United
New Concepts
Fund, Inc.
ANNUAL
REPORT
----------------------------------------
For the fiscal year ended March 31, 1998
<PAGE>
FUND MANAGER'S LETTER
- -----------------------------------------------------------------
MARCH 31, 1998
Dear Shareholder:
This report relates to the operation of United New Concepts Fund for the
fiscal year ended March 31, 1998. The following discussion, graphs and tables
provide you with information regarding the Fund's performance during that
period.
After a disappointing prior year, small company stocks performed quite well
in the past fiscal year. While their returns trailed the performance of blue
chip stocks during 1996, the recently completed fiscal year saw the performance
gap narrow considerably.
We pursued three noteworthy strategies during the past fiscal year that
positively impacted the Fund. First, we held onto large positions, even though
they declined during the early part of the year. Second, we purchased more
shares of some of our holdings that had gone down in price. Third, we added
several quality stocks in the telecommunications sector.
The strategies and techniques we applied resulted in the performance of the
Fund significantly exceeding that of the indexes charted on the following page.
Those indexes reflect the performance of securities that generally represent the
small companies sector of the stock market (the Nasdaq Industrials Index) and
the universe of funds with similar investment objectives (the Lipper Small
Company Growth Fund Universe Average).
As we begin this fiscal year, some pause in the small cap market seems
warranted due to the likelihood of slowing earnings gains. However, factors
such as money flow, inflation and interest rates should be favorable for an
overall positive outcome in the next fiscal year. We will continue searching
for attractive investment opportunities, possibly trimming some of the Fund's
large positions in the process.
Thank you very much for your continued support and confidence in our
organization.
Mark G. Seferovich
Manager, United New Concepts Fund, Inc.
<PAGE>
Comparison of Change in Value of $10,000 Investment in
United New Concepts Fund, Inc., Class A Shares,
The Nasdaq Industrials Index
and The Lipper Small Company Growth Fund Universe Average
United Lipper
New Small
Concepts Company
Fund, Nasdaq Growth Fund
Class Industrials Universe
A Shares Index Average
--------- --------- ----------
03/31/88 Purchase 9,425 10,000 10,000
03/31/89 9,203 10,390 11,245
03/31/90 9,809 11,742 12,605
03/31/91 13,107 14,205 14,417
03/31/92 18,066 17,620 17,755
03/31/93 18,643 18,598 19,868
03/31/94 21,479 20,304 22,041
03/31/95 25,882 20,895 23,740
03/31/96 33,695 26,710 31,317
03/31/97 30,871 26,531 32,812
03/31/98 46,751 35,491 47,162
===== United New Concepts Income Fund, Class A Shares* -- $46,751
+++++ Nasdaq Industrials Index -- $35,491
- ---- Lipper Small Company Growth Fund Universe Average -- $47,162
*The value of the investment in the Fund is impacted by the sales load at the
time of the investment and by the ongoing expenses of the Fund.
Annual Average Total Return+
Class A++ Class Y
-----------------------------
Year Ended
3/31/98 42.73% 51.83%
5 Years Ended
3/31/98 18.77% N/A
10 Years Ended
3/31/98 16.67% N/A
Life of
Class Y +++ N/A 16.22%
+ Total return for the Class Y shares may be greater than that of the Class A
shares because the Fund's Class Y shares are not subject to a sales load or
12b-1 fees.
++ Performance data quoted represents past performance and is based on
deduction of a 5.75% sales load on the initial purchase in each of the
three periods. Investment return and principal value will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their
original cost.
+++ 9/6/95 (the date on which Fund Class Y shares were first acquired by
shareholders) through 3/31/98.
Past performance is not predictive of future performance. Indexes are
unmanaged.
<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)
PERFORMANCE SUMMARY - Class A Shares
PER SHARE DATA
For the Fiscal Year Ended March 31, 1998
- -------------------------------------------
DIVIDEND PAID $0.02
=====
CAPITAL GAINS DISTRIBUTION $1.69
=====
NET ASSET VALUE ON
3/31/98 $18.48 adjusted to:$20.17 (A)
3/31/97 13.59
------
CHANGE PER SHARE $ 6.58
======
Past performance is not necessarily indicative of future results.
(A)This number includes the capital gains distribution of $1.69 paid in December
1997 added to the actual net asset value on March 31, 1998.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
- ------ ----------- ------------
1-year period ended 3-31-98 42.73% 51.44%
5-year period ended 3-31-98 18.77% 20.19%
10-year period ended 3-31-98 16.67% 17.37%
*Performance data quoted represents past performance and is based on deduction
of 5.75% sales load on the initial purchase in each of the three periods.
**Performance data quoted in this column represents past performance without
taking into account the sales load deducted on an initial purchase.
Investment return and principal value will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On March 31, 1998, United New Concepts Fund, Inc. had net assets totaling
$789,701,318 invested in a diversified portfolio of:
80.69% Common Stocks
19.31% Cash and Cash Equivalents
As a shareholder of United New Concepts Fund, Inc., for every $100 you had
invested on March 31, 1998, your Fund owned:
$42.57 Services Stocks
19.31 Cash and Cash Equivalents
14.38 Manufacturing Stocks
10.63 Transportation, Communication, Electric
and Sanitary Services Stocks
9.09 Wholesale and Retail Trade Stocks
4.02 Finance, Insurance and Real Estate Stocks
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
MARCH 31, 1998
Shares Value
COMMON STOCKS
Amusement and Recreation Services - 0.00%
Iwerks Entertainment, Inc.* ............ 2,874 $ 9,070
Automotive Dealers and Service Stations - 1.37%
O'Reilly Automotive, Inc.* ............. 395,000 10,849,860
Building Materials and Garden Supplies - 1.10%
Fastenal Company ....................... 200,000 8,718,600
Business Services - 18.75%
America Online, Inc.* .................. 500,000 34,156,000
BISYS Group, Inc. (The)* ............... 250,000 8,789,000
CKS Group, Inc.* ....................... 285,500 5,353,125
Concord EFS, Inc.* ..................... 379,687 13,122,742
ENVOY Corporation* ..................... 200,000 8,612,400
FactSet Research Systems, Inc.* ........ 400,000 14,300,000
FORE Systems, Inc.* .................... 500,000 7,890,500
Getty Images, Inc.* .................... 150,000 3,773,400
IMNET Systems, Inc.* ................... 105,000 2,355,885
MemberWorks Incorporated* .............. 200,000 6,000,000
Parametric Technology Corporation* ..... 600,000 19,968,600
QuickResponse Services, Inc.* .......... 149,000 8,036,613
Shared Medical Systems Corporation ..... 200,000 15,675,000
Total ................................. 148,033,265
Chemicals and Allied Products - 0.43%
Hyseq, Inc.* ........................... 271,600 3,377,889
Communication - 10.63%
COLT Telecom Group plc, ADR* ........... 100,000 9,390,600
Intermedia Communications of
Florida, Inc.* ........................ 300,000 23,906,100
LCI International, Inc.* ............... 300,000 11,550,000
Mobile Telecommunication Technologies
Corp.* ................................ 500,000 11,187,500
Paging Network, Inc.* .................. 1,000,000 15,437,000
360. Communications Company* ........... 400,000 12,500,000
Total ................................. 83,971,200
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
MARCH 31, 1998
Shares Value
COMMON STOCKS (Continued)
Engineering and Management Services - 4.66%
CuraGen Corporation* ................... 125,000 $ 1,441,375
Incyte Pharmaceuticals, Inc.* .......... 410,000 19,013,750
MAXIMUS, Inc.* ......................... 300,000 8,981,100
Transition Systems, Inc.* .............. 360,000 7,402,320
Total ................................. 36,838,545
Food and Kindred Products - 0.96%
Tootsie Roll Industries, Inc. .......... 106,090 7,605,274
Furniture and Home Furnishings Stores - 1.47%
Williams-Sonoma, Inc.* ................. 200,000 11,575,000
Health Services - 5.04%
American Healthcorp, Inc.* ............. 664,000 6,432,168
Amsurg Corp., Class A .................. 61,197 548,815
Amsurg Corp., Class B .................. 394,294 3,523,805
Concentra Managed Care, Inc.* .......... 386,133 11,885,560
HEALTHSOUTH Corporation* ............... 300,000 8,418,600
Vencor, Incorporated* .................. 300,000 8,981,100
Total ................................. 39,790,048
Industrial Machinery and Equipment - 0.87%
Cisco Systems, Inc.* ................... 100,000 6,840,600
Instruments and Related Products - 4.05%
Bionx Implants, Inc.* .................. 170,000 3,632,900
Innovasive Devices, Inc.* .............. 155,000 1,520,860
Lunar Corporation* ..................... 262,000 5,215,372
STERIS Corporation* .................... 400,000 21,624,800
Total ................................. 31,993,932
Insurance Carriers - 1.75%
United HealthCare Corporation .......... 213,000 13,791,750
Miscellaneous Manufacturing Industries - 2.71%
Blyth Industries, Inc.* ................ 500,000 17,062,500
Racing Champions Corporation* .......... 400,000 4,362,400
Total ................................. 21,424,900
Miscellaneous Retail - 1.01%
MSC Industrial Direct Co., Inc.* ........ 146,500 7,938,396
Paper and Allied Products - 0.52%
IVEX Packaging Corporation* ............ 166,100 4,069,450
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
MARCH 31, 1998
Shares Value
COMMON STOCKS (Continued)
Personal Services - 2.39%
Equity Corporation International* ...... 525,000 $ 12,566,925
Loewen Group Inc. (The) ................ 250,000 6,312,500
Total ................................. 18,879,425
Prepackaged Software - 11.73%
BMC Software, Inc.* .................... 200,000 16,756,200
Broderbund Software, Inc.* ............. 480,000 8,774,880
Cerner Corporation* .................... 500,000 10,687,500
Citrix Systems, Inc.* .................. 250,000 13,531,250
Dendrite International, Inc.* .......... 300,000 8,606,100
Expert Software, Inc.* ................. 400,000 1,774,800
Intuit Inc.* ........................... 400,000 19,374,800
Transaction Systems Architects, Inc.,
Class A*............................... 200,000 7,787,400
Wall Data Incorporated* ................ 363,900 5,355,880
Total ................................. 92,648,810
Real Estate - 2.27%
Stewart Enterprises, Inc., Class A ..... 322,250 17,894,865
Stone, Clay and Glass Products - 2.67%
Department 56, Inc.* ................... 200,000 7,600,000
Gentex Corporation* .................... 400,000 13,512,400
Total ................................. 21,112,400
Transportation Equipment - 2.17%
Harley-Davidson, Inc. .................. 520,000 17,160,000
Wholesale Trade -- Durable Goods - 2.44%
OmniCare, Inc. ......................... 486,400 19,273,600
Wholesale Trade -- Nondurable Goods - 1.70%
Cardinal Health, Inc. .................. 152,458 13,444,814
TOTAL COMMON STOCKS - 80.69% $637,241,693
(Cost: $368,488,603)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Communication - 1.44%
Dominion Resources Inc.:
5.69%, 4-9-98 ......................... $ 2,905 2,901,327
5.69%, 5-15-98 ........................ 8,480 8,421,026
Total ................................. 11,322,353
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
MARCH 31, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Electric, Gas and Sanitary Services - 7.00%
Commonwealth Edison Co.,
5.72%, 4-23-98 ........................ $ 5,780 $ 5,759,796
Houston Industries Incorporated,
5.62%, 4-2-98 ......................... 15,350 15,347,604
PacifiCorp,
5.57%, 5-7-98 ......................... 490 487,271
Potomac Electric Power Co.,
5.52%, 4-23-98 ........................ 8,580 8,551,057
Public Service Electric & Gas Co.:
5.68%, 4-16-98 ........................ 9,310 9,287,966
5.66%, 4-27-98 ........................ 4,055 4,038,424
Western Resources, Inc.:
5.6%, 4-15-98 ......................... 8,080 8,062,403
5.7%, 4-17-98 ......................... 3,751 3,741,497
Total.................................. 55,276,018
Fabricated Metal Products - 0.09%
Danaher Corporation,
5.6875%, Master Note .................. 667 667,000
Food and Kindred Products - 0.05%
General Mills, Inc.,
5.5425%, Master Note .................. 377 377,000
Instruments and Related Products - 0.28%
Baxter International Inc.,
5.57%, 4-16-98 ........................ 2,245 2,239,790
Insurance Agents, Brokers and Service - 0.76%
Aon Corp.,
5.52%, 4-1-98 ......................... 5,975 5,975,000
Motion Pictures - 1.75%
Walt Disney Company (The),
5.55%, 4-13-98 ........................ 13,875 13,849,331
Nondepository Institutions - 1.81%
Island Finance Puerto Rico Inc.:
5.48%, 4-14-98 ........................ 6,750 6,736,643
5.48%, 4-24-98 ........................ 965 961,621
Penney (J.C.) Funding Corp.,
5.55%, 4-14-98 ........................ 6,590 6,576,793
Total ................................. 14,275,057
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
MARCH 31, 1998
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Oil and Gas Extraction - 0.40%
Enron Corp.,
5.65%, 4-15-98 ........................ $ 3,195 $ 3,187,980
Petroleum and Coal Products - 0.35%
Union Oil Co. of California,
5.67%, 5-22-98 ........................ 2,775 2,752,710
Security and Commodity Brokers - 0.93%
Merrill Lynch & Co., Inc.,
5.55%, 4-27-98 ........................ 7,380 7,350,418
Textile Mill Products - 0.00%
Sara Lee Corporation,
5.5375%, Master Note .................. 10 10,000
Tobacco Products - 0.72%
B.A.T. Capital Corp.,
5.65%, 4-16-98 ........................ 5,710 5,696,558
Transportation Equipment - 3.43%
Dana Credit Corp.,
5.8%, 4-6-98 .......................... 3,765 3,761,967
Echlin Inc.:
5.77%, 4-20-98 ........................ 14,000 13,957,366
5.92%, 4-21-98 ........................ 9,420 9,389,019
Total ................................. 27,108,352
TOTAL SHORT-TERM SECURITIES - 19.01% $150,087,567
(Cost: $150,087,567)
TOTAL INVESTMENT SECURITIES - 99.70% $787,329,260
(Cost: $518,576,170)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.30% 2,372,058
NET ASSETS - 100.00% $789,701,318
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
MARCH 31, 1998
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $787,329,260
Cash ............................................ 2,338
Receivables:
Investment securities sold....................... 3,513,216
Fund shares sold ................................ 1,529,987
Dividends and interest .......................... 90,606
Prepaid insurance premium ........................ 10,250
------------
Total assets .................................. 792,475,657
------------
Liabilities
Payable to Fund shareholders ..................... 2,223,894
Payable for investment securities purchased ....... 193,750
Accrued service fee (Note 2) ..................... 189,581
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 131,940
Accrued management fee (Note 2) .................. 16,053
Accrued accounting services fee (Note 2) ......... 7,083
Other ............................................ 12,038
------------
Total liabilities ............................. 2,774,339
------------
Total net assets ............................. $789,701,318
============
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 42,743,305
Additional paid-in capital ...................... 413,861,810
Accumulated undistributed income:
Accumulated undistributed net investment
income ........................................ 376,878
Accumulated undistributed net realized gain
on investment transactions .................... 63,966,235
Net unrealized appreciation in value of
investments ................................... 268,753,090
------------
Net assets applicable to outstanding units
of capital ................................... $789,701,318
============
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $18.48
Class Y .......................................... $18.49
Capital shares outstanding
Class A .......................................... 42,175,189
Class Y .......................................... 568,116
Capital shares authorized .......................... 200,000,000
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended MARCH 31, 1998
Investment Income
Income (Note 1B):
Interest and amortization ....................... $ 8,017,142
Dividends ....................................... 481,865
------------
Total income .................................. 8,499,007
------------
Expenses (Note 2):
Investment management fee ....................... 4,863,292
Transfer agency and dividend disbursing - Class A 1,714,343
Service fee - Class A ........................... 1,139,225
Accounting services fee ......................... 70,417
Custodian fees .................................. 34,565
Audit fees ...................................... 16,866
Shareholder servicing - Class Y ................. 15,455
Legal fees ...................................... 10,100
Other ........................................... 220,561
------------
Total expenses ................................ 8,084,824
------------
Net investment income ........................ 414,183
------------
Realized and Unrealized Gain on
Investments (Notes 1 and 3)
Realized net gain on investments ................. 81,941,223
Unrealized appreciation in value of investments
during the period ............................... 192,524,935
------------
Net gain on investments ......................... 274,466,158
------------
Net increase in net assets resulting from
operations ................................... $274,880,341
============
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year
ended March 31,
----------------------------
1998 1997
Increase in Net Assets -------------- ------------
Operations:
Net investment income ............ $ 414,183 $ 2,159,739
Realized net gain on investments . 81,941,223 50,242,282
Unrealized appreciation
(depreciation) ................. 192,524,935 (96,222,788)
-------------- ------------
Net increase (decrease) in net assets
resulting from operations ..... 274,880,341 (43,820,767)
-------------- ------------
Distributions to shareholders (Note 1D):*
From net investment income:
Class A ........................ (750,436) (2,029,503)
Class Y ........................ (38,544) (53,641)
From realized gains on
securities transactions:
Class A ........................ (63,226,050) (20,120,352)
Class Y ........................ (969,351) (302,385)
-------------- ------------
(64,984,381) (22,505,881)
-------------- ------------
Capital share transactions:
Proceeds from sale of shares:
Class A (69,999,164 and 70,633,686
shares, respectively) ......... 1,127,590,419 1,082,428,196
Class Y (166,671 and 195,033
shares, respectively) ......... 2,765,499 3,026,117
Proceeds from reinvestment of dividend
and/or capital gains distribution:
Class A (4,237,797 and 1,470,532
shares, respectively) ......... 63,566,846 22,028,449
Class Y (67,193 and 23,766
shares, respectively) ......... 1,007,894 356,026
Payments for shares redeemed:
Class A (68,937,977 and 67,021,853
shares, respectively).......... (1,120,135,669)(1,029,804,952)
Class Y (243,230 and 106,038
shares, respectively) ......... (3,950,234) (1,605,831)
-------------- ------------
Net increase in net assets resulting
from capital share transactions 70,844,755 76,428,005
-------------- ------------
Total increase ................ 280,740,715 10,101,357
Net Assets
Beginning of period ............ ... 508,960,603 498,859,246
-------------- ------------
End of period, including undistributed
net investment income of $376,878
and $751,675, respectively........ $ 789,701,318 $508,960,603
============== ============
*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 fiscal year ended March 31,
-----------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $13.59 $15.46 $12.25 $10.94 $ 9.70
------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income (loss) ... 0.01 0.06 0.04 0.03 (0.01)
Net realized and
unrealized gain
(loss) on
investments ..... 6.59 (1.29) 3.63 2.12 1.48
------ ------ ------ ------ ------
Total from investment
operations ....... 6.60 (1.23) 3.67 2.15 1.47
------ ------ ------ ------ ------
Less distributions:
From net investment
income .......... (0.02) (0.06) (0.03) (0.01) (0.00)
From capital gains (1.69) (0.58) (0.43) (0.83) (0.23)
------ ------ ------ ------ ------
Total distributions. (1.71) (0.64) (0.46) (0.84) (0.23)
------ ------ ------ ------ ------
Net asset value,
end of period .... $18.48 $13.59 $15.46 $12.25 $10.94
====== ====== ====== ====== ======
Total return* ...... 51.44% -8.38% 30.18% 20.50% 15.21%
Net assets, end
of period (000
omitted) .......... $779,196$501,107$491,668$303,624$221,053
Ratio of expenses
to average net
assets ........... 1.25% 1.27% 1.19% 1.24% 1.19%
Ratio of net investment
income to average
net assets ....... 0.06% 0.39% 0.29% 0.30% -0.11%
Portfolio turnover
rate ............. 38.51% 38.82% 27.75% 44.01% 55.23%
Average commission
rate paid ......... $0.0542$0.0479
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
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 period
year ended March 31, from 9/6/95*
----------------------- through
1998 1997 3/31/96
-------- -------- --------
Net asset value,
beginning of period $13.60 $15.47 $15.14
------ ------ ------
Income from investment
operations:
Net investment
income .......... 0.06 0.10 0.05
Net realized and
unrealized gain (loss)
on investments... 6.59 (1.29) 0.75
------ ------ ------
Total from investment
operations ........ 6.65 (1.19) 0.80
------ ------ ------
Less distributions:
From net investment
income........... (0.07) (0.10) (0.04)
From capital gains (1.69) (0.58) (0.43)
------ ------ ------
Total distributions. (1.76) (0.68) (0.47)
------ ------ ------
Net asset value,
end of period ..... $18.49 $13.60 $15.47
====== ====== ======
Total return ....... 51.83% -8.12% 5.44%
Net assets, end of
period (000
omitted) .........$10,505 $7,854 $7,191
Ratio of expenses
to average net
assets ............ 0.96% 0.97% 0.96%**
Ratio of net
investment income
to average net
assets ............ 0.35% 0.69% 0.54%**
Portfolio
turnover rate ..... 38.51% 38.82% 27.75%**
Average commission
rate paid ......... $0.0542 $0.0479
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 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 $19.8 billion of
combined net assets at March 31, 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
$3,357,539, out of which W&R paid sales commissions of $1,933,905 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 $22,364, which are included in other
expenses.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and Waddell & Reed Financial, Inc., a holding company, and a direct subsidiary
of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $218,984,771 while proceeds from maturities and
sales aggregated $195,366,494. Purchases of short-term securities aggregated
$2,268,728,996 while proceeds from maturities and sales aggregated
$2,289,774,978. No U.S. Government securities were bought or sold during the
period ended March 31, 1998.
For Federal income tax purposes, cost of investments owned at March 31,
1998 was $518,576,170, resulting in net unrealized appreciation of $268,753,090,
of which $285,118,101 related to appreciated securities and $16,365,011 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, 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 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 March 31, 1998, and the related statements of operations for the year then
ended and changes in net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the years in the five-year
period then ended. The financial statements and the financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on the 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 March
31, 1998 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 March 31, 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
May 8, 1998
<PAGE>
INCOME TAX INFORMATION
The amount of the dividend and capital gain below, multiplied by the number of
shares owned by you on the record date, will give you the total amounts to be
reported in your Federal income tax return for the year in which they were
received or reinvested.
PER-SHARE AMOUNTS REPORTABLE AS:
--------------------------------------------------------------------
For Individuals For Corporations
--------------------------------------------------------------
Record OrdinaryLong-Term Capital Gain Non- Long-Term
Date Total Income 28% Rate 20% RateQualifyingQualifyingCapital Gain
- ----------- ------------- -------- ---------------------------------------
Class A
12-12-97 $1.705 $0.1767 $1.1202 $0.4081 $0.0032 $0.1735 $1.5283
------ ------- ------- ------- ------- ------- -------
Total $1.705 $0.1767 $1.1202 $0.4081 $0.0032 $0.1735 $1.5283
====== ======= ======= ======= ======= ======= =======
Class Y
12-12-97 $1.752 $0.2237 $1.1202 $0.4081 $0.0108 $0.2129 $1.5283
------ ------- ------- ------- ------- ------- -------
Total $1.752 $0.2237 $1.1202 $0.4081 $0.0108 $0.2129 $1.5283
====== ======= ======= ======= ======= ======= =======
CORPORATION DEDUCTIONS -- Under Federal tax law, the amounts reportable as
Qualifying Dividends are eligible for the dividends received deduction in the
year received as provided by Section 243 of the Internal Revenue Code.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Shareholders are advised to consult with their tax advisor concerning the tax
treatment of dividends and distributions from the Fund.
<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
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
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.
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
NUR1012A(3-98)
printed on recycled paper
