United
Vanguard
Fund, Inc.
ANNUAL
REPORT
--------------------------------------------
For the fiscal year ended September 30, 1999
<PAGE>
MANAGER'S LETTER
- -----------------------------------------------------------------
SEPTEMBER 30, 1999
Dear Shareholder:
This report relates to the operation of United Vanguard Fund, Inc. for the
fiscal year ended September 30, 1999. The discussion, graphs and tables
contained in this report will provide you with information regarding the Fund's
performance during that period.
The large cap growth sector has recently come back into favor. Although the
sector's performance was negative for the last quarter of the fiscal year, on a
relative basis, it appears that the popularity of large cap growth strategies
may be improving. Much like previous years, performance has been exceptionally
narrow, but the "narrowness" is different than in previous years. High quality
drug and consumer cyclical stocks have fallen out of favor and have been
replaced by lower quality cyclical shares - namely non-Internet technology
stocks, such as semiconductor, semiconductor equipment and enterprise hardware
stocks. As Asian and European economies have slowly improved and in some cases
accelerated, a dramatic shift in the stock market took place in which stable
consistent growth stocks were generally penalized in favor of companies which
had leverage to improving worldwide economies.
Since 1998, the Fund has had higher than normal exposure to cyclical technology
stocks in the belief that, as international economies improve, the demand for
technology products will accelerate. Although this belief has been tested
severely and the Fund's volatility has risen, technology stocks have proven to
be the right place to be during much of the past fiscal year.
The indexes shown in the chart on the following page reflect the performance of
securities that generally represent the stock market (the S&P 500 Composite
Stock Index) and the universe of funds with similar investment objectives (the
Lipper Growth Fund Universe Average). The strategies and techniques we applied
resulted in the Fund significantly outperforming both indexes during the past
fiscal year.
Going forward, we expect to see a broadening of performance such that more
stocks will participate relative to the recent past. We anticipate the
remainder of 1999 to be volatile, as we expect the market to be torn between the
negative effects of higher interest rates and benefits of better earnings
growth. Into the year 2000, we believe technology stocks will do exceptionally
well as the dollars that were funneled into Y2K testing and remediation are
redirected. Software stocks should also do well in this environment and we are
actively positioning the Fund for this expected trend. In summary, the world
appears to be a better place than it was a year ago and the investment outlook
is bright. Our belief in having large exposures to the most profitable and
sustainable growth companies is unchanged and continues to guide our investment
process.
We appreciate your continued confidence.
Respectfully,
Daniel P. Becker
Manager, United Vanguard Fund, Inc.
<PAGE>
Comparison of Change in Value of $10,000 Investment in
United Vanguard Fund, Inc., Class A Shares,
The Standard & Poor's 500 Composite Stock Index,
and The Lipper Growth Fund Universe Average
Lipper
United S&P Growth
Vanguard 500 Fund
Fund, Composite Universe
Inc.Stock Index Average
------------------ ----------
09/30/89 $ 9,425 $10,000 $10,000
09/30/90 8,231 9,076 8,661
09/30/91 10,773 11,905 11,640
09/30/92 10,710 13,221 12,509
09/30/93 12,678 14,939 14,791
09/30/94 14,182 15,490 14,989
09/30/95 17,985 20,097 19,088
09/30/96 18,631 24,184 22,123
09/30/97 23,029 33,977 29,420
09/30/98 23,895 37,070 28,935
09/30/99 32,674 47,378 37,672
==== United Vanguard Fund, Inc., Class A Shares* -- $32,674
++++ Standard & Poor's 500 Composite Stock Index -- $47,378
---- Lipper Growth Fund Universe Average -- $37,672
*The value of the investment in the Fund is impacted by the sales load at the
time of the investment and by the ongoing expenses of the Fund.
Annual Average Total Return +
Class A++ Class Y
--------- -------
Year Ended
9/30/99 28.88% 36.94%
5 Years Ended
9/30/99 16.78% N/A
10 Years Ended
9/30/99 12.57% N/A
Life of Class Y +++ N/A 15.81%
+ Total return for the Class Y shares may be greater than that of the Class A
shares because the Fund's Class Y shares are not subject to a sales load or
12b-1 fees.
++ Performance data quoted represents past performance and is based on
deduction of a 5.75% sales load on the initial purchase in each of the
three periods. Investment return and principal value will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their
original cost.
+++ 9/8/95 (the date on which Fund Class Y shares were first acquired by
shareholders) through 9/30/99.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
United Vanguard Fund, Inc.
PORTFOLIO STRATEGY:
Common stock of companies OBJECTIVE: To seek 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
U.S. companies believed to
May invest in Foreign have appreciation
Securities possibilities. The Fund's
investment manager typically
emphasizes a blend of value and growth
potential in selecting stocks.
FOUNDED: 1969
SCHEDULED DIVIDEND FREQUENCY: SEMIANNUALLY (June and December)
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended September 30, 1999
- --------------------------------------------
DIVIDENDS PAID $0.01
======
CAPITAL GAINS DISTRIBUTION $ 0.11
======
NET ASSET VALUE ON
9/30/99 $10.11 adjusted to: $10.22 (A)
9/30/98 7.50
------
CHANGE PER SHARE $2.72
======
(A)This number includes the capital gains distribution of $0.11 paid in December
1998 added to the actual net asset value on September 30, 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 9-30-99 28.88% 36.74%
5-year period ended 9-30-99 16.78% 18.17%
10-year period ended 9-30-99 12.57% 13.24%
Performance data quoted represents past performance and is based on deduction of
5.75% sales load on the initial purchase in each of the three periods.
Performance data quoted in this column represents past performance without
taking into account the sales load deducted on an initial purchase.
Investment return and principal value will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1999, United Vanguard Fund, Inc. had net assets totaling
$1,935,521,871 invested in a diversified portfolio of:
96.22% Common Stocks
3.78% Cash and Cash Equivalents
As a shareholder of United Vanguard Fund, Inc., for every $100 you had invested
on September 30, 1999, your Fund owned:
$60.82 Manufacturing Stocks
16.23 Services Stocks
11.65 Wholesale and Retail Trade Stocks
3.78 Cash and Cash Equivalents
3.39 Finance, Insurance and Real Estate Stocks
2.42 Transportation, Communication, Electric
and Sanitary Services Stocks
1.71 Mining Stocks
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1999
Shares Value
COMMON STOCKS
Apparel and Accessory Stores - 2.64%
Abercrombie & Fitch Co., Class A* ...... 1,497,400 $ 51,005,188
Building Materials and Garden Supplies - 2.52%
Home Depot, Inc. (The) ................. 710,000 48,723,750
Business Services - 13.66%
Adobe Systems Incorporated ............. 100,000 11,346,875
BMC Software, Inc.* .................... 875,000 62,589,844
Citrix Systems, Inc.* .................. 100,000 6,190,625
Clear Channel Communications, Inc.* .... 300,300 23,986,462
Compuware Corporation* ................. 1,200,000 31,237,500
Microsoft Corporation* ................. 860,000 77,910,625
Oracle Corporation* .................... 1,125,000 51,222,656
Total ................................. 264,484,587
Chemicals and Allied Products - 10.61%
Bristol-Myers Squibb Company ........... 741,400 50,044,500
Pfizer Inc. ............................ 649,800 23,352,188
Praxair, Inc. .......................... 950,000 43,700,000
Schering-Plough Corporation ............ 965,600 42,124,300
Smith International, Inc.* ............. 533,900 21,622,950
Warner-Lambert Company ................. 368,300 24,445,912
Total ................................. 205,289,850
Electronic and Other Electric Equipment - 23.90%
ADC Telecommunications, Inc.* .......... 327,300 13,715,916
Eaton Corporation ...................... 150,000 12,946,875
Intel Corporation ...................... 528,400 39,283,238
Koninklijke Philips Electronics N.V.,
NY Shares ............................. 670,912 67,762,112
Motorola, Inc. ......................... 540,000 47,520,000
Nokia Corporation, Series A, ADR ....... 700,000 62,584,375
STMicroelectronics N.V., NY Shares ..... 268,750 19,887,500
Tellabs* ............................... 1,021,200 58,176,487
Texas Instruments Incorporated ......... 674,400 55,469,400
Xilinx, Inc.* .......................... 1,301,800 85,308,581
Total ................................. 462,654,484
Fabricated Metal Products - 2.20%
Parker Hannifin Corporation ............ 950,000 42,571,875
General Merchandise Stores - 5.93%
Dollar General Corporation ............. 1,307,500 40,369,062
Kohl's Corporation* .................... 727,000 48,072,875
Wal-Mart Stores, Inc. .................. 554,000 26,349,625
Total ................................. 114,791,562
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1999
Shares Value
COMMON STOCKS (Continued)
Industrial Machinery and Equipment - 16.94%
Applied Materials, Inc.* ............... 1,160,900 $ 90,151,141
Cisco Systems, Inc.* ................... 1,026,400 70,340,475
Cooper Cameron Corporation* ............ 336,000 12,684,000
Dell Computer Corporation* ............. 620,000 25,923,750
EMC Corporation* ....................... 1,633,000 116,657,437
International Business Machines
Corporation ........................... 100,000 12,137,500
Total ................................. 327,894,303
Instruments and Related Products - 2.30%
Guidant Corporation .................... 424,900 22,785,263
Medtronic, Inc. ........................ 611,800 21,718,900
Total ................................. 44,504,163
Motion Pictures - 2.57%
Time Warner Incorporated ............... 818,300 49,711,725
Nondepository Institutions - 3.39%
Fannie Mae ............................. 535,300 33,556,619
Freddie Mac ............................ 618,300 32,151,600
Total ................................. 65,708,219
Oil and Gas Extraction - 1.71%
Schlumberger Limited ................... 530,000 33,025,625
Rubber and Miscellaneous Plastics Products - 1.62%
NIKE, Inc., Class B .................... 550,000 31,281,250
Transportation Equipment - 3.25%
Harley-Davidson, Inc. .................. 1,257,700 62,963,606
Water Transportation - 2.42%
Carnival Corporation, Class A .......... 871,900 37,927,650
Royal Caribbean Cruises Ltd. ........... 197,500 8,887,500
Total ................................. 46,815,150
Wholesale Trade _ Nondurable Goods - 0.56%
Cardinal Health, Inc. .................. 200,000 10,900,000
TOTAL COMMON STOCKS - 96.22% $1,862,325,337
(Cost: $1,227,295,500)
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1999
Shares Value
TOTAL SHORT-TERM SECURITIES - 3.82% $ 73,959,297
(Cost: $73,959,297)
TOTAL INVESTMENT SECURITIES - 100.04% $1,936,284,634
(Cost: $1,301,254,797)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.04%) (762,763)
NET ASSETS - 100.00% $1,935,521,871
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
SEPTEMBER 30, 1999
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities -- at value
(Notes 1 and 3) ................................. $1,936,285
Cash ............................................ 3
Receivables: ......................................
Fund shares sold ................................ 2,314
Dividends and interest .......................... 446
Prepaid insurance premium ........................ 40
----------
Total assets .................................. 1,939,088
----------
Liabilities
Payable to Fund shareholders ..................... 2,768
Accrued service fee (Note 2) ..................... 367
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 326
Accrued management fee (Note 2) .................. 36
Accrued distribution fee (Note 2) ................ 27
Accrued accounting services fee (Note 2) ......... 8
Other ............................................ 34
----------
Total liabilities ............................. 3,566
----------
Total net assets ............................. $1,935,522
==========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 191,378
Additional paid-in capital ...................... 946,366
Accumulated undistributed income:
Accumulated undistributed net realized gain on
investment transactions ....................... 162,748
Net unrealized appreciation in value of
investments ................................... 635,030
----------
Net assets applicable to outstanding
units of capital ............................. $1,935,522
==========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $10.11
Class Y .......................................... $10.13
Capital shares outstanding
Class A .......................................... 190,256
Class Y .......................................... 1,122
Capital shares authorized .......................... 600,000
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended SEPTEMBER 30, 1999
(In Thousands)
Investment Income (Loss)
Income (Note 1B):
Dividends ....................................... $ 12,085
Interest and amortization ....................... 4,091
--------
Total income .................................. 16,176
--------
Expenses (Note 2):
Investment management fee ....................... 12,334
Service fee - Class A ........................... 4,023
Transfer agency and dividend disbursing - Class A 2,937
Distribution fee - Class A ...................... 369
Accounting services fee ......................... 100
Custodian fees .................................. 82
Legal fees ...................................... 31
Audit fees ...................................... 17
Shareholder servicing - Class Y ................. 11
Other ........................................... 295
--------
Total expenses ................................ 20,199
--------
Net investment loss .......................... (4,023)
--------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 168,572
Realized net loss on foreign
currency transactions............................ (3)
--------
Realized net gain on investments................. 168,569
Unrealized appreciation in value of investments
during the period ............................... 354,100
--------
Net gain on investments ....................... 522,669
--------
Net increase in net assets resulting
from operations ............................ $518,646
========
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(Dollars In Thousands)
For the fiscal year
ended September 30,
-----------------------------
1999 1998
Increase (Decrease) in Net Assets ------------ ------------
Operations:
Net investment income (loss)...... $ (4,023) $ 1,920
Realized net gain on investments . 168,569 24,680
Unrealized appreciation .......... 354,100 32,486
---------- ----------
Net increase in net assets
resulting from operations ..... 518,646 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 ........................ (21,925) (284,084)
Class Y ........................ (73) (1,024)
---------- ----------
(23,925) (291,732)
Capital share transactions: ---------- ----------
Proceeds from sale of shares:
Class A (44,093,984 and 40,123,616
shares, respectively) ......... 423,994 321,631
Class Y (886,393 and 122,262
shares, respectively) ......... 8,651 996
Proceeds from reinvestment of dividends
and/or capital gains distribution:
Class A (2,675,283 and
41,192,909 shares, respectively) 23,248 285,879
Class Y (10,622 and 151,657
shares, respectively) ......... 92 1,052
Payments for shares redeemed:
Class A (46,621,433 and 53,303,525
shares, respectively) ......... (442,540) (426,626)
Class Y (401,501 and 224,280
shares, respectively) ......... (3,742) (1,798)
---------- ----------
Net increase in net assets
resulting from capital
share transactions .......... 9,703 181,134
---------- ----------
Total increase (decrease) ... 504,424 (51,512)
Net Assets
Beginning of period ............... 1,431,098 1,482,610
---------- ----------
End of period, including undistributed
net investment income of $0
and $1,776, respectively ......... $1,935,522 $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 fiscal year ended
September 30,
-------------------------------------
1999 1998 1997 1996 1995
------- ------ ------ ------ ------
Net asset value,
beginning of period $ 7.50 $9.11 $8.77 $8.97 $7.73
------ ----- ----- ----- -----
Income from investment
operations:
Net investment
income (loss).... (0.02) 0.01 0.07 0.03 0.07
Net realized and
unrealized gain
on investments .. 2.75 0.19 1.69 0.26 1.82
------ ----- ----- ----- -----
Total from investment
operations ....... 2.73 0.20 1.76 0.29 1.89
------ ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.01) (0.04) (0.06) (0.04) (0.03)
From capital gains (0.11) (1.77) (1.36) (0.45) (0.62)
------ ----- ----- ----- -----
Total distributions (0.12) (1.81) (1.42) (0.49) (0.65)
------ ----- ----- ----- -----
Net asset value,
end of period .... $10.11 $7.50 $9.11 $8.77 $8.97
====== ===== ===== ===== =====
Total return* ...... 36.74% 3.76% 23.60% 3.59% 26.82%
Net assets, end of
period (in
millions) ........ $1,924 $1,426 $1,478 $1,291 $1,285
Ratio of expenses
to average net
assets ........... 1.13% 1.10% 1.09% 1.09% 1.05%
Ratio of net
investment income (loss)
to average net
assets ........... -0.22% 0.13% 0.86% 0.36% 0.87%
Portfolio
turnover rate .... 83.67% 90.51% 139.14% 57.10% 30.01%
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
For the fiscal year ended period from
September 30, 9/8/95*
------------------------------ through
1999 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 (loss) ... (0.00) 0.03 0.09 0.07 0.00
Net realized and
unrealized gain
(loss) on
investments...... 2.75 0.19 1.69 0.24 (0.08)
------ ----- ----- ----- -----
Total from investment
operations ........ 2.75 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 ..... $10.13 $7.52 $9.12 $8.78 $8.97
====== ===== ===== ===== =====
Total return ....... 36.94% 4.02% 23.87% 3.80% -0.88%
Net assets, end of
period (in
millions) ........ $12 $5 $5 $4 $2
Ratio of expenses
to average
net assets ....... 0.90% 0.91% 0.90% 0.91% 0.00%
Ratio of net investment
income (loss) to average
net assets ........ -0.02% 0.33% 1.05% 0.69% 0.00%
Portfolio
turnover rate ..... 83.67% 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
SEPTEMBER 30, 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 to seek appreciation. 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. 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 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. At September 30, 1999, $ 4,174,410 was
reclassified between accumulated undistributed net investment income and
accumulated undistributed net realized gain on investment transactions.
Reported net investment loss, net realized gains and net assets were not
affected by this reclassification.
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. As of
June 30, 1999, the fee is payable by the Fund at the annual rates of .70% of net
assets up to $1 billion, .65% of net assets over $1 billion up to $2 billion,
.60% of net assets over $2 billion up to $3 billion and .55% over $3 billion.
Prior to June 30, 1999, the fee consisted 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 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 the 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
$4,419,165, out of which W&R paid sales commissions of $2,577,200 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 $65,245, 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 $1,439,027,834 while proceeds from maturities and
sales aggregated $1,358,376,329. Purchases of short-term securities and U.S.
Government securities aggregated $2,153,298,780 and $97,257,000. Proceeds from
maturities and sales aggregated $2,264,164,277 and $90,455,650, respectively.
For Federal income tax purposes, cost of investments owned at September 30,
1999 was $1,304,539,444, resulting in net unrealized appreciation of
$631,745,190, of which $652,903,694 related to appreciated securities and
$21,158,504 related to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $166,242,219 during the year ended September 30, 1998, of which a portion was
paid to the Fund's shareholders during the period ended September 30, 1999.
Remaining capital gain net income will be distributed to the Fund's
shareholders.
NOTE 5 -- Multiclass Operations
The Fund is authorized to offer four classes of shares, Class A, Class B,
Class C and Class Y, each of which have equal rights as to assets and voting
privileges. Only Class A and Class Y shares were issued during the fiscal year
ended September 30, 1999. Class Y shares are not subject to a sales charge on
purchases, are not subject to a Rule 12b-1 Distribution and Service Plan and are
subject to a separate transfer agency and dividend disbursement services fee
structure. A comprehensive discussion of the terms under which shares of 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
September 30, 1999, and the related statement of operations for the fiscal year
then ended, the statements of changes in net assets for each of the two fiscal
years in the period then ended, and the financial highlights for each of the
five fiscal years in the 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 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
September 30, 1999, by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of United
Vanguard Fund, Inc. as of September 30, 1999, the results of its operations for
the fiscal year then ended, the changes in its net assets for each of the two
fiscal years in the period then ended, and the financial highlights for each of
the five fiscal years in the period then ended in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
November 5, 1999
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends and long-term capital gains below, multiplied by
the number of shares owned by you on the record dates, will give you the total
amounts to be reported in your Federal income tax return for the years in which
they were received or reinvested.
PER-SHARE AMOUNTS REPORTABLE AS:
-------------------------------------------------------
For Individuals For Corporations
-------------------------------------------------------
Record Ordinary Long-Term Non- Long-Term
Date Total Income Capital Gain Qualifying Qualifying Capital Gain
- ----------- ------------- ------------ ---------- ---------- ------------
Class A
12-16-98 $0.1249 $0.0104 $0.1145 $0.0012 $0.0092 $0.1145
------- ------- ------- ------- ------- -------
Total $0.1249 $0.0104 $0.1145 $0.0012 $0.0092 $0.1145
======= ======= ======= ======= ======= =======
Class Y
12-16-98 $0.1439 $0.0294 $0.1145 $0.0026 $0.0268 $0.1145
------- ------- ------- ------- ------- -------
Total $0.1439 $0.0294 $0.1145 $0.0026 $0.0268 $0.1145
======= ======= ======= ======= ======= =======
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction in the
year received as provided by Section 243 of the Internal Revenue Code.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Shareholders are advised to consult with their tax adviser concerning the tax
treatment of dividends and distributions from the Fund.
<PAGE>
Shareholder Meeting Results
A special meeting of United Vanguard Fund, Inc. was held on June 22, 1999. The
matters voted upon by the shareholders and the resulting votes for each matter
are presented below.
Item 1. To elect the Board of Directors:
Broker
For Withhold Non-Votes*
J. Concannon 91,225,276 3,649,880 0
J. Dillingham 91,265,216 3,609,940 0
D. Gardner 91,065,314 3,809,842 0
L. Graves 91,148,361 3,726,795 0
J. Harroz Jr. 91,033,299 3,841,857 0
J. Hayes 90,898,311 3,976,845 0
R. Hechler 91,142,017 3,733,139 0
H. Herrmann 91,180,529 3,694,627 0
G. Johnson 90,890,092 3,985,064 0
W. Morgan 91,055,723 3,819,433 0
R. Reimer 91,027,293 3,847,863 0
F. Ross 91,202,363 3,672,793 0
E. Schwartz 91,142,062 3,733,094 0
K. Tucker 91,189,149 3,686,007 0
F. Vogel 91,278,113 3,597,043 0
Item 2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent accountants for its current fiscal year:
Broker
For Against Abstain Non-Votes*
90,239,187 863,814 3,772,155 0
Item 3. To approve or disapprove the amendment to the Fund's investment
management agreement with Waddell & Reed Investment Management Company:
Broker
For Against Abstain Non-Votes*
84,928,450 5,258,152 4,688,554 0
Item 4. To approve or disapprove the amendment of the Fund's policy
regarding securities lending:
Broker
For Against Abstain Non-Votes*
84,204,794 4,378,231 6,168,841 123,290
Item 5. To approve or disapprove the Fund's Articles of Incorporation to
change the par value of Fund shares to $0.001:
Broker
For Against Abstain Non-Votes*
84,445,746 3,386,131 7,043,279 0
*Broker Non-Votes are proxies received by the Fund from brokers or nominees when
the broker or nominee neither has received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on a
particular matter.
<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
This report is submitted for the general information of the shareholders of
United Vanguard Fund, Inc. It is not authorized for distribution to prospective
investors in the Fund unless accompanied with or preceded by the United Vanguard
Fund, Inc. current prospectus.
To all 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 Accumulative Fund
United Asset Strategy Fund, Inc.
United Bond Fund
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Income Fund
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Science and Technology Fund
United Small Cap Fund, Inc.
United Vanguard Fund, Inc.
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
NUR1005A(9-99)
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