UNITED
INTERNATIONAL
GROWTH FUND,
INC.
SEMIANNUAL
REPORT
------------------------------------------
For the six months ended December 31, 1997
<PAGE>
This report is submitted for the general information of the shareholders of
United International Growth Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United International Growth Fund, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
DECEMBER 31, 1997
Dear Shareholder:
As Waddell & Reed celebrates its 60th anniversary in the financial services
industry, I would like to thank you for your continued confidence in our
products and services. Since we opened our doors in 1937, our goal has been and
continues to be to provide the best service possible to our shareholders. This
commitment is reflected in every area of our organization: starting with your
financial advisor and continuing with our investment management and customer
service people of our affiliated companies.
Your confidence in the success of the products and services offered by Waddell &
Reed and its affiliates is reflected in the growth the Funds have experienced
over our 60 years. Total mutual fund assets under management reached the $1
billion mark in 1961, and over the $5 billion mark in 1985. As of December 31,
1997, mutual fund assets under management totaled more than $20.8 billion.
We look forward to helping you meet the financial goals that are important to
you, now and for many years to come. Should you have any questions about your
account or other financial issues that are important to you, contact your
financial advisor or your local Waddell & Reed office. They're ready to help
you make the most of your financial future.
Respectfully,
Keith A. Tucker
President
<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 Six Months Ended December 31, 1997
------------------------------------------
DIVIDEND PAID $0.02
=====
CAPITAL GAINS DISTRIBUTION $1.78
=====
NET ASSET VALUE ON
12/31/97 $9.14 adjusted to:$ 10.92(A)
6/30/97 10.61
-----
CHANGE PER SHARE $0.31
=====
(A)This number includes the capital gains distribution of $1.78 paid in December
1997 added to the actual net asset value on December 31, 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 12-31-97 10.63% 17.38%
5-year period ended 12-31-97 16.10% 17.48%
10-year period ended 12-31-97 10.34% 10.99%
*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 December 31, 1997, United International Growth Fund, Inc. had net assets
totaling $1,018,094,995 invested in a diversified portfolio of:
75.06% Common Stocks
21.94% Cash and Cash Equivalents and Open Forward
Currency Contracts
3.00% Convertible Preferred Stocks
As a shareholder of United International Growth Fund, Inc., for every $100 you
had invested on December 31, 1997, your Fund owned $21.94 in cash and cash
equivalents and Open Foreign Currency Contracts; the remainder was invested by
country and by industry, respectively, as follows:
$65.86 Europe
21.94 Cash and Cash Equivalents and Open Foreign Currency
Contracts
4.06 Scandinavia
2.61 Pacific Basin
2.07 United States
1.86 Mexico
1.60 South America
$25.90 Manufacturing
21.94 Cash and Cash Equivalents and Open Foreign Currency
18.23 Finance, Insurance and Real Estate
Contracts
13.88 Miscellaneous Investing Institutions
5.74 Transportation, Communication, Electric,
Gas and Sanitary Services
5.11 Services
4.58 Mining
3.42 Contract Construction
1.20 Wholesale and Retail Trade
The Manufacturing segment shown above is comprised of the following industries:
$10.43 Chemicals and Allied Products
6.97 Electronic and Other Electric Equipment
2.38 Miscellaneous Manufacturing Industries
1.53 Printing and Publishing
1.44 Instruments and Related Products
1.07 Food and Kindred Products
1.06 Petroleum and Coal Products
.60 Industrial Machinery and Equipment
.27 Fabricated Metal Products
.15 Furniture and Fixtures
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1997
Shares Value
COMMON STOCKS
Denmark - 0.70%
SAS Danmark A/S ........................ 100,000 $ 1,459,726
Thorkild Kristensen .................... 66,450 5,688,980
Total ................................. 7,148,706
France - 9.17%
AXA-UAP ................................ 150,000 11,607,291
Accor S.A. ............................. 60,000 11,156,160
Air Liquide ............................ 35,000 5,478,382
Atos SA* ............................... 15,095 1,946,383
Compagnie Generale de Geophysique, ADR* 340,000 8,712,500
Elf Aquitaine S.A. ..................... 94,345 10,973,630
Societe Generale ....................... 130,000 17,712,937
Societe Industrielle de Transports
Automobiles S.A. ...................... 42,100 8,044,764
Suez Lyonnaise des Eaux ................ 160,000 17,706,291
Total ................................. 93,338,338
Germany - 7.24%
Bayer Group ............................ 292,950 10,944,705
Depfa Bank ............................. 38,500 2,281,703
GILDEMEISTER Aktiengesellschaft* ....... 30,000 1,617,835
Hoechst AG ............................. 625,000 21,890,810
K&M Mobel AG* .......................... 175,000 1,498,304
Siemens AG ............................. 265,000 15,690,499
VBH Holding AG ......................... 205,000 2,735,309
VEBA AG ................................ 250,000 17,026,186
Total ................................. 73,685,351
Italy - 5.17%
Alleanza Assicurazioni ................. 495,500 4,932,586
Credito Italiano S.p.A. ................ 3,997,000 12,328,886
Instituto Nazionale delle Assicurazioni 2,000,000 4,167,373
Istituto Bancario San Paolo di
Torino S.p.A.* ........................ 1,000,000 9,556,122
Montedison S.p.A. ...................... 7,250,000 6,514,136
Riunione Adriatica di Sicurta S.p.A* ... 421,500 4,135,157
Telecom Italia Mobile S.p.A., Risp ..... 2,500,000 11,026,293
Total ................................. 52,660,553
Japan - 2.61%
Nintendo Corp., Ltd. ................... 136,500 13,380,816
Sankyo Co., Ltd. ....................... 446,000 10,076,201
Sony Corporation ....................... 35,500 3,153,743
Total ................................. 26,610,760
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1997
Shares Value
COMMON STOCKS (Continued)
Mexico - 1.86%
Empresas ICA Sociedad Controladora,
S.A. de C.V., ADS ..................... 477,000 $ 7,840,449
Gruma, S.A., Class B* .................. 936,938 3,716,165
Grupo Elektra, S.A. de C.V., CPO ....... 3,000,000 5,242,935
Grupo Financiero Inbursa, S.A. de
C.V., Class B ......................... 531,168 2,166,017
Total ................................. 18,965,566
Netherlands - 9.84%
ABN Amro Holding NV .................... 600,000 11,690,426
Akzo Nobel N.V. ........................ 62,000 10,691,659
Benckiser N.V., B Shares* .............. 338,000 13,988,162
Fugro N.V. ............................. 39,742 1,211,491
ING Groep N.V. ......................... 150,000 6,318,749
Internatio-Muller N.V. ................. 205,000 6,451,438
Koninklijke Boskalis Westminster N.V. .. 521,437 9,259,474
Philips Electronics N.V., N.Y. Shares .. 270,000 16,335,000
Royal Dutch Petroleum Company .......... 200,000 10,837,400
Stork N.V. ............................. 129,700 4,478,370
Verenigd Bezit VNU ..................... 315,000 8,887,683
Total ................................. 100,149,852
Norway - 0.66%
Schibsted AS ........................... 392,000 6,725,164
Portugal - 1.34%
Electricidade De Portugal, S.A., ADR* .. 63,130 2,446,288
Portugal Telecom, S.A.,
Ordinary Shares ....................... 200,000 9,282,104
Portugal Telecom, S.A., ADS ............ 41,850 1,966,950
Total ................................. 13,695,342
Spain - 1.34%
Catalana Occidenta, sociedad Anonimade
Seguros y Reaseguros .................. 19,200 977,766
Corporation Financiero Alba, S.A. ...... 120,000 12,639,454
Total ................................. 13,617,220
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1997
Shares Value
COMMON STOCKS (Continued)
Sweden - 2.70%
Biacore International AB, ADR* ......... 100,000 $ 868,700
Frontec AB, Class B* ................... 275,000 2,409,817
Skandia Group Insurance Company Ltd. ... 512,100 24,180,940
Total ................................. 27,459,457
Switzerland - 12.17%
Credit Suisse Group, Registered Shares . 324,500 50,193,005
Julius Baer Holding AG ................. 1,860 3,449,867
Novartis AG ............................ 27,001 43,797,392
SWISS BANK CORPORATION, BASLE .......... 85,125 26,450,448
Total ................................. 123,890,712
United Kingdom - 18.19%
Avis Europe plc* ....................... 400,000 1,143,041
British Petroleum Company p.l.c. (The) . 563,000 7,445,926
BTR plc ................................ 1,925,000 5,832,835
Corporate Services Group plc ........... 2,500,000 8,745,250
Freepages Group plc* ................... 1,000,000 537,853
General Electric Company plc ........... 3,800,000 24,619,725
GKN plc ................................ 100,000 2,043,022
Hays plc ............................... 1,500,000 19,966,267
Imperial Tobacco ....................... 750,000 4,717,508
JBA Holdings Plc ....................... 130,000 2,209,715
Johnson Matthey plc .................... 1,100,000 9,845,591
Misys plc .............................. 703,061 21,245,328
Rentokil Initial plc ................... 2,910,000 12,876,313
Royal and Sun Alliance Insurance
Group plc ............................. 1,317,500 13,371,856
Siebe plc .............................. 700,000 13,783,827
Vodafone Group Plc ..................... 3,600,000 26,014,038
Williams plc ........................... 2,000,000 10,839,183
Total ................................. 185,237,278
United States - 2.07%
ESG Re Limited* ........................ 20,000 467,500
PepsiCo, Inc. .......................... 300,000 10,931,100
Transocean Offshore Inc. ............... 200,000 9,637,400
Total ................................. 21,036,000
TOTAL COMMON STOCKS - 75.06% $764,220,299
(Cost: $650,573,998)
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1997
Shares Value
PREFERRED STOCKS
Brazil - 1.60%
Telebras S.A., ADR, Convertible ........ 140,000 $ 16,301,180
Germany - 1.40%
Marschollek, Lautenschlager und
Partner AG, Convertible ............... 56,190 14,213,849
TOTAL PREFERRED STOCKS - 3.00% $ 30,515,029
(Cost: $20,338,164)
Face
Amount in
Thousands
UNREALIZED GAIN ON OPEN FORWARD CURRENCY CONTRACTS - 0.41%
Deutsche Marks, 6-4-98 (A) ............. DM31,682 1,368,884
Deutsche Marks, 7-29-98 (A) ............. DM42,500 278,561
French Francs, 6-4-98 (A) .............. F241,502 2,550,237
Total ................................. $ 4,197,682
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Certificate of Deposit - 1.97%
ABN AMRO Bank N.V.- Chicago,
5.83%, 1-8-98 ......................... 20,000 20,000,029
Commercial Paper
Chemicals and Allied Products - 1.04%
Air Products & Chemicals Inc.,
5.85%, 1-23-98 ........................ $10,645 $ 10,606,944
Communication - 2.98%
Ameritech Corp.,
5.89%, 2-3-98 ......................... 4,340 4,316,568
BellSouth Telecommunications Inc.,
5.95%, 1-7-98 ......................... 4,415 4,410,622
Dominion Resources Inc.:
5.9%, 1-12-98 ......................... 13,070 13,046,438
6.05%, 1-14-98 ........................ 8,535 8,516,353
Total ................................. 30,289,981
Depository Institutions - 1.26%
Toronto-Dominion Holdings USA Inc.,
5.77%, 1-12-98 ........................ 3,620 3,613,618
UBS Finance (DE) Inc.,
5.9%, 1-22-98 ......................... 9,240 9,208,199
Total ................................. 12,821,817
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Electric, Gas and Sanitary Services - 3.23%
Baltimore Gas & Electric Co.,
5.8%, 1-8-98 .......................... $ 10,295 $ 10,283,390
Commonwealth Edison Co.,
6.18%, 1-28-98 ........................ 5,585 5,559,113
Georgia Power Co.,
5.92%, 1-27-98 ........................ 16,735 16,663,449
Western Resources, Inc.,
6.0%, 1-14-98 ......................... 400 399,133
Total ................................. 32,905,085
Electronic and Other Electric Equipment - 2.04%
Cooper Industries Inc.,
6.0%, 1-23-98 ......................... 13,135 13,086,838
Sony Capital Corp.,
5.95%, 1-8-98 ......................... 7,660 7,651,138
Total ................................. 20,737,976
Fabricated Metal Products - 0.00%
Danaher Corporation,
5.7227%, Master Note .................. 3 3,000
Food and Kindred Products - 2.77%
ConAgra Inc.:
6.35%, 1-9-98 ......................... 17,600 17,575,164
6.0%, 1-15-98 ......................... 4,105 4,095,422
Hercules Inc.,
6.1%, 1-12-98 ......................... 5,000 4,990,680
Seagram (Joseph E.) & Sons Inc.,
6.45%, 1-15-98 ........................ 1,520 1,516,187
Total ................................. 28,177,453
General Merchandise Stores - 0.85%
Dillard Investment Co. Inc.,
5.95%, 1-12-98 ........................ 8,710 8,694,165
Industrial Machinery and Equipment - 0.26%
Hewlett-Packard Co.,
5.68%, 1-5-98 ......................... 2,675 2,673,312
Instruments and Related Products - 0.57%
Baxter International Inc.,
6.07%, 1-14-98 ........................ 5,780 5,767,331
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Nondepository Institutions - 1.38%
Caterpillar Financial Services Corp.,
5.93%, 1-23-98 ........................ $ 2,960 $ 2,949,273
General Electric Capital Corp.,
5.81%, 1-14-98 ........................ 2,000 1,995,804
Island Finance Puerto Rico Inc.,
5.72%, 1-30-98 ........................ 9,130 9,087,931
Total ................................. 14,033,008
Petroleum and Coal Products - 0.81%
BP America Inc.,
6.2%, 1-21-98 ......................... 2,880 2,870,080
Shell Oil Co.,
5.95%, 1-14-98 ........................ 5,385 5,385,000
Total ................................. 8,255,080
Security and Commodity Brokers - 1.10%
Merrill Lynch & Co. Inc.,
5.81%, 1-16-98 ........................ 11,275 11,247,705
Transportation Equipment - 1.57%
Echlin Inc.,
6.03%, 1-16-98 ........................ 16,000 15,959,800
Total Commercial Paper - 19.86% 202,172,657
TOTAL SHORT-TERM SECURITIES - 21.83% $222,172,686
(Cost: $222,172,686)
See Notes to Schedule of Investments on page 12.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1997
Value
TOTAL INVESTMENT SECURITIES - 100.30% $1,021,105,696
(Cost: $893,084,848)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.30%) (3,010,701)
NET ASSETS - 100.00% $1,018,094,995
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
DECEMBER 31, 1997
Assets
Investment securities -- at value (Notes 1 and 3) $1,021,105,696
Receivables:
Dividends and interest ......................... 2,171,085
Investment securities sold ..................... 991,636
Fund shares sold ............................... 917,290
Prepaid insurance premium ........................ 24,270
--------------
Total assets ................................. 1,025,209,977
--------------
Liabilities
Payable to Fund shareholders ............ ........ 5,147,118
Payable for investment securities purchased ..... 1,060,453
Accrued service fee (Note 2) .................... 415,907
Accrued transfer agency and dividend
disbursing (Note 2) ............................ 220,329
Due to custodian ................................ 27,771
Accrued management fee (Note 2) ................. 19,456
Accrued accounting services fee (Note 2) ........ 8,333
Other ........................................... 215,615
--------------
Total liabilities ............................ 7,114,982
--------------
Total net assets ............................$1,018,094,995
==============
Net Assets
$1.00 par value capital stock
Capital stock ..................................$ 111,378,047
Additional paid-in capital ..................... 740,873,655
Accumulated undistributed income:
Accumulated undistributed net investment income 378,640
Accumulated net realized gain on
investment transactions ...................... 37,515,198
Net unrealized appreciation in value
of investments ............................... 123,823,166
Net unrealized appreciation in value of foreign
currency exchange ............................ 4,126,289
--------------
Net assets applicable to outstanding
units of capital ............................$1,018,094,995
==============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $9.14
Class Y .......................................... $9.14
Capital shares outstanding
Class A .......................................... 110,615,070
Class Y .......................................... 762,977
Capital shares authorized .......................... 400,000,000
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended DECEMBER 31, 1997
Investment Income
Income (Note 1B):
Interest and amortization ....................... 4,062,234
Dividends (net of foreign withholding
taxes of $122,396) ............................ $ 3,484,963
------------
Total income .................................. 7,547,197
------------
Expenses (Note 2):
Investment management fee ....................... 3,620,528
Transfer agency and dividend
disbursing - Class A .......................... 1,148,727
Service fee - Class A ........................... 938,347
Custodian fees .................................. 471,290
Accounting services fee ......................... 50,000
Audit fees ...................................... 11,755
Legal fees ...................................... 7,762
Shareholder servicing - Class Y ................. 6,552
Other ........................................... 176,843
------------
Total expenses ................................ 6,431,804
------------
Net investment income ....................... 1,115,393
------------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 89,129,656
Realized net loss on foreign currency
transactions .................................... (614,395)
------------
Realized net gain on investments ................ 88,515,261
------------
Unrealized depreciation in value of securities
during the period................................ (55,526,010)
Unrealized appreciation on open forward currency
contracts during the period ..................... 3,677,845
Unrealized depreciation in value of foreign
currency exchange at end of period .............. (8,456)
------------
Unrealized depreciation on investments .......... (51,856,621)
------------
Net gain on investments ....................... 36,658,640
------------
Net increase in net assets resulting from
operations ................................. $37,774,033
============
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
December 31, June 30,
1997 1997
Increase in Net Assets ------------ ------------
Operations:
Net investment income ...............$ 1,115,393 $ 6,631,203
Realized net gain on investments .... 88,515,261 130,324,867
Unrealized appreciation
(depreciation) .................... (51,856,621) 50,698,966
------------ ------------
Net increase in net assets
resulting from operations ........ 37,774,033 187,655,036
------------ ------------
Distributions to shareholders from (Note 1F):*
Net investment income
Class A ........................... (1,756,686) (8,099,854)
Class Y ........................... (20,934) (69,703)
Realized gains on securities transactions
Class A ...........................(164,452,232) (22,183,965)
Class Y ........................... (1,128,533) (151,820)
------------- ------------
(167,358,385) (30,505,342)
Capital share transactions: ------------ ------------
Proceeds from sale of shares:
Class A (38,165,157 and 78,212,381
shares, respectively) ............ 412,419,437 742,537,028
Class Y (55,813 and 119,762
shares, respectively) ............ 614,456 1,121,845
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (18,199,133 and 3,257,308
shares, respectively)............. 163,610,228 29,838,300
Class Y (127,867 and 24,129
shares, respectively) ............ 1,149,525 221,523
Payments for shares redeemed:
Class A (37,921,633 and 75,483,507
shares, respectively) ............(414,629,002) (721,363,696)
Class Y (59,234 and 56,814
shares, respectively) ............ (639,836) (537,972)
------------ ------------
Net increase in net assets resulting
from capital share transactions 162,524,808 51,817,028
------------ ------------
Total increase ................. 32,940,456 208,966,722
Net Assets
Beginning of period .................. 985,154,539 776,187,817
------------ ------------
End of period ........................$1,018,094,995 $985,154,539
============ ============
Undistributed net investment
income ............................ $378,640 $1,655,262
======== ==========
*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
six
months For the fiscal year ended June 30,
ended ----------------------------------
12/31/97 1997 1996 1995 1994 1993
-------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $10.61 $8.95 $8.68 $8.98 $7.16 $7.10
------ ------ ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .01 .07 .08 .07 .04 .07
Net realized and
unrealized gain on
investments ..... .32 1.94 .86 .60 2.32 .11
------ ------ ----- ----- ----- -----
Total from investment
operations ...... .33 2.01 .94 .67 2.36 .18
------ ------ ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.02) (0.09) (0.07) (0.04) (0.04) (0.07)
From capital gains (1.78) (0.26) (0.60) (0.93) (0.50) (0.05)
------ ------ ----- ----- ----- -----
Total distributions (1.80) (0.35) (0.67) (0.97) (0.54) (0.12)
------ ------ ----- ----- ----- -----
Net asset value,
end of period .... $9.14 $10.61 $8.95 $8.68 $8.98 $7.16
===== ====== ===== ===== ===== =====
Total return* ...... 3.37% 23.03% 11.70% 7.98% 33.31% 2.62%
Net assets, end of
period (000
omitted) .........$1,011,119$978,375$771,252$679,349$572,456$336,382
Ratio of expenses
to average net
assets ........... 1.24%** 1.28% 1.25% 1.25% 1.20% 1.18%
Ratio of net
investment income
to average net
assets ........... 0.21%** 0.78% 0.89% 0.86% 0.57% 1.07%
Portfolio turnover
rate ............. 60.14% 109.71% 58.64% 57.45% 83.76% 94.22%
Average commission
rate paid ........ $0.0155 $0.0219
*Total return calculated without taking into account the sales load deducted on
an initial purchase.
**Annualized.
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 For the
six fiscal period
months year from 9/27/95*
ended ended through
12/31/97 6/30/97 6/30/96
-------- -------- --------
Net asset value,
beginning of period $10.62 $8.95 $9.21
------ ------ ------
Income from investment
operations:
Net investment
income .......... .02 .09 .12
Net realized and
unrealized gain
on investments... .31 1.95 .30
------ ------ ------
Total from investment
operations ........ .33 2.04 .42
------ ------ ------
Less distributions:
From net investment
income........... (0.03) (0.11) (0.08)
From capital gains (1.78) (0.26) (0.60)
------ ------ ------
Total distributions. (1.81) (0.37) (0.68)
------ ------ ------
Net asset value,
end of period ..... $9.14 $10.62 $8.95
===== ====== ======
Total return ....... 3.41% 23.45% 5.44%
Net assets, end of
period (000
omitted) ......... $6,976 $6,780 $4,936
Ratio of expenses
to average net
assets ............ 1.00%** 1.04% 0.98%**
Ratio of net
investment income
to average net
assets ............ 0.45%** 1.02% 2.60%**
Portfolio
turnover rate ..... 60.14% 109.71% 58.64%**
Average commission
rate paid ........ $0.0155 $0.0219
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 the Nasdaq Stock Market, 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.
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 $17.8 billion of
combined net assets at December 31, 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
$1,995,935, out of which W&R paid sales commissions of $1,153,631 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 paid Directors' fees of $18,192, 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 $531,289,396 while proceeds from maturities and sales aggregated
$693,988,779. Purchases of short-term securities aggregated $1,193,338,155
while proceeds from maturities and sales aggregated $1,069,753,869. No U.S.
Government securities were bought or sold during the period.
For Federal income tax purposes, cost of investments owned at December 31,
1997 was $893,084,848, resulting in net unrealized appreciation of $123,823,166,
of which $143,921,649 related to appreciated securities and $20,098,483 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, which has been
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 December 31, 1997, and the related statements of operations for
the six-month period then ended and changes in net assets for the six-month
period then ended and the year ended June 30, 1997, and the financial highlights
for the six-month period then ended and for each of the years in the five-year
period ended June 30, 1997. 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
December 31, 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 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 December 31, 1997, 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
February 6, 1998
<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>
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.
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
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
<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
NUR1002SA(12-97)
printed on recycled paper
