United
New Concepts
Fund, Inc.
SEMIANNUAL
REPORT
-------------------------------------------
For the six months ended September 30, 1997
<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, 1997
Dear Shareholder:
As Waddell & Reed celebrates its 60th anniversary in the financial services
industry, I would like to thank you for your continued confidence in our
products and services. Since we opened our doors in 1937, our goal has been and
continues to be to provide the best service possible to our shareholders. This
commitment is reflected in every area of our organization: starting with your
financial advisor and continuing with our investment management and customer
service people of our affiliated companies.
Your confidence in the success of the products and services offered by Waddell &
Reed and its affiliates is reflected in the growth the Funds have experienced
over our 60 years. Total mutual fund assets under management reached the $1
billion mark in 1961, and over the $5 billion mark in 1985. As of September 30,
1997, mutual fund assets under management totaled more than $20.6 billion.
We look forward to helping you meet the financial goals that are important to
you, now and for many years to come. Should you have any questions about your
account or other financial issues that are important to you, contact your
financial advisor 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. For more information
about the Fund's cash reserves
flexibility, please consult the
Prospectus.
FOUNDED: 1983
SCHEDULED DIVIDEND FREQUENCY: ANNUALLY (December)
PERFORMANCE SUMMARY - Class A Shares
PER SHARE DATA
For the Six Months Ended September 30, 1997
- -------------------------------------------
NET ASSET VALUE ON
9/30/97 $17.64
3/31/97 13.59
------
CHANGE PER SHARE $4.05
======
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 9-30-97 8.84% 15.49%
5-year period ended 9-30-97 16.80% 18.19%
10-year period ended 9-30-97 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, 1997, United New Concepts Fund, Inc. had net assets totaling
$675,408,437 invested in a diversified portfolio of:
85.36% Common Stocks
14.64% Cash and Cash Equivalents
As a shareholder of United New Concepts Fund, Inc., for every $100 you had
invested on September 30, 1997, your Fund owned:
$47.77 Services Stocks
16.92 Manufacturing Stocks
14.64 Cash and Cash Equivalents
8.71 Transportation, Communication, Electric
and Sanitary Services Stocks
8.25 Wholesale and Retail Trade Stocks
3.71 Finance, Insurance and Real Estate Stocks
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS
Automotive Dealers and Service Stations - 1.11%
O'Reilly Automotive, Inc.* ............. 330,000 $ 7,466,250
Building Materials and Garden Supplies - 1.58%
Fastenal Company ....................... 200,000 10,643,600
Business Services - 24.66%
America Online, Inc.* .................. 400,000 30,174,800
BISYS Group, Inc. (The)* ............... 250,000 8,023,250
BMC Software, Inc.* .................... 200,000 12,943,600
CKS Group, Inc.* ....................... 270,000 10,057,500
CUC International Inc.* ................ 600,000 18,600,000
Concord EFS, Inc.* ..................... 379,687 10,227,629
E*TRADE Group, Inc.* ................... 150,000 7,040,550
FactSet Research Systems, Inc.* ........ 400,000 11,900,000
IDX Systems Corporation* ............... 26,000 900,250
IMNET Systems, Inc.* ................... 105,000 2,812,005
Metromail Corporation* ................. 400,000 8,074,800
Parametric Technology Corporation* ..... 400,000 17,637,200
QuickResponse Services, Inc.* .......... 141,000 4,882,125
Shared Medical Systems Corporation ..... 200,000 10,575,000
Synopsys, Inc.* ........................ 300,000 12,740,400
Total ................................. 166,589,109
Chemicals and Allied Products - 0.30%
Hyseq, Inc.* ........................... 100,000 2,000,000
Communication - 8.71%
CommNet Cellular Inc.* ................. 321,100 11,238,500
Intermedia Communications of
Florida, Inc.* ........................ 300,000 14,090,400
Mobile Telecommunication Technologies
Corp.* ................................ 350,000 5,676,300
Paging Network, Inc.* .................. 1,000,000 12,718,000
360. Communications Company* ........... 300,000 6,262,500
WorldCom Inc.* ......................... 250,000 8,835,750
Total ................................. 58,821,450
Electronic and Other Electric Equipment - 1.01%
Scientific-Atlanta, Inc. ............... 300,000 6,787,500
Engineering and Management Services - 3.30%
Incyte Pharmaceuticals, Inc.* .......... 205,000 17,213,440
Transition Systems, Inc.* .............. 250,000 5,093,750
Total ................................. 22,307,190
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Food and Kindred Products - 0.77%
Tootsie Roll Industries, Inc. .......... 103,000 $ 5,227,250
Furniture and Home Furnishings Stores - 0.63%
Williams-Sonoma, Inc.* ................. 100,000 4,265,600
Health Services - 5.77%
American Healthcorp, Inc.* ............. 600,000 8,400,000
Concentra Managed Care, Inc.* .......... 386,133 13,671,425
HEALTHSOUTH Corporation* ............... 169,272 4,528,026
Vencor, Incorporated* .................. 300,000 12,375,000
Total ................................. 38,974,451
Industrial Machinery and Equipment - 2.47%
cisco Systems, Inc.* ................... 125,000 9,136,625
MicroTouch Systems, Inc.* .............. 270,000 7,542,990
Total ................................. 16,679,615
Instruments and Related Products - 5.11%
Bionx Implants, Inc.* .................. 130,000 2,819,700
Innovasive Devices, Inc.* .............. 155,000 1,477,305
LUNAR CORPORATION* ..................... 262,000 5,035,116
St. Jude Medical, Inc.* ................ 250,000 8,765,500
STERIS Corporation* .................... 400,000 16,437,200
Total ................................. 34,534,821
Insurance Carriers - 1.58%
United HealthCare Corporation .......... 213,000 10,650,000
Miscellaneous Manufacturing Industries - 2.62%
Blyth Industries, Inc.* ................ 400,000 11,200,000
Getty Communications plc* .............. 100,000 1,806,200
Racing Champions Corporation* .......... 400,000 4,700,000
Total ................................. 17,706,200
Miscellaneous Retail - 1.00%
MSC Industrial Direct Co., Inc.* ....... 146,500 6,739,000
Nondepository Institutions - 0.05%
Mercury Finance Company ................ 249,999 359,248
Paper and Allied Products - 0.13%
IVEX Packaging Corporation ............. 54,500 872,000
Personal Services - 2.83%
Equity Corporation International* ...... 525,000 12,238,800
Loewen Group Inc. (The) ................ 250,000 6,890,500
Total ................................. 19,129,300
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1997
Shares Value
COMMON STOCKS (Continued)
Prepackaged Software - 11.20%
Broderbund Software, Inc.* ............. 450,000 $ 15,271,650
Cerner Corporation* .................... 300,000 7,190,400
Dendrite International, Inc.* .......... 300,000 4,762,500
Expert Software, Inc.* ................. 300,000 1,593,600
HPR Inc.* .............................. 199,800 4,383,013
Intuit Inc.* ........................... 400,000 12,850,000
Medic Computer Systems, Inc.* .......... 400,000 13,674,800
Transaction Systems Architects, Inc.* .. 200,000 8,125,000
Wall Data Incorporated* ................ 400,000 7,774,800
Total.................................. 75,625,763
Real Estate - 2.08%
Stewart Enterprises, Inc., Class A ..... 322,250 14,078,136
Stone, Clay and Glass Products - 2.26%
Department 56, Inc.* ................... 200,000 5,787,400
Gentex Corporation* .................... 381,000 9,465,183
Total ................................. 15,252,583
Transportation Equipment - 2.25%
Harley-Davidson, Inc. .................. 520,000 15,177,240
Wholesale Trade - Durable Goods - 2.34%
OmniCare, Inc. ......................... 486,400 15,808,000
Wholesale Trade - Nondurable Goods - 1.60%
Cardinal Health, Inc. .................. 152,458 10,824,518
TOTAL COMMON STOCKS - 85.36% $576,518,824
(Cost: $356,909,115)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Depository Institutions - 3.41%
National Austrialia Funding (DE) Inc.,
5.5%, 10-6-97 ......................... $10,745 10,736,792
UBS Finance (DE) Inc.,
5.52%, 10-9-97 ........................ 12,300 12,284,912
Total ................................. 23,021,704
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Electric, Gas and Sanitary Services - 4.80%
Baltimore Gas & Electric Co.,
5.53%, 11-3-97 ........................ 6,050 6,019,332
PacifiCorp:
5.51%, 10-6-97 ........................ 3,715 3,712,157
5.6%, 10-20-97 ........................ 2,245 2,238,365
Public Service Co. of Colorado:
5.68%, 10-2-97 ........................ 2,350 2,349,629
5.7%, 10-2-97 ......................... 4,395 4,394,304
Public Service Electric & Gas Co.,
5.7%, 10-8-97 ......................... 6,720 6,712,552
Questar Corp.,
5.53%, 10-21-97 ....................... 7,000 6,978,494
Total.................................. 32,404,833
Fabricated Metal Products - 0.71%
Danaher Corporation,
5.6563% Master Note ................... 4,827 4,827,000
Food and Kindred Products - 0.60%
General Mills, Inc.,
5.5113% Master Note ................... 545 545,000
PepsiCo Inc.,
5.68%, 10-6-97 ........................ 3,525 3,522,219
Total.................................. 4,067,219
Instruments and Related Products - 1.94%
Baxter International, Inc.,
5.63%, 10-7-97 ........................ 5,500 5,494,839
Hughes Electronics Corp.:
5.77%, 10-14-97 ....................... 4,055 4,046,551
5.85%, 10-14-97 ....................... 3,570 3,562,458
Total ................................. 13,103,848
Insurance Carriers - 2.21%
Safeco Corporation,
5.65%, 10-24-97 ....................... 14,965 14,910,981
Nondepository Institutions - 1.06%
Whirlpool Financial Corp.,
5.7%, 10-24-97 ........................ 7,230 7,203,671
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1997
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Oil and Gas Extraction - 2.99%
Enron Corp.:
5.72%, 10-1-97 ........................ $ 7,250 $ 7,250,000
5.67%, 10-31-97 ....................... 13,000 12,938,575
Total ................................. 20,188,575
Textile Mill Products - 1.19%
Sara Lee Corporation,
5.5063% Master Note ................... 8,021 8,021,000
TOTAL SHORT-TERM SECURITIES - 18.91% $127,748,831
(Cost: $127,748,831)
TOTAL INVESTMENT SECURITIES - 104.27% $704,267,655
(Cost: $484,657,946)
LIABILITIES, NET OF CASH AND OTHER ASSETS _ (4.27%) (28,859,218)
NET ASSETS - 100.00% $675,408,437
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, 1997
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $704,267,655
Cash ............................................ 9,123
Receivables:
Fund shares sold ................................ 995,764
Investment securities sold....................... 475,274
Dividends and interest .......................... 78,045
Prepaid insurance premium ........................ 14,078
------------
Total assets .................................. 705,839,939
------------
Liabilities
Payable to Fund shareholders ..................... 29,126,227
Payable for investment securities purchased ....... 872,000
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 198,252
Accrued service fee (Note 2) ..................... 187,150
Accrued management fee (Note 2) .................. 14,361
Accrued accounting services fee (Note 2) ......... 5,833
Other ............................................ 27,679
------------
Total liabilities ............................. 30,431,502
------------
Total net assets ............................. $675,408,437
============
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 38,279,910
Additional paid-in capital ...................... 357,215,330
Accumulated undistributed income:
Accumulated undistributed net investment
income ........................................ 1,580,933
Accumulated undistributed net realized gain
on investment transactions .................... 58,722,555
Net unrealized appreciation in value of
investments ................................... 219,609,709
------------
Net assets applicable to outstanding units
of capital ................................... $675,408,437
============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $17.64
Class Y .......................................... $17.68
Capital shares outstanding
Class A .......................................... 37,745,594
Class Y .......................................... 534,316
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, 1997
Investment Income
Income (Note 1B):
Interest and amortization ....................... $ 4,491,597
Dividends ....................................... 197,753
------------
Total income .................................. 4,689,350
------------
Expenses (Note 2):
Investment management fee ....................... 2,270,005
Transfer agency and dividend disbursing - Class A 873,038
Service fee - Class A ........................... 476,603
Accounting services fee ......................... 34,167
Custodian fees .................................. 16,837
Audit fees ...................................... 10,656
Shareholder servicing - Class Y.................. 8,530
Legal fees ...................................... 8,536
Other ........................................... 161,720
------------
Total expenses ................................ 3,860,092
------------
Net investment income ........................ 829,258
------------
Realized and Unrealized Gain on
Investments (Notes 1 and 3)
Realized net gain on investments ................. 12,502,142
Unrealized appreciation in value of investments
during the period ............................... 143,381,554
------------
Net gain on investments ......................... 155,883,696
------------
Net increase in net assets resulting from
operations ................................... $156,712,954
============
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,
1997 1997
Increase in Net Assets ------------ ------------
Operations:
Net investment income ............ $ 829,258 $ 2,159,739
Realized net gain on investments . 12,502,142 50,242,282
Unrealized appreciation
(depreciation) ................. 143,381,554 (96,222,788)
------------ ------------
Net increase (decrease) in net assets
resulting from operations ..... 156,712,954 (43,820,767)
------------ ------------
Distributions to shareholders (Note 1D):*
From net investment income:
Class A ........................ -- (2,029,503)
Class Y ........................ -- (53,641)
From realized gains on
securities transactions:
Class A ........................ -- (20,120,352)
Class Y ........................ (302,385)
------------ ------------
-- (22,505,881)
------------ ------------
Capital share transactions:
Proceeds from sale of shares:
Class A (38,636,846 and 70,633,686
shares, respectively) ......... 601,279,659 1,082,428,196
Class Y (69,585 and 195,033
shares, respectively) ......... 1,088,428 3,026,117
Proceeds from reinvestment of dividend
and/or capital gains distribution:
Class A (0 and 1,470,532
shares, respectively) ......... -- 22,028,449
Class Y (0 and 23,766
shares, respectively) ......... -- 356,026
Payments for shares redeemed:
Class A (37,767,457 and 67,021,853
shares, respectively).......... (590,830,403)(1,029,804,952)
Class Y (112,751 and 106,038
shares, respectively) ......... (1,802,804) (1,605,831)
------------ ------------
Net increase in net assets resulting
from capital share transactions 9,734,880 76,428,005
------------ ------------
Total increase ................ 166,447,834 10,101,357
Net Assets
Beginning of period ............ ... 508,960,603 498,859,246
------------ ------------
End of period ..................... $675,408,437 $508,960,603
============ ============
Undistributed net investment income $1,580,933 $751,675
========== ========
*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 -----------------------------------
9-30-97 1997 1996 1995 1994 1993
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $13.59 $15.46 $12.25 $10.94 $ 9.70 $9.41
------ ------ ------ ------ ------ -----
Income from investment
operations:
Net investment
income (loss) ... 0.02 0.06 0.04 0.03 (0.01) 0.01
Net realized and
unrealized gain
(loss) on
investments ..... 4.03 (1.29) 3.63 2.12 1.48 0.29
------ ------ ------ ------ ------ -----
Total from investment
operations ....... 4.05 (1.23) 3.67 2.15 1.47 0.30
------ ------ ------ ------ ------ -----
Less distributions:
From net investment
income .......... (0.00) (0.06) (0.03) (0.01) (0.00) (0.01)
From capital gains (0.00) (0.58) (0.43) (0.83) (0.23) (0.00)
------ ------ ------ ------ ------ -----
Total distributions. (0.00) (0.64) (0.46) (0.84) (0.23) (0.01)
------ ------ ------ ------ ------ -----
Net asset value,
end of period .... $17.64 $13.59 $15.46 $12.25 $10.94 $9.70
====== ====== ====== ====== ====== =====
Total return* ...... 29.80% -8.38% 30.18% 20.50% 15.21% 3.19%
Net assets, end
of period (000
omitted) ..........$665,960$501,107$491,668$303,624$221,053$179,959
Ratio of expenses
to average net
assets ........... 1.28%** 1.27% 1.19% 1.24% 1.19% 1.18%
Ratio of net investment
income to average
net assets ....... 0.27%** 0.39% 0.29% 0.30% -0.11% 0.15%
Portfolio turnover
rate ............. 11.82% 38.82% 27.75% 44.01% 55.23% 57.10%
Average commission
rate paid ......... $0.0505 $0.0479
*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 For the
six fiscal period
months year from 9/6/95*
ended ended through
9/30/97 3/31/97 3/31/96
-------- -------- --------
Net asset value,
beginning of period 13.60 $15.47 $15.14
------ ------ ------
Income from investment
operations:
Net investment
income .......... 0.05 0.10 0.05
Net realized and
unrealized gain (loss)
on investments... 4.03 (1.29) 0.75
------ ------ ------
Total from investment
operations ........ 4.08 (1.19) 0.80
------ ------ ------
Less distributions:
From net investment
income........... (0.00) (0.10) (0.04)
From capital gains (0.00) (0.58) (0.43)
------ ------ ------
Total distributions. (0.00) (0.68) (0.47)
------ ------ ------
Net asset value,
end of period ..... $17.68 $13.60 $15.47
====== ====== ======
Total return ....... 30.00% -8.12% 5.44%
Net assets, end of
period (000
omitted) ......... $9,448 $7,854 $7,191
Ratio of expenses
to average net
assets ............ 0.98%** 0.97% 0.96%**
Ratio of net
investment income
to average net
assets ............ 0.56%** 0.69% 0.54%**
Portfolio
turnover rate ..... 11.82% 38.82% 27.75%**
Average commission
rate paid ......... $0.0505 $0.0479
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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. 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 Subchapter M of the Internal
Revenue Code. In addition, the Fund intends to pay distributions as
required to avoid imposition of excise tax. Accordingly, provision has not
been made for Federal income taxes. See Note 4 -- Federal Income Tax
Matters.
D. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
dividends and capital gains distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are due to differing treatments for items
such as deferral of wash sales and post-October losses, foreign currency
transactions, net operating losses and expiring capital loss carryforwards.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management And Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .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 $18.0 billion of
combined net assets at September 30, 1997) at annual rates of .51% of the first
$750 million of combined net assets, .49% on that amount between $750 million
and $1.5 billion, .47% between $1.5 billion and $2.25 billion, .45% between
$2.25 billion and $3 billion, .43% between $3 billion and $3.75 billion, .40%
between $3.75 billion and $7.5 billion, .38% between $7.5 billion and $12
billion, and .36% of that amount over $12 billion. The Fund accrues and pays
this fee daily.
Pursuant to assignment of the Investment Management Agreement between the
Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment Management
Company ("WRIMCO"), a wholly-owned subsidiary of W&R, serves as the Fund's
investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed Services
Company ("WARSCO"), a wholly-owned subsidiary of W&R. Under the agreement,
WARSCO acts as the agent in providing accounting services and assistance to the
Fund and pricing daily the value of shares of the Fund. For these services, the
Fund pays WARSCO a monthly fee of one-twelfth of the annual fee shown in the
following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A shares, the Fund also pays WARSCO a monthly per account charge
for transfer agency and dividend disbursement services of $1.3125 for each
shareholder account which was in existence at any time during the prior month,
plus $0.30 for each account on which a dividend or distribution of cash or
shares had a record date in that month. With respect to Class Y shares, the
Fund pays WARSCO a monthly fee at an annual rate of .15% of the average daily
net assets of the class for the preceding month. The Fund also reimburses W&R
and WARSCO for certain out-of-pocket costs.
As principal underwriter for the Fund's shares, W&R received gross sales
commissions for Class A shares (which are not an expense of the Fund) of
$1,581,826, out of which W&R paid sales commissions of $908,879 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 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 $10,172, which are included in other
expenses.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $134,632,650 while proceeds from maturities and
sales aggregated $53,090,747. Purchases of short-term securities aggregated
$1,235,117,902 while proceeds from maturities and sales aggregated
$1,275,121,055. No U.S. Government securities were bought or sold during the
period ended September 30, 1997.
For Federal income tax purposes, cost of investments owned at September 30,
1997 was $484,657,946, resulting in net unrealized appreciation of $219,609,709,
of which $229,633,341 related to appreciated securities and $10,023,632 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $50,242,282 during the year ended March 31, 1997, of which a portion was paid
to shareholders during the period ended March 31, 1997. 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 Distribution and Service Plan
and have a separate transfer agency and dividend disbursement services fee
structure. A comprehensive discussion of the terms under which shares of either
class are offered is contained in the Prospectus and 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>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United New Concepts Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of United New Concepts Fund, Inc. (the "Fund") as
of September 30, 1997, the related statements of operations for the six-month
period then ended and changes in net assets for the six-month period then ended
and the year ended March 31, 1997, and the financial highlights for the periods
presented. 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 at
September 30, 1997 by correspondence with the custodian and broker. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of United New Concepts
Fund, Inc. as of September 30, 1997, the results of its operations, the changes
in its net assets and the financial highlights for the periods presented in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
October 31, 1997
<PAGE>
Shareholder Meeting Results
A special meeting of shareholders of United New Concepts Fund, Inc. was held on
July 29, 1997. 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 WithheldNon-Votes*
Henry L. Bellmon 18,752,309 569,737 0
Dodds I. Buchanan 18,809,925 512,121 0
James M. Concannon 18,801,801 520,245 0
John A. Dillingham 18,798,704 523,342 0
Linda Graves 18,753,129 568,917 0
John F. Hayes 18,759,114 562,932 0
Glendon E. Johnson 18,759,698 562,348 0
William T. Morgan 18,802,519 519,527 0
Ronald K. Richey 18,797,000 525,046 0
William L. Rogers 18,785,110 536,936 0
Frank J. Ross, Jr. 18,796,953 525,093 0
Eleanor B. Schwartz 18,792,639 529,407 0
Keith A. Tucker 18,791,685 530,361 0
Frederick Vogel III 18,799,665 522,381 0
Paul S. Wise 18,765,820 556,226 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 AbstainNon-Votes*
18,283,461 175,297 863,288 0
Item 3.To approve or disapprove changes to the following fundamental investment
policies and restrictions:
3.1 Elimination of Fundamental Restriction Regarding Restricted
Securities
Broker
For Against AbstainNon-Votes*
17,365,809 527,496 1,416,941 11,800
3.2 Modification of Fundamental Restriction Regarding Diversification
of Assets
Broker
For Against AbstainNon-Votes*
17,374,735 518,475 1,417,036 11,800
3.3 Elimination of Fundamental Restriction Regarding Unseasoned Issuers
Broker
For Against AbstainNon-Votes*
17,361,970 531,335 1,416,941 11,800
3.4 Modification and/or Elimination of Fundamental Restrictions
Regarding Options, Commodities, Forward Contracts and/or Futures
Contracts
Broker
For Against AbstainNon-Votes*
17,333,974 559,331 1,416,941 11,800
3.5 Modification of Fundamental Restriction Regarding Margin Purchases
of Securities
Broker
For Against AbstainNon-Votes*
17,354,185 539,088 1,416,973 11,800
3.6 Modification of Fundamental Restriction Regarding Short Sales of
Securities
Broker
For Against AbstainNon-Votes*
17,368,745 524,560 1,416,941 11,800
3.7 Elimination of Fundamental Restriction Regarding Foreign Currencies
Broker
For Against AbstainNon-Votes*
17,366,842 526,463 1,416,941 11,800
3.8 Elimination of Fundamental Restriction Regarding Investment in
Warrants and Rights
Broker
For Against AbstainNon-Votes*
17,371,440 521,865 1,416,941 11,800
3.9 Elimination of Fundamental Restriction Regarding Purchasing Call
Options
Broker
For Against AbstainNon-Votes*
17,363,999 529,306 1,416,941 11,800
3.10 Elimination of Fundamental Restriction Regarding Arbitrage
Transactions
Broker
For Against AbstainNon-Votes*
17,361,978 531,327 1,416,941 11,800
3.11 Elimination of Fundamental Restriction Regarding Investments in
Issuers Whose Securities are Owned by Certain Persons
Broker
For Against AbstainNon-Votes*
17,367,461 525,854 1,416,941 11,800
3.12 Modification of Fundamental Policy Regarding Loans
Broker
For Against AbstainNon-Votes*
17,387,960 504,889 1,417,397 11,800
Item 4.To amend the terms of the service plan adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940.
Broker
For Against AbstainNon-Votes*
16,512,243 754,303 1,641,578 2,081
*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
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
William L. Rogers, Los Angeles, California
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
OFFICERS
Keith A. Tucker, President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Sharon K. Pappas, Vice President and Secretary
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
(800) 366-5465
Our INTERNET address is:
http://www.waddell.com
NUR1012SA(9-97)
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