United
Vanguard
Fund, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 1996
<PAGE>
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.
<PAGE>
PRESIDENT'S LETTER
- -----------------------------------------------------------------
MARCH 31, 1996
Dear Shareholder:
As President of your Fund, I would like to thank you for your continued
confidence in our products and services. We strive to provide the best service
possible to our shareholders: from the Fund's manager, to Waddell & Reed's
customer service representatives, to your personal account representative and
the Waddell & Reed office nearest you.
While personalized service has become increasingly rare in the investment
industry, we remain committed to locally based account representatives who
provide the personal service you need. They are ready to assist you through
regular reviews of your financial plan and to answer any financial questions you
may have. Your account representative is anxious to help you plan for your
retirement, fund a child's education or make plans for other long-term financial
goals.
We want to help you open the door to a better financial future. We will
continue to help you meet your specific financial needs through quality
investment products and personalized service that makes the investment process
more convenient and accessible for you.
Should you have any questions about your account or other financial issues,
contact your personal account representative 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 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)
<PAGE>
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Six Months Ended March 31, 1996
- ---------------------------------------------
DIVIDENDS PAID $0.03
======
CAPITAL GAINS DISTRIBUTION $0.45
======
NET ASSET VALUE ON
3/31/96 $8.41 adjusted to:$8.86 (A)
9/30/95 8.97
-----
CHANGE PER SHARE $(0.11)
=====
(A)This number includes the capital gains distribution of $0.45 paid in December
1995 added to the actual net asset value on March 31, 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 3-31-96 15.83% 22.90%
5-year period ended 3-31-96 10.93% 12.25%
10-year period ended 3-31-96 10.39% 11.04%
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 March 31, 1996, United Vanguard Fund, Inc. had net assets totaling
$1,273,175,884 invested in a diversified portfolio of:
84.27% Common Stocks
15.73% Cash and Cash Equivalents
As a shareholder of United Vanguard Fund, Inc., for every $100 you had invested
on March 31, 1996, your Fund owned:
$28.50 Manufacturing Stocks
26.62 Services Stocks
15.73 Cash and Cash Equivalents
12.18 Transportation, Communication, Electric
and Sanitary Services Stocks
10.09 Finance, Insurance and Real Estate Stocks
4.24 Miscellaneous Investing Institutions Stocks
1.68 Contract Construction Stocks
0.96 Wholesale and Retail Trade Stocks
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1996
Shares Value
COMMON STOCKS
Amusement and Recreation Services - 1.00%
Walt Disney Company (The) .............. 200,000 $ 12,775,000
Business Services - 19.92%
Adobe Systems Incorporated ............. 450,000 14,484,150
America Online, Inc.* .................. 600,000 33,712,200
Broderbund Software, Inc.* ............. 470,000 17,625,000
CUC International Inc.* ................ 675,000 19,743,750
Cerner Corporation* .................... 760,900 17,500,700
First Data Corporation ................. 500,000 35,250,000
General Motors Corporation, Class E .... 500,000 28,500,000
Informix Corporation* .................. 1,400,000 37,011,800
Intuit Inc.* ........................... 250,000 11,250,000
Microsoft Corporation* ................. 100,000 10,306,200
Oracle Systems Corporation* ............ 600,000 28,200,000
Total ................................. 253,583,800
Chemicals and Allied Products - 2.97%
ALZA Corporation* ..................... 651,000 20,018,250
Biogen, Inc.* .......................... 300,000 17,812,500
Total ................................. 37,830,750
Communication - 13.86%
British Sky Broadcasting Group
plc, ADS .............................. 217,000 8,707,125
Comcast Corporation, Class A ........... 1,250,000 22,108,750
Infinity Broadcasting Corporation,
Class A* .............................. 350,000 15,181,250
MFS Communications Company, Inc.* ...... 500,000 31,156,000
Nokia Corporation, Series K (A) ........ 999,200 34,773,388
Tele-Communications, Inc., Class A* .... 1,000,000 18,562,000
Telefonaktiebolaget LM Ericsson, ADR,
Class B ............................... 1,000,000 21,437,000
Viacom Inc., Class B* .................. 226,442 9,538,869
Vodafone Group Plc, ADR ................ 400,000 15,000,000
Total ................................. 176,464,382
Depository Institutions - 2.01%
HSBC Holdings Plc (A) .................. 1,705,316 25,577,866
Electronic and Other Electric Equipment - 11.27%
AMP Incorporated ....................... 600,000 24,825,000
Ascend Communications, Inc.* ........... 600,000 32,362,200
Emerson Electric Co. ................... 275,000 22,206,250
Intel Corporation ...................... 400,000 22,724,800
Motorola, Inc. ......................... 600,000 31,800,000
Xilinx, Inc.* .......................... 300,000 9,562,500
Total ................................. 143,480,750
Food and Kindred Products - 0.99%
PepsiCo, Inc. .......................... 200,000 12,650,000
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1996
Shares Value
COMMON STOCKS (Continued)
Food Stores - 0.96%
Cifra, S.A. de C.V., Series C (A)* ..... 9,315,000 $ 12,217,612
Health Services - 1.25%
Beverly Enterprises, Inc.* ............. 800,000 8,800,000
Quorum Health Group, Inc.* ............. 300,000 7,068,600
Total ................................. 15,868,600
Holding and Other Investment Offices - 2.23%
First Pacific Company Limited (A) ...... 8,420,179 11,976,101
Grupo Carso, S.A. de C.V.,
Series 1A (A)* ........................ 2,100,000 16,397,739
Total ................................. 28,373,840
Industrial Machinery and Equipment - 10.36%
Applied Materials, Inc.* ............... 600,000 20,887,200
cisco Systems, Inc.* ................... 1,100,000 51,080,700
Mannesmann AG (A) ...................... 60,000 21,868,437
Silicon Graphics, Inc.* ................ 700,000 17,500,000
Silicon Valley Group, Inc.* ............ 850,000 20,612,500
Total ................................. 131,948,837
Instruments and Related Products - 1.09%
Teradyne, Inc.* ........................ 825,000 13,818,750
Insurance Carriers - 6.34%
American International Group, Inc. ..... 30,000 2,808,750
MBIA, Inc. ............................. 300,300 22,522,500
United HealthCare Corporation .......... 900,000 55,350,000
Total ................................. 80,681,250
Motion Pictures - 0.21%
Tele-Communications, Inc., Class A* .... 100,000 2,625,000
Nondepository Institutions - 3.75%
Federal National Mortgage Association .. 1,500,000 47,812,500
Paper and Allied Products - 0.62%
International Paper Company ............ 200,000 7,875,000
Personal Services - 1.70%
Block (H&R), Inc. ...................... 600,000 21,675,000
Printing and Publishing - 1.63%
News Corporation Limited (The), ADR .... 900,000 20,700,000
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1996
Shares Value
COMMON STOCKS (Continued)
Transportation Equipment - 0.89%
AB Volvo (A) ........................... 490,000 $ 11,390,579
Wholesale Trade - Nondurable Goods - 1.22%
Gillette Company (The) ................. 300,000 15,525,000
TOTAL COMMON STOCKS - 84.27% $1,072,874,516
(Cost: $716,845,878)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Auto Repair, Services and Parking - 0.96%
Hertz Corp.,
5.23%, 4-1-96 ......................... $12,185 12,185,000
Chemicals and Allied Products - 1.18%
Air Products and Chemicals, Inc.,
5.35%, 5-28-96......................... 1,000 991,529
Ciba-Geigy Corp.,
5.35%, 4-24-96......................... 5,650 5,630,688
PPG Industries, Inc.,
5.2%, 4-8-96........................... 8,365 8,356,542
Total ................................. 14,978,759
Communication - 1.75%
AT&T Capital Corp.,
5.3%, 4-11-96 ......................... 4,370 4,363,566
GTE Corporation:
5.5%, 4-4-96........................... 10,015 10,010,410
5.49%, 4-26-96......................... 3,445 3,431,866
5.5%, 4-29-96.......................... 4,460 4,440,921
Total ................................. 22,246,763
Depository Institutions - 0.23%
U.S. Bancorp,
Master Note ........................... 2,901 2,901,000
Electric, Gas and Sanitary Services - 3.06%
Carolina Power & Light Co.,
5.3%, 5-3-96........................... 5,000 4,976,444
Georgia Power Co.,
5.18%, 5-6-96.......................... 5,370 5,342,956
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Electric, Gas and Sanitary Services (Continued)
Nicor Inc.,
5.24%, 4-2-96 ......................... $11,785 $ 11,783,285
Public Service Company of Colorado:
5.55%, 4-11-96......................... 5,825 5,816,020
5.57%, 5-8-96.......................... 3,570 3,549,563
Public Service Electric & Gas Co.,
5.47%, 4-17-96......................... 7,565 7,546,609
Total.................................. 39,014,877
Food and Kindred Products - 0.59%
ConAgra, Inc.,
5.55%, 4-24-96......................... 6,615 6,591,544
General Mills, Inc.,
Master Note ........................... 973 973,000
Total ................................. 7,564,544
Instruments and Related Products - 0.62%
Baxter International Inc.:
5.45%, 4-11-96......................... 5,000 4,992,430
5.35%, 4-12-96......................... 2,915 2,910,235
Total ................................. 7,902,665
Insurance Carriers - 0.70%
Safeco Credit Co. Inc.,
5.34%, 4-25-96......................... 9,000 8,967,960
Miscellaneous Retail - 0.45%
Toys "R" Us Inc.,
5.32%, 4-26-96......................... 5,705 5,683,923
Nondepository Institutions - 1.81%
General Motors Acceptance Corporation,
5.34%, 4-25-96......................... 8,780 8,748,743
International Business Machines Credit Corp.,
5.33%, 4-11-96 ........................ 2,435 2,431,395
Textron Financial Corp.,
5.65%, 4-29-96 ....................... 3,000 2,986,817
Transamerica Finance Corporation,
5.22%, 4-4-96.......................... 8,850 8,846,150
Total ................................. 23,013,105
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Personal Services - 0.21%
Block Financial Corp.,
5.42%, 4-26-96......................... $ 2,630 $ 2,620,101
Petroleum and Coal Products - 0.98%
Kerr-McGee Credit Corp.:
5.53%, 4-22-96......................... 11,555 11,517,726
5.63%, 5-2-96 ......................... 1,000 995,152
Total ................................. 12,512,878
Printing and Publishing - 0.88%
American Greetings Corporation,
5.3%, 4-9-96 .......................... 11,265 11,251,732
192 ..............................192,000
Tobacco Products - 2.17%
B.A.T. Capital Corp.:
5.27%, 4-11-96......................... 12,000 11,982,433
5.27%, 5-6-96.......................... 11,140 11,082,923
Philip Morris Companies Inc.,
5.3%, 4-23-96 ......................... 4,535 4,520,312
Total ................................. 27,585,668
Transportation Equipment - 0.18%
Dana Credit Corp.,
5.72%, 4-24-96 ........................ 2,315 2,306,540
Wholesale Trade - Nondurable Goods - 0.01%
Sara Lee Corporation,
Master Note ........................... 192 192,000
Total Commercial Paper - 15.78% 200,927,515
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Municipal Obligation - 0.28%
Texas
Gulf Coast Waste Disposal Authority,
Solid Waste Disposal Revenue Bonds
(Amoco Oil Company Project), Taxable
Series 1993,
5.35%, 4-9-96.......................... $ 3,570 $ 3,570,000
TOTAL SHORT-TERM SECURITIES - 16.06% $ 204,497,515
(Cost: $204,497,515)
TOTAL INVESTMENT SECURITIES - 100.33% $1,277,372,031
(Cost: $921,343,393)
LIABILITIES, NET OF
CASH AND OTHER ASSETS - (0.33%) (4,196,147)
NET ASSETS - 100.00% $1,273,175,884
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
MARCH 31, 1996
Assets
Investment securities -- at value
(Notes 1 and 3) ................................. $1,277,372,031
Cash ............................................ 20,717
Receivables:
Dividends and interest .......................... 1,125,599
Fund shares sold ................................ 908,042
Prepaid insurance premium ........................ 29,066
--------------
Total assets .................................. 1,279,455,455
--------------
Liabilities
Payable for investment securities purchased ...... 2,843,040
Payable for Fund shares redeemed ................. 2,795,705
Accrued service fee .............................. 387,382
Accrued transfer agency and dividend
disbursing ...................................... 139,633
Accrued accounting services fee .................. 8,333
Other ............................................ 105,478
--------------
Total liabilities ............................. 6,279,571
--------------
Total net assets ............................. $1,273,175,884
==============
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 151,305,940
Additional paid-in capital ...................... 724,102,624
Accumulated undistributed income:
Accumulated undistributed net investment
income ......................................... 1,789,307
Accumulated undistributed net realized gain on
investment transactions ....................... 39,949,514
Net unrealized appreciation in value of
investments at end of period ................... 356,028,499
--------------
Net assets applicable to outstanding
units of capital ............................. $1,273,175,884
==============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $8.41
Class Y .......................................... $8.42
Capital shares outstanding
Class A .......................................... 150,652,013
Class Y .......................................... 653,927
Capital shares authorized .......................... 600,000,000
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended MARCH 31, 1996
Investment Income
Income:
Interest ........................................ $ 3,758,396
Dividends ....................................... 3,638,443
------------
Total income .................................. 7,396,839
------------
Expenses (Note 2):
Investment management fee ....................... 4,536,171
Service fee - Class A ........................... 992,436
Transfer agency and dividend disbursing - Class A 905,549
Custodian fees .................................. 106,714
Accounting services fee ......................... 50,000
Audit fees ...................................... 23,156
Legal fees ...................................... 13,098
Shareholder servicing - Class Y.................. 2,295
Other ........................................... 183,825
------------
Total expenses ................................ 6,813,244
------------
Net investment income ........................ 583,595
------------
Realized and Unrealized Gain (Loss) on Investments
Realized net gain on securities .................. 39,941,862
Realized net loss on foreign currency
transactions .................................... (38,098)
------------
Realized net gain on investments ................ 39,903,764
Unrealized depreciation in value of investments
during the period ............................... (49,198,381)
------------
Net loss on investments ....................... (9,294,617)
------------
Net decrease in net assets resulting
from operations ............................ $(8,711,022)
============
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the sixFor the fiscal
months ended year ended
March 31, September 30,
1996 1995
Increase (Decrease) in Net Assets ------------ ------------
Operations:
Net investment income ............ $ 583,595 $ 9,556,581
Realized net gain on investments . 39,903,764 68,377,208
Unrealized appreciation
(depreciation) ................. (49,198,381) 194,298,937
-------------- --------------
Net increase (decrease) in net assets
resulting from operations ..... (8,711,022) 272,232,726
-------------- --------------
Dividends to shareholders from:*
Net investment income
Class A ........................ (3,869,047) (4,857,502)
Class Y ........................ (7,160) ---
Realized gains on securities
transactions
Class A ........................ (64,486,712) (81,376,803)
Class Y ........................ (115,078) ---
-------------- --------------
(68,477,997) (86,234,305)
-------------- --------------
Capital share transactions:
Proceeds from sale of shares:
Class A (6,084,836 and 24,614,638
shares, respectively) ......... 52,329,077 181,684,410
Class Y (461,489 and 196,892
shares, respectively) ......... 4,045,947 1,781,870
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (8,229,954 and
622,043 shares, respectively).. 67,320,873 4,701,960
Class Y (14,925 and 0
shares, respectively) ......... 122,238 ---
Payments for shares redeemed:
Class A (6,963,824 and 13,070,843
shares, respectively) ......... (60,002,003) (101,713,982)
Class Y (19,379 and 0
shares, respectively) ......... (166,789) ---
-------------- --------------
Net increase in net assets
resulting from capital
share transactions ............ 63,649,343 86,454,258
-------------- --------------
Total increase (decrease)...... (13,539,676) 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 $1,789,307
and $5,120,017, respectively ..... $1,273,175,884 $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
six For the fiscal year ended
months September 30,
ended ------------------------------------
3/31/96 1995 1994 1993 1992 1991
------- ------ ------ ------ ------ ------
Net asset value,
beginning of period $8.97 $7.73 $7.10 $6.03 $6.36 $5.18
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .00 0.07 .00 .04 .06 .14
Net realized and
unrealized gain
(loss) on
investments...... (0.08) 1.82 .83 1.07 (0.10) 1.39
----- ----- ----- ----- ----- -----
Total from investment
operations ........ (0.08) 1.89 .83 1.11 (0.04) 1.53
----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income........... (0.03) (0.03) (0.02) (0.04) (0.09) (0.14)
Distribution from
capital gains.... (0.45) (0.62) (0.18) (0.00) (0.20) (0.21)
----- ----- ----- ----- ----- -----
Total distributions. (0.48) (0.65) (0.20) (0.04) (0.29) (0.35)
----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $8.41 $8.97 $7.73 $7.10 $6.03 $6.36
===== ===== ===== ===== ===== =====
Total return*....... -0.78% 26.82% 11.86% 18.38% -0.58% 30.88%
Net assets, end of
period (000
omitted) .........$1,267,671$1,286,716$1,014,263$921,816$843,978 $875,293
Ratio of expenses
to average net
assets ............ 1.06%** 1.05% 1.05% 0.97% 0.96% 0.97%
Ratio of net
investment income
to average net
assets ............ 0.09%** 0.87% 0.04% 0.50% 0.96% 2.28%
Portfolio
turnover rate ..... 16.93% 30.01% 36.70% 62.12% 84.82% 173.44%
Average commission
rate paid ......... $0.0424
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
**Annualized.
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
six period
months from 9/08/95
ended through
3/31/96 9/30/95*
-------- --------
Net asset value,
beginning of period $8.97 $9.05
-----
Income from investment
operations:
Net investment
income .......... .02 0.00
Net realized and
unrealized loss
on investments... (0.09) (0.08)
----- -----
Total from investment
operations ........ (0.07) (0.08)
----- -----
Less distributions:
Dividends from net
investment
income........... (0.03) (0.00)
Distribution from
capital gains.... (0.45) (0.00)
----- -----
Total distributions. (0.48) (0.00)
----- -----
Net asset value,
end of period ..... $8.42 $8.97
===== =====
Total return ....... -0.65% -0.88%
Net assets, end of
period (000
omitted) ......... $5,505 $1,765
Ratio of expenses
to average net
assets ............ 0.93%** 0.00%
Ratio of net
investment income
to average net
assets ............ 0.33%** 0.00%
Portfolio
turnover rate ..... 16.93% 30.01%
Average commission
rate paid ......... $0.0424
*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
MARCH 31, 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 major 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) 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.
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 $14.0 billion of
combined net assets at March 31, 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 $1.0208 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 direct and
indirect gross sales commissions for Class A shares (which are not an expense of
the Fund) of $2,012,845 out of which W&R paid sales commissions of $1,095,796
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 $27,015.
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 $194,840,311 while proceeds from maturities and
sales aggregated $231,242,858. Purchases of short-term securities aggregated
$873,242,730 while proceeds from maturities and sales aggregated $837,925,485.
For Federal income tax purposes, cost of investments owned at March 31,
1996 was $921,343,393, resulting in net unrealized appreciation of $356,028,638,
of which $383,875,733 related to appreciated securities and $27,847,095 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $68,304,281 during its fiscal year ended September 30, 1995, of which a
portion was paid to shareholders during the period ended September 30, 1995.
Remaining net capital gains have been 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. The Fund commenced multiclass operations on September 8, 1995.
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 March 31, 1996, the results of its operations for the six months 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 March 31, 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
May 10, 1996
<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, Los Angeles, California
Doyle Patterson, 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
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
NUR1005SA(3-96)
printed on recycled paper
