United
New Concepts
Fund, Inc.
SEMIANNUAL
REPORT
-------------------------------------------
For the six months ended September 30, 1996
<PAGE>
This report is submitted for the general information of the shareholders of
United New Concepts Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United New Concepts Fund, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
SEPTEMBER 30, 1996
Dear Shareholder:
As President of your Fund, I would like to thank you for your continued
confidence in our products and services. Our goal to provide the best service
possible to our shareholders has not changed since we opened our doors nearly 60
years ago. Waddell & Reed's team of professionals, including the Fund's
manager, our customer service representatives and your personal account
representative continue to strive to meet your financial needs.
Waddell & Reed plays a special role in the investment industry. We take
pride in being one of the few financial services firms committed to locally
based account representatives who provide the personal service you need. When
you're ready to evaluate your financial plan to keep up with life's changes, or
to find an answer to a financial question that you may have, your representative
is ready to assist you--when you need it. He or she is available to help you
plan for your retirement, fund a child's education or make plans for other long-
term financial goals.
All of us are committed to helping you meet the financial goals that are
important to you. This is accomplished by our offering investment products to
meet a variety of personal financial objectives, along with the personal service
to make the investment process more convenient and accessible.
We want to continue to meet your financial needs for many years to come.
Should you have any questions about your account or other financial issues that
are important to you, contact your personal account representative or your local
Waddell & Reed office. They're ready to help you make the most of your
financial future.
Respectfully,
Keith A. Tucker
President
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
United New Concepts Fund, Inc.
PORTFOLIO STRATEGY:
Common Stock in new & OBJECTIVE: Growth of capital.
emerging companies
STRATEGY: Invests primarily in
Maximum 10% Foreign common stocks of
Securities relatively new or
unseasoned companies,
Cash Reserves companies in their early stages of
development or smaller companies in new
or emerging industries. (May purchase
securities subject to repurchase
agreements. May invest in certain
options and futures.)
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the New Concepts Fund
from time to time.
Moving into cash reserve positions at
times thought to be near a major stock
market peak allows the Fund the
opportunity to capture profits and
attempts to cushion the impact of market
declines. The added flexibility
provided by our CASH RESERVES STRATEGY
has from time to time been an important
element in our past success and, when
deemed appropriate, may be used in the
management of the portfolio in the
future.
FOUNDED: 1983
SCHEDULED DIVIDEND FREQUENCY: ANNUALLY (December)
PERFORMANCE SUMMARY - Class A Shares
PER SHARE DATA
For the Six Months Ended September 30, 1996
- -------------------------------------------
NET ASSET VALUE ON
9/30/96 $15.92
3/31/96 15.46
------
CHANGE PER SHARE $0.46
======
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 9-30-96 2.23% 8.47%
5-year period ended 9-30-96 15.96% 17.34%
10-year period ended 9-30-96 14.31% 14.99%
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, 1996, United New Concepts Fund, Inc. had net assets totaling
$582,315,439 invested in a diversified portfolio of:
70.90% Common Stocks
29.10% Cash and Cash Equivalents
As a shareholder of United New Concepts Fund, Inc., for every $100 you had
invested on September 30, 1996, your Fund owned:
$38.38 Services Stocks
29.10 Cash and Cash Equivalents
12.09 Manufacturing Stocks
6.79 Finance, Insurance and Real Estate Stocks
8.45 Wholesale and Retail Trade Stocks
5.19 Transportation, Communication, Electric
and Sanitary Services Stocks
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1996
Shares Value
COMMON STOCKS
Automotive Dealers and Service Stations - 0.66%
O'Reilly Automotive, Inc.* ............. 110,000 $ 3,822,500
Building Materials and Garden Supplies - 2.11%
Central Tractor Farm & Country, Inc.* ... 200,000 2,375,000
Fastenal Company ....................... 200,000 9,925,000
Total ................................. 12,300,000
Business Services - 18.94%
America Online, Inc.* .................. 500,000 17,812,500
CKS Group, Inc.* ....................... 250,000 5,859,250
CMG Information Services, Inc.* ........ 170,000 2,486,250
CUC International Inc.* ................ 400,000 15,950,000
Cerner Corporation* .................... 154,700 2,407,441
cisco Systems, Inc.* ................... 500,000 31,031,000
FactSet Research Systems, Inc.* ........ 208,900 3,995,213
HCIA Inc.* ............................. 65,800 3,972,675
Health Management Systems, Inc.* ....... 180,000 5,310,000
IMNET Systems, Inc.* ................... 105,000 2,027,760
Leap Group, Inc.* ...................... 200,000 2,050,000
Metromail Corporation* ................. 202,500 4,379,063
PHAMIS, Inc.* .......................... 200,000 3,312,400
QuickResponse Services, Inc.* .......... 141,000 5,340,375
Shared Medical Systems Corporation ..... 6,300 357,916
Shiva Corporation* ..................... 70,000 4,016,250
Total ................................. 110,308,093
Chemicals and Allied Products - 0.78%
Watson Pharmaceuticals Inc.* ........... 120,400 4,530,050
Communication - 5.19%
CommNet Cellular Inc.* ................. 200,000 5,800,000
Intermedia Communications of Florida,
Inc.* ................................ 300,000 8,868,600
LCC International, Inc.* ............... 40,000 735,000
MFS Communications Company, Inc.* ...... 250,000 10,890,500
Mobile Telecommunication Technologies
Corp.* ................................ 250,000 3,937,500
Total ................................. 30,231,600
Depository Institutions - 1.69%
Concord EFS, Inc.* .................... 379,687 9,824,401
Eating and Drinking Places - 0.24%
Longhorn Steaks, Inc.* ................. 95,000 1,425,000
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1996
Shares Value
COMMON STOCKS (Continued)
Electronic and Other Electric Equipment - 2.53%
Advanced Fibre Communication* .......... 35,000 $ 875,000
Ascend Communications, Inc.* ........... 210,000 13,873,020
Total ................................. 14,748,020
Engineering and Management Service - 0.36%
Transition Systems, Inc.* .............. 100,000 2,075,000
Furniture and Home Furnishings Stores - 0.49%
Williams-Sonoma, Inc.* ................ 100,000 2,843,700
Health Services - 4.49%
ARV Assisted Living, Inc.* ............. 61,000 907,375
American Healthcorp, Inc.* ............. 300,000 3,243,600
Assisted Living Concepts, Inc.* ........ 100,000 1,900,000
HEALTHSOUTH Corporation* ............... 84,636 3,247,906
Inphynet Medical Management Inc.* ...... 200,000 3,600,000
Physicians Resource Group, Inc.* ....... 300,000 7,087,500
Vencor, Incorporated* .................. 190,150 6,132,337
Total ................................. 26,118,718
Industrial Machinery and Equipment - 1.25%
Digi International Inc.* ............... 150,000 2,156,250
MicroTouch Systems, Inc.* .............. 270,000 5,130,000
Total ................................. 7,286,250
Instruments and Related Products - 4.59%
Boston Scientific Corporation* ......... 120,000 6,900,000
Innovasive Devices, Inc.* .............. 55,000 495,000
LUNAR CORPORATION* ..................... 210,000 6,825,000
St. Jude Medical, Inc.* ................ 120,000 4,852,440
STERIS Corporation* .................... 100,000 3,368,700
Target Therapeutics, Inc.* ............. 100,000 4,262,500
Total ................................. 26,703,640
Insurance Agents, Brokers and Service - 1.19%
CRA Managed Care, Inc.* ................ 128,700 6,917,625
Insurance Carriers - 1.52%
United HealthCare Corporation .......... 213,000 8,866,125
Miscellaneous Retail - 3.51%
Books-A-Million, Inc.* ................. 180,000 1,428,660
MSC Industrial Direct Co., Inc.* ....... 116,500 4,150,313
OmniCare, Inc. ......................... 486,400 14,835,200
Total ................................. 20,414,173
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1996
Shares Value
COMMON STOCKS (Continued)
Nondepository Institutions - 0.82%
Mercury Finance Company ................ 399,999 $ 4,799,988
Personal Services - 1.90%
Equity Corporation International* ...... 350,000 11,046,700
Prepackaged Software - 12.69%
Broderbund Software, Inc.* ............. 120,200 3,455,750
Citrix Systems, Inc.* .................. 33,000 1,683,000
Dendrite International, Inc.* .......... 152,000 4,664,424
Electronic Arts Inc.* .................. 120,000 4,477,440
Expert Software, Inc.* ................. 300,000 2,100,000
GT Interactive Software Corp.* ......... 150,000 3,431,250
HPR Inc.* .............................. 199,800 3,221,775
Health Systems Design Corporation* ..... 180,200 1,982,200
Macromedia, Inc.* ...................... 80,000 1,660,000
Medic Computer Systems, Inc.* .......... 80,000 2,910,000
Microsoft Corporation* ................. 40,000 5,272,480
Parametric Technology Corporation* ..... 400,000 19,774,800
Premenos Technology Corp.* ............. 175,000 3,609,375
Synopsys, Inc.* ........................ 140,000 6,457,500
Wall Data Incorporated* ................ 400,000 9,200,000
Total.................................. 73,899,994
Real Estate - 1.57%
Stewart Enterprises, Inc., Class A ..... 268,650 9,134,100
Stone, Clay and Glass Products - 0.55%
Department 56, Inc.* ................... 129,800 3,228,775
Transportation Equipment - 2.39%
Gentex Corporation* .................... 120,000 2,722,440
Harley-Davidson, Inc. .................. 260,000 11,180,000
Total ................................. 13,902,440
Wholesale Trade - Nondurable Goods - 1.44%
Cardinal Health, Inc. .................. 101,639 8,397,922
TOTAL COMMON STOCKS - 70.90% $412,824,814
(Cost: $222,114,118)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES
Commercial Paper
Chemicals and Allied Products - 2.96%
Air Products & Chemicals Inc.,
5.42%, 10-23-96 ....................... $11,000 $ 10,963,566
Hercules, Inc.,
5.33%, 10-24-96 ....................... 6,275 6,253,632
Total.................................. 17,217,198
Communication - 1.88%
Bell Atlantic Financial Services Inc.,
5.43%, 10-24-96 ....................... 1,750 1,743,929
GTE Corporation,
5.42%, 10-8-96 ........................ 9,220 9,210,283
Total ................................. 10,954,212
Depository Institutions - 0.58%
U.S. Bancorp,
Master Note............................ 3,388 3,388,000
Electric, Gas and Sanitary Services - 6.57%
Carolina Power & Light Co.,
5.32%, 10-9-96 ........................ 5,980 5,972,930
PacifiCorp,
5.31%, 10-18-96 ....................... 5,540 5,526,056
Public Service Company of Colorado:
5.56%, 10-4-96 ........................ 2,850 2,848,679
5.49%, 10-18-96 ....................... 4,905 4,892,284
Public Service Electric & Gas Co.,
5.5%, 10-16-96 ........................ 1,495 1,491,574
Questar Corp.,
5.28%, 10-11-96 ....................... 6,275 6,265,797
Western Resources Inc.:
5.42%, 10-7-96 ........................ 8,285 8,277,516
5.52%, 10-25-96 ....................... 3,000 2,988,960
Total.................................. 38,263,796
Food and Kindred Products - 4.12%
General Mills, Inc.,
Master Note ........................... 1,659 1,659,000
Heinz (H.J.) Company,
5.35%, 10-24-96 ....................... 3,615 3,602,644
Quaker Oats Co.:
5.55%, 10-7-96 ........................ 4,135 4,131,175
5.66%, 10-17-96 ....................... 5,390 5,376,441
Ralston Purina Co.,
5.47%, 10-25-96 ....................... 2,000 1,992,707
Seagram (Joseph E.) & Son Inc.,
5.34%, 10-17-96 ....................... 7,250 7,232,793
Total.................................. 23,994,760
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Nondepository Institutions - 1.12%
Island Finance Puerto Rico Inc.,
5.32%, 10-21-96 ....................... $ 2,540 $ 2,532,493
Textron Financial Corp.,
5.47%, 10-18-96 ....................... 4,025 4,014,603
Total.................................. 6,547,096
Petroleum and Coal Products - 1.91%
Kerr-McGee Credit Corp.:
5.45%, 10-15-96 ....................... 5,275 5,263,820
5.47%, 10-23-96 ....................... 5,860 5,840,412
Total ................................. 11,104,232
Primary Metal Industries - 3.42%
Aluminum Co. of America,
5.33%, 10-24-96 ....................... 20,000 19,931,894
Printing and Publishing - 1.71%
American Greetings Corporation,
5.43%, 10-22-96 ....................... 10,000 9,968,325
Transportation Equipment - 1.41%
Dana Credit Corp.:
5.48%, 10-11-96 ....................... 2,525 2,521,156
5.5%, 10-30-96 ........................ 2,905 2,892,129
Echlin, Inc.,
5.42%, 10-7-96 ........................ 2,275 2,272,945
Textron Inc.,
5.45%, 10-22-96 ....................... 550 548,252
Total ................................. 8,234,482
Wholesale Trade - Nondurable Goods - 1.56%
Sara Lee Corporation,
Master Note ........................... 9,055 9,055,000
Total Commercial Paper - 27.24% 158,658,995
Commercial Paper (backed by irrevocable bank
letter of credit) - 1.08%
Electric, Gas and Sanitary Services
CommEd Fuel Co. Inc. (Credit Suisse),
5.37%, 10-8-96 ........................ 6,290 6,283,432
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1996
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Municipal Obligations - 1.72%
California
Oakland-Alameda County Coliseum Lease
Revenue Bonds,
5.4%, 10-21-96 ........................ $10,000 $ 10,000,000
TOTAL SHORT-TERM SECURITIES - 30.04% $174,942,427
(Cost: $174,942,427)
TOTAL INVESTMENT SECURITIES - 100.94% $587,767,241
(Cost: $397,056,545)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.94%) (5,451,802)
NET ASSETS - 100.00% $582,315,439
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 NEW CONCEPTS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $587,767,241
Cash ............................................ 93,134
Receivables:
Investment securities sold....................... 2,433,867
Fund shares sold ................................ 1,421,124
Dividends and interest .......................... 93,049
Prepaid insurance premium ........................ 12,564
------------
Total assets .................................. 591,820,979
------------
Liabilities
Payable for investment securities purchased ....... 8,227,591
Payable for Fund shares redeemed ................. 956,722
Accrued service fee .............................. 173,100
Accrued transfer agency and dividend disbursing .. 116,196
Accrued accounting services fee .................. 5,833
Other ............................................ 26,098
------------
Total liabilities ............................. 9,505,540
------------
Total net assets ............................. $582,315,439
============
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 36,565,069
Additional paid-in capital ...................... 337,226,884
Accumulated undistributed income:
Accumulated undistributed net investment
income ........................................ 1,693,093
Accumulated undistributed net realized gain
on investment transactions .................... 16,119,697
Net unrealized appreciation in value of
investments at end of period .................. 190,710,696
------------
Net assets applicable to outstanding units
of capital ................................... $582,315,439
============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $15.92
Class Y .......................................... $15.96
Capital shares outstanding
Class A .......................................... 36,043,961
Class Y .......................................... 521,108
Capital shares authorized .......................... 200,000,000
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended SEPTEMBER 30, 1996
Investment Income
Income:
Interest ........................................ $4,310,016
Dividends ....................................... 135,849
-----------
Total income .................................. 4,445,865
-----------
Expenses (Note 2):
Investment management fee ....................... 2,024,438
Transfer agency and dividend disbursing - Class A 707,325
Service fee - Class A ........................... 465,041
Accounting services fee ......................... 31,667
Custodian fees .................................. 15,698
Audit fees ...................................... 8,790
Shareholder servicing - Class Y.................. 6,340
Legal fees ...................................... 5,448
Other ........................................... 163,105
-----------
Total expenses ................................ 3,427,852
-----------
Net investment income ........................ 1,018,013
-----------
Realized and Unrealized Gain (Loss) on Investments
Realized net loss on investments ................. (281,171)
Unrealized appreciation in value of investments
during the period ............................... 18,259,753
-----------
Net gain on investments ......................... 17,978,582
-----------
Net increase in net assets resulting from
operations ................................... $18,996,595
===========
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
September 30, March 31,
1996 1996
Increase in Net Assets ------------ ------------
Operations:
Net investment income ............... $1,018,013 $ 1,167,792
Realized net gain (loss) on
investments ....................... (281,171) 23,180,531
Unrealized appreciation ............. 18,259,753 81,497,533
------------ ------------
Net increase in net assets
resulting from operations ........ 18,996,595 105,845,856
------------ ------------
Dividends to shareholders from:*
Net investment income:
Class A ........................... --- (912,026)
Class Y ........................... --- (2,797)
Realized gains on securities transactions:
Class A ........................... --- (12,198,918)
Class Y ........................... --- (32,358)
------------ ------------
--- (13,146,099)
------------ ------------
Capital share transactions:
Proceeds from sale of shares:
Class A (35,484,422 and 63,533,003
shares, respectively) ............ 551,142,517 921,129,691
Class Y (91,689 and 471,439
shares, respectively) ............ 1,463,833 7,171,949
Proceeds from reinvestment of dividend
and/or capital gains distribution:
Class A (0 and 895,245
shares, respectively) ............ --- 13,052,675
Class Y (0 and 2,411
shares, respectively) ............ --- 35,155
Payments for shares redeemed:
Class A (31,234,301 and 57,415,916
shares, respectively) ............(487,614,271) (838,714,963)
Class Y (35,302 and 9,129
shares, respectively) ............ (532,481) (138,928)
------------ ------------
Net increase in net assets resulting
from capital share transactions .. 64,459,598 102,535,579
------------ ------------
Total increase ................... 83,456,193 195,235,336
Net Assets
Beginning of period ............ ...... 498,859,246 303,623,910
------------ ------------
End of period ........................ 582,315,439 $498,859,246
============ ============
Undistributed net investment income.. $1,693,093 $675,080
========== ========
*See "Financial Highlights" on pages 15 - 16.
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six months For the fiscal year ended March 31,
ended -----------------------------------
9-30-96 1996 1995 1994 1993 1992
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $15.46 $12.25 $10.94 $ 9.70 $9.41 $6.84
------ ------ ------ ------ ----- -----
Income from investment
operations:
Net investment
income (loss) ... 0.03 0.04 0.03 (0.01) 0.01 0.02
Net realized and
unrealized gain
on investments .. 0.43 3.63 2.12 1.48 0.29 2.57
------ ------ ------ ------ ----- -----
Total from investment
operations ....... 0.46 3.67 2.15 1.47 0.30 2.59
------ ------ ------ ------ ----- -----
Less distributions:
Dividends from
net investment
income .......... (0.00) (0.03) (0.01) (0.00) (0.01) (0.02)
Distribution from
capital gains ... (0.00) (0.43) (0.83) (0.23) (0.00) (0.00)
------ ------ ------ ------ ----- -----
Total distributions. (0.00) (0.46) (0.84) (0.23) (0.01) (0.02)
------ ------ ------ ------ ----- -----
Net asset value,
end of period .... $15.92 $15.46 $12.25 $10.94 $9.70 $9.41
====== ====== ====== ====== ===== =====
Total return* ...... 2.98% 30.18% 20.50% 15.21% 3.19% 37.83%
Net assets, end
of period (000
omitted) ..........$573,999$491,668$303,624$221,053$179,959$152,426
Ratio of expenses
to average net
assets ........... 1.28%** 1.19% 1.24% 1.19% 1.18% 1.16%
Ratio of net investment
income to average
net assets ....... 0.38%** 0.29% 0.30% -0.11% 0.15% 0.22%
Portfolio turnover
rate ............. 16.08% 27.75% 44.01% 55.23% 57.10% 71.56%
Average commission
rate paid ......... $0.0501
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the For the
six period
months from 9/6/95
ended through
9/30/96 3/31/96*
-------- --------
Net asset value,
beginning of period $15.47 $15.14
------ ------
Income from investment
operations:
Net investment
income .......... 0.05 0.05
Net realized and
unrealized gain on
investments...... 0.44 0.75
------ ------
Total from investment
operations ........ 0.49 0.80
------ ------
Less distributions:
Dividends from net
investment
income........... (0.00) (0.04)
Distribution from
capital gains.... (0.00) (0.43)
------ ------
Total distributions. (0.00) (0.47)
------ ------
Net asset value,
end of period ..... $15.96 $15.47
====== ======
Total return ....... 3.17% 5.44%
Net assets, end of
period (000
omitted) ......... $8,316 $7,191
Ratio of expenses
to average net
assets ............ 0.99%** 0.96%**
Ratio of net
investment income
to average net
assets ............ 0.67%** 0.54%**
Portfolio
turnover rate ..... 16.08% 27.75%**
Average commission
rate paid ......... $0.0501
*On July 18, 1995, the Fund began offering Class Y shares to the public.
Fund shares outstanding prior to that date were designated Class A
shares.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 -- Significant Accounting Policies
United New Concepts 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 growth through a diversified
holding of securities issued primarily by new or unseasoned companies, companies
which are in their early stages of development or smaller companies positioned
in new and emerging industries where the opportunity for rapid growth is above
average. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal period as
reported by the principal securities exchange on which the issue is traded
or, if no sale is reported for a stock, the average of the latest bid and
asked prices. Bonds, other than convertible bonds, are valued using a
pricing system provided by a pricing service or dealer in bonds.
Convertible bonds are valued using this pricing system only on days when
there is no sale reported. Stocks which are traded over-the-counter are
priced using Nasdaq (National Association of Securities Dealers Automated
Quotations System) which provides information on bid and asked or closing
prices quoted by major dealers in such stocks. Short-term debt securities
are valued at amortized cost, which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on the accrual basis. See Note 3 --
Investment Security Transactions.
C. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code. In
addition, the Fund intends to pay distributions as required to avoid
imposition of excise tax. Accordingly, provision has not been made for
Federal income taxes. See Note 4 -- Federal Income Tax Matters.
D. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management And Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .35% of net assets and (ii)
a "Group" fee computed each day on the combined net asset values of all of the
funds in the United Group of mutual funds (approximately $14.7 billion of
combined net assets at September 30, 1996) at annual rates of .51% of the first
$750 million of combined net assets, .49% on that amount between $750 million
and $1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between
$2.25 billion and $3 billion, .43% between $3 billion and $3.75 billion, .40%
between $3.75 billion and $7.5 billion, .38% between $7.5 billion and $12
billion, and .36% of that amount over $12 billion. The Fund accrues and pays
this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A shares, the Fund also pays WARSCO a monthly per account charge
for transfer agency and dividend disbursement services of $1.3125 for each
shareholder account which was in existence at any time during the prior month
($1.0208 per account prior to April 1, 1996), plus $0.30 for each account on
which a dividend or distribution of cash or shares had a record date in that
month. With respect to Class Y shares, the Fund pays WARSCO a monthly fee at an
annual rate of .15% of the average daily net assets of the class for the
preceding month. The Fund also reimburses W&R and WARSCO for certain out-of-
pocket costs.
As principal underwriter for the Fund's shares, W&R received direct and
indirect gross sales commissions for Class A shares (which are not an expense of
the Fund) of $2,591,222, out of which W&R paid sales commissions of $1,486,125
and all expenses in connection with the sale of Fund shares, except for
registration fees and related expenses.
Under a Service Plan for Class A shares adopted by the Fund pursuant to
Rule 12b-1 under the Investment Company Act of 1940, the Fund may pay monthly a
fee to W&R in an amount not to exceed .25% of the Fund's average annual net
assets. The fee is to be paid to reimburse W&R for amounts it expends in
connection with the provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
The Fund paid Directors' fees of $9,241.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $101,564,370 while proceeds from maturities and
sales aggregated $61,294,536. Purchases of short-term securities aggregated
$1,175,302,507 while proceeds from maturities and sales aggregated
$1,148,860,610. No U.S. Government securities were bought or sold during the
period ended September 30, 1996.
For Federal income tax purposes, cost of investments owned at September 30,
1996 was $397,056,545, resulting in net unrealized appreciation of $190,710,696,
of which $201,116,964 related to appreciated securities and $10,406,268 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $23,180,531 during the year ended March 31, 1996, of which a portion was paid
to shareholders during the period ended March 31, 1996. Remaining capital gain
net income will be distributed to the Fund's shareholders.
NOTE 5 -- Multiclass Operations
On July 18, 1995, the Fund was authorized to offer investors a choice of
two classes of shares, Class A and Class Y, each of which has equal rights as to
assets and voting privileges. Class Y shares are not subject to a sales charge
on purchases; they are not subject to a Rule 12b-1 Service Plan and have a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of either class are
offered is contained in the prospectus and 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
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United New Concepts Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United New Concepts Fund, Inc. (the
"Fund") at September 30, 1996, the results of its operations for the six months
then ended and the changes in its net assets and the financial highlights for
each of the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1996 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Kansas City, Missouri
November 8, 1996
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Doyle Patterson, Kansas City, Missouri
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Keith A. Tucker, President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Sharon K. Pappas, Vice President and Secretary
Mark G. Seferovich, Vice President
Carl E. Sturgeon, Vice President
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
<PAGE>
The United Group of Mutual Funds
United Cash Management, Inc.
United Government Securities Fund, Inc.
United Bond Fund
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Continental Income Fund, Inc.
United Retirement Shares, Inc.
United Asset Strategy Fund, Inc.
United Income Fund
United Accumulative Fund
United Vanguard Fund, Inc.
United New Concepts Fund, Inc.
United Science and Technology Fund
United International Growth Fund, Inc.
United Gold & Government Fund, Inc.
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(913) 236-1303
Our INTERNET address is:
http://www.waddell.com
NUR1012SA(9-96)
printed on recycled paper
