,142,369
Service fee - Class A ........................... 1,408,281
Custodian fees .................................. 943,631
Accounting services fee ......................... 85,000
Audit fees ...................................... 23,508
Legal fees ...................................... 14,784
Shareholder servicing - Class Y ................. 9,072
Other ........................................... 238,342
------------
Total expenses ................................ 10,830,027
------------
Net investment income ....................... 6,631,203
------------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 126,992,713
Realized net gain on forward currency contracts .. 3,572,654
Realized net loss on foreign currency
transactions .................................... (240,500)
------------
Realized net gain on investments ................ 130,324,867
------------
Unrealized appreciation in value of securities
during the period................................ 52,922,085
Unrealized depreciation on open forward currency
contracts during the period ..................... (2,151,903)
Unrealized depreciation in value of foreign
currency exchange at end of period .............. (71,216)
------------
Unrealized appreciation on investments .......... 50,698,966
------------
Net gain on investments ....................... 181,023,833
------------
Net increase in net assets resulting from
operations ................................. $187,655,036
============
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended
June 30,
-------------------------
1997 1996
Increase in Net Assets ------------ ------------
Operations:
Net investment income ...............$ 6,631,203 $ 6,477,989
Realized net gain on investments .... 130,324,867 35,468,930
Unrealized appreciation ............. 50,698,966 39,040,862
------------ ------------
Net increase in net assets
resulting from operations ........ 187,655,036 80,987,781
------------ ------------
Distributions to shareholders from (Note 1F):*
Net investment income
Class A ........................... (8,099,854) (5,719,358)
Class Y ........................... (69,703) (22,311)
Realized gains on securities transactions
Class A ........................... (22,183,965) (46,756,060)
Class Y ........................... (151,820) (4,319)
------------- ------------
(30,505,342) (52,502,048)
------------ ------------
Capital share transactions:
Proceeds from sale of shares:
Class A (78,212,381 and 47,085,595
shares, respectively) ............ 742,537,028 410,226,754
Class Y (119,762 and 591,404
shares, respectively) ............ 1,121,845 5,052,415
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (3,257,308 and 6,447,921
shares, respectively)............. 29,838,300 51,649,557
Class Y (24,129 and 3,058
shares, respectively) ............ 221,523 26,631
Payments for shares redeemed:
Class A (75,483,507 and 45,588,818
shares, respectively) ............(721,363,696) (398,231,010)
Class Y (56,814 and 43,008
shares, respectively) ............ (537,972) (371,574)
------------ ------------
Net increase in net assets resulting
from capital share transactions 51,817,028 68,352,773
------------ ------------
Total increase ................. 208,966,722 96,838,506
Net Assets
Beginning of period .................. 776,187,817 679,349,311
------------ ------------
End of period ........................ $985,154,539 $776,187,817
============ ============
Undistributed net investment
income ............................ $1,655,262 $3,434,116
========== ==========
*See "Financial Highlights" on pages 16 - 17.
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,
----------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $8.95 $8.68 $8.98 $7.16 $7.10
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .07 .08 .07 .04 .07
Net realized and
unrealized gain on
investments ..... 1.94 .86 .60 2.32 .11
----- ----- ----- ----- -----
Total from investment
operations ...... 2.01 .94 .67 2.36 .18
----- ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.09) (0.07) (0.04) (0.04) (0.07)
From capital gains (0.26) (0.60) (0.93) (0.50) (0.05)
----- ----- ----- ----- -----
Total distributions (0.35) (0.67) (0.97) (0.54) (0.12)
----- ----- ----- ----- -----
Net asset value,
end of period .... $10.61 $8.95 $8.68 $8.98 $7.16
===== ===== ===== ===== =====
Total return* ...... 23.03% 11.70% 7.98% 33.31% 2.62%
Net assets, end of
period (000
omitted) ......... $978,375$771,252$679,349$572,456$336,382
Ratio of expenses
to average net
assets ........... 1.28% 1.25% 1.25% 1.20% 1.18%
Ratio of net
investment income
to average net
assets ........... 0.78% 0.89% 0.86% 0.57% 1.07%
Portfolio turnover
rate ............. 109.71% 58.64% 57.45% 83.76% 94.22%
Average commission
rate paid ........ $0.0219
*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 Each Period:
For the For the
fiscal period
year from 9/27/95*
ended through
6/30/97 6/30/96
-------- --------
Net asset value,
beginning of period $8.95 $9.21
------ ------
Income from investment
operations:
Net investment
income .......... .09 .12
Net realized and
unrealized gain
on investments... 1.95 .30
------ ------
Total from investment
operations ........ 2.04 .42
------ ------
Less distributions:
From net investment
income........... (0.11) (0.08)
From capital gains (0.26) (0.60)
------ ------
Total distributions. (0.37) (0.68)
------ ------
Net asset value,
end of period ..... $10.62 $8.95
====== ======
Total return ....... 23.45% 5.44%
Net assets, end of
period (000
omitted) ......... $6,780 $4,936
Ratio of expenses
to average net
assets ............ 1.04% 0.98%**
Ratio of net
investment income
to average net
assets ............ 1.02% 2.60%**
Portfolio
turnover rate ..... 109.71% 58.64%**
Average commission
rate paid ........ $0.0219
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
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 Subchapter M of the Internal
Revenue Code. In addition, the Fund intends to pay distributions as
required to avoid imposition of excise tax. Accordingly, provision has not
been made for Federal income taxes. 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
dividends 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, 1997, $240,500 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 $16.9 billion of
combined net assets at June 30, 1997) 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,
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 gross sales
commissions for Class A shares (which are not an expense of the Fund) of
$3,772,737, out of which W&R paid sales commissions of $2,157,604 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 $31,327, which are included in other
expenses.
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 short-term securities,
aggregated $862,958,717 while proceeds from maturities and sales aggregated
$849,211,805. Purchases of short-term securities aggregated $1,475,033,784
while proceeds from maturities and sales aggregated $1,423,042,802. No U.S.
Government securities were bought or sold during the period.
For Federal income tax purposes, cost of investments owned at June 30, 1997
was $839,596,383, resulting in net unrealized appreciation of $179,076,315, of
which $198,444,071 related to appreciated securities and $19,367,756 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $128,240,009 during its fiscal year ended June 30, 1997, of which a portion
was paid to shareholders during the period ended June 30, 1997. Remaining
capital gain net income will be distributed to Fund shareholders.
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.
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>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United International Growth Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United International Growth
Fund, Inc. (the "Fund") as of June 30, 1997, the related statements of
operations and changes in net assets for the year then ended, and the
financial highlights for the year 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 audit.
The financial statements and the financial highlights of the Fund for
each of the periods in the four-year period ended June 30, 1996 were
audited by other auditors whose report, dated August 5, 1996, expressed
an unqualified opinion on those statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing
standards. 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 at June 30, 1997 by correspondence with
the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
United International Growth Fund, Inc. as of June 30, 1997, the results
of its operations, the changes in its net assets, and the financial
highlights for the year then ended in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
August 1, 1997
<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
12-13-96 $0.305 $0.1100 $0.1950 $0.0000 $0.1100 $0.1950
6-13-97 0.040 0.0400 0.0000 0.0001 0.0399 0.0000
------- ------- ------- ------ ------- -------
Totals $0.345 $0.1500 $0.1950 $0.0001 $0.1499 $0.1950
======= ======= ======= ======= ======= =======
Class Y
12-13-96 $0.320 $0.1250 $0.1950 $0.0000 $0.1250 $0.1950
6-13-97 0.049 0.0490 0.0000 0.0002 0.0488 0.0000
------- ------- ------- ------ ------- -------
Totals $0.369 $0.1740 $0.1950 $0.0002 $0.1738 $0.1950
======= ======= ======= ======= ======= =======
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>
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
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., 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
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.
<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
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
NUR1002A(6-97)
printed on recycled paper
