UNITED
INTERNATIONAL
GROWTH FUND,
INC.
SEMIANNUAL
REPORT
-----------------
December 31, 1999
<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, 1999
Dear Shareholder:
We are delighted to share with you this report on your Fund's operations for the
six months ended December 31, 1999.
The second half of 1999 was another extraordinary period for equity markets in
the U.S. and, indeed, around much of the globe, as all major stock market
indices weathered some volatility and finished 1999 solidly above mid-year
levels. Leading the way was the Nasdaq Composite, which is laden with
technology-oriented companies. This index rose a stunning 51.5 percent in the
last six months of 1999 and 85.6 percent for all of 1999, as investors poured
money into stocks of these "new era" companies. The Standard & Poor's 500, the
index most often used to track the performance of the largest U.S. stocks, rose
7.84 percent for the six months ended December 31 and 21.09 percent for the
year. The Dow Jones Industrial Average, which includes 30 of the nation's
largest companies, rose 5.44 percent in the last six months of the year and
26.93 percent for all of 1999. And, finally, the Russell 2000, which tracks the
performance of small-company stocks, rose 10.99 percent for the last six months
of 1999 and 21.17 percent for the year after having significantly trailed other
indices in recent years. Clearly, smaller and mid-sized companies -- especially
those in the technology industry -- were at the center of the market's favor for
the final six months of 1999.
The domestic equity markets' performance was achieved despite conflicting
economic signals. Inflation, as defined by the Consumer Price Index, rose 2.2
percent for all of 1999, up from the prior year's 1.8 percent but still modest
by historical standards. At the same time, though, interest rates increased
considerably over the course of the year and overall economic activity remained
strong. While such factors might ordinarily have undermined a vibrant stock
market, they had no noticeably negative overall effect in 1999. This was due in
part to investors' enormous enthusiasm for technology-related stocks which,
throughout 1999 -- and especially in the last six months of the year -- seemed
impervious to the influence of economic factors. U.S. equity markets were not
alone in turning in strong performances for the second half and all of 1999.
Many foreign equity markets turned in exceptional years as well, buoyed by some
of the same factors that propelled U.S. markets, along with a faster-than-
expected recovery in certain of the Asian markets that had been in economic
crisis in the recent past.
The news from bond markets was much less favorable. Inflationary pressures,
including high levels of consumer spending and very low unemployment, caused
bond yields (which move inversely to bond prices) to rise considerably over the
course of the year. As a result, U.S. bond markets experienced a very difficult
six months and their toughest full year since 1994. The Federal Reserve, which
is committed to keeping inflation in check, raised interest rates three times
during 1999 and, as the year came to a close, the likelihood of additional rate
hikes early in 2000 appeared to be high.
We were pleased with the overall performance of the United Fund family in the
second half of 1999 and for the full year. This report provides in-depth
discussion of the performance of the fund you own. I urge you to read it with
care so you can continue to be a well-informed investor.
While these reports necessarily focus on the second half of 1999, we of course
urge all our investors to keep a long-term perspective. Just as we urge you not
to become unduly concerned if the market moves downward in the near term, we
would urge that you not become too exuberant when it moves higher in similarly
short periods. No one can predict with certainty where markets will go next,
but one thing that remains certain is that a well-thought-out investment plan is
essential. Remember, a plan that is appropriate for you is appropriate
regardless of inevitable market changes. Your Waddell & Reed financial advisor
is indispensable in helping you create an investment program comprising our
time-tested investments. And with that plan in place, you can face any market
condition with confidence.
Respectfully,
Robert L. Hechler
President
<PAGE>
SHAREHOLDER SUMMARY
- -----------------------------------------------------------------
UNITED INTERNATIONAL GROWTH FUND, INC.
PORTFOLIO STRATEGY:
Normally at least 80% in GOALS: To seek, as a primary
foreign securities. Not goal, long-term
more than 75% in securities appreciation of capital.
in any one country. As a secondary goal, this
Fund seeks current income.
Maximum of 15% in currency STRATEGY: Invests primarily in
exchange contracts common stocks of foreign
companies that Waddell &
Reed Investment Management
Cash Reserves Company, the Fund's
investment manager,
believes have the
potential for long-term
growth, represented by
economic expansion within
a country or region and
the restructuring and/or
privatization of
particular industries.
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, 1999
---------------------------------------
DIVIDEND PAID $0.02
=====
CAPITAL GAINS DISTRIBUTION $1.44
=====
NET ASSET VALUE ON
12/31/99 $13.81 adjusted to: $15.25(A)
6/30/99 9.97
------
CHANGE PER SHARE $5.28
======
(A)This number includes the capital gains distribution of $1.44 paid in December
1999 added to the actual net asset value on December 31, 1999.
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 12-31-99 48.01% 57.04%
5-year period ended 12-31-99 21.94% 23.39%
10-year period ended 12-31-99 15.12% 15.80%
*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, 1999, United International Growth Fund, Inc. had net assets
totaling $1,885,592,031 invested in a diversified portfolio of:
91.92% Common Stocks
5.90% Preferred Stocks
2.18% Cash and Cash Equivalents
As a shareholder of United International Growth Fund, Inc., for every $100 you
had invested on December 31, 1999, your Fund was invested by geographic region
and by industry, respectively, as follows:
$49.38 Europe
30.48 Pacific Basin
6.12 Scandinavia
5.69 Canada
3.27 Other Regions
2.88 United States
2.18 Cash and Cash Equivalents
$29.99 Transportation, Communication, Electric,
Gas and Sanitary Services
27.86 Manufacturing
12.12 Services
9.02 Finance, Insurance and Real Estate
Contracts
8.93 Miscellaneous Investing Institutions
5.71 Wholesale and Retail Trade
2.37 Contract Construction
2.18 Cash and Cash Equivalents
1.82 Mining
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1999
Shares Value
COMMON STOCKS
Australia - 0.62%
Cable & Wireless Optus Limited* ........3,490,000$ 11,658,579
Canada - 5.69%
AT&T Canada Inc.* ...................... 329,000 13,221,688
AT&T Canada Inc., Class B* ............. 200,000 8,034,354
BCE Inc. ............................... 260,000 23,617,537
Nortel Networks Corporation ............ 425,000 42,925,000
Rogers Communications Inc., Class B* ... 800,000 19,559,496
Total ................................. 107,358,075
Finland - 3.87%
Nokia, AB .............................. 230,500 41,792,877
Sonera Group plc ....................... 200,000 13,709,353
UPM-Kymmene Corporation ................ 432,500 17,426,290
Total ................................. 72,928,520
France - 9.91%
AXA-UAP ................................ 143,300 19,977,499
Alcatel ................................ 117,500 26,985,567
ALTRAN TECHNOLOGIES .................... 18,316 11,069,824
Banque Nationale de Paris .............. 130,000 11,994,928
Bouygues Offshore SA ................... 30,000 19,068,189
CANAL+ ................................. 118,000 17,175,472
Carrefour, S.A. ........................ 81,000 14,939,367
France Telecom ......................... 100,000 13,225,849
Suez Lyonnaise des Eaux ................ 160,000 25,641,829
Total, S.A., B Shares* ................. 100,000 13,346,725
Vivendi ................................ 150,000 13,545,667
Total ................................. 186,970,916
Germany - 7.80%
Bayerische Hypo- und Vereinsbank AG .... 85,000 5,805,070
Deutsche Bank AG, Registered Shares .... 245,000 20,693,216
Dresdner Bank AG ....................... 85,000 4,623,507
EM.TV & Merchandising AG ............... 250,000 16,116,800
Mannesmann AG, Registered Shares ....... 280,000 67,549,538
Siemens AG ............................. 228,000 29,006,614
VBH Holding AG ......................... 205,000 3,252,320
Total ................................. 147,047,065
Hong Kong - 1.32%
China Telecom (Hong Kong) Limited* .....4,000,000 24,956,583
Ireland - 1.26%
Bank of Ireland (The) ..................1,360,450 10,826,012
CRH public limited company ............. 600,000 12,933,732
Total ................................. 23,759,744
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1999
Shares Value
COMMON STOCKS(Continued)
Israel - 0.89%
Partner Communications, ADR* ........... 650,100$ 16,861,969
Japan - 28.54%
Benesse Corporation .................... 100,000 24,086,948
Fast Retailing Co., Ltd. ............... 60,000 24,439,440
FUJITSU LIMITED ........................ 600,000 27,376,873
Fujitsu Support and Service Inc. ....... 25,000 12,263,781
Hikari Tsushin, Inc. ................... 16,700 33,521,003
Hitachi Software Engineering Co., Ltd. . 100,000 14,589,249
Hitachi, Ltd. ..........................1,000,000 16,057,965
Kyocera Corporation .................... 175,000 45,407,814
Matsushita Communication Industrial
Co., Ltd. ............................. 150,000 39,655,341
Matsushita Electric Industrial ......... 800,000 22,167,825
Mitsubishi Materials Corporation* ......4,000,000 9,791,442
NTT Mobile Communications Network, Inc. 1,300 50,024,479
Nippon Telegraph and Telephone Corporation 2,350 40,267,306
Oracle Corporation Japan ............... 20,000 9,301,870
ROHM CO., LTD. ......................... 50,000 20,562,029
Ryohin Keikaku Co., Ltd. ............... 60,000 12,049,349
SECOM Co., Ltd. ........................ 200,000 22,030,745
SOFTBANK CORP. ......................... 40,000 38,304,122
Sony Corporation ....................... 120,000 35,601,684
Sumitomo Electric Industries, Ltd. ..... 943,000 10,904,563
Taiyo Yuden Co., Ltd. .................. 500,000 29,668,070
Total ................................. 538,071,898
Mexico - 0.71%
Fomento Economico Mexicano, S.A de C.V. 3,000,000 13,350,868
Netherlands - 7.91%
EQUANT N.V.* ........................... 229,685 26,074,464
Fortis NV .............................. 412,000 14,836,522
Getronics N.V. ......................... 200,000 15,955,632
ING Groep N.V. .......................... 265,273 16,016,537
Koninklijke Philips Electronics N.V.,
Ordinary Shares ....................... 183,807 24,995,087
Royal Dutch Petroleum Company .......... 235,000 14,404,138
United Pan-Europe Communications N.V.* . 226,000 28,911,525
VNU nv ................................. 150,000 7,884,137
Total ................................. 149,078,042
Spain - 0.34%
Tele Pizza, S.A.* ......................1,500,000 6,345,990
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1999
Shares Value
COMMON STOCKS (Continued)
Sweden - 2.25%
NetCom Systems AB, Class B* ............ 250,000$ 17,588,235
Nordbanken Holding AB ..................1,000,000 5,882,353
Telefonaktiebolaget LM Ericsson,
Class B ............................... 294,200 18,932,635
Total ................................. 42,403,223
Switzerland - 3.18%
Clariant Limited, Registered Shares .... 26,300 12,530,099
Credit Suisse Group, Registered Shares . 70,000 13,906,848
Julius Baer Holding AG ................. 5,215 15,745,496
Roche Holdings AG ...................... 1,500 17,795,493
Total ................................. 59,977,936
United Kingdom - 14.75%
Allied Zurich p.l.c. ...................1,000,000 11,791,690
Barclays PLC ........................... 364,000 10,459,972
British Telecommunications plc .........1,012,553 24,533,653
Cable and Wireless plc ................. 600,000 10,147,315
Capita Group plc (The) .................1,080,700 19,638,615
COLT Telecom Group plc* ................1,221,200 62,630,188
Energis plc* ........................... 211,575 10,167,274
Energis plc (A)* ....................... 241,380 11,599,558
Independent Energy Holdings plc, ADS* .. 475,000 15,719,531
Invensys plc ...........................2,296,800 12,410,020
Kingfisher plc .........................1,151,525 12,778,601
Lloyds TSB Group plc ...................1,055,734 13,131,019
Reckitt Benckiser plc ..................1,250,000 11,751,308
Sema Group plc .........................1,227,395 22,006,984
Telewest Communications plc* ...........2,549,000 13,587,419
Telewest Communications plc (A)* .......2,948,837 15,718,746
Total ................................. 278,071,893
United States - 2.88%
Global TeleSystems Group, Inc.* ........ 800,000 27,700,000
Intel Corporation ...................... 100,000 8,228,125
Microsoft Corporation* ................. 100,000 11,671,875
Transocean Sedco Forex Inc. ............ 200,000 6,737,500
Total ................................. 54,337,500
TOTAL COMMON STOCKS - 91.92% $1,733,178,801
(Cost: $1,042,693,817)
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED INTERNATIONAL GROWTH FUND, INC.
DECEMBER 31, 1999
Shares Value
PREFERRED STOCKS
Brazil - 1.67%
Petroleo Brasileiro S.A. - Petrobras ...55,500,000 $ 14,191,217
Telebras S.A., ADR ..................... 134,500 17,283,250
Total 31,474,467
Germany - 4.23%
Fresenius Medical Care AG .............. 40,000 7,333,144
MLP AG ................................. 162,240 49,027,306
Rhoen-Klinikum AG ...................... 215,100 7,670,126
SAP AG ................................. 26,250 15,812,092
Total ................................. 79,842,668
TOTAL PREFERRED STOCKS - 5.90% $ 111,317,135
(Cost: $54,316,823)
TOTAL SHORT-TERM SECURITIES - 1.99% $ 37,448,788
(Cost: $37,448,788)
TOTAL INVESTMENT SECURITIES - 99.81% $1,881,944,724
(Cost: $1,134,459,428)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.19% 3,647,307
NET ASSETS - 100.00% $1,885,592,031
See Notes to Schedule of Investments.
Notes to Schedule of Investments
*No dividends were paid during the preceding 12 months.
(A) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At December 31, 1999, the value of
these securities amounted to $27,318,304 or 1.45% of net assets.
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, 1999
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities -- at value (Notes 1 and 3) $1,881,945
Cash ........................................... 13
Receivables:
Fund shares sold ............................... 6,998
Dividends and interest ......................... 2,196
Prepaid insurance premium ........................ 23
----------
Total assets ................................. 1,891,175
----------
Liabilities
Payable to Fund shareholders ............ ........ 4,535
Accrued service fee (Note 2) .................... 326
Accrued transfer agency and dividend
disbursing (Note 2) ............................ 318
Accrued management fee (Note 2) ................. 42
Accrued distribution fee (Note 2) ............... 30
Accrued accounting services fee (Note 2) ........ 8
Accrued shareholder servicing - Class Y (Note 2) 2
Other ........................................... 322
----------
Total liabilities ............................ 5,583
----------
Total net assets ............................ $1,885,592
==========
Net Assets
$1.00 par value capital stock:
Capital stock .................................. $136,524
Additional paid-in capital ..................... 976,976
Accumulated undistributed income (loss):
Accumulated undistributed net investment loss .. (5,848)
Accumulated undistributed net realized gain on
investment transactions ...................... 30,560
Net unrealized appreciation in value
of investments ............................... 747,485
Net unrealized depreciation in value of foreign
currency exchange ............................ (105)
----------
Net assets applicable to outstanding
units of capital ............................ $1,885,592
==========
Capital shares outstanding:
Class A ......................................... 134,863
Class B .......................................... 299
Class C ......................................... 40
Class Y ......................................... 1,322
Capital shares authorized ......................... 400,000
Net asset value per share (net assets divided
by shares outstanding):
Class A ......................................... $13.81
Class B .......................................... $13.79
Class C ......................................... $13.80
Class Y ......................................... $13.82
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended DECEMBER 31, 1999
(In Thousands)
Investment Loss
Income (Note 1B):
Dividends (net of foreign withholding
taxes of $212) ................................ $ 2,637
Interest and amortization ....................... 1,714
--------
Total income .................................. 4,351
--------
Expenses (Note 2):
Investment management fee ....................... 5,964
Service fees:
Class A ...................................... 1,621
Class B ...................................... 1
Class C ...................................... ---
Transfer agency and dividend
disbursing:
Class A ...................................... 1,515
Class B ...................................... 4
Class C ...................................... ---
Custodian fees .................................. 615
Distribution fee:
Class A ...................................... 69
Class B ...................................... 3
Class C ...................................... ---
Accounting services fee ......................... 50
Audit fees ...................................... 12
Shareholder servicing - Class Y ................. 10
Legal fees ...................................... 8
Other ........................................... 135
--------
Total expenses ................................ 10,007
--------
Net investment loss ......................... (5,656)
--------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 122,337
Realized net gain on forward currency contracts .. 339
Realized net gain on foreign currency
transactions .................................... 176
--------
Realized net gain on investments ................ 122,852
--------
Unrealized appreciation in value of securities
during the period................................ 556,654
Unrealized depreciation on open forward currency
contracts during the period ..................... (339)
Unrealized appreciation in value of foreign
currency exchange during the period ............. 26
--------
Unrealized appreciation on investments .......... 556,341
--------
Net gain on investments ....................... 679,193
--------
Net increase in net assets resulting from
operations ................................. $673,537
========
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(Dollars In Thousands)
For the For the
six months fiscal year
ended ended
December 31, June 30,
1999 1999
Increase (Decrease) in Net Assets ------------ ------------
Operations:
Net investment income (loss) ........ $ (5,656) $ 6,375
Realized net gain on investments .... 122,852 111,905
Unrealized appreciation
(depreciation) .................... 556,341 (182,732)
---------- ----------
Net increase (decrease) in net assets
resulting from operations ........ 673,537 (64,452)
---------- ----------
Distributions to shareholders from (Note 1F):*
Net investment income:
Class A ........................... (2,768) (5,120)
Class B ........................... --- ---
Class C ........................... --- ---
Class Y ........................... (52) (68)
Realized gains on securities transactions:
Class A ........................... (173,434) (125,603)
Class B ........................... (271) ---
Class C ........................... (41) ---
Class Y ........................... (1,741) (852)
---------- ----------
(178,307) (131,643)
---------- ----------
Capital share transactions (Note 5) .. 128,992 117,162
---------- ----------
Total increase (decrease) ...... 624,222 (78,933)
Net Assets
Beginning of period .................. 1,261,370 1,340,303
---------- ----------
End of period ........................ $1,885,592 $1,261,370
========== ==========
Undistributed net investment
income (loss) ..................... $(5,848) $2,452
======== ======
*See "Financial Highlights" on pages 13 - 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
six
months For the fiscal year ended June 30,
ended ----------------------------------
12/31/99 1999 1998 1997 1996 1995
-------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $9.97 $11.85 $10.61 $8.95 $8.68 $8.98
------ ------ ------ ------ ----- -----
Income from investment
operations:
Net investment
income (loss) ... (0.04) .05 .07 .07 .08 .07
Net realized and
unrealized gain
(loss) on
investments ..... 5.34 (0.74) 3.01 1.94 .86 .60
------ ------ ------ ------ ----- -----
Total from investment
operations ...... 5.30 (0.69) 3.08 2.01 .94 .67
------ ------ ------ ------ ----- -----
Less distributions:
From net investment
income .......... (0.02) (0.04) (0.06) (0.09) (0.07) (0.04)
From capital gains (1.44) (1.15) (1.78) (0.26) (0.60) (0.93)
------ ------ ------ ------ ----- -----
Total distributions (1.46) (1.19) (1.84) (0.35) (0.67) (0.97)
------ ------ ------ ------ ----- -----
Net asset value,
end of period .... $13.81 $9.97 $11.85 $10.61 $8.95 $8.68
====== ====== ====== ====== ===== =====
Total return* ...... 54.91% -5.40% 34.49% 23.03% 11.70% 7.98%
Net assets, end of
period (in
millions) ........ $1,863 $1,252 $1,331 $978 $771 $679
Ratio of expenses
to average net
assets ........... 1.42%** 1.30% 1.23% 1.28% 1.25% 1.25%
Ratio of net
investment income
(loss) to average
net assets ....... -0.80%** 0.52% 0.67% 0.78% 0.89% 0.86%
Portfolio turnover
rate ............. 50.93% 149.45%114.34% 109.71% 58.64% 57.45%
*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 B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/4/99*
through
12/31/99
-------
Net asset value,
beginning of period $10.79
-----
Income from investment
operations:
Net investment loss (0.03)
Net realized and
unrealized gain
on investments .. 4.47
-----
Total from investment
operations ....... 4.44
-----
Less distributions:
From net investment
income .......... (0.00)
From capital gains (1.44)
-----
Total distributions (1.44)
-----
Net asset value,
end of period .... $13.79
=====
Total return ....... 42.70%
Net assets, end of
period (in
millions) ........ $4
Ratio of expenses to
average net assets 3.15%**
Ratio of net investment
loss to average
net assets ....... -2.76%**
Portfolio turnover
rate ............. 50.93%***
*Commencement of operations.
**Annualized.
***For the six months ended December 31, 1999.
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/5/99*
through
12/31/99
-------
Net asset value,
beginning of period $10.78
-----
Income from investment
operations:
Net investment loss (0.03)
Net realized and
unrealized gain
on investments .. 4.49
-----
Total from investment
operations ....... 4.46
-----
Less distributions:
From net investment
income .......... (0.00)
From capital gains (1.44)
-----
Total distributions (1.44)
-----
Net asset value,
end of period .... $13.80
=====
Total return ....... 42.94%
Net assets, end of
period (in
millions) ........ $1
Ratio of expenses to
average net assets 2.71%**
Ratio of net investment
loss to average
net assets ....... -2.32%**
Portfolio turnover
rate ............. 50.93%***
*Commencement of operations.
**Annualized.
***For the six months ended December 31, 1999.
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
six For the fiscal period
months year ended June 30, from 9/27/95*
ended ---------------------- through
12/31/99 1999 1998 1997 6/30/96
-------- ------ ------ ------ --------
Net asset value,
beginning of period $9.97 $11.85 $10.62 $8.95 $9.21
------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... (0.03) .09 .10 .09 .12
Net realized and
unrealized gain (loss)
on investments... 5.36 (0.74) 3.00 1.95 .30
------ ------ ------ ------ ------
Total from investment
operations ........ 5.33 (0.65) 3.10 2.04 .42
------ ------ ------ ------ ------
Less distributions:
From net investment
income........... (0.04) (0.08) (0.09) (0.11) (0.08)
From capital gains (1.44) (1.15) (1.78) (0.26) (0.60)
------ ------ ------ ------ ------
Total distributions. (1.48) (1.23) (1.87) (0.37) (0.68)
------ ------ ------ ------ ------
Net asset value,
end of period ..... $13.82 $9.97 $11.85 $10.62 $8.95
====== ====== ====== ====== ======
Total return ....... 55.24% -5.06% 34.71% 23.45% 5.44%
Net assets, end of
period (in
millions) ........ $18 $9 $9 $7 $5
Ratio of expenses
to average net
assets ............ 1.11%** 0.99% 0.97% 1.04% 0.98%**
Ratio of net
investment income
(loss) to average
net assets ........ -0.52%** 0.85% 0.93% 1.02% 2.60%**
Portfolio
turnover rate ..... 50.93% 149.45%114.34% 109.71% 58.64%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED INTERNATIONAL GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
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 either by
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 business day following 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.
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 is
payable by the Fund at the annual rates of: 0.85% of net assets up to $1
billion, 0.83% of net assets over $1 billion and up to $2 billion, 0.80% of net
assets over $2 billion and up to $3 billion, and 0.76% of net assets over $3
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, Class B and Class C shares, the Fund 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
$1,592,657. With respect to Class A, Class B and Class C shares, W&R paid sales
commissions of $977,840 and all expenses in connection with the sale of Fund
shares, except for registration fees and related expenses.
A contingent deferred sales charge ("CDSC") may be assessed against a
shareholder's redemption amount of Class B and Class C shares and is paid to
W&R. The purpose of the deferred sales charge is to compensate W&R for the
costs incurred by the W&R in connection with the sale of Fund shares.
With respect to Class B shares, the amount of the CDSC will be the
following percent of the total amount invested during a calendar year to acquire
the shares or the value of the shares redeemed, whichever is less. Redemption
at any time during the first calendar year of investment, 5%; the second
calendar year, 4%; the third calendar year, 3%; the fourth calendar year, 3%;
the fifth calendar year, 2%; the sixth calendar year, 1% and thereafter, 0%.
If Class C shares are sold within 12 months of buying these shares, a 1%
CDSC will be imposed.
The deferred sales charge will not be imposed on shares representing
payment of dividends or distributions or on amounts which represent an increase
in the value of the shareholder's account resulting from capital appreciation
above the amount paid for shares purchased during the deferred sales charge
period. During the period ended December 31, 1999, W&R received $32 in deferred
sales charges from Class B shares. No CDSC fees were received from Class C
shares.
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.
Under the Distribution and Service Plan adopted by the Fund for Class B and
Class C shares, respectively, the Fund may pay W&R, on an annual basis, a
service fee of up to 0.25% of the average daily net assets of the class to
compensate W&R for providing services to shareholders of that class and/or
maintaining shareholder accounts for that class and a distribution fee of up to
0.75% of the average daily net assets of the class to compensate W&R for
distributing the shares of that class. The Class B Plan and the Class C Plan
each permit W&R to receive compensation, through the distribution and service
fee, respectively, for its distribution activities for that class, which are
similar to the distribution activities described with respect to the Class A
Plan, and for its activities in providing personal services to shareholders of
that class and/or maintaining shareholder accounts of that class, which are
similar to the corresponding activities for which it is entitled to
reimbursement under the Class A Plan.
The Fund paid Directors' fees of $22,673, which are included in other
expenses.
W&R is a subsidiary of 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 and
U.S. Government obligations, aggregated $700,295,172 while proceeds from
maturities and sales aggregated $696,178,441. Purchases of short-term
securities aggregated $1,704,917,784 while proceeds from maturities and sales
aggregated $1,706,547,889.
For Federal income tax purposes, cost of investments owned at December 31,
1999 was $1,134,466,886, resulting in net unrealized appreciation of
$747,477,838, of which $770,133,893 related to appreciated securities and
$22,656,055 related to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $112,236,770 during its fiscal year ended June 30, 1999, which has been
distributed to the Fund's shareholders.
NOTE 5 -- Multiclass Operations
The Fund is authorized to offer four classes of shares, Class A, Class B,
Class C and Class Y, each of which have equal rights as to assets and voting
privileges. Class Y shares are not subject to a sales charge on purchases, are
not subject to a Rule 12b-1 Distribution and Service Plan and are subject to a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of each 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 their
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
Transactions in capital stock are summarized below. Dollar amounts are in
thousands.
For the For the
six months fiscal year
ended ended
December 31, June 30,
1999 1999
------------ ------------
Shares issued from sale
of shares:
Class A ............ 50,872,582 92,391,138
Class B ............. 277,977 ---
Class C ............. 36,809 ---
Class Y ............ 361,575 842,161
Shares issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 13,861,234 13,271,687
Class B ............. 21,920 ---
Class C ............. 3,298 ---
Class Y ............ 131,931 95,800
Shares redeemed:
Class A ............ (55,429,932) (92,479,345)
Class B ............. (1,038) ---
Class C ............. (3) ---
Class Y ............ (112,706) (768,642)
---------- -----------
Increase in outstanding
capital shares 10,023,647 13,352,799
========== ===========
Value issued from sale
of shares:
Class A ............ $579,390 $959,040
Class B ............. 3,471 ---
Class C ............. 466 ---
Class Y ............ 3,969 8,682
Value issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 171,467 127,323
Class B ............. 271 ---
Class C ............. 41 ---
Class Y ............ 1,632 919
Value redeemed:
Class A ............ (630,323) (970,805)
Class B ............. (13) ---
Class C ............. --- ---
Class Y ............ (1,379) (7,997)
-------- --------
Increase in outstanding
capital $128,992 $117,162
======== ========
<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, 1999, and the related statement of operations for the
six-month period then ended, the statements of changes in net assets for the
six-month period then ended and the fiscal year ended June 30, 1999, and the
financial highlights for the six-month period ended December 31, 1999, and for
each of the five fiscal years in the period ended June 30, 1999. 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 as of
December 31, 1999, by correspondence with the custodian. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of United
International Growth Fund, Inc. as of December 31, 1999, the results of its
operations for the six-month period then ended, the changes in its net assets
for the six-month period then ended and the fiscal year ended June 30, 1999, and
the financial highlights for the six-month period ended December 31, 1999, and
for each of the five fiscal years in the period ended June 30, 1999, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
February 4, 2000
<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
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, San Mateo, California
Linda K. Graves, Topeka, Kansas
Joseph Harroz, Jr., Norman, Oklahoma
John F. Hayes, Hutchinson, Kansas
Robert L. Hechler, Overland Park, Kansas
Henry J. Herrmann, Overland Park, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald C. Reimer, Mission Hills, Kansas
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
OFFICERS
Robert L. Hechler, President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Thomas A. Mengel, Vice President
Kristen A. Richards, Vice President and Secretary
Daniel C. Schulte, Vice President
<PAGE>
THE UNITED GROUP OF MUTUAL FUNDS
United Accumulative Fund
United Asset Strategy Fund, Inc.
United Bond Fund
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Income Fund
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Science and Technology Fund
United Small Cap Fund, Inc.
United Vanguard 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(12-99)
printed on recycled paper
