United
Vanguard
Fund, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 2000
<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, 2000
Dear Shareholder:
We are delighted to share with you this report on your Fund's operations for the
six months ended March 31, 2000.
This six-month period provided some remarkable gains, especially in many of the
so-called "new economy" stocks. The exceptional performance of these stocks was
evident in the Nasdaq Composite Index, which is made up primarily of technology-
oriented companies; and in the Russell 2000, which includes many small-cap
growth companies. The Nasdaq Composite recorded a remarkable gain of 67 percent
over the six months ended March 31, 2000. The Russell 2000 rose a very strong
27 percent over the period.
The performance of the two other major indices -- the Dow Jones Industrial
Average and the Standard & Poor's 500 -- did not match the Nasdaq or Russell,
reflecting a growing investor sentiment that the "old economy" companies that
they include could not provide the growth opportunity of their "new economy"
counterparts. Still, their performance, by historical standards, was very
strong. The S&P 500, the index most often used to track the performance of the
largest U.S. stocks, rose 18 percent for the six months ended March 31. The Dow
Jones Industrial Average, which includes 30 of the nation's largest companies,
rose 6 percent.
The across-the-board strength of the equity market and, especially, the enormous
gains in the Nasdaq over this period, left many investors wondering if this
upward trend was sustainable. The answer came just after the period's end, as a
sharp sell-off erased all of the market's gains of the first three months of
2000. The sell-off was most pronounced, by far, in the Nasdaq Composite.
Nonetheless, at May 1, 2000, the Nasdaq remained up 41 percent from its
September 30, 1999 level.
For the six months ended March 31, bonds remained depressed, the result of
several forces weighing on all fixed-income markets. The Federal Reserve began
raising short-term interest rates at the end of June 1999, and has now raised
interest rates five times. Tax-loss selling and investor preference for
equities over fixed-income securities placed additional pressure on bonds.
Looking ahead, the market is still trying to find direction. Currently,
economic news suggests that the economy remains sufficiently strong to perhaps
prompt additional interest rate hikes by the Federal Reserve. Other factors
that may affect the market during the coming year include the presidential
election, the high trade deficit and the implications of that deficit for the
value of the U.S. dollar abroad.
Overall, investors have been rewarded well in recent years. Those who continue
a structured and consistent investment program remain well positioned to take
advantage of opportunities, including those presented by the market's occasional
downdrafts. Just as we urge you not to become unduly concerned if the market
moves downward in the near term, we would urge that you not become too exuberant
when it moves higher in similarly short periods.
It is impossible to predict with certainty where markets will go next, but one
thing that remains certain is that a well-thought-out investment plan is
essential. Remember, a plan that is appropriate for you is appropriate
regardless of inevitable market changes. You have a partnership with your
Waddell & Reed financial advisor, and that partnership is built upon a
customized program based on your specific needs. Focusing on that plan, despite
market fluctuations, is your key to a sound financial future. Thank you for
your ongoing commitment and support.
Respectfully,
Robert L. Hechler
President
<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
growth stocks, but also includes value
stocks in the Fund's portfolio.
FOUNDED: 1969
SCHEDULED DIVIDEND FREQUENCY: SEMIANNUALLY (June and December)
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Six Months Ended March 31, 2000
---------------------------------------
CAPITAL GAINS DISTRIBUTION $0.87
=====
NET ASSET VALUE ON
3/31/00 $14.55 adjusted to: $15.42 (A)
9/30/99 10.11
------
CHANGE PER SHARE $ 5.31
======
(A)This number includes the capital gains distribution of $0.87 paid in December
1999 added to the actual net asset value on March 31, 2000.
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 3-31-00 46.77% 55.72%
5-year period ended 3-31-00 26.87% 28.38%
10-year period ended 3-31-00 17.92% 18.62%
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, 2000, United Vanguard Fund, Inc. had net assets totaling
$3,054,697,421 invested in a diversified portfolio of:
99.20% Common Stocks
0.80% Cash and Cash Equivalents
As a shareholder of United Vanguard Fund, Inc., for every $100 you had invested
on March 31, 2000, your Fund owned:
$66.73 Manufacturing Stocks
19.87 Services Stocks
5.21 Wholesale and Retail Trade Stocks
3.18 Mining Stocks
2.11 Transportation, Communication, Electric
and Sanitary Services Stocks
2.10 Finance, Insurance and Real Estate Stocks
0.80 Cash and Cash Equivalents
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 2000
Shares Value
COMMON STOCKS
Building Materials and Garden Supplies - 1.72%
Home Depot, Inc. (The) ................. 815,000 $ 52,567,500
Business Services - 18.34%
BMC Software, Inc.* .................... 175,000 8,635,156
Brocade Communications Systems, Inc.* .. 200,000 35,806,250
CheckFree Holdings Corporation* ........ 550,000 38,826,563
Citrix Systems, Inc.* .................. 698,400 46,247,175
Clear Channel Communications, Inc.* .... 300,300 20,739,469
Edwards (J. D.) & Company* ............. 100,000 3,278,125
Intuit Inc.* ........................... 500,000 27,171,875
Microsoft Corporation* ................. 960,000 102,270,000
Oracle Corporation* .................... 2,640,000 205,837,500
SAP AG, ADR ............................ 1,100,000 65,725,000
Siebel Systems, Inc.* .................. 5,000 597,031
VeriSign, Inc.* ........................ 10,000 1,494,375
Veritas Software Corp.* ................ 15,000 1,940,156
Vignette Corporation* .................. 10,000 1,602,813
Total ................................. 560,171,488
Chemicals and Allied Products - 13.49%
Bristol-Myers Squibb Company ........... 597,300 34,494,075
Forest Laboratories, Inc.* ............. 700,000 59,150,000
Pfizer Inc. ............................ 2,449,800 89,570,813
Schering-Plough Corporation ............ 1,265,600 46,510,800
Smith International, Inc.* ............. 1,133,900 87,877,250
Warner-Lambert Company ................. 968,300 94,409,250
Total ................................. 412,012,188
Communication - 1.83%
Nextel Communications, Inc.* ........... 376,500 55,804,359
Depository Institutions - 0.22%
Firstar Corporation .................... 300,000 6,881,250
Electronic and Other Electric Equipment - 20.98%
ADC Telecommunications, Inc.* .......... 854,600 46,068,281
Intel Corporation ...................... 503,400 66,354,413
JDS Uniphase Corporation* .............. 361,200 43,535,887
Nokia Corporation, Series A, ADR ....... 700,000 152,075,000
Nortel Networks Corporation ............ 240,000 30,240,000
Rambus Inc.* ........................... 88,700 26,041,766
STMicroelectronics N.V., NY Shares ..... 268,750 50,306,641
Texas Instruments Incorporated ......... 324,400 51,904,000
Xilinx, Inc.* .......................... 2,103,600 174,138,637
Total ................................. 640,664,625
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 2000
Shares Value
COMMON STOCKS (Continued)
Fabricated Metal Products - 1.79%
Parker Hannifin Corporation ............ 1,325,000 $ 54,739,063
General Merchandise Stores - 3.49%
Kohl's Corporation* .................... 827,000 84,767,500
Wal-Mart Stores, Inc. .................. 394,000 21,867,000
Total ................................. 106,634,500
Industrial Machinery and Equipment - 18.92%
Applied Materials, Inc.* ............... 1,621,800 152,905,331
Cisco Systems, Inc.* ................... 2,052,800 158,707,100
Cooper Cameron Corporation* ............ 936,000 62,595,000
EMC Corporation* ....................... 1,623,000 202,875,000
Sun Microsystems, Inc.* ................ 10,000 937,187
Total ................................. 578,019,618
Instruments and Related Products - 2.19%
Guidant Corporation* ................... 424,900 24,989,431
Medtronic, Inc. ........................ 811,800 41,756,963
Total ................................. 66,746,394
Motion Pictures - 1.53%
Time Warner Incorporated ............... 468,300 46,830,000
Nondepository Institutions - 1.88%
Fannie Mae ............................. 535,300 30,210,994
Freddie Mac ............................ 618,300 27,321,131
Total ................................. 57,532,125
Oil and Gas Extraction - 3.18%
BJ Services Company* ................... 350,000 25,856,250
Schlumberger Limited ................... 930,000 71,145,000
Total ................................. 97,001,250
Radio and Television Communications Equipment - 6.09%
Koninklijke Philips Electronics N.V.,
NY Shares ............................. 670,912 114,935,612
Motorola, Inc. ......................... 500,000 71,187,500
Total ................................. 186,123,112
Railroad Transportation - 0.28%
Kansas City Southern Industries, Inc. .. 100,000 8,593,750
Transportation Equipment - 3.27%
Harley-Davidson, Inc. .................. 1,257,700 99,829,937
TOTAL COMMON STOCKS - 99.20% $3,030,151,159
(Cost: $1,432,329,262)
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 2000
Value
TOTAL SHORT-TERM SECURITIES - 0.89% $ 27,144,433
(Cost: $27,144,433)
TOTAL INVESTMENT SECURITIES - 100.09% $3,057,295,592
(Cost: $1,459,473,695)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.09%) (2,598,171)
NET ASSETS - 100.00% $3,054,697,421
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, 2000
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities -- at value
(Notes 1 and 3) ................................. $3,057,296
Cash ............................................ 1
Receivables:
Fund shares sold ................................ 3,419
Dividends and interest .......................... 748
Prepaid insurance premium ........................ 33
----------
Total assets .................................. 3,061,497
----------
Liabilities
Payable to Fund shareholders ..................... 5,709
Accrued service fee (Note 2) ..................... 585
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 344
Accrued distribution fee (Note 2) ................ 57
Accrued management fee (Note 2) .................. 55
Accrued accounting services fee (Note 2) ......... 8
Other ............................................ 42
----------
Total liabilities ............................. 6,800
----------
Total net assets ............................. $3,054,697
==========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 209,917
Additional paid-in capital ...................... 1,140,983
Accumulated undistributed income (loss):
Accumulated undistributed net investment loss.... (8,201)
Accumulated undistributed net realized gain on
investment transactions ....................... 114,176
Net unrealized appreciation in value of
investments ................................... 1,597,822
----------
Net assets applicable to outstanding
units of capital ............................. $3,054,697
==========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $14.55
Class B ........................................... $14.47
Class C ........................................... $14.47
Class Y .......................................... $14.60
Capital shares outstanding
Class A .......................................... 207,031
Class B ........................................... 1,298
Class C ........................................... 244
Class Y .......................................... 1,344
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, 2000
(In Thousands)
Investment Loss
Income (Note 1B):
Dividends (net of foreign withholding
taxes of $1) .................................. $ 3,429
Interest and amortization ....................... 1,596
----------
Total income .................................. 5,025
----------
Expenses (Note 2):
Investment management fee ....................... 8,216
Service fee:
Class A ........................................ 2,722
Class B ........................................ 10
Class C ........................................ 2
Transfer agency and dividend disbursing:
Class A ........................................ 1,711
Class B ........................................ 18
Class C ........................................ 3
Distribution fee:
Class A ........................................ 165
Class B ........................................ 28
Class C ........................................ 5
Accounting services fee ......................... 50
Custodian fees .................................. 50
Legal fees ...................................... 14
Audit fees ...................................... 12
Shareholder servicing - Class Y ................. 12
Other ........................................... 206
----------
Total expenses ................................ 13,224
----------
Net investment loss .......................... (8,199)
----------
Realized and Unrealized Gain on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 119,564
Unrealized appreciation in value of investments
during the period ............................... 962,792
----------
Net gain on investments ....................... 1,082,356
----------
Net increase in net assets resulting
from operations ............................ $1,074,157
==========
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands)
For the six For the fiscal
months ended year ended
March 31, September 30,
2000 1999
Increase in Net Assets ------------ ------------
Operations:
Net investment loss .............. $ (8,199) $ (4,023)
Realized net gain on investments . 119,564 168,569
Unrealized appreciation .......... 962,792 354,100
---------- ----------
Net increase in net assets
resulting from operations ..... 1,074,157 518,646
---------- ----------
Distributions to shareholders from (Note 1E):*
Net investment income:
Class A ........................ --- (1,908)
Class B ........................ --- ---
Class C ........................ --- ---
Class Y ........................ --- (19)
Realized gains on securities
transactions:
Class A ........................ (166,701) (21,925)
Class B ........................ (343) ---
Class C ........................ (57) ---
Class Y ........................ (1,037) (73)
---------- ----------
(168,138) (23,925)
Capital share transactions ---------- ----------
(Note 5) ......................... 213,156 9,703
---------- ----------
Total increase ................ 1,119,175 504,424
Net Assets
Beginning of period ............... 1,935,522 1,431,098
---------- ----------
End of period ...................... $3,054,697 $1,935,522
========== ==========
Undistributed net investment loss $(8,201) $---
======= ====
*See "Financial Highlights" on pages 12 - 15.
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 ------------------------------------
3/31/00 1999 1998 1997 1996 1995
------- ------ ------ ------ ------ ------
Net asset value,
beginning of period $10.11 $ 7.50 $9.11 $8.77 $8.97 $7.73
------ ------ ----- ----- ----- -----
Income from investment
operations:
Net investment
income (loss).... (0.04) (0.02) 0.01 0.07 0.03 0.07
Net realized and
unrealized gain
on investments .. 5.35 2.75 0.19 1.69 0.26 1.82
------ ------ ----- ----- ----- -----
Total from investment
operations ....... 5.31 2.73 0.20 1.76 0.29 1.89
------ ------ ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.00) (0.01) (0.04) (0.06) (0.04) (0.03)
From capital gains (0.87) (0.11) (1.77) (1.36) (0.45) (0.62)
------ ------ ----- ----- ----- -----
Total distributions (0.87) (0.12) (1.81) (1.42) (0.49) (0.65)
------ ------ ----- ----- ----- -----
Net asset value,
end of period .... $14.55 $10.11 $7.50 $9.11 $8.77 $8.97
====== ====== ===== ===== ===== =====
Total return* ...... 54.95% 36.74% 3.76% 23.60% 3.59% 26.82%
Net assets, end of
period (in
millions) ........ $3,013 $1,924 $1,426 $1,478 $1,291 $1,285
Ratio of expenses
to average net
assets ........... 1.06%** 1.13% 1.10% 1.09% 1.09% 1.05%
Ratio of net
investment income (loss)
to average net
assets ........... -0.66%**-0.22% 0.13% 0.86% 0.36% 0.87%
Portfolio
turnover rate .... 29.04% 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.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/4/99*
through
3/31/00
-------
Net asset value,
beginning of period $10.43
-----
Income from investment
operations:
Net investment loss (0.05)
Net realized and
unrealized gain
on investments .. 4.96
-----
Total from investment
operations ....... 4.91
-----
Less distributions:
From net investment
income .......... (0.00)
From capital gains (0.87)
-----
Total distributions (0.87)
-----
Net asset value,
end of period .... $14.47
=====
Total return ....... 49.39%
Net assets, end of
period (in
millions) ........ $19
Ratio of expenses to
average net assets 2.18%**
Ratio of net investment
loss to average
net assets ....... -1.78%**
Portfolio turnover
rate ............. 29.04%***
*Commencement of operations.
**Annualized.
***For the six months ended March 31, 2000.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/4/99*
through
3/31/00
-------
Net asset value,
beginning of period $10.43
-----
Income from investment
operations:
Net investment loss (0.05)
Net realized and
unrealized gain
on investments .. 4.96
-----
Total from investment
operations ....... 4.91
-----
Less distributions:
From net investment
income .......... (0.00)
From capital gains (0.87)
-----
Total distributions (0.87)
-----
Net asset value,
end of period .... $14.47
=====
Total return ....... 49.39%
Net assets, end of
period (in
millions) ........ $3
Ratio of expenses to
average net assets 2.17%**
Ratio of net investment
loss to average
net assets ....... -1.76%**
Portfolio turnover
rate ............. 29.04%***
*Commencement of operations.
**Annualized.
***For the six months ended March 31, 2000.
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 ended period from
months September 30, 9/8/95*
ended----------------------------- through
3/31/00 1999 1998 1997 1996 9/30/95
------- ------- ------ ------ ------ ------
Net asset value,
beginning of period $10.13 $ 7.52 $9.12 $8.78 $8.97 $9.05
------ ------ ----- ----- ----- -----
Income from investment
operations:
Net investment
income (loss) ... (0.03) (0.00) 0.03 0.09 0.07 0.00
Net realized and
unrealized gain
(loss) on
investments...... 5.37 2.75 0.19 1.69 0.24 (0.08)
------ ------ ----- ----- ----- -----
Total from investment
operations ........ 5.34 2.75 0.22 1.78 0.31 (0.08)
------ ------ ----- ----- ----- -----
Less distributions:
From net investment
income........... (0.00) (0.03) (0.05) (0.08) (0.05) (0.00)
From capital gains (0.87) (0.11) (1.77) (1.36) (0.45) (0.00)
------ ------ ----- ----- ----- -----
Total distributions. (0.87) (0.14) (1.82) (1.44) (0.50) (0.00)
------ ------ ----- ----- ----- -----
Net asset value,
end of period ..... $14.60 $10.13 $7.52 $9.12 $8.78 $8.97
====== ====== ===== ===== ===== =====
Total return ....... 55.14% 36.94% 4.02% 23.87% 3.80% -0.88%
Net assets, end of
period (in
millions) ........ $20 $12 $5 $5 $4 $2
Ratio of expenses
to average
net assets ....... 0.82%** 0.90% 0.91% 0.90% 0.91% 0.00%
Ratio of net investment
income (loss) to average
net assets ........ -0.42%**-0.02% 0.33% 1.05% 0.69% 0.00%
Portfolio
turnover rate ..... 29.04% 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
MARCH 31, 2000
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
accounting principles generally accepted in the United States of America.
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 accounting
principles generally accepted in the United States of America. 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 accounting
principles generally accepted in the United States of America 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
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. 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, Class B and Class C shares, the Fund 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 0.15% 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
$2,339,943. With respect to Class A, Class B and Class C shares, W&R paid sales
commissions of $1,676,637 and all expenses in connection with the sale of Fund
shares, except for registration fees and related expenses.
A contingent deferred sales charge ("CDSC") may be assessed against a
shareholder's redemption amount of Class B and Class C shares and is paid to
W&R. The purpose of the deferred sales charge is to compensate W&R for the
costs incurred by W&R in connection with the sale of Fund shares.
With respect to Class B shares, the amount of the CDSC will be the
following percent of the total amount invested during a calendar year to acquire
the shares or the value of the shares redeemed, whichever is less. Redemption
at any time during the first calendar year of investment, 5%; the second
calendar year, 4%; the third calendar year, 3%; the fourth calendar year, 3%;
the fifth calendar year, 2%; the sixth calendar year, 1% and thereafter, 0%.
If Class C shares are sold within 12 months of buying these shares, a 1%
CDSC will be imposed.
The deferred sales charge will not be imposed on shares representing
payment of dividends or distributions or on amounts which represent an increase
in the value of the shareholder's account resulting from capital appreciation
above the amount paid for shares purchased during the deferred sales charge
period. During the period ended March 31, 2000, W&R received $2,520 and $472 in
deferred sales charges from Class B shares and Class C shares, respectively.
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 0.25% 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 distribution of the
Class A shares and/or provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
Under the Distribution and Service Plan adopted by the Fund for Class B and
Class C shares, respectively, the Fund may pay W&R, on an annual basis, a
service fee of up to 0.25% of the average daily net assets of the class to
compensate W&R for providing services to shareholders of that class and/or
maintaining shareholder accounts for that class and a distribution fee of up to
0.75% of the average daily net assets of the class to compensate W&R for
distributing the shares of that class. The Class B Plan and the Class C Plan
each permit W&R to receive compensation, through the distribution and service
fee, respectively, for its distribution activities for that class, which are
similar to the distribution activities described with respect to the Class A
Plan, and for its activities in providing personal services to shareholders of
that class and/or maintaining shareholder accounts of that class, which are
similar to the corresponding activities for which is it entitled to
reimbursement under the Class A Plan.
The Fund paid Directors' fees of $37,548, 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 $785,873,814 while proceeds from maturities and
sales aggregated $700,286,447. Purchases of short-term securities aggregated
$1,121,159,375, while proceeds from maturities and sales aggregated
$1,169,439,688. No U.S. Government securities were purchased or sold during the
period.
For Federal income tax purposes, cost of investments owned at March 31,
2000 was $1,462,758,342, resulting in net unrealized appreciation of
$1,594,537,250, of which $1,610,571,988 related to appreciated securities and
$16,034,738 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 its fiscal year ended September 30, 1999, which has been
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. 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 each class are
offered is contained in the Prospectus and the 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 their
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
Transactions in capital stock are summarized below. Amounts are in
thousands.
For the For the
six months fiscal year
ended ended
March 31, September 30,
2000 1999
------------ ------------
Shares issued from sale
of shares:
Class A ............ 19,234 44,094
Class B ............. 1,299 ---
Class C ............. 246 ---
Class Y ............ 466 886
Shares issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 14,266 2,675
Class B ............. 30 ---
Class C ............. 5 ---
Class Y ............ 59 11
Shares redeemed:
Class A ............ (16,725) (46,621)
Class B ............. (31) ---
Class C ............. (7) ---
Class Y ............ (303) (402)
------ ------
Increase in
outstanding capital
shares .............. 18,539 643
====== ======
Value issued from sale
of shares:
Class A ............ $235,717 $423,994
Class B ............. 16,122 ---
Class C ............. 3,093 ---
Class Y ............ 5,860 8,651
Value issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 162,063 23,248
Class B ............. 343 ---
Class C ............. 57 ---
Class Y ............ 673 92
Value redeemed:
Class A ............ (206,390) (442,540)
Class B ............. (402) ---
Class C ............. (90) ---
Class Y ............ (3,890) (3,742)
-------- --------
Increase in outstanding
capital ............ $213,156 $ 9,703
======== ========
<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, 2000, 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
then ended and the fiscal year ended September 30, 1999, and the financial
highlights for the six-month period ended March 31, 2000, and for each of the
five fiscal years in the period ended September 30, 1999. 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 auditing standards generally accepted
in the United States of America. 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, 2000, 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 March 31, 2000, 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, 1999, and the
financial highlights for the six-month period ended March 31, 2000, and for each
of the five fiscal years in the period ended September 30, 1999, in conformity
with accounting principles generally accepted in the United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 5, 2000
<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, San Mateo, 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
Kristen A. Richards, Vice President and Secretary
Daniel C. Schulte, Vice President
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 Tax-Managed Equity 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
(888)-WADDELL
(888)-923-3355
Our INTERNET address is:
http://www.waddell.com
NUR1005SA(3-00)
printed on recycled paper
