United
New Concepts
Fund, Inc.
ANNUAL
REPORT
----------------------------------------
For the fiscal year ended March 31, 2000
<PAGE>
MANAGER'S LETTER
-----------------------------------------------------------------
MARCH 31, 2000
Dear Shareholder:
This report relates to the operation of United New Concepts Fund for the
fiscal year ended March 31, 2000. The following discussion, graphs and
tables provide you with information regarding the Fund's performance during
that period.
Strong growth, low inflation and rising productivity characterized the U.S.
economy over the past year as it continued in what now has become the
longest economic expansion in U.S. history. Throughout the year, the
global economy improved as well.
A year ago, we positioned the Fund somewhat defensively feeling that equity
valuations would be threatened by rising interest rates. Through the
summer that move proved appropriate. However, by the fall of 1999, it
became clear that the market's pull back would only be temporary.
Momentum, narrow market leadership, initial public offerings and technology
again became the order of the day. Our exposure to technology,
telecommunications and energy sectors was increased and helped lead the
Fund to substantial gains for the year.
The strategies and techniques we applied resulted in the performance of the
Fund falling below the Lipper Mid-Cap Growth Fund Universe Average and
slightly below the Russell Midcap Growth Index, as charted on the following
page. These indexes reflect the performance of securities that generally
represent the mid-cap companies sector of the stock market (the Russell
Midcap Growth Index) and the universe of funds with similar investment
objectives (the Lipper Mid-Cap Growth Fund Universe Average). The Lipper
category assigned to the Fund by Lipper, Inc. has changed from last year's
report. The change resulted from Lipper's new fund classification system
which now uses a fund's portfolio holdings as the primary basis for its
classification. The Russell Midcap Growth Index replaces the Nasdaq
Industrials Index in this year's report. We believe that the new index
provides a more accurate basis for comparing the Fund's performance to the
types of securities in which the Fund invests. Both indexes are presented
in this year's report for comparison purposes.
Many of the positive conditions that led to strong financial markets this
past year remain in place, particularly strong economic growth. At the
same time, there is reason for pause. The valuation gap between the "old
economy" and the "new economy" is wider than ever, interest rates appear to
be on the rise and investors appear to have become indifferent towards
risk. While these factors are not new, recent market action suggests that
some caution may be warranted. In the face of this, we approach the year
ahead with some caution, but remain focused on achieving superior returns
through sound fundamental research and prudent stock selection.
Thank you very much for your continued support and confidence in our
organization.
Respectfully,
Zachary H. Shafran
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 Russell Midcap Growth Index,
The Nasdaq Industrials Index
and The Lipper Mid-Cap Growth Fund Universe Average
United Lipper
New Mid-Cap
Concepts Russell Growth
Fund, Inc., Midcap Nasdaq Fund
Class Growth Industrials Universe
A Shares Index Index Average
--------- --------- ---------- ----------
03/31/90 Purchase9,425 10,000 10,000 10,000
03/31/91 12,593 12,102 12,098 11,812
03/31/92 17,358 14,017 15,006 14,434
03/31/93 17,912 15,859 15,839 16,053
03/31/94 20,637 16,934 17,292 18,277
03/31/95 24,868 18,950 17,795 20,232
03/31/96 32,375 24,395 22,748 27,654
03/31/97 29,662 25,941 22,595 26,797
03/31/98 44,919 36,939 30,226 38,321
03/31/99 52,928 40,220 30,778 40,484
03/31/00 92,418 71,268 53,719 78,302
===== United New Concepts Income Fund, Class A Shares* -- $92,418
. . . Russell Midcap Growth Index -- $71,268
+++++ Nasdaq Industrials Index -- $53,719
---- Lipper Mid-Cap Growth Fund Universe Average -- $78,302
*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.
Average Annual Total Return+
Class A Class B Class C Class Y
----------------------------------------------
Year Ended
3/31/00 64.57% N/A N/A 75.17%
5 Years Ended
3/31/00 28.49% N/A N/A N/A
10 Years Ended
3/31/00 24.90% N/A N/A N/A
Since inception of
Class++ through
3/31/00 N/A 50.60% 53.71% 27.62%
+Performance data quoted represents past performance and is based on
deduction of the maximum applicable sales load for each of the periods.
Class A shares carry a maximum front-end sales load of 5.75%. Class B
and Class C shares carry maximum contingent deferred sales charges of 5%
and 1%, respectively. Total returns reflect share price appreciation,
including reinvestment of all income and capital gains distributions.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original
cost.
++10/4/99 for Class B shares, 10/4/99 for Class C shares and 9/6/95 for
Class Y shares (the date on which shares were first acquired by
shareholders).
Past performance is not necessarily indicative of future results. Indexes
are unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
--------------------------------------------------------------
United New Concepts Fund, Inc.
PORTFOLIO STRATEGY:
Common Stock in OBJECTIVE: To seek growth of
mid-capitalization companies capital.
STRATEGY: Invests primarily in
Maximum 10% Foreign common stocks of U.S.
Securities companies whose market
capitalizations are
within the range of capitalizations
of companies comprising the
Standard & Poors MidCap 400 Index
and that the Fund's investment
manager believes offer above-
average growth potential.
FOUNDED: 1983
SCHEDULED DIVIDEND FREQUENCY: ANNUALLY (December)
<PAGE>
PERFORMANCE SUMMARY - Class A Shares
PER SHARE DATA
For the Fiscal Year Ended March 31, 2000
----------------------------------------
CAPITAL GAINS DISTRIBUTION $1.32
=====
NET ASSET VALUE ON
3/31/00 $15.07 adjusted to: $16.39 (A)
3/31/99 9.52
------
CHANGE PER SHARE $ 6.87
======
(A)This number includes the capital gains distribution of $1.32 paid in
December 1999 added to the actual net asset value on March 31, 2000.
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
------ ----------- ------------
1-year period ended 3-31-00 64.57% 74.61%
5-year period ended 3-31-00 28.49% 30.02%
10-year period ended 3-31-00 24.90% 25.65%
*Performance data quoted represents past performance and is based on
deduction of 5.75% sales load on the initial purchase in each of the
three periods.
**Performance data quoted in this column represents past performance
without taking into account the sales load deducted on an initial
purchase.
Investment return and principal value will fluctuate and an investor's
shares, when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On March 31, 2000, United New Concepts Fund, Inc. had net assets totaling
$2,039,313,867 invested in a diversified portfolio of:
94.70% Common Stocks
5.30% Cash and Cash Equivalents
As a shareholder of United New Concepts Fund, Inc., for every $100 you had
invested on March 31, 2000, your Fund owned:
$38.48 Services Stocks
28.71 Manufacturing Stocks
22.32 Transportation, Communication, Electric
and Sanitary Services Stocks
5.30 Cash and Cash Equivalents
3.11 Finance, Insurance and Real Estate Stocks
1.09 Mining Stocks
0.99 Wholesale and Retail Trade Stocks
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
MARCH 31, 2000
Shares Value
COMMON STOCKS
Automotive Dealers and Service Stations - 0.50%
O'Reilly Automotive, Inc.* ............. 712,500$ 10,242,188
Building Materials and Garden Supplies - 0.49%
Fastenal Company ....................... 210,000 10,047,187
Business Services - 24.28%
AHL Services, Inc.* .................... 600,000 6,112,500
Acxiom Corporation* ....................1,100,000 37,021,875
Aether Systems, Inc.* .................. 274,200 49,904,400
America Online, Inc.* .................. 825,000 55,481,250
ARTISTdirect, Inc.* .................... 15,000 114,844
Cerner Corporation* ....................1,100,000 29,665,625
CheckFree Holdings Corporation* ........1,200,000 84,712,500
Critical Path, Inc.* ................... 500,000 42,484,375
Getty Images, Inc.* .................... 459,600 16,531,238
InterTrust Technologies Corporation* ... 17,100 726,216
NOVA Corporation* ...................... 600,000 17,475,000
Official Payments Corporation* ......... 300,000 12,562,500
S1 Corporation* ........................ 404,000 34,630,375
Shared Medical Systems Corporation .....1,200,000 62,250,000
Ticketmaster Online-CitySearch, Inc.,
Class B* .............................. 450,000 11,292,187
USINTERNETWORKING, Inc.* ............... 531,750 20,638,547
Valassis Communications, Inc.* ......... 409,000 13,624,812
Total ................................. 495,228,244
Chemicals and Allied Products - 3.95%
Dial Corporation (The)* ................1,000,000 13,750,000
Genzyme Corporation - General Division* 800,000 40,075,000
Watson Pharmaceuticals, Inc.* .......... 673,600 26,733,500
Total ................................. 80,558,500
Communication - 21.65%
American Mobile Satellite Corporation* .1,500,000 36,093,750
COLT Telecom Group plc, ADR* ........... 375,000 73,968,750
Insight Communications Company, L.P.* .. 550,750 11,376,430
Nextel Communications, Inc.* ........... 400,000 59,287,500
PanAmSat Corporation* .................. 400,000 19,612,500
Research In Motion Limited* ............ 700,000 74,637,500
Research In Motion Limited* (A) ........ 600,000 62,740,782
Salem Communications Corporation, Class A* 400,000 4,762,500
VoiceStream Wireless Corporation* ...... 500,000 64,562,500
Western Wireless Corporation, Class A* . 750,000 34,382,812
Total ................................. 441,425,024
Depository Institutions - 2.32%
Concord EFS, Inc.* ..................... 2,062,850 47,252,158
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
MARCH 31, 2000
Shares Value
COMMON STOCKS (Continued)
Educational Services - 0.83%
Edison Schools Inc.* ................... 860,000$ 16,850,625
Electronic and Other Electric Equipment - 9.56%
Alteon WebSystems, Inc.* ............... 176,000 14,256,000
Chartered Semiconductor Manufacturing
Ltd, ADR* ............................. 276,800 25,984,600
Cypress Semiconductor Corporation* ..... 700,000 34,518,750
Flextronics International Ltd.* ........ 325,000 22,882,031
Microsemi Corporation* ................. 600,000 20,475,000
Sawtek Inc.* ........................... 400,000 20,900,000
Sycamore Networks, Inc.* ............... 96,000 12,372,000
TelCom Semiconductor, Inc.* ............ 527,000 15,777,062
Viasystems Group, Inc.* ................1,800,000 27,900,000
Total ................................. 195,065,443
Engineering and Management Services - 4.14%
Incyte Pharmaceuticals, Inc.* .......... 600,000 52,443,750
marchFIRST, Inc.* ...................... 640,100 22,803,562
MAXIMUS, Inc.* ......................... 300,000 9,150,000
Total ................................. 84,397,312
Health Services - 2.02%
Express Scripts, Inc., Class A ......... 500,000 20,984,375
Quorum Health Group, Inc.* .............2,000,000 20,187,500
Total ................................. 41,171,875
Industrial Machinery and Equipment - 11.03%
Baker Hughes Incorporated ..............1,200,000 36,300,000
Cisco Systems, Inc.* ................... 480,000 37,110,000
Compaq Computer Corporation ............ 500,000 13,312,500
Concurrent Computer Corp.* .............2,300,000 29,109,375
Cooper Cameron Corporation* ............ 550,000 36,781,250
Maxtor Corporation* ....................2,000,000 25,812,500
Proxim, Inc.* .......................... 80,200 10,187,906
RSA Security Inc.* ..................... 700,000 36,246,875
Total ................................. 224,860,406
Oil and Gas Extraction - 1.09%
Noble Affiliates, Inc. ................. 675,000 22,148,438
Prepackaged Software - 7.21%
Dendrite International, Inc.* .......... 900,000 18,928,125
Descartes Systems* ..................... 700,000 32,987,500
Intuit Inc.* ...........................1,200,000 65,212,500
Parametric Technology Corporation* ..... 600,000 12,656,250
Transaction Systems Architects, Inc.,
Class A* .............................. 601,200 17,359,650
Total ................................. 147,144,025
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED NEW CONCEPTS FUND, INC.
MARCH 31, 2000
Shares Value
COMMON STOCKS (Continued)
Printing and Publishing - 0.51%
Martha Stewart Living Omnimedia, Inc.* . 388,500$ 10,489,500
Real Estate - 0.79%
HomeServices.Com Inc.* ................. 390,000 3,839,063
homestore.com, Inc.* ................... 250,200 12,181,612
Total ................................. 16,020,675
Transportation Equipment - 3.66%
Gentex Corporation* .................... 900,000 33,328,125
Harley-Davidson, Inc. .................. 520,000 41,275,000
Total ................................. 74,603,125
Trucking and Warehousing - 0.67%
Iron Mountain Incorporated* ............ 400,000 13,625,000
TOTAL COMMON STOCKS - 94.70% $1,931,129,725
(Cost: $1,094,466,791)
TOTAL SHORT-TERM SECURITIES - 3.83% $ 78,200,856
(Cost: $78,200,856)
TOTAL INVESTMENT SECURITIES - 98.53% $2,009,330,581
(Cost: $1,172,667,647)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 1.47% 29,983,286
NET ASSETS - 100.00% $2,039,313,867
Notes To Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) Listed on an exchange outside the United States.
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, 2000
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $2,009,331
Cash ............................................ 1
Receivables:
Fund shares sold ................................ 33,739
Dividends and interest .......................... 378
Prepaid insurance premium ........................ 11
----------
Total assets .................................. 2,043,460
----------
Liabilities
Payable to Fund shareholders ..................... 3,345
Accrued service fee (Note 2) ..................... 347
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 331
Accrued distribution fee (Note 2) ................ 68
Accrued management fee (Note 2) .................. 46
Accrued accounting services fee (Note 2) ......... 8
Other ............................................ 1
----------
Total liabilities ............................. 4,146
----------
Total net assets ............................. $2,039,314
==========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 135,338
Additional paid-in capital ...................... 881,608
Accumulated undistributed income:
Accumulated undistributed net realized gain
on investment transactions .................... 185,705
Net unrealized appreciation in value of
investments ................................... 836,663
----------
Net assets applicable to outstanding units
of capital ................................... $2,039,314
==========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $15.07
Class B .......................................... $14.98
Class C .......................................... $14.99
Class Y .......................................... $15.14
Capital shares outstanding
Class A .......................................... 131,634
Class B .......................................... 1,869
Class C .......................................... 364
Class Y .......................................... 1,471
Capital shares authorized .......................... 300,000
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended MARCH 31, 2000
(In Thousands)
Investment Loss
Income (Note 1B):
Interest and amortization ....................... $ 8,142
Dividends ....................................... 1,195
--------
Total income .................................. 9,337
--------
Expenses (Note 2):
Investment management fee ....................... 11,686
Transfer agency and dividend disbursing:
Class A ........................................ 3,086
Class B ........................................ 31
Class C ........................................ 4
Service fee:
Class A ........................................ 3,023
Class B ........................................ 14
Class C ........................................ 2
Distribution fee:
Class A ........................................ 301
Class B ........................................ 43
Class C ........................................ 7
Accounting services fee ......................... 100
Custodian fees .................................. 73
Shareholder servicing - Class Y ................. 27
Legal fees ...................................... 21
Audit fees ...................................... 17
Other ........................................... 325
--------
Total expenses ................................ 18,760
--------
Net investment loss .......................... (9,423)
--------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on investments ................. 309,145
Realized net loss on call options written ........ (19,611)
Realized net loss on put options purchased ....... (7,100)
--------
Realized net gain on investments ................ 282,434
Unrealized appreciation in value of investments
during the period ............................... 530,512
--------
Net gain on investments ....................... 812,946
--------
Net increase in net assets resulting from
operations ................................. $803,523
========
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands)
For the fiscal year
ended March 31,
----------------------------
2000 1999
Increase in Net Assets -------------- ------------
Operations:
Net investment loss .............. $(9,423) $ (311)
Realized net gain on investments . 282,434 110,553
Unrealized appreciation .......... 530,512 37,398
---------- ---------
Net increase in net assets
resulting from operations ..... 803,523 147,640
---------- ---------
Distributions to shareholders from (Note 1D):*
Net investment income:
Class A ........................ --- (348)
Class B ......................... --- ---
Class C ......................... --- ---
Class Y ........................ --- (40)
Realized gains on securities transactions:
Class A ........................ (149,021) (108,654)
Class B ......................... (616) ---
Class C ......................... (89) ---
Class Y ........................ (1,793) (1,329)
---------- ---------
(151,519) (110,371)
---------- ---------
Capital share transactions
(Note 5) ......................... 403,326 157,014
---------- ---------
Total increase .............. 1,055,330 194,283
Net Assets
Beginning of period ............ ... 983,984 789,701
---------- ---------
End of period ..................... $2,039,314 $983,984
========== =========
Undistributed net investment
income ......................... $--- $---
==== ====
*See "Financial Highlights" on pages 12 - 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,
-----------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $ 9.52 $9.24 $6.80 $7.73 $6.13
------ ----- ----- ----- -----
Income from investment
operations:
Net investment
income (loss) ... (0.09) (0.00) 0.01 0.03 0.02
Net realized and
unrealized gain
(loss) on
investments ..... 6.96 1.54 3.29 (0.64) 1.81
------ ----- ----- ----- -----
Total from investment
operations ....... 6.87 1.54 3.30 (0.61) 1.83
------ ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.00) (0.01) (0.01) (0.03) (0.02)
From capital gains (1.32) (1.25) (0.85) (0.29) (0.21)
------ ----- ----- ----- -----
Total distributions. (1.32) (1.26) (0.86) (0.32) (0.23)
------ ----- ----- ----- -----
Net asset value,
end of period .... $15.07 $9.52 $9.24 $6.80 $7.73
====== ===== ===== ===== =====
Total return**...... 74.61% 17.83% 51.44% -8.38% 30.18%
Net assets, end
of period (in
millions) ......... $1,984 $972 $779 $501 $492
Ratio of expenses
to average net
assets ........... 1.32% 1.29% 1.25% 1.27% 1.19%
Ratio of net investment
income (loss) to average
net assets ....... -0.66% -0.04% 0.06% 0.39% 0.29%
Portfolio turnover
rate ............. 127.31% 48.95% 38.51% 38.82% 27.75%
*Per-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.
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/4/99*
through
3/31/00
-------
Net asset value,
beginning of period $10.69
-----
Income from investment
operations:
Net investment income 0.01
Net realized and
unrealized gain
on investments .. 5.60
-----
Total from investment
operations ....... 5.61
-----
Less distributions:
From net investment
income .......... (0.00)
From capital gains (1.32)
-----
Total distributions (1.32)
-----
Net asset value,
end of period .... $14.98
=====
Total return ....... 54.60%
Net assets, end of
period (in
millions) ........ $28
Ratio of expenses to
average net assets 2.40%**
Ratio of net investment
loss to average
net assets ....... -1.73%**
Portfolio turnover
rate ............. 127.31%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED NEW CONCEPTS FUND, INC.
FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/4/99*
through
3/31/00
-------
Net asset value,
beginning of period $10.69
-----
Income from investment
operations:
Net investment income 0.02
Net realized and
unrealized gain
on investments .. 5.60
-----
Total from investment
operations ....... 5.62
-----
Less distributions:
From net investment
income .......... (0.00)
From capital gains (1.32)
-----
Total distributions (1.32)
-----
Net asset value,
end of period .... $14.99
=====
Total return ....... 54.71%
Net assets, end of
period (in
millions) ........ $5
Ratio of expenses to
average net assets 2.30%**
Ratio of net investment
loss to average
net assets ....... -1.62%**
Portfolio turnover
rate ............. 127.31%**
*Commencement of operations.
**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
period
For the fiscal from
year ended March 31, 9/6/95**
----------------------------- through
2000 1999 1998 1997 3/31/96
------ ------ ------ ------ -------
Net asset value,
beginning of period $ 9.53 $9.25 $6.80 $7.74 $7.57
------ ----- ----- ----- -----
Income from investment
operations:
Net investment
income (loss) ... (0.05) 0.03 0.03 0.05 0.02
Net realized and
unrealized gain (loss)
on investments... 6.98 1.54 3.30 (0.65) 0.38
------ ----- ----- ----- -----
Total from investment
operations ........ 6.93 1.57 3.33 (0.60) 0.40
------ ----- ----- ----- -----
Less distributions:
From net investment
income........... (0.00) (0.04) (0.03) (0.05) (0.02)
From capital gains (1.32) (1.25) (0.85) (0.29) (0.21)
------ ----- ----- ----- -----
Total distributions. (1.32) (1.29) (0.88) (0.34) (0.23)
------ ----- ----- ----- -----
Net asset value,
end of period ..... $15.14 $9.53 $9.25 $6.80 $7.74
====== ===== ===== ===== =====
Total return ....... 75.17% 18.29% 51.83% -8.12% 5.44%
Net assets, end of
period (in
millions) ........ $22 $12 $11 $8 $7
Ratio of expenses
to average net
assets ............ 1.02% 0.95% 0.96% 0.97% 0.96%+
Ratio of net
investment income
(loss) to average
net assets ....... -0.36% 0.29% 0.35% 0.69% 0.54%+
Portfolio
turnover rate ..... 127.31% 48.95% 38.51% 38.82% 27.75%+
*Per-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
MARCH 31, 2000
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. The
following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with accounting principles generally accepted in
the United States of America.
A. Security valuation -- Each stock and convertible bond is valued at the
latest sale price thereof on the last business day of the fiscal
period as reported by the principal securities exchange on which the
issue is traded or, if no sale is reported for a stock, the average of
the latest bid and asked prices. Bonds, other than convertible bonds,
are valued using a pricing system provided by a pricing service.
Convertible bonds are valued using this pricing system only on days
when there is no sale reported. Stocks which are traded over-the-
counter are priced using the Nasdaq Stock Market, which provides
information on bid and asked prices quoted by major dealers in such
stocks. Short-term debt securities are valued at amortized cost,
which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Securities gains and losses are calculated
on the identified cost basis. Dividend income is recorded on the ex-
dividend date. Interest income is recorded on the accrual basis. See
Note 3 -- Investment Security Transactions.
C. Foreign currency translations -- All assets and liabilities
denominated in foreign currencies are translated into U.S. dollars
daily. Purchases and sales of investment securities and accruals of
income and expenses are translated at the rate of exchange prevailing
on the date of the transaction. For assets and liabilities other than
investments in securities, net realized and unrealized gains and
losses from foreign currency translations arise from changes in
currency exchange rates. The Fund combines fluctuations from currency
exchange rates and fluctuations in market value when computing net
realized and unrealized gain or loss from investments.
D. Federal income taxes -- It is the Fund's policy to distribute all of
its taxable income and capital gains to its shareholders and otherwise
qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code. In addition, the Fund intends to pay
distributions as required to avoid imposition of excise tax.
Accordingly, provision has not been made for Federal income taxes.
See Note 4 -- Federal Income Tax Matters.
E. Dividends and distributions -- Dividends and distributions to
shareholders are recorded by the Fund on the business day following
record date. Net investment income dividends and capital gains
distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences are due to differing
treatments for items such as deferral of wash sales and post-October
losses, foreign currency transactions, net operating losses and
expiring capital loss carryovers. At March 31, 2000, $9,423,186 was
reclassified between accumulated undistributed net investment income
and accumulated undistributed net realized gain on investment
transactions. Net investment income, net realized gains and net
assets were not affected by this change.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
NOTE 2 -- Investment Management And Payments to Affiliated Persons
The Fund pays a fee for investment management services. The fee is
computed daily based on the net asset value at the close of business. The
fee is payable by the Fund at the annual rates of: 0.85% of net assets up
to $1 billion; 0.83% of net assets over $1 billion and up to $2 billion;
0.80% of net assets over $2 billion and up to $3 billion; and 0.76% of net
assets over $3 billion. The Fund accrues and pays the fee daily.
Pursuant to assignment of the Investment Management Agreement between
the Fund and Waddell & Reed, Inc. ("W&R"), Waddell & Reed Investment
Management Company ("WRIMCO"), a wholly owned subsidiary of W&R, serves as
the Fund's investment manager.
The Fund has an Accounting Services Agreement with Waddell & Reed
Services Company ("WARSCO"), a wholly owned subsidiary of W&R. Under the
agreement, WARSCO acts as the agent in providing accounting services and
assistance to the Fund and pricing daily the value of shares of the Fund.
For these services, the Fund pays WARSCO a monthly fee of one-twelfth of
the annual fee shown in the following table.
Accounting Services Fee
Average
Net Asset Level Annual Fee
(all dollars in millions) Rate for Each Level
------------------------- -------------------
From $ 0 to $ 10 $ 0
From $ 10 to $ 25 $ 10,000
From $ 25 to $ 50 $ 20,000
From $ 50 to $ 100 $ 30,000
From $ 100 to $ 200 $ 40,000
From $ 200 to $ 350 $ 50,000
From $ 350 to $ 550 $ 60,000
From $ 550 to $ 750 $ 70,000
From $ 750 to $1,000 $ 85,000
$1,000 and Over $100,000
For Class A, Class B and Class C shares, the Fund pays WARSCO a
monthly per account charge for transfer agency and dividend disbursement
services of $1.3125 for each shareholder account which was in existence at
any time during the prior month, plus $0.30 for each account on which a
dividend or distribution of cash or shares had a record date in that month.
With respect to Class Y shares, the Fund pays WARSCO a monthly fee at an
annual rate of 0.15% of the average daily net assets of the class for the
preceding month. The Fund also reimburses W&R and WARSCO for certain out-
of-pocket costs.
As principal underwriter for the Fund's shares, W&R received gross
sales commissions for Class A shares (which are not an expense of the Fund)
of $4,075,298. With respect to Class A, Class B and Class C shares, W&R
paid sales commissions of $3,617,639 and all expenses in connection with
the sale of Fund shares, except for registration fees and related expenses.
A contingent deferred sales charge ("CDSC") may be assessed against a
shareholder's redemption amount of Class B and Class C shares and is paid
to W&R. The purpose of the deferred sales charge is to compensate W&R for
the costs incurred by W&R in connection with the sale of Fund shares.
With respect to Class B shares, the amount of the CDSC will be the
following percent of the total amount invested during a calendar year to
acquire the shares or the value of the shares redeemed, whichever is less.
Redemption at any time during the first calendar year of investment, 5%;
the second calendar year, 4%; the third calendar year, 3%; the fourth
calendar year, 3%; the fifth calendar year, 2%; the sixth calendar year, 1%
and thereafter, 0%.
If Class C shares are sold within 12 months of buying these shares, a
1% CDSC will be imposed.
The deferred sales charge will not be imposed on shares representing
payment of dividends or distributions or on amounts which represent an
increase in the value of the shareholder's account resulting from capital
appreciation above the amount paid for shares purchased during the deferred
sales charge period. During the period ended March 31, 2000, W&R received
$2,144 and $844 in deferred sales charges from Class B shares and Class C
shares, respectively.
Under a Distribution and Service Plan for Class A shares adopted by
the Fund pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund may pay monthly a distribution and/or service fee to W&R in an
amount not to exceed 0.25% of the Fund's average annual net assets. The
fee is to be paid to reimburse W&R for amounts it expends in connection
with the distribution of the Class A shares and/or provision of personal
services to Fund shareholders and/or maintenance of shareholder accounts.
Under the Distribution and Service Plan adopted by the Fund for Class
B and Class C shares, respectively, the Fund may pay W&R, on an annual
basis, a service fee of up to 0.25% of the average daily net assets of the
class to compensate W&R for providing services to shareholders of that
class and/or maintaining shareholder accounts for that class and a
distribution fee of up to 0.75% of the average daily net assets of the
class to compensate W&R for distributing the shares of that class. The
Class B Plan and the Class C Plan each permit W&R to receive compensation,
through the distribution and service fee, respectively, for its
distribution activities for that class, which are similar to the
distribution activities described with respect to the Class A Plan, and for
its activities in providing personal services to shareholders of that class
and/or maintaining shareholder accounts of that class, which are similar to
the corresponding activities for which it is entitled to reimbursement
under the Class A Plan.
The Fund paid Directors' fees of $42,955, which are included in other
expenses.
W&R is a subsidiary of Waddell & Reed Financial, Inc., a holding
company, and a direct subsidiary of Waddell & Reed Financial Services,
Inc., a holding company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and
short-term securities, aggregated $1,865,601,703 while proceeds from
maturities and sales aggregated $1,611,764,282. Purchases of options
aggregated $7,907,540 while proceeds from options aggregated $10,105,904.
Purchases of short-term securities aggregated $4,735,305,338 while proceeds
from maturities and sales aggregated $4,817,650,731. No U.S. Government
securities were bought or sold during the period ended March 31, 2000.
For Federal income tax purposes, cost of investments owned at March
31, 2000 was $1,177,665,495, resulting in net unrealized appreciation of
$831,665,086, of which $887,936,810 related to appreciated securities and
$56,271,724 related to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net
income of $277,946,487 during the year ended March 31, 2000, of which a
portion was paid to shareholders during the period ended March 31, 2000.
Remaining capital gain net income will be distributed to the Fund's
shareholders.
NOTE 5 -- Multiclass Operations
The Fund is authorized to offer four classes of shares, Class A, Class
B, Class C and Class Y, each of which have equal rights as to assets and
voting privileges. Class Y shares are not subject to a sales charge on
purchases, are not subject to a Rule 12b-1 Distribution and Service Plan
and are subject to a separate transfer agency and dividend disbursement
services fee structure. A comprehensive discussion of the terms under
which shares of each class are offered is contained in the Prospectus and
the Statement of Additional Information for the Fund.
Income, non-class specific expenses, and realized and unrealized gains
and losses are allocated daily to each class of shares based on the value
of their relative net assets as of the beginning of each day adjusted for
the prior day's capital share activity.
Transactions in capital stock are summarized below. Amounts are in
thousands.
For the fiscal
year ended March 31,
--------------------------
2000 1999
------------ ------------
Shares issued from sale
of shares:
Class A ............ 76,177 45,230
Class B ............. 1,843 ---
Class C ............. 367 ---
Class Y ............ 475 1,008
Shares issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 11,409 12,288
Class B ............. 48 ---
Class C ............. 7 ---
Class Y ............ 139 156
Shares redeemed:
Class A ............ (57,998) (39,822)
Class B ............. (22) ---
Class C ............. (10) ---
Class Y ............ (411) (1,033)
------ ------
Increase in
outstanding capital
shares .............. 32,024 17,827
====== ======
Value issued from sale
of shares:
Class A ............ $1,022,613 $420,544
Class B ............. 26,532 ---
Class C ............. 5,432 ---
Class Y ............ 5,962 9,457
Value issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 146,603 107,269
Class B ............. 616 ---
Class C ............. 89 ---
Class Y ............ 1,793 1,367
Value redeemed:
Class A ............ (800,566) (371,985)
Class B ............. (330) ---
Class C ............. (165) ---
Class Y ............ (5,253) (9,638)
-------- --------
Increase in outstanding
capital ............ $403,326 $157,014
======== ========
NOTE 6 -- Options
Options purchased by the Fund are accounted for in the same manner as
marketable portfolio securities. The cost of portfolio securities acquired
through the exercise of call options is increased by the premium paid to
purchase the call. The proceeds from securities sold through the exercise
of put options are decreased by the premium paid to purchase the put.
When the Fund writes (sells) an option, an amount equal to the premium
received by the Fund is recorded as a liability. The amount of the
liability is subsequently adjusted to reflect the current market value of
the option written. The current market value of an option is the last
sales price on the principal exchange on which the option is traded, or in
the absence of transactions, the mean between the bid and asked prices or
at a value supplied by a broker-dealer. When an option expires on its
stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of a closing
purchase transaction exceeds the premium received when the call option was
sold) and the liability related to such option is extinguished. When a
call option is exercised, the premium is added to the proceeds from the
sale of the underlying security in determining whether the Fund has
realized a gain or loss. For the Fund, when a put written is exercised,
the cost basis of the securities purchased by the Fund is reduced by the
amount of the premium.
Transactions in call options written were as follows:
Number of Premiums
Contracts Received
--------- --------
Outstanding at March 31, 1999 ...... 1,101 $6,499,725
Options written .............. 7,900 3,606,179
Options terminated in closing
purchase transactions ......... (6,501) (8,793,448)
Options exercised .............. (2,500) (1,312,456)
Options expired .................... --- ---
----- -----------
Outstanding at March 31, 2000 ...... --- $ ---
===== ===========
<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, 2000, and the related statement of operations
for the fiscal year then ended, the statements of changes in net assets for
each of the two fiscal years in the period then ended, and the financial
highlights for each of the five fiscal years in the period then ended.
These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of March 31, 2000,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of United New Concepts Fund, Inc. as of March 31, 2000, the results of its
operations for the fiscal year then ended, the changes in its net assets
for each of the two fiscal years in the period then ended, and the
financial highlights for each of the five fiscal years in the period then
ended in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
Kansas City, Missouri
May 5, 2000
<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 Ordinary Long-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
----------- ------------- -------- ----------------------------
Class A, B, C and Y
12-15-99 $1.324 $0.2461 $1.0779 $0.0000 $0.2461 $1.0779
------ ------- ------- ------- ------- -------
Total $1.324 $0.2461 $1.0779 $0.0000 $0.2461 $1.0779
====== ======= ======= ======= ======= =======
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.
Shareholder Meeting Results
A special meeting of United New Concepts Fund, Inc. was held on June 22,
1999. 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 Withhold Non-Votes*
J. Concannon 48,758,069 2,775,411 0
J. Dillingham 48,760,750 2,772,730 0
D. Gardner 48,684,216 2,849,264 0
L. Graves 48,736,807 2,796,673 0
J. Harroz Jr. 48,651,152 2,882,328 0
J. Hayes 48,606,256 2,927,224 0
R. Hechler 48,707,006 2,826,474 0
H. Herrmann 48,729,223 2,804,257 0
G. Johnson 48,547,795 2,985,685 0
W. Morgan 48,673,913 2,859,567 0
R. Reimer 48,672,395 2,861,085 0
F. Ross 48,746,111 2,787,369 0
E. Schwartz 48,730,539 2,802,941 0
K. Tucker 48,742,811 2,790,669 0
F. Vogel 48,771,310 2,762,170 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 Abstain Non-Votes*
48,376,951 491,131 2,665,398 0
Item 3. To approve or disapprove the amendment to the Fund's
investment management agreement with Waddell & Reed Investment
Management Company:
Broker
For Against Abstain Non-Votes*
44,437,601 3,841,645 3,211,891 42,343
Item 4. To approve or disapprove amendment of the Fund's policy
regarding securities lending:
Broker
For Against Abstain Non-Votes*
45,673,327 2,176,156 3,641,654 42,343
Item 5. To approve or disapprove the Fund's Articles of
Incorporation to change the par value of Fund shares to $0.001:
Broker
For Against Abstain Non-Votes*
45,613,924 1,789,263 4,130,293 0
*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
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, San Mateo, California
Linda K. Graves, Topeka, Kansas
Joseph Harroz, Jr., Norman, Oklahoma
John F. Hayes, Hutchinson, Kansas
Robert L. Hechler, Overland Park, Kansas
Henry J. Herrmann, Overland Park, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald C. Reimer, Mission Hills, Kansas
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
OFFICERS
Robert L. Hechler, President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Kristen A. Richards, Vice President and Secretary
Daniel C. Schulte, Vice President
Zachary H. Shafran, 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 Accumulative Fund
United Asset Strategy Fund, Inc.
United Bond Fund
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Income Fund
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Science and Technology Fund
United Small Cap Fund, Inc.
United Tax-Managed Equity Fund, Inc.
United Vanguard Fund, Inc.
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(888)-WADDELL
(888)-923-3355
Our INTERNET address is:
http://www.waddell.com
NUR1012A(3-00)
printed on recycled paper
