United
Vanguard
Fund, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 1997
<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, 1997
Dear Shareholder:
As President of your Fund, I would like to thank you for your continued
confidence in our products and services. Our goal to provide the best service
possible to our shareholders has not changed since we opened our doors nearly 60
years ago. Waddell & Reed's team of professionals, including the Fund's
manager, our customer service representatives and your personal account
representative continue to strive to meet your financial needs.
Waddell & Reed plays a special role in the investment industry. We take
pride in being one of the few financial services firms committed to locally
based account representatives who provide the personal service you need. When
you're ready to evaluate your financial plan to keep up with life's changes, or
to find an answer to a financial question that you may have, your representative
is ready to assist you--when you need it. He or she is available to help you
plan for your retirement, fund a child's education or make plans for other long-
term financial goals.
All of us are committed to helping you meet the financial goals that are
important to you. This is accomplished by our offering investment products to
meet a variety of personal financial objectives, along with the personal service
to make the investment process more convenient and accessible.
We want to continue to meet your financial needs for many years to come.
Should you have any questions about your account or other financial issues that
are important to you, 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, 1997
- ---------------------------------------
DIVIDEND PAID $0.04
=====
CAPITAL GAINS DISTRIBUTION $1.36
=====
NET ASSET VALUE ON
3/31/97 $7.58 adjusted to:$8.94 (A)
9/30/96 8.77
-----
CHANGE PER SHARE $0.17
=====
(A)This number includes the capital gains distribution of $1.36 paid in December
1996 added to the actual net asset value on March 31, 1997.
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
- ------ ----------- ------------
1-year period ended 3-31-97 0.96% 7.12%
5-year period ended 3-31-97 10.86% 12.18%
10-year period ended 3-31-97 9.22% 9.86%
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, 1997, United Vanguard Fund, Inc. had net assets totaling
$1,271,491,709 invested in a diversified portfolio of:
70.72% Common Stocks
27.91% Cash and Cash Equivalents
1.37% Preferred Stock
As a shareholder of United Vanguard Fund, Inc., for every $100 you had invested
on March 31, 1997, your Fund owned:
$27.91 Cash and Cash Equivalents
25.57 Manufacturing Stocks
15.43 Finance, Insurance and Real Estate Stocks
12.46 Services Stocks
8.92 Transportation, Communication, Electric
and Sanitary Services Stocks
5.74 Wholesale and Retail Trade Stocks
1.37 Preferred Stock
1.33 Contract Construction Stocks
1.27 Mining Stocks
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1997
Shares Value
COMMON STOCKS
Business Services - 8.15%
America Online, Inc.* .................. 289,900 12,284,512
CUC International Inc.* ................ 1,200,000 27,000,000
Cap Gemini Sogeti S.A. (A)* ............ 100,000 6,080,684
Computer Associates International, Inc. 200,000 7,775,000
First Data Corporation ................. 500,000 16,937,500
Informix Corporation* .................. 196,400 2,958,177
Manpower Inc. .......................... 220,000 7,920,000
Microsoft Corporation* ................. 100,000 9,168,700
Parametric Technology Corporation* ..... 300,000 13,518,600
Total ................................. 103,643,173
Chemicals and Allied Products - 11.46%
American Home Products Corporation ..... 250,000 15,000,000
Amgen Inc.* ............................ 350,000 19,600,000
Biogen, Inc.* .......................... 200,000 7,500,000
Merck & Co., Inc. ...................... 350,000 29,487,500
Novartis AG (A)* ........................ 23,467 29,135,949
Pfizer Inc. ............................ 375,000 31,546,875
Praxair, Inc. .......................... 300,000 13,462,500
Total ................................. 145,732,824
Communication - 6.06%
AirTouch Communications* ............... 600,000 13,800,000
Evergreen Media Corporation, Class A* .. 152,000 4,436,424
Nokia Corporation, Series K (A) ........ 200,000 11,935,516
SBC Communications Inc. ................ 400,000 21,050,000
360 Communications Company* ............ 700,000 12,075,000
WorldCom Inc.* ......................... 630,000 13,820,310
Total ................................. 77,117,250
Depository Institutions - 5.77%
BankAmerica Corporation ................ 100,000 10,075,000
Credit Suisse Group, Registered Shares (A) 200,000 24,025,026
HSBC Holdings Plc (A) .................. 827,617 19,225,049
Wells Fargo & Company .................. 70,400 20,002,400
Total ................................. 73,327,475
Electric, Gas and Sanitary Services - 2.34%
Compagnie Generale des Eaux (A) ........ 58,000 7,902,752
Sonat Inc. ............................. 400,000 21,800,000
Total ................................. 29,702,752
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1997
Shares Value
COMMON STOCKS (Continued)
Electronic and Other Electric Equipment - 3.14%
Ascend Communications, Inc.* ........... 250,000 $ 10,203,000
Emerson Electric Co. ................... 350,000 15,750,000
Intel Corporation ...................... 100,000 13,906,200
Total ................................. 39,859,200
General Merchandise Stores - 2.72%
May Department Stores Company (The) .... 300,000 13,650,000
Wal-Mart Stores, Inc. .................. 750,000 20,906,250
Total ................................. 34,556,250
Health Services - 1.89%
Columbia/HCA Healthcare Corporation .... 350,000 11,768,750
Tenet Healthcare Corporation* .......... 500,000 12,312,500
Total ................................. 24,081,250
Industrial Machinery and Equipment - 1.75%
Applied Materials, Inc.* ............... 229,000 10,605,448
cisco Systems, Inc.* ................... 100,000 4,818,700
Cooper Cameron Corporation* ............ 100,000 6,850,000
Total ................................. 22,274,148
Instruments and Related Products - 2.38%
General Motors Corporation, Class H .... 250,000 13,562,500
SMH Swiss Corporation (A) .............. 30,000 16,684,046
Total ................................. 30,246,546
Insurance Carriers - 4.11%
American International Group, Inc. ..... 200,000 23,475,000
MBIA Inc. .............................. 300,300 28,791,262
Total ................................. 52,266,262
Motion Pictures - 2.42%
News Corporation Limited ............... 900,000 16,200,000
Walt Disney Company (The) .............. 200,000 14,600,000
Total ................................. 30,800,000
Nondepository Institutions - 5.55%
Federal Home Loan Mortgage Corporation . 1,000,000 27,250,000
Fannie Mae ............................. 1,200,000 43,350,000
Total ................................. 70,600,000
Oil and Gas Extraction - 1.27%
Schlumberger Limited ................... 150,000 16,087,500
Paper and Allied Products - 0.61%
International Paper Company ............ 200,000 7,775,000
Petroleum and Coal Products - 2.75%
Royal Dutch Petroleum Company .......... 200,000 35,000,000
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1997
Shares Value
COMMON STOCKS (Continued)
Primary Metal Industries - 1.46%
Aluminum Company of America ............ 175,000 11,900,000
British Steel plc, ADR ................. 250,000 6,656,250
Total ................................. 18,556,250
Special Trade Contractors - 1.33%
Telefonaktiebolaget LM Ericsson, ADR,
Class B ............................... 500,000 16,906,000
Transportation by Air - 0.52%
Southwest Airlines Co. ................. 300,000 6,637,500
Transportation Equipment - 2.02%
Boeing Company (The) ................... 260,000 25,642,500
Wholesale Trade - Durable Goods - 1.88%
Johnson & Johnson ...................... 450,000 23,850,000
Wholesale Trade - Nondurable Goods - 1.14%
Gillette Company (The) ................. 200,000 14,525,000
TOTAL COMMON STOCKS - 70.72% $ 899,186,880
(Cost: $739,289,498)
PREFERRED STOCK - 1.37%
Communication
Telebras S.A., ADR ..................... 170,000 $ 17,403,750
(Cost: $15,691,510)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Auto Repair, Services and Parking - 0.97%
PHH Corp.:
5.34%, 4-16-97 ........................ $10,000 9,977,750
5.52%, 4-16-97 ........................ 2,320 2,314,664
Total ................................. 12,292,414
Chemicals and Allied Products - 0.85%
PPG Industries Inc.,
5.31%, 4-8-97 ......................... 10,755 10,743,895
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Communication - 4.00%
Bell Atlantic Financial Services Inc.:
5.29%, 4-7-97 ......................... $ 21,000$ 20,981,485
5.31%, 4-17-97 ........................ 4,330 4,319,781
Dominion Resources Inc.:
5.45%, 4-16-97 ........................ 5,000 4,988,646
5.51%, 5-5-97 ......................... 7,430 7,391,335
GTE Corporation,
5.34%, 4-8-97.......................... 13,190 13,176,304
Total ................................. 50,857,551
Depository Institutions - 0.44%
Creditanstalt Finance Inc.,
5.3%, 4-3-97 .......................... 3,210 3,209,055
Svenska Handelsbanken Inc.,
5.32%, 4-16-97 ........................ 1,560 1,556,542
U.S. Bancorp,
Master Note ........................... 757 757,000
Total ................................. 5,522,597
Electric, Gas and Sanitary Services - 6.32%
Carolina Power & Light Co.:
5.3%, 4-10-97 ......................... 1,600 1,597,880
5.4%, 4-18-97 ......................... 8,300 8,278,835
Commonwealth Edison Co.:
5.73%, 4-14-97 ........................ 5,580 5,568,454
5.52%, 4-17-97 ........................ 26,280 26,215,526
Pacific Gas & Electric Co.,
5.31%, 4-21-97 ........................ 17,955 17,902,033
Western Resources Inc.:
5.47%, 4-8-97 ......................... 9,500 9,489,896
5.52%, 4-11-97 ........................ 7,385 7,373,676
5.57%, 4-28-97 ........................ 3,925 3,908,603
Total.................................. 80,334,903
Electronic and Other Electric Equipment - 0.07%
Whirlpool Corp.,
5.4%, 4-7-97 .......................... 915 914,177
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Food and Kindred Products - 1.62%
ConAgra, Inc.,
5.51%, 4-28-97......................... $ 7,850 $ 7,817,560
General Mills, Inc.,
Master Note ........................... 1,907 1,907,000
Heinz (H.J.) Co.,
5.25%, 4-4-97 ......................... 6,220 6,217,279
Hercules Inc.,
5.4%, 4-17-97 ......................... 4,620 4,608,912
Total ................................. 20,550,751
Food Stores - 0.22%
Albertson's Inc.,
5.53%, 5-5-97 ......................... 2,865 2,850,037
Insurance Agents, Brokers and Service - 0.07%
Aon Corp.,
5.35%, 4-17-97 ........................ 945 942,753
Insurance Carriers - 1.76%
Transamerica Finance Corporation:
5.35%, 4-16-97 ........................ 10,000 9,977,708
5.3%, 4-24-97 ......................... 4,505 4,489,747
5.57%, 5-2-97 ......................... 5,502 5,475,610
USAA Capital Corp.,
5.29%, 4-29-97 ........................ 2,490 2,479,755
Total ................................. 22,422,820
Nondepository Institutions - 3.75%
Associates Corp. of North America,
5.26%, 4-17-97 ........................ 25,000 24,941,556
Caterpillar Financial Services Corp.,
5.31%, 5-7-97 ......................... 4,710 4,684,990
General Electric Capital Corp.,
5.32%, 4-21-97 ........................ 2,115 2,108,749
Island Finance Puerto Rico Inc.,
5.42%, 4-24-97 ........................ 7,000 6,975,761
Textron Financial Corp.,
5.45%, 4-25-97 ........................ 9,000 8,967,300
Total ................................. 47,678,356
Personal Services - 0.23%
Block Financial Corp.,
5.47%, 4-18-97 ........................ 2,900 2,892,509
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Petroleum and Coal Products - 0.08%
Kerr-McGee Credit Corp.,
5.7%, 4-22-97.......................... $ 1,067 $ 1,063,452
Security and Commodity Brokers - 0.90%
Merrill Lynch & Co., Inc.:
5.27%, 4-8-97 ......................... 9,500 9,490,265
5.33%, 4-14-97 ........................ 1,960 1,956,228
Total ................................. 11,446,493
Textile Mill Products - 0.04%
Sara Lee Corporation,
Master Note ........................... 513 513,000
Tobacco Products - 1.44%
B.A.T. Capital Corp.,
5.37%, 4-18-97 ........................ 18,305 18,258,582
Transportation Equipment - 1.89%
Dana Credit Corp.:
5.48%, 4-8-97 ......................... 13,095 13,081,047
5.47%, 4-29-97 ........................ 4,065 4,047,706
Echlin Inc.:
5.31%, 4-14-97 ........................ 360 359,310
5.33%, 4-14-97 ........................ 1,560 1,556,997
5.38%, 4-25-97 ........................ 5,045 5,026,905
Total ................................. 24,071,965
Total Commercial Paper - 24.65% 313,356,255
Commercial Paper (backed by irrevocable
bank letter of credit) - 0.32%
Nondepository Institutions
Hahn Issuing Corp. (Canadian Imperial
Bank of Commerce),
5.48%, 4-18-97 ........................ 4,128 4,117,318
Municipal Obligation - 1.10%
Indiana
City of Whiting, Indiana, Industrial Sewage
and Solid Waste Disposal Revenue Bonds
(Amoco Oil Company Project), Taxable
Series 1995, Adjustable Rate Note,
5.37%, 5-2-97 ......................... 14,000 14,000,000
TOTAL SHORT-TERM SECURITIES - 26.07% $ 331,473,573
(Cost: $331,473,573)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1997
Value
TOTAL INVESTMENT SECURITIES - 98.16% $1,248,064,203
(Cost: $1,086,454,581)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.84% 23,427,506
NET ASSETS - 100.00% $1,271,491,709
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.
UNITED VANGUARD FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
Assets
Investment securities -- at value
(Notes 1 and 3) ................................. $1,248,064,203
Cash ............................................ 3,679
Receivables:
Investment securities sold ...................... 28,140,842
Dividends and interest .......................... 1,097,375
Fund shares sold ................................ 638,296
Prepaid insurance premium ........................ 30,118
--------------
Total assets .................................. 1,277,974,513
--------------
Liabilities
Payable for Fund shares redeemed ................. 4,192,224
Payable for investment securities purchased ...... 1,633,950
Accrued service fee (Note 2) ..................... 405,603
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 199,667
Accrued accounting services fee (Note 2) ......... 8,333
Accrued management fee (Note 2) .................. 24,514
Other ............................................ 18,513
--------------
Total liabilities ............................. 6,482,804
--------------
Total net assets ............................. $1,271,491,709
==============
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 167,832,202
Additional paid-in capital ...................... 823,194,320
Accumulated undistributed income:
Accumulated undistributed net investment
income ......................................... 4,270,979
Accumulated undistributed net realized gain on
investment transactions ....................... 114,584,279
Net unrealized appreciation in value of
investments .................................... 161,609,929
--------------
Net assets applicable to outstanding
units of capital ............................. $1,271,491,709
==============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $7.58
Class Y .......................................... $7.58
Capital shares outstanding
Class A .......................................... 167,244,115
Class Y .......................................... 588,087
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, 1997
Investment Income
Income(Note 1B):
Interest and amortization ....................... $ 8,934,338
Dividends ....................................... 4,472,217
------------
Total income .................................. 13,406,555
------------
Expenses (Note 2):
Investment management fee ....................... 4,629,594
Transfer agency and dividend disbursing - Class A 1,268,991
Service fee - Class A ........................... 1,097,281
Custodian fees .................................. 90,337
Accounting services fee ......................... 50,000
Audit fees ...................................... 18,548
Legal fees ...................................... 8,557
Shareholder servicing - Class Y.................. 3,397
Other ........................................... 138,849
------------
Total expenses ................................ 7,305,554
------------
Net investment income ........................ 6,101,001
------------
Realized and Unrealized Gain (Loss) on
Investments (Note 1 and 3)
Realized net gain on securities .................. 166,215,293
Realized net gain on foreign currency
transactions .................................... 25,536
------------
Realized net gain on investments ................ 166,240,829
Unrealized depreciation in value of investments
during the period ............................... (138,845,066)
------------
Net gain on investments ....................... 27,395,763
------------
Net increase in net assets resulting
from operations ............................ $ 33,496,764
============
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,
1997 1996
Increase (Decrease) in Net Assets ------------ ------------
Operations:
Net investment income ............ $ 6,101,001 $ 4,600,019
Realized net gain on investments . 166,240,829 146,213,063
Unrealized depreciation .......... (138,845,066) (104,771,885)
-------------- --------------
Net increase in net assets
resulting from operations ..... 33,496,764 46,041,197
-------------- --------------
Dividends to shareholders from (Note 1E):*
Net investment income
Class A ........................ (5,809,454) (5,362,420)
Class Y ........................ (25,886) (18,377)
Realized gains on securities
transactions
Class A ........................ (197,521,025) (64,486,580)
Class Y ........................ (690,293) (115,078)
-------------- --------------
(204,046,658) (69,982,455)
Capital share transactions: -------------- --------------
Proceeds from sale of shares:
Class A (3,778,989 and 10,454,280
shares, respectively) ......... 31,006,978 89,257,617
Class Y (109,378 and 575,709
shares, respectively) ......... 910,451 5,007,444
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (26,800,323 and
8,400,456 shares, respectively) 200,465,670 68,790,612
Class Y (95,746 and 16,225
shares, respectively) ......... 716,179 133,455
Payments for shares redeemed:
Class A (10,476,843 and 15,014,137
shares, respectively) ......... (85,522,036) (128,046,129)
Class Y (89,891 and 315,972
shares, respectively) ......... (704,593) (2,748,347)
-------------- --------------
Net increase in net assets
resulting from capital
share transactions ............ 146,872,649 32,394,652
-------------- --------------
Total increase (decrease) ..... (23,677,245) 8,453,394
Net Assets
Beginning of period ............... 1,295,168,954 1,286,715,560
-------------- --------------
End of period, including undistributed
net investment income of $4,270,979
and $3,979,782, respectively ..... $1,271,491,709 $1,295,168,954
============== ==============
*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 ------------------------------------
3/31/97 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------
Net asset value,
beginning of period $8.77 $8.97 $7.73 $7.10 $6.03 $6.36
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.04 0.03 0.07 .00 .04 .06
Net realized and
unrealized gain
(loss) on
investments...... 0.17 0.26 1.82 .83 1.07 (0.10)
----- ----- ----- ----- ----- -----
Total from investment
operations ........ 0.21 0.29 1.89 .83 1.11 (0.04)
----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income........... (0.04) (0.04) (0.03) (0.02) (0.04) (0.09)
Distribution from
capital gains.... (1.36) (0.45) (0.62) (0.18) (0.00) (0.20)
----- ----- ----- ----- ----- -----
Total distributions. (1.40) (0.49) (0.65) (0.20) (0.04) (0.29)
----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $7.58 $8.77 $8.97 $7.73 $7.10 $6.03
===== ===== ===== ===== ===== =====
Total return*....... 2.61% 3.59% 26.82% 11.86% 18.38% -0.58%
Net assets, end of
period (000
omitted) .........$1,267,034$1,291,017$1,284,951$1,014,263$921,816 $843,978
Ratio of expenses
to average net
assets ............ 1.11%** 1.09% 1.05% 1.05% 0.97% 0.96%
Ratio of net
investment income
to average net
assets ............ 0.93%** 0.36% 0.87% 0.04% 0.50% 0.96%
Portfolio
turnover rate ..... 47.83% 57.10% 30.01% 36.70% 62.12% 84.82%
Average commission
rate paid ......... $0.0680 $0.0347
*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 For the
six fiscal period
months year from 9/8/95*
ended ended through
3/31/97 9/30/96 9/30/95
-------- -------- --------
Net asset value,
beginning of period $8.78 $8.97 $9.05
----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.05 0.07 0.00
Net realized and
unrealized gain
(loss) on
investments...... 0.16 0.24 (0.08)
----- ----- -----
Total from investment
operations ........ 0.21 0.31 (0.08)
----- ----- -----
Less distributions:
Dividends from net
investment
income........... (0.05) (0.05) (0.00)
Distribution from
capital gains.... (1.36) (0.45) (0.00)
----- ----- -----
Total distributions. (1.41) (0.50) (0.00)
----- ----- -----
Net asset value,
end of period ..... $7.58 $8.78 $8.97
===== ===== =====
Total return ....... 2.62% 3.80% -0.88%
Net assets, end of
period (000
omitted) ......... $4,458 $4,152 $1,765
Ratio of expenses
to average net
assets........... 0.90%** 0.91% 0.00%
Ratio of net
investment income
to average net
assets ............ 1.14%** 0.69% 0.00%
Portfolio
turnover rate ..... 47.83% 57.10% 30.01%**
Average commission
rate paid ......... $0.0680 $0.0347
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
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 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.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
dividends and capital gains distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are due to differing treatments for items
such as deferral of wash sales and post-October losses, foreign currency
transactions, net operating losses and expiring capital loss carryforwards.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .30% of net assets and (ii)
a "Group" fee computed each day on the combined net asset values of all of the
funds in the United Group of mutual funds (approximately $15.0 billion of
combined net assets at March 31, 1997) at annual rates of .51% of the first $750
million of combined net assets, .49% on that amount between $750 million and
$1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between $2.25
billion and $3 billion, .43% between $3 billion and $3.75 billion, .40% between
$3.75 billion and $7.5 billion, .38% between $7.5 billion and $12 billion, and
.36% of that amount over $12 billion. The Fund accrues and pays this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A shares, the Fund also pays WARSCO a monthly per account charge
for transfer agency and dividend disbursement services of $1.3125 for each
shareholder account which was in existence at any time during the prior month,
plus $0.30 for each account on which a dividend or distribution of cash or
shares had a record date in that month. With respect to Class Y shares, the Fund
pays WARSCO a monthly fee at an annual rate of .15% of the average daily net
assets of the class for the preceding month. The Fund also reimburses W&R and
WARSCO for certain out-of-pocket costs.
As principal underwriter for the Fund's shares, W&R received gross sales
commissions for Class A shares (which are not an expense of the Fund) of
$1,184,746, out of which W&R paid sales commissions of $663,493 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 $27,322, which are included in other
expenses.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $467,231,213 while proceeds from maturities and
sales aggregated $613,452,050. Purchases of short-term securities aggregated
$1,916,431,136 while proceeds from maturities and sales aggregated
$1,853,321,317.
For Federal income tax purposes, cost of investments owned at March 31,
1997 was $1,086,454,581, resulting in net unrealized appreciation of
$161,609,622, of which $186,588,696 related to appreciated securities and
$24,979,074 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 were 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>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Vanguard Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of United Vanguard Fund, Inc. (the
``Fund' '), as of March 31, 1997, the related statements of operations and
changes in net assets for the six-month period then ended, and the
financial highlights for the six-month period then ended. These
financial statements and the financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on
these financial statements and the financial highlights based on our
audit. The financial statements and the financial highlights of the Fund
for each of the periods presented in the five-year period ended September
30, 1996 were audited by other auditors whose report, dated November 8,
1996, expressed an unqualified opinion on those statements and financial
highlights.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
the financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at March 31, 1997 by correspondence with
the custodian and broker. 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
United Vanguard Fund, Inc. as of March 31, 1997, the results of its
operations, the changes in its net assets, and the financial highlights
for the six-month period then ended in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
May 7, 1997
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Keith A. Tucker, President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
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
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
NUR1005SA(3-97)
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