United
Vanguard
Fund, Inc.
ANNUAL
REPORT
--------------------------------------------
For the fiscal year ended September 30, 1996
<PAGE>
FUND MANAGER'S LETTER
- -----------------------------------------------------------------
SEPTEMBER 30, 1996
Dear Shareholder:
This report relates to the operation of United Vanguard Fund, Inc. for the
fiscal year ended September 30, 1996. The discussion, graphs and tables
contained in this report will provide you with information regarding the Fund's
performance during that period.
The past fiscal year was characterized by moderate economic growth,
relatively low inflation and slowing growth rates for corporate earnings.
Interest rates experienced substantial volatility during the past fiscal year.
Various economic indicators displayed conflicting signs of both economic
strength and weakness during the fiscal year, creating uncertainty in the
financial markets.
During the course of the year, the Fund maintained a significant position
in stocks of corporations in the technology sector. Despite strong overall
performance by the stock market during the past fiscal year, certain industries
in the technology sector experienced declining valuations that negatively
affected the Fund's performance. The Fund increased its emphasis on stocks in
pharmaceutical, financial and petroleum-related companies, while reducing
exposure to consumer-related, semiconductor and telecommunications stocks.
The strategies and techniques we applied resulted in the Fund's performance
remaining below that of the indexes charted on the following page. This
underperformance was largely due to our investments in semiconductor,
semiconductor equipment and health care stocks. The indexes shown in the chart
reflect the performance of securities that generally represent the stock market
(the S&P 500 Index) and the universe of funds with similar investment objectives
(the Lipper Growth Fund Universe Average).
Two important issues likely will shape the immediate future. First, U.S.
economic growth appears to be entering a period of slowing. Second, domestic
and foreign political events in the coming months have the potential to alter
the investment environment that U.S. markets have experienced over the past few
years. We will monitor these events and respond to perceived opportunities that
may occur. The Fund intends to continue focusing on investments in companies
with prospects for exceptional growth.
We appreciate your continued confidence.
Respectfully,
James D. Wineland
Manager, United Vanguard Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
UNITED VANGUARD FUND, INC.,
THE S&P 500 INDEX,
AND THE LIPPER GROWTH FUND UNIVERSE AVERAGE
Lipper
United Growth
Vanguard S&P Fund
Fund, 500 Universe
Inc. Index Average
------------------ ----------
09/30/86 Purchase 9,425 10,000 10,000
09/30/87 13,207 14,343 13,323
09/30/88 12,081 12,569 11,728
09/30/89 14,943 16,718 15,067
09/30/90 13,050 15,173 13,049
09/30/91 17,080 19,902 17,538
09/30/92 16,981 22,103 18,847
09/30/93 20,101 24,976 22,285
09/30/94 22,485 25,896 22,583
09/30/95 28,515 33,599 28,760
09/30/96 29,539 40,431 33,333
==== United Vanguard Fund* -- $29,539
++++ S&P's 500 Index -- $40,431
---- Lipper Growth Fund Universe Average -- $33,333
*The value of the investment in the Fund is impacted by the sales load at the
time of the investment and by the ongoing expenses of the Fund.
Annual Average Total Return +
Class A++ Class Y
-----------------------------
Year Ended
9/30/96 -2.37% 3.80%
5 Years Ended
9/30/96 10.26% N/A
10 Years Ended
9/30/96 11.44% N/A
Life of Class Y +++ N/A 2.71%
+ Total return for the Class Y shares may be greater than that of the Class A
shares because the Fund's Class Y shares are not subject to a sales load or
12b-1 fees.
++ Performance data quoted represents past performance and is based on
deduction of a 5.75% sales load on the initial purchase in each of the
three periods. Investment return and principal value will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their
original cost.
+++ 9/8/95 (the date on which Fund Class Y shares were first acquired by
shareholders) through 9/30/96.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
United Vanguard Fund, Inc.
PORTFOLIO STRATEGY:
Common stock of companies OBJECTIVE: Appreciation of
thought to have superior capital.
prospects for growth and/or
other unique investment STRATEGY: Invests in securities
characteristics primarily issued by
companies believed to
May invest in Foreign have the potential for
Securities appreciation in
value and seeks to
Cash Reserves achieve proper timing of purchases and
sales relative to market conditions.
(May purchase securities subject to
repurchase agreements. May invest in
certain options and futures.)
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the Vanguard Fund
from time to time.
Moving into cash reserve positions at
times thought to be near a major stock
market peak allows the Fund the
opportunity to capture profits and
attempts to cushion the impact of market
declines. The added flexibility
provided by our CASH RESERVES STRATEGY
has from time to time been an important
element in our past success and, when
deemed appropriate, may be used in the
management of the portfolio in the
future.
FOUNDED: 1969
SCHEDULED DIVIDEND FREQUENCY: SEMIANNUALLY (June and December)
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended September 30, 1996
- ---------------------------------------------
DIVIDENDS PAID $0.04
=====
CAPITAL GAINS DISTRIBUTION $0.45
=====
NET ASSET VALUE ON
9/30/96 $8.77 adjusted to:$9.22 (A)
9/30/95 8.97
-----
CHANGE PER SHARE $0.25
=====
(A)This number includes the capital gains distribution of $0.45 paid in December
1995 added to the actual net asset value on September 30, 1996.
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
- ------ ----------- ------------
1-year period ended 9-30-96 -2.37% 3.59%
5-year period ended 9-30-96 10.26% 11.58%
10-year period ended 9-30-96 11.44% 12.10%
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 September 30, 1996, United Vanguard Fund, Inc. had net assets totaling
$1,295,168,954 invested in a diversified portfolio of:
78.64% Common Stocks
20.06% Cash and Cash Equivalents
1.30 Preferred Stock
As a shareholder of United Vanguard Fund, Inc., for every $100 you had invested
on September 30, 1996, your Fund owned:
$36.53 Manufacturing Stocks
20.70 Services Stocks
20.06 Cash and Cash Equivalents
12.67 Finance, Insurance and Real Estate Stocks
5.29 Transportation, Communication, Electric
and Sanitary Services Stocks
1.53 Wholesale and Retail Trade Stocks
1.30 Preferred Stock
1.17 Contract Construction Stocks
0.75 Miscellaneous Investing Institutions Stocks
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1996
Shares Value
COMMON STOCKS
Amusement and Recreation Services - 0.49%
Walt Disney Company (The) .............. 100,000 $ 6,337,500
Business Services - 20.21%
America Online, Inc.* .................. 500,000 17,812,500
Broderbund Software, Inc.* ............. 633,000 18,198,750
cisco Systems, Inc.* ................... 300,000 18,618,600
CUC International Inc.* ................ 800,000 31,900,000
Computer Associates International, Inc. 400,000 23,900,000
Electronic Arts Inc.* .................. 500,000 18,656,000
Electronic Data Systems Corporation .... 450,000 27,618,750
First Data Corporation ................. 400,000 32,650,000
Informix Corporation* .................. 1,246,200 34,815,089
Intuit Inc.* ........................... 304,200 9,544,275
Microsoft Corporation* ................. 100,000 13,181,200
Oracle Systems Corporation* ............ 350,000 14,896,700
Total ................................. 261,791,864
Chemicals and Allied Products - 13.17%
ALZA Corporation* ..................... 750,000 20,156,250
Amgen Inc.* ............................ 300,000 18,956,100
Biogen, Inc.* .......................... 150,000 11,418,750
Ciba-Geigy AG, Registered (A) .......... 22,000 28,122,410
Eastman Chemical Company ............... 250,000 14,593,750
Johnson & Johnson ...................... 450,000 23,062,500
Merck & Co., Inc. ...................... 350,000 24,631,250
Pfizer Inc. ............................ 375,000 29,671,875
Total ................................. 170,612,885
Communication - 4.26%
British Sky Broadcasting Group
plc, ADS .............................. 200,000 11,000,000
MFS Communications Company, Inc.* ...... 700,000 30,493,400
Vodafone Group Plc, ADR ................ 400,000 13,650,000
Total ................................. 55,143,400
Depository Institutions - 4.26%
HSBC Holdings Plc (A) .................. 1,705,316 31,645,676
Wells Fargo & Company .................. 90,400 23,504,000
Total ................................. 55,149,676
Electric, Gas and Sanitary Services - 1.03%
Sonat Inc. ............................. 300,000 13,275,000
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1996
Shares Value
COMMON STOCKS (Continued)
Electronic and Other Electric Equipment - 9.34%
Ascend Communications, Inc.* ........... 150,000 $ 9,909,300
Atmel Corporation* ..................... 450,000 13,865,400
Emerson Electric Co. ................... 175,000 15,771,875
Intel Corporation ...................... 300,000 28,631,100
Motorola, Inc. ......................... 300,000 15,487,500
Nokia Corporation, Series K (A) ........ 500,000 22,064,782
Xilinx, Inc.* .......................... 450,000 15,271,650
Total ................................. 121,001,607
Fabricated Metal Products - 1.11%
Gillette Company (The) ................. 200,000 14,425,000
General Merchandise Stores - 1.53%
Wal-Mart Stores, Inc. .................. 750,000 19,781,250
Holding and Other Investment Offices - 0.75%
Grupo Carso, S.A. de C.V.,
Series 1A (A) ......................... 2,100,000 9,658,052
Industrial Machinery and Equipment - 6.12%
Applied Materials, Inc.* ............... 500,000 13,843,500
Mannesmann AG (A) ...................... 60,000 22,488,697
Seagate Technology, Inc.* .............. 500,000 27,937,500
Silicon Valley Group, Inc.* ............ 850,000 15,033,950
Total ................................. 79,303,647
Instruments and Related Products - 2.34%
General Motors Corporation, Class H .... 175,000 10,106,250
SMH Swiss Corporation for Microelectronics
and Watchmaking Industries Ltd. (A) ... 30,000 20,178,514
Total ................................. 30,284,764
Insurance Carriers - 5.18%
American International Group, Inc. ..... 200,000 20,150,000
Chubb Corporation (The) ................ 100,000 4,600,000
MBIA Inc. .............................. 300,300 25,750,725
United HealthCare Corporation .......... 400,000 16,650,000
Total ................................. 67,150,725
Nondepository Institutions - 3.23%
Federal National Mortgage Association .. 1,200,000 41,850,000
Paper and Allied Products - 0.66%
International Paper Company ............ 200,000 8,500,000
Petroleum and Coal Products - 1.93%
Royal Dutch Petroleum Company .......... 160,000 24,980,000
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1996
Shares Value
COMMON STOCKS (Continued)
Printing and Publishing - 1.86%
Berkshire Hathaway Inc., Class B* ....... 5,000 $ 5,365,000
News Corporation Limited (The), ADR .... 900,000 18,787,500
Total ................................. 24,152,500
Special Trade Contractors - 1.17%
Telefonaktiebolaget LM Ericsson, ADR,
Class B ............................... 600,000 15,187,200
TOTAL COMMON STOCKS - 78.64% $1,018,585,070
(Cost: $718,745,429)
PREFERRED STOCK - 1.30%
Business Services
SAP Aktiengesellschaft (A) ............. 100,000 $ 16,807,549
(Cost: $16,192,236)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Chemicals and Allied Products - 0.58%
Hercules, Inc.,
5.34%, 10-28-96 ....................... $ 7,540 7,509,802
Communication - 0.91%
Bell Atlantic Financial Services Inc.,
5.43%, 10-24-96 ....................... 6,000 5,979,185
GTE Corporation,
5.42%, 10-8-96 ........................ 5,780 5,773,909
Total ................................. 11,753,094
Depository Institutions - 0.02%
U.S. Bancorp,
Master Note ........................... 242 242,000
Electric, Gas and Sanitary Services - 3.40%
Dominion Resources Inc.,
5.42%, 10-28-96 ....................... 5,600 5,577,236
Michigan Consolidated Gas Co.,
5.35%, 10-18-96 ....................... 4,180 4,169,440
Public Service Company of Colorado,
5.56%, 10-4-96 ........................ 2,050 2,049,050
Public Service Electric & Gas Co.:
5.47%, 10-9-96 ........................ 6,000 5,992,707
5.5%, 10-16-96 ........................ 4,130 4,120,535
5.54%, 10-28-96 ....................... 7,600 7,568,422
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Electric, Gas and Sanitary Services (Continued)
Questar Corp.:
5.32%, 10-2-96 ........................ $ 5,000 $ 4,999,261
5.4%, 10-31-96 ........................ 3,000 2,986,500
Western Resources Inc.,
5.58%, 10-15-96 ....................... 6,630 6,615,613
Total.................................. 44,078,764
Food and Kindred Products - 3.25%
ConAgra, Inc.,
5.55%, 11-1-96......................... 15,435 15,361,234
General Mills, Inc.,
Master Note ........................... 9,181 9,181,000
Quaker Oats Co.,
5.67%, 10-21-96 ....................... 5,570 5,552,454
Ralston Purina Co.,
5.47%, 10-25-96 ....................... 2,000 1,992,707
Seagram (Joseph E.) & Sons Inc.:
5.34%, 10-17-96 ....................... 6,095 6,080,534
5.35%, 10-17-96 ....................... 3,905 3,895,715
Total ................................. 42,063,644
Insurance Carriers - 1.34%
Transamerica Finance Corporation,
5.42%, 10-23-96 ....................... 7,500 7,475,158
USAA Capital Corp.,
5.4%, 11-7-96 ......................... 10,000 9,944,500
Total ................................. 17,419,658
Nondepository Institutions - 4.55%
Ford Credit Europe PLC:
5.36%, 10-21-96 ....................... 20,000 19,940,445
5.38%, 10-21-96 ....................... 15,000 14,955,167
International Business Machines Credit Corp.,
5.35%, 10-25-96 ....................... 12,870 12,824,097
Island Finance Puerto Rico Inc.,
5.41%, 11-8-96 ........................ 10,000 9,942,894
Textron Financial Corp.,
5.47%, 10-18-96 ....................... 1,345 1,341,526
Total ................................. 59,004,129
Personal Services - 0.92%
Block Financial Corp.,
5.35%, 10-15-96 ....................... 11,960 11,935,117
Petroleum and Coal Products - 0.45%
Kerr-McGee Credit Corp.,
5.45%, 10-15-96 ....................... 5,865 5,852,569
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Tobacco Products - 0.72%
B.A.T. Capital Corp.,
5.37%, 10-3-96 ........................ $ 9,325 $ 9,322,218
Transportation Equipment - 0.92%
Echlin Inc.,
5.41%, 11-8-96 ........................ 2,305 2,291,837
Textron Inc.:
5.48%, 10-4-96 ........................ 3,900 3,898,219
5.54%, 10-22-96 ....................... 5,730 5,711,483
Total ................................. 11,901,539
Wholesale Trade - Nondurable Goods - 0.01%
Sara Lee Corporation,
Master Note ........................... 32 32,000
Total Commercial Paper - 17.07% 221,114,534
Commercial Paper (backed by irrevocable
bank letter of credit)
Electric, Gas and Sanitary Services - 0.69%
AES Barbers Point Inc. (Bank of America NT & SA),
5.37%, 10-18-96 ....................... 8,980 8,957,228
Petroleum and Coal Products - 1.16%
Petroleo Brasileiro S.A. - Petrobras
(Barclays Bank PLC),
5.37%, 10-11-96 ....................... 15,000 14,977,625
Rubber and Miscellaneous Plastics Products - 0.39%
Michelin North America Inc. (Societe Generale),
5.37%, 10-7-96 ........................ 5,000 4,995,525
Total Commercial Paper (backed by irrevocable
bank letter of credit) - 2.24% 28,930,378
Municipal Obligations - 0.77%
California
Oakland-Alameda County Coliseum Lease
Revenue Bonds (Oakland Coliseum Project),
1995 Series B-1 (Canadian Imperial Bank
of Commerce):
5.43%, 10-4-96 ........................ 4,000 4,000,000
5.4%, 10-10-96 ........................ 6,000 6,000,000
Total ................................. 10,000,000
TOTAL SHORT-TERM SECURITIES - 20.08% $ 260,044,912
(Cost: $260,044,912)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1996
Value
TOTAL INVESTMENT SECURITIES - 100.02% $1,295,437,531
(Cost: $994,982,577)
LIABILITIES, NET OF
CASH AND OTHER ASSETS - (0.02%) (268,577)
NET ASSETS - 100.00% $1,295,168,954
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) Listed on an exchange outside the United States.
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 VANGUARD FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
Assets
Investment securities -- at value
(Notes 1 and 3) ................................. $1,295,437,531
Cash ............................................ 93,165
Receivables:
Investment securities sold ...................... 2,190,000
Dividends and interest .......................... 1,435,538
Fund shares sold ................................ 648,169
Prepaid insurance premium ........................ 37,660
--------------
Total assets .................................. 1,299,842,063
--------------
Liabilities
Payable for Fund shares redeemed ................. 3,068,006
Payable for investment securities purchased ...... 954,525
Accrued service fee .............................. 397,100
Accrued transfer agency and dividend
disbursing ...................................... 195,626
Accrued accounting services fee .................. 8,333
Other ............................................ 49,519
--------------
Total liabilities ............................. 4,673,109
--------------
Total net assets ............................. $1,295,168,954
==============
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 147,614,500
Additional paid-in capital ...................... 696,539,373
Accumulated undistributed income:
Accumulated undistributed net investment
income ......................................... 3,979,782
Accumulated undistributed net realized gain on
investment transactions ....................... 146,580,304
Net unrealized appreciation in value of
investments at end of period ................... 300,454,995
--------------
Net assets applicable to outstanding
units of capital ............................. $1,295,168,954
==============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $8.77
Class Y .......................................... $8.78
Capital shares outstanding
Class A .......................................... 147,141,646
Class Y .......................................... 472,854
Capital shares authorized .......................... 600,000,000
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended SEPTEMBER 30, 1996
Investment Income
Income:
Interest ........................................ $ 9,769,244
Dividends ....................................... 8,726,688
------------
Total income .................................. 18,495,932
------------
Expenses (Note 2):
Investment management fee ....................... 9,020,391
Service fee - Class A ........................... 2,046,992
Transfer agency and dividend disbursing - Class A 2,198,235
Custodian fees .................................. 212,114
Accounting services fee ......................... 100,000
Audit fees ...................................... 35,556
Legal fees ...................................... 17,206
Shareholder servicing - Class Y.................. 6,852
Other ........................................... 258,567
------------
Total expenses ................................ 13,895,913
------------
Net investment income ........................ 4,600,019
------------
Realized and Unrealized Gain (Loss) on Investments
Realized net gain on securities .................. 146,572,520
Realized net loss on foreign currency
transactions .................................... (359,457)
------------
Realized net gain on investments ................ 146,213,063
Unrealized depreciation in value of investments
during the period ............................... (104,771,885)
------------
Net gain on investments ....................... 41,441,178
------------
Net increase in net assets resulting
from operations ............................ $ 46,041,197
============
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year
ended September 30,
-----------------------------
1996 1995
Increase in Net Assets -------------- ------------
Operations:
Net investment income ............ $ 4,600,019 $ 9,556,581
Realized net gain on investments . 146,213,063 68,377,208
Unrealized appreciation
(depreciation) ................. (104,771,885) 194,298,937
-------------- --------------
Net increase in net assets
resulting from operations ..... 46,041,197 272,232,726
-------------- --------------
Dividends to shareholders from:*
Net investment income
Class A ........................ (5,362,420) (4,857,502)
Class Y ........................ (18,377) ---
Realized gains on securities
transactions
Class A ........................ (64,486,580) (81,376,803)
Class Y ........................ (115,078) ---
-------------- --------------
(69,982,455) (86,234,305)
Capital share transactions: -------------- --------------
Proceeds from sale of shares:
Class A (10,454,280 and 24,614,638
shares, respectively) ......... 89,257,617 181,684,410
Class Y (575,709 and 196,892
shares, respectively) ......... 5,007,444 1,781,870
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (8,400,456 and
622,043 shares, respectively).. 68,790,612 4,701,960
Class Y (16,225 and 0
shares, respectively) ......... 133,455 ---
Payments for shares redeemed:
Class A (15,014,137 and 13,070,843
shares, respectively) ......... (128,046,129) (101,713,982)
Class Y (315,972 and 0
shares, respectively) ......... (2,748,347) ---
-------------- --------------
Net increase in net assets
resulting from capital
share transactions ............ 32,394,652 86,454,258
-------------- --------------
Total increase ................ 8,453,394 272,452,679
Net Assets
Beginning of period ............... 1,286,715,560 1,014,262,881
-------------- --------------
End of period, including undistributed
net investment income of $3,979,782
and $5,120,017, respectively ..... $1,295,168,954 $1,286,715,560
============== ==============
*See "Financial Highlights" on pages 15 - 16.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the fiscal year ended
September 30,
------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
Net asset value,
beginning of period $8.97 $7.73 $7.10 $6.03 $6.36
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.03 0.07 .00 .04 .06
Net realized and
unrealized gain
(loss) on
investments...... 0.26 1.82 .83 1.07 (0.10)
----- ----- ----- ----- -----
Total from investment
operations ........ 0.29 1.89 .83 1.11 (0.04)
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income........... (0.04) (0.03) (0.02) (0.04) (0.09)
Distribution from
capital gains.... (0.45) (0.62) (0.18) (0.00) (0.20)
----- ----- ----- ----- -----
Total distributions. (0.49) (0.65) (0.20) (0.04) (0.29)
----- ----- ----- ----- -----
Net asset value,
end of period ..... $8.77 $8.97 $7.73 $7.10 $6.03
===== ===== ===== ===== =====
Total return*....... 3.59% 26.82% 11.86% 18.38% -0.58%
Net assets, end of
period (000
omitted) ......... $1,291,017$1,284,951$1,014,263$921,816 $843,978
Ratio of expenses
to average net
assets ............ 1.09% 1.05% 1.05% 0.97% 0.96%
Ratio of net
investment income
to average net
assets ............ 0.36% 0.87% 0.04% 0.50% 0.96%
Portfolio
turnover rate ..... 57.10% 30.01% 36.70% 62.12% 84.82%
Average commission
rate paid ......... $0.0347
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the
fiscal period
year from 9/08/95
ended through
9/30/96 9/30/95*
-------- --------
Net asset value,
beginning of period $8.97 $9.05
----- -----
Income from investment
operations:
Net investment
income .......... 0.07 0.00
Net realized and
unrealized gain
(loss) on
investments...... 0.24 (0.08)
----- -----
Total from investment
operations ........ 0.31 (0.08)
----- -----
Less distributions:
Dividends from net
investment
income........... (0.05) (0.00)
Distribution from
capital gains.... (0.45) (0.00)
----- -----
Total distributions. (0.50) (0.00)
----- -----
Net asset value,
end of period ..... $8.78 $8.97
===== =====
Total return ....... 3.80% -0.88%
Net assets, end of
period (000
omitted) ......... $4,152 $1,765
Ratio of expenses
to average net
assets........... 0.91% 0.00%
Ratio of net
investment income
to average net
assets ............ 0.69% 0.00%
Portfolio
turnover rate ..... 57.10% 30.01%**
Average commission
rate paid ......... $0.0347
*On August 15, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class A shares.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 -- Significant Accounting Policies
United Vanguard 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 appreciation through a diversified holding of
securities issued primarily by companies that the Fund's investment manager
believes have appreciation possibilities and through proper timing of purchases
and sales of securities. The following is a summary of significant accounting
policies consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a pricing service or dealer in bonds.
Convertible bonds are valued using this pricing system only on days when
there is no sale reported. Stocks which are traded over-the-counter are
priced using Nasdaq (National Association of Securities Dealers Automated
Quotations System) which provides information on bid and asked or closing
prices quoted by major dealers in such stocks. 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. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on the accrual basis. See Note 3 --
Investment Security 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. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code. In
addition, the Fund intends to pay distributions as required to avoid
imposition of excise tax. Accordingly, provision has not been made for
Federal income taxes. See Note 4 -- Federal Income Tax Matters.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards. At September 30, 1996, $359,457 was reclassified between
accumulated undistributed net investment income and accumulated
undistributed net realized gain on investment transactions.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .30% of net assets and (ii)
a "Group" fee computed each day on the combined net asset values of all of the
funds in the United Group of mutual funds (approximately $14.7 billion of
combined net assets at September 30, 1996) at annual rates of .51% of the first
$750 million of combined net assets, .49% on that amount between $750 million
and $1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between
$2.25 billion and $3 billion, .43% between $3 billion and $3.75 billion, .40%
between $3.75 billion and $7.5 billion, .38% between $7.5 billion and $12
billion, and .36% of that amount over $12 billion. The Fund accrues and pays
this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A shares, the Fund also pays WARSCO a monthly per account charge
for transfer agency and dividend disbursement services of $1.3125 for each
shareholder account which was in existence at any time during the prior month
($1.0208 per account prior to April 1, 1996), plus $0.30 for each account on
which a dividend or distribution of cash or shares had a record date in that
month. With respect to Class Y shares, the Fund pays WARSCO a monthly fee at an
annual rate of .15% of the average daily net assets of the class for the
preceding month. The Fund also reimburses W&R and WARSCO for certain out-of-
pocket costs.
As principal underwriter for the Fund's shares, W&R received direct and
indirect gross sales commissions for Class A shares (which are not an expense of
the Fund) of $3,514,918, out of which W&R paid sales commissions of $1,923,568
and all expenses in connection with the sale of Fund shares, except for
registration fees and related expenses.
Under a Service Plan for Class A shares adopted by the Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940, the Fund may pay monthly a
fee to W&R in an amount not to exceed .25% of the Fund's average annual net
assets. The fee is to be paid to reimburse W&R for amounts it expends in
connection with the provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
The Fund paid Directors' fees of $50,747.
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 Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $630,270,590 while proceeds from maturities and
sales aggregated $755,036,051. Purchases of short-term securities aggregated
$2,134,969,554 while proceeds from maturities and sales aggregated
$2,049,915,219.
For Federal income tax purposes, cost of investments owned at September 30,
1996 was $994,982,577, resulting in net unrealized appreciation of $300,454,954,
of which $310,814,272 related to appreciated securities and $10,359,318 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $146,572,520 during its fiscal year ended September 30, 1996, of which a
portion was paid to shareholders during the period ended September 30, 1996.
Remaining net capital gains will be distributed to the Fund's shareholders.
NOTE 5 -- Multiclass Operations
On August 15, 1995, the Fund was authorized to offer investors a choice of two
classes of shares, Class A and Class Y, each of which has equal rights as to
assets and voting privileges. Class Y shares are not subject to a sales charge
on purchases; they are not subject to a Rule 12b-1 Service Plan and have a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of either class are
offered is contained in the prospectus and 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 the day adjusted for the prior day's
capital share activity.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United Vanguard Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United Vanguard Fund, Inc. (the
"Fund") at September 30, 1996, the results of its operations for the year then
ended and the changes in its net assets and the financial highlights for each of
the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Kansas City, Missouri
November 8, 1996
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends and long-term capital gains below, multiplied by
the number of shares owned by you on the record dates, will give you the total
amounts to be reported in your Federal income tax return for the years in which
they were received or reinvested.
PER-SHARE AMOUNTS REPORTABLE AS:
-----------------------------------------------
For Individuals For Corporations
----------------- -----------------------------
Record Ordinary Long-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
- --------- ----- ---------------------------------------------------
Class A
12-15-95 $0.477 $0.0445 $0.4325 $0.0188 $0.0257 $0.4325
06-14-96 .010 .0100 --- .0061 .0039 ---
------- ------- ------- ------- ------- -------
Total $0.487 $0.0545 $0.4325 $0.0249 $0.0296 $0.4325
======= ======= ======= ======= ======= =======
Class Y
12-15-95 $0.478 $0.0455 $0.4325 $0.0195 $0.0260 $0.4325
06-14-96 .017 .0170 --- .0104 .0066 ---
------- ------- ------- ------- ------- -------
Total $0.495 $0.0625 $0.4325 $0.0299 $0.0326 $0.4325
======= ======= ======= ======= ======= =======
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction in the
year received as provided by Section 243 of the Internal Revenue Code.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Shareholders are advised to consult with their tax adviser concerning the tax
treatment of dividends and distributions from the Fund.
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Doyle Patterson, Kansas City, Missouri
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
Sharon K. Pappas, Vice President and Secretary
Carl E. Sturgeon, Vice President
James D. Wineland, Vice President
This report is submitted for the general information of the shareholders of
United Vanguard Fund, Inc. It is not authorized for distribution to prospective
investors in the Fund unless accompanied with or preceded by the United Vanguard
Fund, Inc. current prospectus.
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
<PAGE>
The United Group of Mutual Funds
United Cash Management, Inc.
United Government Securities Fund, Inc.
United Bond Fund
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Continental Income Fund, Inc.
United Retirement Shares, Inc.
United Asset Strategy Fund, Inc.
United Income Fund
United Accumulative Fund
United Vanguard Fund, Inc.
United New Concepts Fund, Inc.
United Science and Technology Fund
United International Growth Fund, Inc.
United Gold & Government Fund, Inc.
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(913) 236-1303
Our INTERNET address is:
http://www.waddell.com
NUR1005A(9-96)
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