UNITED
INTERNATIONAL
GROWTH FUND,
INC.
ANNUAL
REPORT
---------------------------------------
For the fiscal year ended June 30, 1998<PAGE>
MANAGER'S LETTER
JUNE 30, 1998
Dear Shareholder:
This report relates to the operation of United International
Growth Fund for the fiscal year ended June 30, 1998. The
following discussion, graphs and tables provide you with
information regarding the Fund's performance during that period.
The past fiscal year witnessed a broad economic recovery in
Europe, while inflation remained benign. Companies continued to
implement restructuring programs and expand operations across
Europe to benefit from the move to a single currency. In Asia, a
decade of easy credit and over-investment came to a halt as Japan
struggled to support its failing economy and much of Asia fell
into financial crisis. Emerging Asian currencies and stock
markets plunged while interest rates soared. These economies are
now in severe recession and face huge structural problems.
Europe has remained our primary focus for several years now.
The Fund has continued to achieve very favorable returns on our
European investments, especially restructuring opportunities and
interest-sensitive sectors. As the Asian financial crisis began
to unfold last year, we reduced the Fund's holdings in Asia, in
emerging markets in general and in industries we believed were
vulnerable due to the crisis. We also temporarily increased our
cash reserves during the height of the crisis late in 1997.
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 Capital International E.A.FE. Index
(Europe, Australia, Far East Index) and the universe of funds
with similar investment objectives (the Lipper International Fund
Universe Average). Heavy exposure to European investments and an
underweight position in Japan contributed to the Fund's stellar
performance relative to the indexes.
We maintain our positive outlook on Europe as the single
European currency remains an important global theme. High debt
and overvalued assets remain obstacles to recovery in Asia and in
many emerging markets. Japan's domestic economy has been
extremely weak this entire decade. This leaves emerging Asian
countries to rebuild their devastated economies with little or no
help from Japan. A return of investor confidence in this region
largely depends on the willingness of Japan to move forward on
difficult and unpopular reforms in its crumbling financial
sector. The Fund's investments will remain heavily concentrated
in Europe, with a focus on companies that have positioned
themselves to benefit from the move toward an integrated Europe.
We will continue to limit the Fund's investments in Latin
America, as we maintain a cautious approach toward emerging
markets. The current financial crisis in Asia will eventually
force important reforms, leading to an economic recovery in this
important region of the world. However, critical stumbling
blocks remain to be resolved first. We will closely monitor
events in Asia and the entire emerging world, requiring solid
evidence of a sustained recovery in investor confidence before we
commit investments to this region.
Thank you very much for your continued support and
confidence in our organization.
Respectfully,
Thomas 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 Capital International E.A.FE. Index (with net
dividends),
and The Lipper International Fund Universe Average
Morgan
Stanley
United Capital Lipper
Inter- Inter- International
nationalnational Fund
Growth E.A.FE. Universe
Fund Index Average
------------------ ----------
06/30/88 Purchase$9,425 $10,000 $10,000
06/30/89 9,428 10,953 11,074
06/30/90 10,884 11,310 13,418
06/30/91 9,741 10,005 12,074
06/30/92 11,844 9,940 13,259
06/30/93 12,154 11,956 14,312
06/30/94 16,204 13,989 17,425
06/30/95 17,497 14,220 17,632
06/30/96 19,544 16,109 20,371
06/30/97 24,046 18,177 23,675
06/30/98 32,339 19,285 25,546
===== United International Growth Fund, Class A* -- $32,339
+++++ Morgan Stanley Capital International E.A.FE. Index --
$19,285
---- Lipper International Fund Universe Average -- $25,546
*The value of the investment in the Fund is impacted by the sales
load at the time of the investment and by the ongoing expenses
of the Fund.
Average Annual Total Return +
Class A++ Class Y
-----------------------------
Year Ended
6/30/98 26.75% 34.71%
5 Years Ended
6/30/98 20.19% N/A
10 Years Ended
6/30/98 12.45% N/A
Life of
Class Y +++ N/A 22.58%
+ 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 6/30/98.
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.
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. For
more information about the
Fund's cash reserves
flexibility, please
consult the Prospectus.
FOUNDED: 1970
SCHEDULED DIVIDEND FREQUENCY: SEMIANNUALLY (June and
December)
<PAGE>
PERFORMANCE SUMMARY - Class A Shares
PER SHARE DATA
For the Fiscal Year Ended June 30, 1998
---------------------------------------
DIVIDENDS PAID $0.06
=====
CAPITAL GAINS DISTRIBUTION $1.78
=====
NET ASSET VALUE ON
6/30/98 $11.85 adjusted to:$13.63(A)
6/30/97 10.61
-----
CHANGE PER SHARE $ 3.02
=====
(A)This number includes the capital gains distribution of $1.78
paid in December 1997 added to the actual net asset value on
June 30, 1998.
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 6-30-98 26.75% 34.49%
5-year period ended 6-30-98 20.19% 21.62%
10-year period ended 6-30-98 12.45% 13.12%
*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, 1998, United International Growth Fund, Inc. had net
assets totaling $1,340,303,108 invested in a diversified
portfolio of:
79.84% Common Stocks and Rights
10.72% Cash and Cash Equivalents and Open Forward
Currency Contracts
9.44% Convertible Preferred Stocks
As a shareholder of United International Growth Fund, Inc., for
every $100 you had invested on June 30, 1998, your Fund was
invested by geographic region and by industry, respectively, as
follows:
$76.75 Europe
10.72 Cash and Cash Equivalents and Open Foreign Currency
Contracts
5.57 Scandinavia
2.49 South America
2.23 Pacific Basin
1.66 Mexico
0.58 United States
$27.95 Finance, Insurance and Real Estate
Contracts
24.67 Manufacturing
11.56 Transportation, Communication, Electric,
Gas and Sanitary Services
11.18 Miscellaneous Investing Institutions
10.72 Cash and Cash Equivalents and Open Foreign Currency
7.72 Services
2.78 Contract Construction
2.67 Wholesale and Retail Trade
0.75 Mining
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1998
Shares Value
COMMON STOCKS AND RIGHTS
Brazil - 0.00%
Telecomunicacoes de Sao Paulo, S.A,
Rights* ............................... 1,879,910 $ 30,072
Denmark - 0.58%
NeuroSearch A/S* ........................ 19,200 1,487,245
Thorkild Kristensen ..................... 66,450 6,240,572
Total ................................. 7,727,817
Finland - 0.25%
Merita plc, Class A ..................... 500,000 3,302,920
France - 14.52%
AXA-UAP ................................. 220,000 24,748,954
Accor S.A. .............................. 60,000 16,794,878
Air Liquide ............................. 33,750 5,583,404
Alcatel Alsthom Compagnie Generale
d'Electricite ......................... 150,000 30,547,422
Alstom* ................................. 85,800 2,824,656
Banque Nationale de Paris ............... 208,200 17,015,038
Compagnie Generale de Geophysique, ADR* . 340,000 9,987,500
Paribas ................................. 100,000 10,703,591
SITA* ................................... 10,525 2,705,817
Societe Generale ........................ 145,000 30,152,861
Societe Industrielle de Transports
Automobiles S.A. ...................... 42,100 10,656,112
Suez Lyonnaise des Eaux ................. 200,000 32,921,402
Total ................................. 194,641,635
Germany - 7.08%
K&M Mobel AG ............................ 175,000 1,523,595
MAN AG .................................. 45,000 17,567,792
Mannesmann AG ........................... 300,000 30,860,090
METRO AG ................................ 250,000 15,111,185
VBH Holding AG .......................... 205,000 4,376,698
Volkswagen AG ........................... 22,890 22,124,588
Winkler + Dunnebier AG* ................. 75,000 3,368,824
Total ................................. 94,932,772
Italy - 5.55%
Alleanza Assicurazioni .................. 895,500 12,172,187
Banca Popolare Di Brescia ............... 562,000 10,628,243
Credito Italiano S.p.A. ................. 3,500,000 18,330,331
Instituto Nazionale delle Assicurazioni . 3,176,000 9,027,298
Telecom Italia Mobile S.p.A., Risp ...... 5,000,000 24,216,244
Total ................................. 74,374,303
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1998
Shares Value
COMMON STOCKS AND RIGHTS(Continued)
Japan - 2.23%
Nintendo Corp., Ltd. .................... 136,500$ 12,685,507
Sony Corporation ........................ 200,000 17,285,022
Total ................................. 29,970,529
Mexico - 1.66%
Empresas ICA Sociedad Controladora,
S.A. de C.V., ADS ..................... 477,000 4,501,449
Grupo Elektra, S.A. de C.V., CPO ........ 3,000,000 2,985,972
Grupo Financiero Banamex Accival,
S.A. de C.V., B, CPO shares* .......... 3,000,000 5,845,023
Grupo Financiero Inbursa, S.A. de
C.V., Class B ......................... 531,168 1,360,150
Grupo Televisa, S.A., GDR* .............. 200,000 7,525,000
Total ................................. 22,217,594
Netherlands - 8.37%
Akzo Nobel N.V. ......................... 62,000 13,793,368
Benckiser N.V., Class B* ................ 400,000 24,618,715
Fugro N.V. .............................. 40,788 1,625,420
Getronics N.V. .......................... 190,300 9,877,325
ING Groep N.V. .......................... 453,465 29,716,392
Internatio-Muller N.V. .................. 209,555 7,020,907
Philips Electronics N.V., N.Y. Shares ... 300,000 25,481,100
Total ................................. 112,133,227
Norway - 0.68%
Merkantildata A/S ....................... 200,000 2,531,646
Schibsted AS ............................ 392,000 6,598,982
Total ................................. 9,130,628
Portugal - 0.78%
Electricidade de Portugal, S.A., ADR .... 63,130 2,907,894
Portugal Telecom, S.A., ADS ............. 41,850 2,215,413
Portugal Telecom, S.A.,
Ordinary Shares ....................... 100,000 5,304,652
Total ................................. 10,427,959
Spain - 3.97%
Bankinter, S.A. ......................... 130,000 8,450,934
Tele Pizza, S.A.* ....................... 1,300,000 13,801,777
Telefonica de Espana, S.A. .............. 667,445 30,917,190
Total ................................. 53,169,901
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1998
Shares Value
COMMON STOCKS AND RIGHTS(Continued)
Sweden - 4.06%
AB Volvo, B Shares ...................... 323,500 9,635,221
Biacore International AB, ADR* .......... 100,000$ 906,200
Nordbanken Holding AB ................... 1,000,000 7,336,343
Skandia Group Insurance Company Ltd. .... 2,560,500 36,606,095
Total ................................. 54,483,859
Switzerland - 12.95%
Credit Suisse Group, Registered Shares .. 300,000 66,862,577
Julius Baer Holding AG .................. 7,000 21,934,227
Novartis, AG ............................ 22,001 36,670,755
UBS AG, Registered Shares* .............. 129,274 48,148,013
Total ................................. 173,615,572
United Kingdom - 16.58%
Avis Europe plc ......................... 400,000 1,812,159
Capita Group plc (The) .................. 375,000 3,238,696
Colt Telecom Group PLC* ................. 200,000 8,114,742
Corporate Services Group plc ............ 2,500,000 9,976,457
Freepages Group plc* .................... 1,000,000 630,312
General Electric Company plc ............ 4,800,000 41,395,203
JBA Holdings plc ........................ 130,000 1,345,778
Misys plc ............................... 704,696 40,064,283
National Westminster Bank Plc ........... 600,000 10,729,492
Orange plc* ............................. 2,298,600 24,371,125
Rentokil Initial plc .................... 3,010,000 21,661,185
Vodafone Group Plc ...................... 3,625,442 46,036,111
Williams plc ............................ 2,000,000 12,856,690
Total ................................. 222,232,233
United States - 0.58%
ESG Re Limited .......................... 350,000 7,721,700
TOTAL COMMON STOCKS AND RIGHTS - 79.84% $1,070,112,721
(Cost: $732,480,822)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1998
Shares Value
PREFERRED STOCKS
Brazil - 2.49%
Telebras S.A., ADR....................... 220,000$ 23,980,000
Telecomunicacoes de Sao Paulo S.A. ......40,000,000 9,407,696
Total ................................. 33,387,696
Germany - 6.95%
Fresenius Medical Care AG ............... 35,000 6,637,831
GEA AG .................................. 22,300 8,718,183
Marschollek, Lautenschlager und
Partner AG ............................ 56,190 27,420,396
Porsche AG .............................. 8,000 23,068,818
Rhoen-Klinikum AG ....................... 71,700 6,918,316
SAP AG .................................. 30,000 20,379,305
Total ................................. 93,142,849
TOTAL PREFERRED STOCKS - 9.44% $ 126,530,545
(Cost: $90,563,018)
Face
Amount in
Thousands
UNREALIZED GAIN ON OPEN FORWARD CURRENCY CONTRACTS - 0.02%
Deutsche Marks, 7-29-98 (A).............. DM42,500$ 278,561
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Communication - 3.72%
Bell Atlantic Financial Services, Inc.,
5.55%, 7-15-98 ........................ $20,000 19,956,833
Dominion Resources Inc.,
5.66%, 7-28-98 ........................ 10,000 9,957,550
GTE Corporation,
5.59%, 7-17-98 ........................ 20,000 19,950,044
Total ................................. 49,864,427
Electric, Gas and Sanitary Services - 2.56%
Commonwealth Edison Co.,
5.8%, 7-24-98 ......................... 8,625 8,593,040
Detroit Edison Co.,
5.7%, 7-20-98 ......................... 7,150 7,128,490
Pacificorp,
5.55%, 7-29-98 ........................ 11,400 11,350,790
Western Resources, Inc.,
5.66%, 7-7-98 ......................... 7,300 7,293,114
Total ................................. 34,365,434
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Fabricated Metal Products - 0.06%
Danaher Corporation,
5.6602%, Master Note .................. $ 744$ 744,000
Food and Kindred Products - 1.37%
General Mills, Inc.,
5.5152%, Master Note .................. 10 10,000
Hercules Inc.,
5.64%, 7-13-98 ........................ 18,430 18,395,352
Total ................................. 18,405,352
General Merchandise Stores - 0.53%
Dillard Investment Co. Inc.,
6.75%, 7-1-98 ......................... 7,100 7,100,000
Instruments and Related Products - 1.45%
Honeywell Inc.,
6.1%, 7-1-98 .......................... 19,468 19,468,000
Insurance Agents, Brokers and Service - 0.72%
Aon Corp.,
5.58%, 7-17-98 ........................ 9,600 9,576,192
Nondepository Institutions - 0.74%
Textron Financial Corp.,
5.72%, 7-28-98 ........................ 10,000 9,957,100
Transportation Equipment - 0.22%
Echlin Inc.,
5.8%, 7-13-98 ......................... 2,875 2,869,442
Total Commercial Paper - 11.37% 152,349,947
Municipal Obligations - 0.60%
California
Oakland-Alameda County Coliseum Lease Revenue
Bonds (Oakland Coliseum Project), 1995 Series
B-1 (Canadian Imperial Bank of Commerce),
5.59%, 7-14-98 ........................ 8,000 8,000,000
TOTAL SHORT-TERM SECURITIES - 11.97% $160,349,947
(Cost: $160,349,947)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
JUNE 30, 1998
Value
TOTAL INVESTMENT SECURITIES - 101.27% $1,357,271,774
(Cost: $983,393,787)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (1.27%) (16,968,666)
NET ASSETS - 100.00% $1,340,303,108
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).
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, 1998
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities -- at value (Notes 1 and 3) $1,357,272
Receivables:
Dividends and interest ........................ 4,284
Fund shares sold .............................. 3,476
Prepaid insurance premium........................ 19
----------
Total assets ................................. 1,365,051
----------
Liabilities
Payable to Fund shareholders .................... 14,652
Payable for investment securities purchased ..... 8,836
Accrued service fee (Note 2) .................... 460
Accrued transfer agency and dividend
disbursing (Note 2) ........................... 214
Accrued management fee (Note 2) ................. 26
Due to custodian ................................ 19
Accrued accounting services fee (Note 2) ........ 8
Other ........................................... 533
----------
Total liabilities ............................ 24,748
----------
Total net assets ........................... $1,340,303
==========
Net Assets
$1.00 par value capital stock
Capital stock ................................. $ 113,147
Additional paid-in capital .................... 754,199
Accumulated undistributed income:
Accumulated undistributed net investment income 1,529
Accumulated net realized gain on
investment transactions ...................... 97,657
Net unrealized appreciation in value
of investments ............................... 373,599
Net unrealized appreciation in value of foreign
currency exchange ............................ 172
----------
Net assets applicable to outstanding
units of capital ........................... $1,340,303
==========
Capital shares outstanding
Class A ........................................... 112,376
Class Y ........................................... 771
Capital shares authorized .......................... 400,000
Net asset value per share (net assets divided
by shares outstanding)
Class A ......................................... . $11.85
Class Y ......................................... . $11.85
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended JUNE 30, 1998
(In Thousands)
Investment Income
Income (Note 1B):
Dividends (net of foreign withholding
taxes of $1,006) ............................... $ 13,692
Interest and amortization ....................... 7,540
--------
Total income ................................... 21,232
--------
Expenses (Note 2):
Investment management fee ....................... 7,747
Transfer agency and dividend
disbursing - Class A ........................... 2,271
Distribution and service fees - Class A ......... 2,288
Custodian fees .................................. 1,015
Accounting services fee ......................... 100
Audit fees ...................................... 19
Legal fees ...................................... 15
Shareholder servicing - Class Y ................. 12
Other ........................................... 263
--------
Total expenses ................................. 13,730
--------
Net investment income ........................ 7,502
--------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on securities ................... 145,358
Realized net gain on forward currency contracts ... 3,919
Realized net loss on foreign currency
transactions .................................... (1,400)
--------
Realized net gain on investments ................ 147,877
--------
Unrealized appreciation in value of securities
during the period ................................ 194,250
Unrealized depreciation on open forward currency
contracts during the period ..................... (241)
Unrealized depreciation in value of foreign
currency exchange at end of period .............. (44)
--------
Unrealized appreciation on investments .......... 193,965
--------
Net gain on investments ........................ 341,842
--------
Net increase in net assets resulting from
operations .................................. $349,344
========
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(Dollars In Thousands)
For the fiscal year ended
June 30,
-------------------------
1998 1997
Increase in Net Assets ------------ ------------
Operations:
Net investment income .............. $ 7,502 $ 6,631
Realized net gain on investments ... 147,877 130,325
Unrealized appreciation ............ 193,965 50,699
---------- --------
Net increase in net assets
resulting from operations ....... 349,344 187,655
---------- --------
Distributions to shareholders from (Note 1F):*
Net investment income
Class A ........................... (6,165) (8,100)
Class Y ........................... (63) (69)
Realized gains on securities transactions
Class A ........................... (164,458) (22,184)
Class Y ........................... (1,128) (152)
----------- --------
(171,814) (30,505)
Capital share transactions: ---------- --------
Proceeds from sale of shares:
Class A (97,362,755 and 78,212,381
shares, respectively) ........... 1,056,297 742,537
Class Y (147,574 and 119,762
shares, respectively) ........... 1,609 1,122
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (18,572,233 and 3,257,308
shares, respectively) ............ 167,919 29,838
Class Y (131,500 and 24,129
shares, respectively) ........... 1,191 222
Payments for shares redeemed:
Class A (95,731,629 and 75,483,507
shares, respectively) ........... (1,047,872) (721,364)
Class Y (145,901 and 56,814
shares, respectively) ........... (1,526) (538)
---------- --------
Net increase in net assets resulting
from capital share transactions 177,618 51,817
---------- --------
Total increase ................. 355,148 208,967
Net Assets
Beginning of period .................. 985,155 776,188
---------- --------
End of period, including undistributed
net investment income of $1,529
and $1,655, respectively ........... $1,340,303 $985,155
========== ========
*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,
------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $10.61 $8.95 $8.68 $8.98 $7.16
------ ------ ----- ----- -----
Income from investment
operations:
Net investment
income ......... .07 .07 .08 .07 .04
Net realized and
unrealized gain on
investments .... 3.01 1.94 .86 .60 2.32
------ ------ ----- ----- -----
Total from investment
operations ...... 3.08 2.01 .94 .67 2.36
------ ------ ----- ----- -----
Less distributions:
From net investment
income ......... (0.06) (0.09) (0.07) (0.04) (0.04)
From capital gains (1.78) (0.26) (0.60) (0.93) (0.50)
------ ------ ----- ----- -----
Total distributions (1.84) (0.35) (0.67) (0.97) (0.54)
------ ------ ----- ----- -----
Net asset value,
end of period .... $11.85 $10.61 $8.95 $8.68 $8.98
====== ====== ===== ===== =====
Total return* ..... 34.49% 23.03% 11.70% 7.98% 33.31%
Net assets, end of
period (in
millions) ........ $ 1,331 $978 $771 $679 $572
Ratio of expenses
to average net
assets ........... 1.23% 1.28% 1.25% 1.25% 1.20%
Ratio of net
investment income
to average net
assets ........... 0.67% 0.78% 0.89% 0.86% 0.57%
Portfolio turnover
rate ............. 114.34% 109.71% 58.64% 57.45% 83.76%
Average commission
rate paid ........ $0.0187 $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 year period
ended June 30, from 9/27/95*
----------------------- through
1998 1997 6/30/96
-------- -------- --------
Net asset value,
beginning of period $10.62 $8.95 $9.21
------ ------ ------
Income from investment
operations:
Net investment
income ......... .10 .09 .12
Net realized and
unrealized gain
on investments .. 3.00 1.95 .30
------ ------ ------
Total from investment
operations........ 3.10 2.04 .42
------ ------ ------
Less distributions:
From net investment
income .......... (0.09) (0.11) (0.08)
From capital gains (1.78) (0.26) (0.60)
------ ------ ------
Total distributions (1.87) (0.37) (0.68)
------ ------ ------
Net asset value,
end of period..... $11.85 $10.62 $8.95
====== ====== ======
Total return ...... 34.71% 23.45% 5.44%
Net assets, end of
period (in
millions) ........ $9 $7 $5
Ratio of expenses
to average net
assets............ 0.97% 1.04% 0.98%**
Ratio of net
investment income
to average net
assets............ 0.93% 1.02% 2.60%**
Portfolio
turnover rate..... 114.34% 109.71% 58.64%**
Average commission
rate paid ........ $0.0187 $0.0219
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
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
the Nasdaq Stock Market, which provides information on bid
and asked 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
carryovers. At June 30, 1998, $1,399,721 was reclassified
between accumulated undistributed net investment income and
accumulated undistributed net realized gain on investment
transactions. Net investment income, net realized gains,
and net assets were not affected by this change.
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
$19.9 billion of combined net assets at June 30, 1998) 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 $4,119,854, out of which W&R paid sales
commissions of $2,379,607 and all expenses in connection with the
sale of Fund shares, except for registration fees and related
expenses.
Under a Distribution and Service Plan for Class A shares
adopted by the Fund pursuant to Rule 12b-1 under the Investment
Company Act of 1940, the Fund may pay monthly a distribution
and/or service fee to W&R in an amount not to exceed .25% of the
Fund's Class A average annual net assets. The fee is to be paid
to reimburse W&R for amounts it expends in connection with the
distribution of the Class A shares and/or provision of personal
services to Fund shareholders and/or maintenance of shareholder
accounts. The Fund incurred $4,473 and $2,283,597 in
distribution and service fees, respectively.
The Fund paid Directors' fees of $37,420, which are included
in other expenses.
W&R is an indirect subsidiary of Torchmark Corporation, a
holding company, and Waddell & Reed Financial, Inc., 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 $1,125,549,425 while proceeds from
maturities and sales aggregated $1,192,394,994. Purchases of
short-term securities aggregated $2,311,277,387 while proceeds
from maturities and sales aggregated $2,252,825,744. No U.S.
Government securities were bought or sold during the period.
For Federal income tax purposes, cost of investments owned
at June 30, 1998 was $983,393,787, resulting in net unrealized
appreciation of $373,599,426 of which $382,931,446, related to
appreciated securities and $9,332,020 related to depreciated
securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital
gain net income of $148,763,058 during its fiscal year ended June
30, 1998, of which a portion was paid to shareholders during the
period ended June 30, 1998. Remaining capital gain net income
will be distributed to Fund shareholders.
NOTE 5 -- 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 Distribution and 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, 1998,
and the related statements of operations for the fiscal year then
ended and changes in net assets for each of the fiscal years in
the two-year period then ended, and the financial highlights for
each of the fiscal years in the five-year period then ended.
These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with 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, 1998 by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, 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, 1998, the results of its operations, the changes in
its net assets and the financial highlights for the respective
stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Kansas City, Missouri
August 7, 1998
<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 Corporation
------------------------------------------------------
Record OrdinaryLong-Term Capital Gain Non- Long-T
Date Total Income 28% Rate 20% RateQualifyingQualifyingCapital
----------- ------------- -------- -----------------------------------
Class A
12-12-97 $1.798 $0.6701 $0.6091 $0.5188 $0.0001 $0.6700 $1.1279
06-12-98 .040 .0400 --- --- .0007 .0393 ---
------ ------- ------- ------- ------- ------- -------
Total $1.838 $0.7101 $0.6091 $0.5188 $0.0008 $0.7093 $1.1279
====== ======= ======= ======= ======= ======= =======
Class Y
12-12-97 $1.812 $0.6841 $0.6091 $05188 $0.0002 $0.6839 $1.1279
06-12-98 0.055 .0550 --- --- .0010 .0540 ---
------ ------- ------- ------- ------- ------- -------
Total $1.867 $0.7391 $0.6091 $0.5188 $0.0012 $0.7379 $1.1279
====== ======= ======= ======= ======= ======= =======
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>
Shareholder Meeting Results
A special meeting of shareholders of United International Growth
Fund, Inc. was held on July 29, 1997. The matters voted upon by
the shareholders and the resulting votes for each matter are
presented below.
Item 1. To elect the Board of Directors;
Broker
For Withheld Non-Votes*
Henry L. Bellmon 47,154,681 1,295,581 0
Dodds I. Buchanan 47,280,884 1,169,378 0
James M. Concannon 47,268,665 1,181,597 0
John A. Dillingham 47,266,059 1,184,203 0
Linda Graves 47,209,812 1,240,450 0
John F. Hayes 47,178,031 1,272,231 0
Glendon E. Johnson 47,159,936 1,290,326 0
William T. Morgan 47,260,649 1,189,613 0
Ronald K. Richey 47,244,450 1,205,812 0
William L. Rogers 47,231,171 1,219,091 0
Frank J. Ross, Jr. 47,277,187 1,173,075 0
Eleanor B. Schwartz 47,244,857 1,205,405 0
Keith A. Tucker 47,272,429 1,177,833 0
Frederick Vogel III 47,274,461 1,175,801 0
Paul S. Wise 47,196,126 1,254,136 0
Item 2. To ratify the selection of Deloitte & Touche LLP
as the Fund's independent accountants for its current
fiscal year;
Broker
For Against Abstain Non-Votes*
45,790,959 303,619 2,355,684 0
Item 3. To approve or disapprove changes to certain of its
fundamental investment policies and restrictions:
3.1 Elimination of Fundamental Restriction Regarding
Restricted Securities
Broker
For Against Abstain Non-Votes*
43,456,173 1,299,142 3,608,712 86,235
3.2 Modification of Fundamental Restriction Regarding
Diversification of Assets
Broker
For Against Abstain Non-Votes*
43,454,590 1,300,725 3,608,712 86,235
3.3 Modification and/or Elimination of Fundamental
Restrictions Regarding Options, Commodities, Forward
Contracts and/or Futures Contracts
Broker
For Against Abstain Non-Votes*
43,346,334 1,407,379 3,610,314 86,235
3.4 Elimination of Fundamental Restriction Regarding
Mortgaging or Pledging Securities
Broker
For Against Abstain Non-Votes*
43,401,379 1,353,936 3,608,712 86,235
3.5 Modification of Fundamental Restriction Regarding
Margin Purchases of Securities
Broker
For Against Abstain Non-Votes*
43,399,806 1,352,495 3,611,726 86,235
3.6 Modification of Fundamental Restriction Regarding
Short Sales of Securities
Broker
For Against Abstain Non-Votes*
43,423,280 1,332,035 3,608,712 86,235
3.7 Elimination of Fundamental Restriction Regarding
Foreign Currencies
Broker
For Against Abstain Non-Votes*
43,456,233 1,299,082 3,608,712 86,235
3.8 Elimination of Fundamental Restriction Regarding
Investment in Warrants and Rights
Broker
For Against Abstain Non-Votes*
43,458,768 1,296,547 3,608,712 86,235
3.9 Elimination of Fundamental Restriction Regarding
Purchasing Call Options
Broker
For Against Abstain Non-Votes*
43,428,369 1,326,166 3,609,492 86,235
3.10 Elimination of Fundamental Restriction Regarding
Arbitrage Transactions
Broker
For Against Abstain Non-Votes*
43,432,513 1,321,207 3,610,307 86,235
3.11 Elimination of Fundamental Restriction Regarding
Investments in Issuers Whose Securities are Owned by
Certain Persons
Broker
For Against Abstain Non-Votes*
43,451,793 1,303,522 3,608,712 86,235
3.12 Modification of Fundamental Policy Regarding Loans
Broker
For Against Abstain Non-Votes*
43,479,802 1,274,698 3,609,527 86,235
Item 4. To amend the terms of the service plan adopted
pursuant to Rule 12b-1 under the Investment Company Act
of 1940.
Broker
For Against Abstain Non-Votes*
41,596,780 1,748,299 4,474,200 33,640
* Broker non-votes are proxies received by the Fund from brokers
or nominees when the broker or nominee neither has received
instructions from the beneficial owner or other persons entitled
to vote nor has discretionary power to vote on a particular
matter.
<PAGE>
DIRECTORS
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, Menlo Park, California
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald K. Richey, Birmingham, Alabama
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Robert L. Hechler, 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
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 traditional IRA Planholders:
As required by law, income tax will automatically be withheld
from any distribution or withdrawal from a traditional 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.
<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(6-98)
printed on recycled paper
30
