United
Vanguard
Fund, Inc.
SEMIANNUAL
REPORT
---------------------------------------
For the six months ended March 31, 1994
<PAGE>
This report is submitted for the general information of the shareholders of
United Vanguard Fund, Inc. It is not authorized for distribution to prospective
investors in the Fund unless accompanied with or preceded by the United Vanguard
Fund, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
- -----------------------------------------------------------------
MARCH 31, 1994
Dear Shareholder:
This report covers the investment performance of your Fund for the six
months ended March 31, 1994.
During the past six months, bond and equity markets have experienced
considerable fluctuations due to increases in interest rates and other economic
developments. These markets will continue to react to events that affect the
economy such as actions on health care proposals and many other issues.
We are hoping to see improved economies throughout the world over the next
year. We believe this would contribute to a favorable outlook for U.S. and
foreign securities.
Regardless of the rise and decline of markets, we will continue to use the
strengths and abilities we have developed over the past 55 years. These
include:
Professional portfolio management-- As investment professionals, we pay
careful attention to economic trends; we understand the business of each company
in which we invest; and we have the ability to judge the management of such
companies as they adapt to changes in the industries and markets they serve.
A widely diversified approach-- Our extensive experience managing a variety
of securities allows us to see the whole "investment pie." We use this broad
view to consider every investment opportunity available that meets your Fund's
objectives, and to take advantage of these opportunities in an effort to achieve
maximum return.
These are just two of the many attributes that we bring to the table when
making investment decisions. We believe your Fund is designed appropriately to
meet its investment objectives, and can reward the long-term investor. We never
forget that we are managing your money.
The following is a comprehensive look at your Fund's recent performance.
We believe you will find that the information continues to reflect our aim of
meeting the stated objectives of your Fund.
Respectfully,
Keith A. Tucker
President
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
United Vanguard Fund, Inc.
PORTFOLIO STRATEGY:
Common stock of companies OBJECTIVE: Long-term appreciation
thought to have superior of capital.
prospects for growth and/or
other unique investment STRATEGY: Invests in common stocks
characteristics of smaller and medium-
sized growth companies
May invest in Foreign believed to have the
Securities potential for above average appreciation
in
Cash Reserves value.
The use of cash reserves (often invested
in money market securities) for
defensive purposes is a strategy that
may be utilized by the Vanguard Fund
from time to time.
Moving into cash reserve positions at
times thought to be near a major stock
market peak allows the Fund the
opportunity to capture profits and
attempts to cushion the impact of market
declines. The added flexibility
provided by our CASH RESERVES STRATEGY
has from time to time been an important
element in our past success and, when
deemed appropriate, may be used in the
management of the portfolio in the
future.
FOUNDED: 1969
DIVIDENDS: PAID SEMIANNUALLY (June and December)
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Six Months Ended March 31, 1994
- -------------------------------------
DIVIDENDS PAID $0.02
=====
CAPITAL GAINS DISTRIBUTION $0.18
=====
NET ASSET VALUE ON
3/31/94 $7.13 adjusted to:$7.31 (A)
9/30/93 7.10
-----
CHANGE PER SHARE $0.21
=====
(A)This number includes the capital gains distribution of $0.18 paid in December
1993 added to the actual net asset value on March 31, 1994.
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 3-31-94 7.88% 14.46%
5-year period ended 3-31-94 8.59% 9.88%
10-year period ended 3-31-94 11.43% 12.09%
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, 1994, United Vanguard Fund, Inc. had net assets totaling
$933,541,518 invested in a diversified portfolio of:
89.44% Common Stocks
10.56% Cash and Cash Equivalents
As a shareholder in United Vanguard Fund, Inc., for every $100 you had invested
on March 31, 1994, your Fund owned:
$44.99 Technological Stocks
20.38 Consumer Stocks
15.32 Basic Industries Stocks
10.56 Cash and Cash Equivalents
8.75 Financial Stocks
<PAGE>
- -----------------------------------------------------------------
These STOCK CATEGORIES are provided as a reference only. Not all categories or
subcategories will be represented in a portfolio at all times. Refer to the
following pages for a more detailed portfolio listing.
BASIC INDUSTRIES
Airlines
Automotive
Building
Chemicals Major
Electrical Equipment
Engineering and Construction
Machinery
Manufacturers
Metals and Mining
Multi-Industry
Paper
Precious Metals
Railroad Equipment
Railroads
Shipping
Steel
Tire and Rubber
Trucking
CONSUMER
Beverages
Consumer Electronics and Appliances
Food and Related
Hospital Management
Household Products
Leisure Time
Packaging and Containers
Publishing and Advertising
Retailing
Services, Consumer and Business
Textiles and Apparel
Tobacco
ENERGY AND ENERGY-RELATED
Canadian Oil
Coal
Domestic Oil
International Oil
Oil Services
Propane
FINANCIAL
Banks and Savings and Loans
Financial
Insurance
PUBLIC UTILITIES
Electric
Gas
Pipelines
TECHNOLOGICAL
Aerospace
Biotechnology and Medical Services
Chemicals Specialty and Miscellaneous Technology
Computers and Office Equipment
Drugs and Hospital Supply
Electronics
Telecommunications
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1994
Shares Value
COMMON STOCKS
Airlines - 3.55%
Mesa Airlines, Inc.* ................... 500,000 $ 10,187,500
Southwest Airlines Co. ................. 700,000 22,925,000
Total ................................. 33,112,500
Automotive - 3.21%
Ford Motor Company ..................... 200,000 11,750,000
Harley-Davidson, Inc. .................. 400,000 18,250,000
Total ................................. 30,000,000
Banks and Savings and Loans - 6.10%
HSBC Holdings plc (A) .................. 1,161,843 13,080,028
Istituto Mobiliare Italiano SpA (A)* ... 75,000 596,850
Union Bank of Switzerland (A) .......... 10,000 8,372,250
Wells Fargo & Company .................. 250,000 34,843,750
Total ................................. 56,892,878
Beverages - 2.30%
Buenos Aires Embotelladora S.A., ADR ... 200,000 6,800,000
PepsiCo, Inc. .......................... 400,000 14,650,000
Total ................................. 21,450,000
Biotechnology and Medical Services - 2.72%
Biogen, Inc.* .......................... 300,000 10,462,500
Chiron Corporation* .................... 100,000 6,562,500
Ventritex, Inc.* ....................... 400,000 8,400,000
Total ................................. 25,425,000
Building - 5.45%
Cemex, S.A., CPO Shares (A) ............. 900,000 21,201,300
Georgia-Pacific Corporation ............ 215,000 13,760,000
Sherwin-Williams Company (The) ......... 500,000 15,937,500
Total ................................. 50,898,800
Chemicals Major - 0.68%
Georgia Gulf Corporation* .............. 250,000 6,343,750
Chemicals Specialty and Miscellaneous
Technology - 1.69%
Calgon Carbon Corporation .............. 500,000 6,437,500
Raychem Corporation .................... 250,000 9,343,750
Total ................................. 15,781,250
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1994
Shares Value
COMMON STOCKS (Continued)
Computers and Office Equipment - 18.77%
BMC Software* .......................... 250,000 $ 15,406,250
Broderbund Software, Inc.* ............. 303,600 12,409,650
Cerner Corporation* .................... 200,000 8,300,000
Compaq Computer Corporation* ........... 200,000 19,550,000
First Data Corporation ................. 415,900 17,519,788
General Motors Corporation, Class E .... 500,000 17,125,000
Informix Corporation* .................. 1,000,000 20,875,000
Microsoft Corporation* ................. 500,000 42,500,000
Oracle Systems Corporation* ............ 300,000 9,618,600
Silicon Graphics, Inc.* ................ 500,000 11,937,500
Total ................................. 175,241,788
Drugs and Hospital Supply - 2.57%
Sandoz Ltd. (A) ........................ 8,875 23,993,270
Electronics - 9.25%
AMP Incorporated ....................... 300,000 18,075,000
Applied Materials, Inc.* ............... 200,000 8,925,000
cisco Systems, Inc.* ................... 800,000 27,300,000
Intel Corporation ...................... 200,000 13,475,000
Motorola, Inc. ......................... 60,000 6,075,000
Xilinx, Inc.* .......................... 250,000 12,468,750
Total ................................. 86,318,750
Hospital Management - 4.58%
United HealthCare Corporation .......... 1,000,000 42,750,000
Household Products - 1.81%
Gillette Company (The) ................. 200,000 12,650,000
Valence Technology, Inc.* ............. 300,000 4,275,000
Total ................................. 16,925,000
Insurance - 2.65%
MBIA, Inc. ............................. 250,000 13,656,250
TIG Holdings, Inc. ..................... 575,000 11,068,750
Total ................................. 24,725,000
Leisure Time - 4.33%
Comcast Corporation, Class A ........... 750,000 13,312,500
Walt Disney Company (The) .............. 400,000 16,750,000
Tele-Communications, Inc., Class A* .... 500,000 10,375,000
Total ................................. 40,437,500
Machinery - 1.33%
Mannesmann AG (A) ...................... 50,000 12,451,400
Multi-Industry - 1.10%
Grupo Carso, S.A. de C. V., Class 1 (A)* 1,100,000 10,286,100
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1994
Shares Value
COMMON STOCKS (Continued)
Publishing and Advertising - 1.35%
News Corporation Limited, ADR .......... 250,000 $ 12,593,750
Retailing - 6.01%
Blockbuster Entertainment Corporation .. 208,600 5,267,150
Cifra, S.A. de C.V., C (A) ............. 9,315,000 23,911,605
Gap, Inc. (The) ........................ 250,000 11,093,750
Home Depot, Inc. (The) ................. 300,000 12,225,000
Tommy Hilfiger Corporation* ............ 100,000 3,587,500
Total ................................. 56,085,005
Telecommunications - 9.99%
General Instrument Corporation* ........ 400,000 19,000,000
MCI Communications Corporation ......... 600,000 14,062,200
MFS Communications Company, Inc.* ...... 350,000 10,106,250
Nokia Corporation (A) .................. 186,100 13,367,749
Telefonaktiebolaget LM Ericsson, ADR,
Class B ............................... 500,000 21,031,000
Telefonos de Mexico S.A. de C.V., ADR .. 260,000 15,665,000
Total ................................. 93,232,199
TOTAL COMMON STOCKS - 89.44% $834,943,940
(Cost: $657,601,295)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 0.92%
Canadian Imperial Holdings Inc.,
3.6%, 4-1-94 .......................... $ 6,800 6,800,000
U.S. Bancorp,
Master Note ........................... 1,804 1,804,000
Total ................................. 8,604,000
Beverages - 0.22%
Anheuser-Busch Companies, Inc.,
3.5%, 4-13-94 ......................... 2,075 2,072,579
Building - 1.09%
Weyerhaeuser Company,
3.6%, 4-11-94 ......................... 10,185 10,174,815
Computers and Office Equipment - 0.64%
Electronic Data Systems Corp.,
3.75%, 5-13-94 ........................ 6,000 5,973,750
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Drugs and Hospital Supply - 0.18%
Ciba Geigy Ltd.,
3.55%, 4-11-94 ........................ $ 1,670 $ 1,668,353
Financial - 3.71%
Associates Corporation of North America,
Master Note ........................... 5,226 5,226,000
BHP Finance (U.S.A.) Inc.,
3.67%, 5-5-94 ......................... 10,000 9,965,339
Bell Atlantic Financial Services Inc.,
3.51%, 4-22-94 ........................ 7,525 7,509,593
PHH Corp.:
3.52%, 4-12-94 ........................ 4,700 4,694,945
3.53%, 4-12-94 ........................ 3,750 3,745,955
3.5%, 4-18-94 ......................... 3,500 3,494,215
Total ................................. 34,636,047
Food and Related - 1.55%
ConAgra, Inc.,
3.75%, 4-21-94 ........................ 7,600 7,584,167
McCormick & Co., Inc.,
3.09%, 4-20-94 ........................ 2,450 2,446,004
Sara Lee Corporation,
Master Note ........................... 4,441 4,441,000
Total ................................. 14,471,171
Insurance - 1.15%
Aon Corporation,
3.6%, 4-28-94 ......................... 7,200 7,180,560
Transamerica Financial Group,
3.6%, 4-22-94 ......................... 3,600 3,592,440
Total ................................. 10,773,000
Machinery - 0.64%
Cooper Industries Inc.,
3.6%, 4-15-94 ......................... 5,960 5,951,656
Metals and Mining - 0.32%
Aluminum Company of America,
3.6%, 4-25-94 ......................... 3,000 2,992,800
Paper - 0.29%
Champion International Corporation,
3.7%, 4-7-94 .......................... 2,700 2,698,335
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
MARCH 31, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Public Utilities - Electric - 0.48%
Potomac Electric Power Co.,
3.63%, 5-6-94 ......................... $ 4,450 $ 4,434,295
Telecommunications - 0.91%
Siemens Corp.,
3.38%, 4-15-94 ........................ 8,550 8,538,762
TOTAL SHORT-TERM SECURITIES - 12.10% $112,989,563
(Cost: $112,989,563)
TOTAL INVESTMENT SECURITIES - 101.54% $947,933,503
(Cost: $770,590,858)
LIABILITIES, NET OF CASH AND
OTHER ASSETS - (1.54%) (14,391,985)
NET ASSETS - 100.00% $933,541,518
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 VANGUARD FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
Assets
Investment securities -- at value
(Notes 1 and 3) ................................. $947,933,503
Cash ............................................ 16,697
Receivables:
Fund shares sold ................................ 1,628,919
Dividends and interest .......................... 944,372
Investment securities sold ...................... 780,296
Prepaid insurance premium ........................ 31,596
------------
Total assets .................................. 951,335,383
------------
Liabilities
Payable for investment securities purchased ...... 14,334,400
Payable for Fund shares redeemed ................. 3,052,958
Accrued service fee .............................. 192,153
Accrued transfer agency and dividend
disbursing ...................................... 122,527
Accrued accounting services fee .................. 7,083
Other ............................................ 84,744
------------
Total liabilities ............................. 17,793,865
------------
Total net assets ............................. $933,541,518
============
Net Assets
$1.00 par value capital stock, authorized --
400,000,000; shares outstanding -- 130,912,272
Capital stock ................................... $130,912,272
Additional paid-in capital ...................... 592,714,246
Accumulated undistributed income (loss)
Accumulated undistributed net investment
loss ........................................... (1,147,035)
Accumulated undistributed net realized gain on
investment transactions ........................ 33,719,390
Net unrealized appreciation in value of
investments at end of period ................... 177,342,645
------------
Net assets applicable to outstanding
units of capital ............................. $933,541,518
============
Net asset value per share (net assets divided
by shares outstanding) ........................... $7.13
=====
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended MARCH 31, 1994
Investment Income
Income:
Dividends ....................................... $ 2,443,784
Interest ........................................ 1,459,150
-----------
Total income .................................. 3,902,934
-----------
Expenses (Note 2):
Investment management fee ....................... 3,400,360
Transfer agency and dividend disbursing ......... 860,007
Service fee ..................................... 508,567
Custodian fees .................................. 134,861
Accounting services fee ......................... 42,500
Audit fees ...................................... 23,047
Legal fees ...................................... 4,984
Other ........................................... 90,439
-----------
Total expenses ................................ 5,064,765
-----------
Net investment loss .......................... (1,161,831)
-----------
Realized and Unrealized Gain (Loss) on Investments
Realized net gain on investments ................. 34,058,899
Unrealized depreciation in value of investments
during the period ............................... (3,311,511)
-----------
Net gain on investments ......................... 30,747,388
-----------
Net increase in net assets resulting
from operations .............................. $29,585,557
===========
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
March 31, September 30,
1994 1993
-------------------------
Increase in Net Assets
Operations:
Net investment income (loss) ........$ (1,161,831) $ 4,369,067
Realized net gain on
investments ....................... 34,058,899 26,314,492
Unrealized appreciation
(depreciation) ..................... (3,311,511) 117,706,476
------------ ------------
Net increase in net assets
resulting from operations ........ 29,585,557 148,390,035
------------ ------------
Dividends to shareholders from:*
Net investment income ............... (2,315,397) (4,820,030)
Realized gains on securities
transactions ...................... (22,767,821) ---
------------ ------------
(25,083,218) (4,820,030)
------------ ------------
Capital share transactions:
Proceeds from sale of shares
(5,328,834 and 10,417,512
shares, respectively) ............. 38,987,937 67,105,227
Proceeds from reinvestment of
dividends and/or capital gains
distribution (3,461,009 and
713,365 shares, respectively) ..... 24,607,769 4,654,207
Payments for shares redeemed
(7,718,373 and 21,266,075 shares,
respectively) ..................... (56,372,927) (137,491,017)
------------ ------------
Net increase (decrease) in net
assets resulting from capital
share transactions ............... 7,222,779 (65,731,583)
------------ ------------
Total increase ................... 11,725,118 77,838,422
Net Assets
Beginning of period .................. 921,816,400 843,977,978
------------ ------------
End of period ........................$933,541,518 $921,816,400
============ ============
Undistributed net investment
income (loss) ..................... $(1,147,035) $2,330,193
============ ============
*See "Financial Highlights" on page 14.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
FINANCIAL HIGHLIGHTS
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six For the fiscal year ended
months September 30,
ended ------------------------------------
3/31/94 1993 1992 1991 1990 1989
------- ------ ------ ------ ------ ------
Net asset value,
beginning of period $7.10 $6.03 $6.36 $5.18 $6.91 $5.82
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income (loss).... (0.01) .04 .06 .14 .17 .22
Net realized and
unrealized gain
(loss) on
investments...... .24 1.07 (0.10) 1.39 (0.95) 1.12
----- ----- ----- ----- ----- -----
Total from investment
operations ........ .23 1.11 (0.04) 1.53 (0.78) 1.34
----- ----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income.......... (0.02) (0.04) (0.09) (0.14) (0.22) (0.18)
Distribution from
capital gains.... (0.18) (0.00) (0.20) (0.21) (0.73) (0.07)
----- ----- ----- ----- ----- -----
Total distributions. (0.20) (0.04) (0.29) (0.35) (0.95) (0.25)
----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $7.13 $7.10 $6.03 $6.36 $5.18 $6.91
===== ===== ===== ===== ===== =====
Total return*....... 3.18% 18.38% -0.58% 30.88%-12.67% 23.69%
Net assets, end of
period (000
omitted) .........$933,542$921,816$843,978$875,293$679,765$781,650
Ratio of expenses
to average net
assets ............ 1.07%** 0.97% 0.96% 0.97% 0.98% 0.95%
Ratio of net
investment income
to average net
assets ............ -0.24%** 0.50% 0.96% 2.28% 2.85% 3.62%
Portfolio
turnover rate ..... 43.47%**62.12% 84.82% 173.44%161.54% 172.59%
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
NOTE 1 -- Significant Accounting Policies
United Vanguard Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940 as a diversified, open-end management investment company.
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 major dealer in bonds. Convertible bonds are
valued using this pricing system only on days when there is no sale re-
ported. Stocks which are traded over-the-counter are priced using NASDAQ
(National Association of Securities Dealers Automated Quotations) which
provides information on bid and asked or closing prices quoted by major
dealers in such stocks. Short-term debt securities are valued at amortized
cost, which approximates market.
B. Security transactions and related investment income -- Security
transactions are accounted for on the trade date (date the order to buy or
sell is executed). Securities gains and losses are calculated on the
identified cost basis. Dividend income is recorded on the ex-dividend
date. Interest income is recorded on the accrual basis. See Note 3 --
Investment Security Transactions.
C. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code. In
addition, the Fund intends to pay distributions as required to avoid
imposition of excise tax. Accordingly, provision has not been made for
Federal income taxes. See Note 4 -- Federal Income Tax Matters.
D. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. During the period ended March
31, 1994, the Fund adopted Statement of Position 93-2 Determination,
Disclosure, and Financial Statement Presentation of Income, Capital Gain,
and Return of Capital Distributions by Investment Companies. Accordingly,
permanent book and tax basis differences relating to future shareholder
distributions have been reclassified to additional paid-in capital. As of
October 1, 1993, the cumulative effect of such differences totaling $500
was reclassified from accumulated undistributed net realized gain on
investment transactions to additional paid-in capital. Net investment
income, net realized gains and net assets were not affected by this change.
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 .30% 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 $10.9 billion of
combined net assets at March 31, 1994) 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
The Fund also pays WARSCO a monthly per account charge for transfer agency
and dividend disbursement services of $1.0208 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. The Fund also reimburses W&R and WARSCO for certain out-of-pocket costs.
As principal underwriter for the Fund's shares, W&R received direct and
indirect gross sales commissions (which are not an expense of the Fund) of
$1,559,870, out of which W&R paid sales commissions of $806,859 and all expenses
in connection with the sale of Fund shares, except for registration fees and
related expenses.
Effective October 1, 1993, the Fund adopted a 12b-1 Service Plan with a
maximum fee of .25%
The Fund paid Directors' fees of $17,235.
W&R is an indirect subsidiary of Torchmark Corporation, a holding company,
and United Investors Management Company, a holding company, and a direct
subsidiary of Waddell & Reed Financial Services, Inc., a holding company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $190,581,955 while proceeds from maturities and
sales aggregated $185,394,746. Purchases of short-term securities aggregated
$467,306,800 while proceeds from maturities and sales aggregated $499,439,586.
There was no gain or loss on the sale of short-term securities. There were no
transactions in U.S. Government securities during the period.
For Federal income tax purposes, cost of investments owned at March 31,
1994 was $770,781,722, resulting in net unrealized appreciation of $177,151,781,
of which $192,723,555 related to appreciated securities and $15,571,774 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $23,339,686 during the fiscal year ended September 30, 1993. These gains
were partially offset by utilization of all available capital loss
carryforwards, resulting in distributable capital gain net income of $22,563,386
which was distributed to the Fund's shareholders subsequent to September 30,
1993.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United Vanguard Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of United Vanguard Fund, Inc. (the
"Fund") at March 31, 1994, the results of its operations for the six months then
ended and the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at March
31, 1994 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE
Kansas City, Missouri
April 29, 1994
<PAGE>
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Los Angeles, California
Doyle Patterson, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel, III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
Leslie S. Wright, Birmingham, Alabama
OFFICERS
Keith A. Tucker, President
Robert L. Hechler, Vice President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Rodney O. McWhinney, Vice President
Sharon K. Pappas, Vice President and Secretary
Carl E. Sturgeon, Vice President
James D. Wineland, Vice President
To all IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from an IRA unless you make a written election not to
have taxes withheld. The election may be made by submitting forms provided by
Waddell & Reed, Inc. which can be obtained from your Waddell & Reed
representative or by submitting Internal Revenue Service form W-4P. Once made,
an election can be revoked by providing written notice to Waddell & Reed, Inc.
If you elect not to have tax withheld you may be required to make payments of
estimated tax. Penalties may be imposed by the IRS if withholding and estimated
tax payments are not adequate.
<PAGE>
The United Group of Mutual Funds
United Cash Management, Inc.
United Government Securities Fund, Inc.
United Bond Fund
United Municipal Bond Fund, Inc.
United Continental Income Fund, Inc.
United Income Fund
United Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
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.
United Retirement Shares, Inc.
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(913) 236-1303
NUR1005SA(3-94)
printed on recycled paper
