United
New Concepts
Fund, Inc.
SEMIANNUAL
REPORT
-------------------------------------------
For the six months ended September 30, 1998
<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, 1998
Dear Shareholder:
As president of your Fund, I would like to thank you for your continued
confidence as an investor. From every area of Waddell & Reed, including your
personal financial advisor, our goal has been to provide the best service
possible to our shareholders.
While it is impossible to predict the future direction of the markets, there are
some basic principles that we stand by that can help investors achieve their
objectives:
. Develop a financial plan that helps you pinpoint your financial objectives,
and identify specific strategies for turning your dreams into reality. There
is no better way to plan for your future.
. Invest on a regular basis. It can be one of the best ways to invest long
term and provide a hedge against market volatility.
. Adopt a long-term view to take advantage of compounding. The key to
successful investing is time, not timing. The power of compounding is
awesome and, on a long-term basis, can overwhelm any nuances of timing.
. Review your financial plan regularly. Financial planning is an ongoing
process that requires periodic review.
Waddell & Reed is positioned to assist you as you work toward your financial
goals. We will continue to offer quality investment products and personal
service to make the financial planning and investment process convenient and
accessible to you. Our locally based financial advisors are ready to assist you
with your total financial plan to help you plan for your retirement, to help you
meet your education funding goals or to achieve other financial objectives.
We look forward to assisting you in the future. If you have any questions about
your account, wish to review your financial plan or have other financial issues
that are important to you, contact your financial advisor or your local Waddell
& Reed office.
Respectfully,
Robert L. Hechler
President
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
United 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.
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)
<PAGE>
PERFORMANCE SUMMARY - Class A Shares
PER SHARE DATA
For the Six Months Ended September 30, 1998
(Restated to reflect the 100% stock
dividend effected June 26, 1998.)
- -------------------------------------------
NET ASSET VALUE ON
9/30/98 $ 8.24
3/31/98 9.24
------
CHANGE PER SHARE $(1.00)
======
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 9-30-98 -1.94% 4.04%
5-year period ended 9-30-98 12.83% 14.17%
10-year period ended 9-30-98 15.72% 16.41%
*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, 1998, United New Concepts Fund, Inc. had net assets totaling
$724,590,486 invested in a diversified portfolio of:
70.70% Common Stocks
29.30% Cash and Cash Equivalents
As a shareholder of United New Concepts Fund, Inc., for every $100 you had
invested on September 30, 1998, your Fund owned:
$38.88 Services Stocks
29.30 Cash and Cash Equivalents
13.64 Manufacturing Stocks
8.65 Transportation, Communication, Electric
and Sanitary Services Stocks
8.04 Wholesale and Retail Trade Stocks
1.49 Finance, Insurance and Real Estate Stocks
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1998
Shares Value
COMMON STOCKS
Automotive Dealers and Service Stations - 1.97%
O'Reilly Automotive, Inc.* ............. 395,000 $ 14,269,375
Building Materials and Garden Supplies - 0.69%
Fastenal Company ....................... 200,000 4,975,000
Business Services - 16.44%
America Online, Inc.* .................. 300,000 33,375,000
CKS Group, Inc.* ....................... 500,000 8,750,000
Carreker-Antinori, Inc. ................ 330,000 1,660,313
Concord EFS, Inc.* ..................... 569,530 14,629,802
ENVOY Corporation* ..................... 600,000 12,975,000
FactSet Research Systems, Inc.* ........ 300,000 9,506,250
FORE Systems, Inc.* .................... 500,000 8,312,500
Getty Images, Inc.* .................... 150,000 2,559,375
MemberWorks Incorporated* .............. 275,000 4,245,312
Parametric Technology Corporation* ..... 600,000 6,056,250
QuickResponse Services, Inc.* .......... 200,000 6,400,000
Shared Medical Systems Corporation ..... 200,000 10,637,500
Total ................................. 119,107,302
Communication - 8.65%
COLT Telecom Group plc, ADR* ........... 460,000 15,525,000
Intermedia Communications of Florida, Inc.* 300,000 7,359,375
Paging Network, Inc.* .................. 1,200,000 7,331,250
Qwest Communications International Inc.* 349,830 10,910,323
SkyTel Communications, Inc.* ........... 500,000 8,984,375
Western Wireless Corporation, Class A* . 700,000 12,556,250
Total ................................. 62,666,573
Engineering and Management Services - 4.12%
Incyte Pharmaceuticals, Inc.* .......... 640,000 $ 13,520,000
MAXIMUS, Inc.* ......................... 400,000 12,200,000
Transition Systems, Inc.* .............. 500,000 4,156,250
Total ................................. 29,876,250
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1998
Shares Value
COMMON STOCKS (Continued)
Food and Kindred Products - 2.30%
American Italian Pasta Company, Class A* 351,000 9,213,750
Tootsie Roll Industries, Inc. .......... 212,180 7,479,345
Total ................................. 16,693,095
Furniture and Home Furnishings Stores - 1.18%
Williams-Sonoma, Inc.* ................. 400,000 8,525,000
Health Services - 2.43%
American Healthcorp, Inc.* ............. 664,000 5,415,750
Amsurg Corp., Class A .................. 771,657 5,353,370
Concentra Managed Care, Inc.* .......... 872,100 6,840,534
Total ................................. 17,609,654
Industrial Machinery and Equipment - 1.02%
Cisco Systems, Inc.* ................... 120,000 7,421,250
Instruments and Related Products - 2.37%
Bionx Implants, Inc.* .................. 205,000 2,101,250
Innovasive Devices, Inc.* .............. 155,000 794,375
Lunar Corporation* ..................... 278,800 2,997,100
STERIS Corporation* .................... 400,000 11,312,500
Total ................................. 17,205,225
Miscellaneous Manufacturing Industries - 2.65%
Blyth Industries, Inc.* ................ 500,000 13,718,750
Racing Champions Corporation* .......... 500,000 5,515,625
Total ................................. 19,234,375
Miscellaneous Retail - 1.16%
MSC Industrial Direct Co., Inc.* ........ 421,100 8,422,000
Paper and Allied Products - 0.66%
IVEX Packaging Corporation* ............ 330,000 4,785,000
Personal Services - 0.81%
Loewen Group Inc. (The) ................ 400,000 $ 5,900,000
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1998
Shares Value
COMMON STOCKS (Continued)
Prepackaged Software - 15.08%
BMC Software, Inc.* .................... 400,000 24,012,500
Cerner Corporation* .................... 600,000 16,031,250
Citrix Systems, Inc.* .................. 300,000 21,337,500
Dendrite International, Inc.* .......... 600,000 14,250,000
Intuit Inc.* ........................... 400,000 18,600,000
Learning Company, Inc. (The)* .......... 400,000 7,925,000
Transaction Systems Architects, Inc.,
Class A* .............................. 200,000 7,081,250
Total ................................. 109,237,500
Printing and Publishing - 0.13%
IDG Books Worldwide, Inc., Class A* .... 89,000 973,438
Real Estate - 1.49%
Stewart Enterprises, Inc., Class A ..... 644,500 10,795,375
Stone, Clay and Glass Products - 2.40%
Department 56, Inc.* ................... 200,000 5,400,000
Gentex Corporation* .................... 800,000 12,000,000
Total ................................. 17,400,000
Transportation Equipment - 2.11%
Harley-Davidson, Inc. .................. 520,000 15,275,000
Wholesale Trade -- Durable Goods - 1.95%
OmniCare, Inc. ......................... 400,000 14,100,000
Wholesale Trade -- Nondurable Goods - 1.09%
NCS Healthcare, Inc., Class A* ......... 447,500 7,859,219
TOTAL COMMON STOCKS - 70.70% $512,330,631
(Cost: $385,200,706)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Chemicals and Allied Products - 0.96%
Monsanto Company,
5.5%, 10-21-98 ........................ $ 7,000 6,978,611
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Communication - 5.11%
Bell Atlantic Network Funding Corp.,
5.5%, 10-5-98 ......................... $19,000 $ 18,988,389
GTE Corporation:
5.55%, 10-8-98 ........................ 5,100 5,094,496
5.33%, 10-26-98 ....................... 13,000 12,951,882
Total ................................. 37,034,767
Depository Institutions - 2.75%
Deutsche Bank Financial Inc.,
5.51%, 10-16-98 ....................... 20,000 19,954,083
Electric, Gas and Sanitary Services - 1.67%
Western Resources, Inc.,
5.66%, 10-20-98 ....................... 12,100 12,063,855
Engineering and Management Services - 1.56%
Halliburton Co.,
5.5%, 1-16-98 ......................... 11,300 11,274,104
Fabricated Metal Products - 0.02%
Danaher Corporation,
5.3438%, Master Note .................. 164 164,000
Food and Kindred Products - 2.76%
General Mills, Inc.,
5.1988%, Master Note .................. 34 34,000
McCormick & Co., Inc.,
5.5%, 10-15-98 ........................ 20,000 19,957,222
Total ................................. 19,991,222
General Merchandise Stores - 2.82%
May Department Stores Co.,
5.5%, 10-26-98 ........................ 20,500 20,421,702
Instruments and Related Products - 1.38%
Baxter International Inc.,
5.55%, 10-7-98 ........................ 10,000 9,990,750
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Nondepository Institutions - 3.60%
Associates Financial Services Co. of Puerto
Rico Inc. (Associates Corporation of North
America, Guarantor),
5.5%, 10-8-98 ......................... $11,400 $ 11,387,808
Caterpillar Financial Services Corp.,
5.48%, 10-14-98 ....................... 11,100 11,078,034
Whirlpool Corp.,
6.0%, 10-1-98 ......................... 3,585 3,585,000
Total ................................. 26,050,842
Primary Metal Industries - 0.27%
Aluminum Company of America,
5.51%, 10-30-98 ....................... 2,000 1,991,123
Security and Commodity Brokers - 2.38%
Merrill Lynch & Co., Inc.,
5.52%, 10-14-98 ....................... 17,300 17,265,516
Textile Mill Products - 0.27%
Sara Lee Corporation,
5.1938%, Master Note .................. 1,930 1,930,000
Tobacco Products - 1.72%
B.A.T. Capital Corp.,
5.6%, 10-27-98 ........................ 12,500 12,449,445
Transportation Equipment - 0.71%
Echlin Inc.,
5.7%, 10-26-98 ........................ 5,170 5,149,536
Wholesale Trade -- Durable Goods - 0.88%
Motorola, Inc.,
5.48%, 10-6-98 ........................ 6,410 6,405,121
Wholesale Trade -- Nondurable Goods - 0.18%
McKesson Corp.,
5.65%, 10-2-98 ........................ 1,285 1,284,798
Total Commercial Paper - 29.04% 210,399,475
Commercial Paper (backed by irrevocable bank
letter of credit) - 0.69%
Nondepository Institutions
Western Financial Bank FSB (Federal Home Loan
Bank of San Francisco),
5.55%, 10-2-98 ........................ 5,000 4,999,229
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
SEPTEMBER 30, 1998
Value
TOTAL SHORT-TERM SECURITIES - 29.73% $215,398,704
(Cost: $215,398,704)
TOTAL INVESTMENT SECURITIES - 100.43% $727,729,335
(Cost: $600,599,410)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.43%) (3,138,849)
NET ASSETS - 100.00% $724,590,486
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, 1998
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $727,729
Cash ............................................ 1
Receivables:
Investment securities sold....................... 4,094
Fund shares sold ................................ 852
Dividends and interest .......................... 60
Prepaid insurance premium ........................ 14
--------
Total assets .................................. 732,750
--------
Liabilities
Payable for investment securities purchased ....... 6,688
Payable to Fund shareholders ..................... 1,106
Accrued service fee (Note 2) ..................... 168
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 160
Accrued management fee (Note 2) .................. 15
Accrued accounting services fee (Note 2) ......... 6
Accrued distribution fee (Note 2) ................ 2
Other ............................................ 15
--------
Total liabilities ............................. 8,160
--------
Total net assets ............................. $724,590
========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 87,959
Additional paid-in capital ...................... 389,804
Accumulated undistributed income:
Accumulated undistributed net investment
income ........................................ 154
Accumulated undistributed net realized gain
on investment transactions .................... 119,543
Net unrealized appreciation in value of
investments ................................... 127,130
--------
Net assets applicable to outstanding units
of capital ................................... $724,590
========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $8.24
Class Y .......................................... $8.26
Capital shares outstanding
Class A .......................................... 86,902
Class Y .......................................... 1,057
Capital shares authorized .......................... 300,000
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended SEPTEMBER 30, 1998
(In Thousands)
Investment Loss
Income (Note 1B):
Interest and amortization ....................... $ 4,748
Dividends ....................................... 214
--------
Total income .................................. 4,962
--------
Expenses (Note 2):
Investment management fee ....................... 2,983
Service fee - Class A ........................... 1,056
Transfer agency and dividend disbursing - Class A 910
Accounting services fee ......................... 41
Custodian fees .................................. 23
Distribution fee - Class A ...................... 18
Audit fees ...................................... 10
Shareholder servicing - Class Y ................. 9
Legal fees ...................................... 5
Other ........................................... 130
--------
Total expenses ................................ 5,185
--------
Net investment loss .......................... (223)
--------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on investments ................. 55,577
Unrealized depreciation in value of investments
during the period ............................... (141,623)
--------
Net loss on investments ......................... (86,046)
--------
Net decrease in net assets resulting from
operations ................................... $(86,269)
========
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(Dollars In Thousands)
For the For the
six months fiscal year
ended ended
September 30, March 31,
1998 1998
Increase (Decrease) in Net Assets ------------ ------------
Operations:
Net investment income (loss) ..... $ (223) $ 414
Realized net gain on investments . 55,577 81,941
Unrealized appreciation
(depreciation) ................. (141,623) 192,525
-------- ---------
Net increase (decrease) in net assets
resulting from operations ..... (86,269) 274,880
-------- ---------
Distributions to shareholders from (Note 1D):*
Net investment income:
Class A ........................ --- (750)
Class Y ........................ --- (39)
Realized gains on
securities transactions:
Class A ........................ --- (63,226)
Class Y ........................ --- (969)
-------- ---------
--- (64,984)
-------- ---------
Capital share transactions:
Proceeds from sale of shares:
Class A (34,347,943 and 69,999,164
shares, respectively) ......... 319,313 1,127,590
Class Y (112,417 and 166,671
shares, respectively) ......... 1,026 2,765
Proceeds from reinvestment of dividend
and/or capital gains distribution:
Class A (0 and 4,237,797
shares, respectively) ......... --- 63,567
Class Y (0 and 67,193
shares, respectively) ......... --- 1,008
Payments for shares redeemed:
Class A (31,796,477 and 68,937,977
shares, respectively).......... (297,444) (1,120,136)
Class Y (191,907 and 243,230
shares, respectively) ......... (1,737) (3,950)
-------- ---------
Net increase in net assets resulting
from capital share transactions 21,158 70,844
-------- ---------
Total increase (decrease) ..... (65,111) 280,740
Net Assets
Beginning of period ............ ... 789,701 508,961
-------- ---------
End of period, including undistributed
net investment income of $154
and $377, respectively............ $724,590 $ 789,701
======== =========
*See "Financial Highlights" on pages 14 - 15.
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 -----------------------------------
9/30/98 1998 1997 1996 1995 1994
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $9.24 $6.80 $7.73 $6.13 $5.47 $4.85
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income (loss) ... (0.00) 0.01 0.03 0.02 0.02 (0.00)
Net realized and
unrealized gain
(loss) on
investments ..... (1.00) 3.29 (0.64) 1.81 1.06 0.74
----- ----- ----- ----- ----- -----
Total from investment
operations ....... (1.00) 3.30 (0.61) 1.83 1.08 0.74
----- ----- ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.00) (0.01) (0.03) (0.02) (0.01) (0.00)
From capital gains (0.00) (0.85) (0.29) (0.21) (0.41) (0.12)
----- ----- ----- ----- ----- -----
Total distributions. (0.00) (0.86) (0.32) (0.23) (0.42) (0.12)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $8.24 $9.24 $6.80 $7.73 $6.13 $5.47
===== ===== ===== ===== ===== =====
Total return**...... -10.82% 51.44% -8.38% 30.18% 20.50% 15.21%
Net assets, end
of period (in
millions) ......... $716 $779 $501 $492 $304 $221
Ratio of expenses
to average net
assets ........... 1.29%***1.25% 1.27% 1.19% 1.24% 1.19%
Ratio of net investment
income to average
net assets ....... -0.06%***0.06% 0.39% 0.29% 0.30% -0.11%
Portfolio turnover
rate ............. 16.41% 38.51% 38.82% 27.75% 44.01% 55.23%
*Per-share and share amounts have been adjusted retroactively to reflect the
100% stock dividend effected June 26, 1998.
**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 fiscal For the
six year ended period
months March 31, from 9/6/95**
ended -------------- through
9/30/98 1998 1997 3/31/96
------- ------ ------ --------
Net asset value,
beginning of period $9.25 $6.80 $7.74 $7.57
----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.01 0.03 0.05 0.02
Net realized and
unrealized gain (loss)
on investments... (1.00) 3.30 (0.65) 0.38
----- ----- ----- -----
Total from investment
operations ........ (0.99) 3.33 (0.60) 0.40
----- ----- ----- -----
Less distributions:
From net investment
income........... (0.00) (0.03) (0.05) (0.02)
From capital gains (0.00) (0.85) (0.29) (0.21)
----- ----- ----- -----
Total distributions. (0.00) (0.88) (0.34) (0.23)
----- ----- ----- -----
Net asset value,
end of period ..... $8.26 $9.25 $6.80 $7.74
===== ===== ===== =====
Total return ....... -10.66% 51.83% -8.12% 5.44%
Net assets, end of
period (in
millions) ........ $9 $11 $8 $7
Ratio of expenses
to average net
assets ............ 0.96%***0.96% 0.97% 0.96%***
Ratio of net
investment income
to average net
assets ............ 0.27%***0.35% 0.69% 0.54%***
Portfolio
turnover rate ..... 16.41% 38.51% 38.82% 27.75%***
*Per-share and share amounts have been adjusted retroactively to reflect the
100% stock dividend effected June 26, 1998.
**Commencement of operations.
***Annualized.
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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 the Nasdaq Stock
Market, which provides information on bid and asked prices quoted by major
dealers in such stocks. Short-term debt securities are valued at amortized
cost, which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on the accrual basis. See Note 3 --
Investment Security Transactions.
C. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under Subchapter M of the Internal
Revenue Code. In addition, the Fund intends to pay distributions as
required to avoid imposition of excise tax. Accordingly, provision has not
been made for Federal income taxes. See Note 4 -- Federal Income Tax
Matters.
D. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
dividends and capital gains distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are due to differing treatments for items
such as deferral of wash sales and post-October losses, foreign currency
transactions, net operating losses and expiring capital loss carryovers.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
NOTE 2 -- Investment Management And Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The fee
consists of two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .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 $18.9 billion of
18
combined net assets at September 30, 1998) 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
$2,403,130, out of which W&R paid sales commissions of $1,397,819 and all
expenses in connection with the sale of Fund shares, except for registration
fees and related expenses.
Under a Distribution and Service Plan for Class A shares adopted by the
Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
may pay monthly a distribution and/or service fee to W&R in an amount not to
exceed .25% of the Fund's Class A average annual net assets. The fee is to be
paid to reimburse W&R for amounts it expends in connection with the distribution
of the Class A shares and/or provision of personal services to Fund shareholders
and/or maintenance of shareholder accounts.
The Fund paid Directors' fees of $13,478, 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.
<PAGE>
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $101,231,125 while proceeds from maturities and
sales aggregated $140,096,082. Purchases of short-term securities aggregated
$1,370,945,693 while proceeds from maturities and sales aggregated
$1,310,151,397. No U.S. Government securities were bought or sold during the
period ended September 30, 1998.
For Federal income tax purposes, cost of investments owned at September 30,
1998 was $600,599,410, resulting in net unrealized appreciation of $127,129,925,
of which $184,188,986 related to appreciated securities and $57,059,061 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $81,941,223 during the year ended March 31, 1998, of which a portion was paid
to shareholders during the period ended March 31, 1998. 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 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.
Note 6 -- Stock Dividend
The Fund's Board of Directors approved on February 11, 1998 a stock
dividend of 100% effected on June 26, 1998. Authorized shares of the Fund were
accordingly increased by 100,000,000 shares.
<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, 1998, and 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 fiscal year ended March 31, 1998, 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, 1998 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, 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, 1998, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
November 6, 1998
<PAGE>
DIRECTORS
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, Menlo Park, California
Linda 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
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Mark G. Seferovich, 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 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(9-98)
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