United
Vanguard
Fund, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 1999
<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, 1999
Dear Shareholder:
As president of your Fund, I would like to thank you for your continued
confidence as an investor. From every area of Waddell & Reed, including your
personal financial advisor, our goal has been to provide the best service
possible to our shareholders.
While it is impossible to predict the future direction of the markets, there are
some basic principles that we stand by that can help investors achieve their
objectives:
. Develop a financial plan that helps you pinpoint your financial objectives,
and identify specific strategies for turning your dreams into reality. There
is no better way to plan for your future.
. Invest on a regular basis. It can be one of the best ways to invest long
term and provide a hedge against market volatility.
. Adopt a long-term view to take advantage of compounding. The key to
successful investing is time, not timing. The power of compounding is
awesome and, on a long-term basis, can overwhelm any nuances of timing.
. Review your financial plan regularly. Financial planning is an ongoing
process that requires periodic review.
Waddell & Reed is positioned to assist you as you work toward your financial
goals. We will continue to offer quality investment products and personal
service to make the financial planning and investment process convenient and
accessible to you. Our locally based financial advisors are ready to assist you
with your total financial plan to help you plan for your retirement, to help you
meet your education funding goals or to achieve other financial objectives.
We look forward to assisting you in the future. If you have any questions about
your account, wish to review your financial plan or have other financial issues
that are important to you, contact your financial advisor or your local Waddell
& Reed office.
Respectfully,
Robert L. Hechler
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 primarily in a
characteristics diversified portfolio of
common stocks issued by
companies believed to
May invest in Foreign have appreciation
Securities possibilities.
Cash Reserves
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. For more information
about the Fund's cash reserves
flexibility, please consult the
Prospectus.
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, 1999
- -------------------------------------
DIVIDENDS PAID $ 0.01
======
CAPITAL GAINS DISTRIBUTION $ 0.11
======
NET ASSET VALUE ON
3/31/99 $10.06 adjusted to: $10.17 (A)
9/30/98 7.50
------
CHANGE PER SHARE $ 2.67
======
(A)This number includes the capital gains distribution of $0.11 paid in December
1998 added to the actual net asset value on March 31, 1999.
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
- ------ ----------- ------------
1-year period ended 3-31-99 22.83% 30.33%
5-year period ended 3-31-99 18.56% 19.97%
10-year period ended 3-31-99 14.14% 14.82%
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, 1999, United Vanguard Fund, Inc. had net assets totaling
$1,922,189,404 invested in a diversified portfolio of:
96.67% Common Stocks
3.33% Cash and Cash Equivalents
As a shareholder of United Vanguard Fund, Inc., for every $100 you had invested
on March 31, 1999, your Fund owned:
$50.88 Manufacturing Stocks
19.33 Wholesale and Retail Trade Stocks
10.87 Finance, Insurance and Real Estate Stocks
8.60 Services Stocks
6.99 Transportation, Communication, Electric
and Sanitary Services Stocks
3.33 Cash and Cash Equivalents
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1999
Shares Value
COMMON STOCKS
Apparel and Accessory Stores - 7.41%
Abercrombie & Fitch Co., Class A* ...... 988,700 $ 90,960,400
Kohl's Corporation* .................... 727,000 51,526,125
Total ................................. 142,486,525
Apparel and Other Textile Products - 1.07%
Tommy Hilfiger Corporation* ............ 300,000 20,662,500
Building Materials and Garden Supplies - 3.89%
Home Depot, Inc. (The) ................. 1,200,000 74,700,000
Business Services - 5.48%
America Online, Inc.* .................. 120,000 17,520,000
Microsoft Corporation* ................. 980,000 87,801,875
Total ................................. 105,321,875
Chemicals and Allied Products - 11.63%
Bristol-Myers Squibb Company ........... 991,400 63,759,412
Lilly (Eli) and Company ................ 277,700 23,569,788
Pfizer Inc. ............................ 316,600 43,928,250
Schering-Plough Corporation ............ 965,600 53,409,750
Warner-Lambert Company ................. 588,300 38,938,106
Total ................................. 223,605,306
Communication - 1.77%
Clear Channel Communications, Inc.* .... 506,300 33,953,744
Depository Institutions - 2.45%
Comerica Incorporated .................. 755,000 47,140,312
Electronic and Other Electric Equipment - 10.85%
General Electric Company ............... 190,000 21,018,750
Intel Corporation ...................... 151,700 18,033,338
Nokia Corporation, Series A, ADR ....... 350,000 54,512,500
Tellabs* ............................... 345,600 33,782,400
Texas Instruments Incorporated ......... 287,200 28,504,600
Xilinx, Inc.* .......................... 1,301,800 52,763,581
Total ................................. 208,615,169
General Merchandise Stores - 3.50%
Dollar General Corporation ............. 800,000 27,200,000
Wal-Mart Stores, Inc. .................. 434,700 40,073,906
Total ................................. 67,273,906
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1999
Shares Value
COMMON STOCKS (Continued)
Hotels and Other Lodging Places _ 0.09%
Sun International Hotels, Ltd.* ........ 49,900 $ 1,640,463
Industrial Machinery and Equipment - 17.23%
Applied Materials, Inc.* ............... 1,340,100 82,709,297
Cisco Systems, Inc.* ................... 713,200 78,162,262
EMC Corporation* ....................... 1,333,100 170,303,525
Total ................................. 331,175,084
Instruments and Related Products - 3.17%
Guidant Corporation .................... 524,900 31,756,450
Medtronic, Inc. ........................ 405,900 29,123,325
Total ................................. 60,879,775
Miscellaneous Manufacturing Industries - 0.00%
Tyco International Ltd. ................ 482 34,584
Miscellaneous Retail - 1.60%
Walgreen Co. ........................... 1,090,600 30,809,450
Motion Pictures - 3.03%
Time Warner Incorporated ............... 818,300 58,150,444
Nondepository Institutions - 8.42%
Capital One Financial Corp. ............ 147,900 22,332,900
Fannie Mae ............................. 930,500 64,437,125
Freddie Mac ............................ 1,043,800 59,627,075
Providian Financial Corporation ........ 139,700 15,367,000
Total ................................. 161,764,100
Rubber and Miscellaneous Plastics Products - 1.20%
NIKE, Inc., Class B .................... 400,000 23,075,000
Transportation by Air - 1.26%
Southwest Airlines Co. ................. 800,000 24,200,000
Transportation Equipment - 5.73%
General Motors Corporation ............. 400,000 34,750,000
Harley-Davidson, Inc. .................. 1,310,000 75,325,000
Total ................................. 110,075,000
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1999
Shares Value
COMMON STOCKS (Continued)
Water Transportation - 3.96%
Carnival Corporation, Class A .......... 1,568,400 $ 76,165,425
Wholesale Trade _ Durable Goods - 2.93%
Johnson & Johnson ...................... 250,000 23,421,875
Motorola, Inc. ......................... 450,000 32,962,500
Total ................................. 56,384,375
TOTAL COMMON STOCKS - 96.67% $1,858,113,037
(Cost: $1,086,159,928)
TOTAL SHORT-TERM SECURITIES - 3.42% $ 65,780,856
(Cost: $65,780,856)
TOTAL INVESTMENT SECURITIES - 100.09% $1,923,893,893
(Cost: $1,151,940,784)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.09%) (1,704,489)
NET ASSETS - 100.00% $1,922,189,404
See Notes to Schedule of Investments.
Notes to Schedule of Investments
*No income dividends were paid during the preceding 12 months.
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, 1999
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities -- at value
(Notes 1 and 3) ................................. $1,923,894
Cash ............................................ 5
Receivables:
Fund shares sold ................................ 2,176
Dividends and interest .......................... 1,179
Prepaid insurance premium ........................ 33
----------
Total assets .................................. 1,927,287
----------
Liabilities
Payable to Fund shareholders ..................... 4,026
Payable for investment securities purchased ...... 360
Accrued transfer agency and dividend302
disbursing (Note 2) ............................. 302
Accrued service fee (Note 2) ..................... 298
Accrued management fee (Note 2) .................. 36
Accrued distribution fee (Note 2) ................ 27
Accrued accounting services fee (Note 2) ......... 8
Other ............................................ 41
----------
Total liabilities ............................. 5,098
----------
Total net assets ............................. $1,922,189
==========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 191,040
Additional paid-in capital ...................... 942,676
Accumulated undistributed income:
Accumulated undistributed net investment
loss .......................................... (1,754)
Accumulated undistributed net realized gain on
investment transactions ....................... 18,278
Net unrealized appreciation in value of
investments ................................... 771,949
----------
Net assets applicable to outstanding
units of capital ............................. $1,922,189
==========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $10.06
Class Y .......................................... $10.07
Capital shares outstanding
Class A .......................................... 190,426
Class Y .......................................... 614
Capital shares authorized .......................... 600,000
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended MARCH 31, 1999
(In Thousands)
Investment Income (Loss)
Income (Note 1B):
Dividends ....................................... $ 4,966
Interest and amortization ....................... 2,761
--------
Total income .................................. 7,727
--------
Expenses (Note 2):
Investment management fee ....................... 5,786
Service fee - Class A ........................... 1,790
Transfer agency and dividend disbursing - Class A 1,325
Distribution fee - Class A ...................... 174
Accounting services fee ......................... 50
Custodian fees .................................. 39
Legal fees ...................................... 21
Audit fees ...................................... 11
Shareholder servicing - Class Y ................. 4
Other ........................................... 130
--------
Total expenses ................................ 9,330
--------
Net investment loss .......................... (1,603)
--------
Realized and Unrealized Gain on
Investments (Notes 1 and 3)
Realized net gain on investments ................. 19,931
Unrealized appreciation in value of investments
during the period ............................... 491,019
--------
Net gain on investments ....................... 510,950
--------
Net increase in net assets resulting
from operations ............................ $509,347
========
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(Dollars In Thousands)
For the six For the fiscal
months ended year ended
March 31, September 30,
1999 1998
Increase (Decrease)in Net Assets ------------ ------------
Operations:
Net investment income (loss)...... $ (1,603) $ 1,920
Realized net gain on investments . 19,931 24,680
Unrealized appreciation .......... 491,019 32,486
---------- ----------
Net increase in net assets
resulting from operations ..... 509,347 59,086
---------- ----------
Distributions to shareholders from (Note 1E):*
Net investment income:
Class A ........................ (1,908) (6,595)
Class Y ........................ (19) (29)
Realized gains on securities
transactions:
Class A ........................ (21,930) (284,084)
Class Y ........................ (74) (1,024)
---------- ----------
(23,931) (291,732)
Capital share transactions: ---------- ----------
Proceeds from sale of shares:
Class A (26,000,895 and 40,123,616
shares, respectively) ......... 240,687 321,631
Class Y (321,514 and 122,262
shares, respectively) ......... 2,937 996
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (2,675,901 and
41,192,909 shares, respectively) 23,253 285,879
Class Y (10,622 and 151,657
shares, respectively) ......... 92 1,052
Payments for shares redeemed:
Class A (28,358,768 and 53,303,525
shares, respectively) ......... (258,118) (426,626)
Class Y (344,924 and 224,280
shares, respectively) ......... (3,176) (1,798)
---------- ----------
Net increase in net assets
resulting from capital
share transactions .......... 5,675 181,134
---------- ----------
Total increase (decrease) ..... 491,091 (51,512)
Net Assets
Beginning of period ............... 1,431,098 1,482,610
---------- ----------
End of period, including undistributed
net investment income (loss) of ($1,754)
and $1,776, respectively ......... $1,922,189 $1,431,098
========== ==========
*See "Financial Highlights" on pages 12 - 13.
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 ------------------------------------
3/31/99 1998 1997 1996 1995 1994
------- ------ ------ ------ ------ ------
Net asset value,
beginning of period $7.50 $9.11 $8.77 $8.97 $7.73 $7.10
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income (loss).... (0.01) 0.01 0.07 0.03 0.07 0.00
Net realized and
unrealized gain
on investments .. 2.69 0.19 1.69 0.26 1.82 0.83
----- ----- ----- ----- ----- -----
Total from investment
operations ....... 2.68 0.20 1.76 0.29 1.89 0.83
----- ----- ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.01) (0.04) (0.06) (0.04) (0.03) (0.02)
From capital gains (0.11) (1.77) (1.36) (0.45) (0.62) (0.18)
----- ----- ----- ----- ----- -----
Total distributions (0.12) (1.81) (1.42) (0.49) (0.65) (0.20)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $10.06 $7.50 $9.11 $8.77 $8.97 $7.73
===== ===== ===== ===== ===== =====
Total return* ...... 36.06% 3.76% 23.60% 3.59% 26.82% 11.86%
Net assets, end of
period (in
millions) ........ $1,916 $1,426 $1,478 $1,291 $1,285 $1,014
Ratio of expenses
to average net
assets ........... 1.12%** 1.10% 1.09% 1.09% 1.05% 1.05%
Ratio of net
investment income (loss)
to average net
assets ........... -0.19%** 0.13% 0.86% 0.36% 0.87% 0.04%
Portfolio
turnover rate .... 42.61% 90.51%139.14% 57.10% 30.01% 36.70%
*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 For the fiscal year period from
months ended September 30, 9/8/95*
ended -------------------- through
3/31/99 1998 1997 1996 9/30/95
------- ----- ----- ------ -------
Net asset value,
beginning of period $7.52 $9.12 $8.78 $8.97 $9.05
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.00 0.03 0.09 0.07 0.00
Net realized and
unrealized gain
(loss) on
investments...... 2.69 0.19 1.69 0.24 (0.08)
----- ----- ----- ----- -----
Total from investment
operations ........ 2.69 0.22 1.78 0.31 (0.08)
----- ----- ----- ----- -----
Less distributions:
From net investment
income........... (0.03) (0.05) (0.08) (0.05) (0.00)
From capital gains (0.11) (1.77) (1.36) (0.45) (0.00)
----- ----- ----- ----- -----
Total distributions. (0.14) (1.82) (1.44) (0.50) (0.00)
----- ----- ----- ----- -----
Net asset value,
end of period ..... $10.07 $7.52 $9.12 $8.78 $8.97
===== ===== ===== ===== =====
Total return ....... 36.13% 4.02% 23.87% 3.80% -0.88%
Net assets, end of
period (in
millions) ........ $6 $5 $5 $4 $2
Ratio of expenses
to average
net assets ....... 0.89%** 0.91% 0.90% 0.91% 0.00%
Ratio of net investment
income to average
net assets ........ 0.04%** 0.33% 1.05% 0.69% 0.00%
Portfolio
turnover rate ..... 42.61% 90.51%139.14% 57.10% 30.01%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
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 the Nasdaq Stock Market, which provides information on bid and
asked 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. 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.
D. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the business day following record date. Net
investment income dividends and capital gains distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are due to differing
treatments for items such as deferral of wash sales and post-October
losses, foreign currency transactions, net operating losses and expiring
capital loss carryovers.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management and Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
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 $21.5 billion of
combined net assets at March 31, 1999) 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
$1,522,682, out of which W&R paid sales commissions of $881,451 and all expenses
in connection with the sale of Fund shares, except for registration fees and
related expenses.
Under a Distribution and Service Plan for Class A shares adopted by the
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
may pay monthly a distribution and/or service fee to W&R in an amount not to
exceed .25% of the Fund's Class A average annual net assets. The fee is to be
paid to reimburse W&R for amounts it expends in connection with the distribution
of the Class A shares and/or provision of personal services to Fund shareholders
and/or maintenance of shareholder accounts.
The Fund paid Directors' fees of $30,911, which are included in other
expenses.
W&R is a subsidiary of Waddell & Reed Financial, Inc., a holding company,
and a direct subsidiary of Waddell & Reed Financial Services, Inc., a holding
company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $692,024,136 while proceeds from maturities and
sales aggregated $603,984,829. Purchases of short-term securities and U.S.
Government securities aggregated $1,120,533,422 and $97,257,000. Proceeds from
maturities and sales aggregated $1,328,843,643 and $90,455,650, respectively.
For Federal income tax purposes, cost of investments owned at March 31,
1999 was $1,152,003,586, resulting in net unrealized appreciation of
$771,890,307, of which $773,471,120 related to appreciated securities and
$1,580,813 related to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $26,175,538 during its fiscal year ended September 30, 1998, which has been
distributed to the Fund's shareholders.
NOTE 5 -- Multiclass Operations
On August 15, 1995, the Fund was authorized to offer two classes of shares,
Class A and Class Y, each of which has equal rights as to assets and voting
privileges. Class Y shares are not subject to a sales charge on purchases; they
are not subject to a Rule 12b-1 Distribution and Service Plan and have a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of either class are
offered is contained in the Prospectus and 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, 1999, and the related statement of operations for
the six-month period then ended, the statements of changes in net assets
for the six-month period ended March 31, 1999 and the fiscal year ended
September 30, 1998, and the financial highlights for the six-month period
then ended and for each of the five fiscal years in the period ended
September 30, 1998. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
the financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of March 31, 1999, by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of United Vanguard Fund, Inc. as of March 31, 1999, the results
of its operations for the six-month period then ended, the changes in its
net assets for the six-month period then ended and the fiscal year ended
September 30, 1998, and the financial highlights for the six-month period
ended March 31, 1999 and for each of the five fiscal years in the period
ended September 30, 1998 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Kansas City, Missouri
May 7, 1999
<PAGE>
DIRECTORS
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, Menlo Park, California
Linda K. Graves, Topeka, Kansas
Joseph Harroz, Jr., Norman, Oklahoma
John F. Hayes, Hutchinson, Kansas
Robert L. Hechler, Overland Park, Kansas
Henry J. Herrmann, Overland Park, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald C. Reimer, Mission Hills, Kansas
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
OFFICERS
Robert L. Hechler, President
Daniel P. Becker, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Helge K. Lee, Vice President and Secretary
Lower sales charges are available by combining the net asset value (_NAV_) of
existing Class A shares of the Fund with additional purchases of Class A shares
of any fund in the United Group, except that only the Class A shares of United
Cash Management, Inc. that were acquired by exchange of another United Group
fund's Class A shares on which a sales charge was paid, plus the shares paid as
dividends on those acquired shares, may be combined.
Any person who was a holder of an uncompleted Plan on May 30, 1996, with a
face amount of less than $12,000, may purchase Class A shares of the Fund at
NAV, up to the amount representing the unpaid balance of the Plan, if the
purchase order is so designated.
For shareholders who have chosen the Income-Earned option or the Cash option for
their distribution method: if the dividend distribution (for Income-Earned) or
the total distribution (for Cash) is less than ten dollars, the distribution
will be automatically paid in additional shares of the same class of the Fund.
To all traditional IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from a traditional IRA unless you make a written
election not to have taxes withheld. The election may be made by submitting
forms provided by Waddell & Reed, Inc. which can be obtained from your Waddell &
Reed representative or by submitting Internal Revenue Service Form W-4P. Once
made, an election can be revoked by providing written notice to Waddell & Reed,
Inc. If you elect not to have tax withheld you may be required to make payments
of estimated tax. Penalties may be imposed by the IRS if withholding and
estimated tax payments are not adequate.
<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(3-99)
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