United
Vanguard
Fund, Inc.
ANNUAL
REPORT
--------------------------------------------
For the fiscal year ended September 30, 1994
<PAGE>
FUND MANAGER'S LETTER
- -----------------------------------------------------------------
SEPTEMBER 30, 1994
Dear Shareholder:
This report relates to the operation of your Fund for the fiscal year ended
September 30, 1994. The following discussion, graphs and tables provide you
with information regarding the Fund's performance during that period.
During the past fiscal year, the Federal Reserve increased interest rates
several times to combat the economic forces that might lead to increased
inflation. The rate of inflation remained steady and relatively low during the
year. The stock market, while fluctuating considerably, showed little net
change from the beginning of the fiscal year to the end.
The Fund's investment focus included stocks of large capitalization
companies with dominant positions in their consumer markets. The Fund also
emphasized stocks of telecommunication equipment companies and health
maintenance organizations (HMO's). The Fund maintained significant holdings in
a diversified group of foreign stocks as well. Whether investing domestically
or abroad, the Fund searched for companies that appeared to possess superior
prospects for growth.
The strategies and techniques we applied resulted in the direction of the
Fund's performance remaining fairly consistent with that of the indexes charted
on the following page. Those indexes reflect the performance of securities that
generally represent the stock market (the S&P 500 Index) and the universe of
funds with similar investment objectives (the Lipper Growth Fund Universe
Average). The Fund's performance was impacted positively during the past fiscal
year by strong results from its HMO holdings, telecommunication industry
investments and many of its foreign securities, particularly Mexican and
Scandinavian stocks.
We expect the economy to continue growing at a fairly robust rate. We
believe the Federal Reserve would counter a strengthening U.S. economy with
additional increases in interest rates, which would have the likely effect of
tempering returns in the equity markets. In view of current and anticipated
conditions, we expect to continue to pursue the same strategies we have employed
recently. This includes continued emphasis on companies that have excellent
prospects for growth, including foreign investment opportunities.
We appreciate your continued confidence.
Respectfully,
James D. Wineland
Manager, United Vanguard Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
UNITED VANGUARD FUND, INC.,
THE S&P 500 INDEX,
AND THE LIPPER GROWTH FUND UNIVERSE AVERAGE
The line graph which appears here is the paper version which was filed on Form
SE on November 23, 1994.
<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
PERFORMANCE SUMMARY
PER SHARE DATA
For the Fiscal Year Ended September 30, 1994
- ---------------------------------------------
DIVIDEND PAID $0.02
=====
CAPITAL GAINS DISTRIBUTION $0.18
=====
NET ASSET VALUE ON
9/30/94 $7.73 adjusted to:$7.91 (A)
9/30/93 7.10
-----
CHANGE PER SHARE $0.81
=====
(A)This number includes the capital gains distribution of $0.18 paid in December
1993 added to the actual net asset value on September 30, 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 9-30-94 5.43% 11.86%
5-year period ended 9-30-94 7.24% 8.51%
10-year period ended 9-30-94 12.21% 12.88%
Performance data quoted represents past performance and is based on deduction of
5.75% sales load on the initial purchase in each of the three periods.
Performance data quoted in this column represents past performance without
taking into account the sales load deducted on an initial purchase.
Investment return and principal value will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
<PAGE>
PORTFOLIO HIGHLIGHTS
On September 30, 1994, United Vanguard Fund, Inc. had net assets totaling
$1,014,262,881 invested in a diversified portfolio of:
77.04% Common Stocks and Rights
22.79% Cash and Cash Equivalents
0.17% Preferred Stock
As a shareholder in United Vanguard Fund, Inc., for every $100 you had invested
on September 30, 1994, your Fund owned:
$38.90 Technological Stocks
22.79 Cash and Cash Equivalents
17.36 Consumer Stocks
12.44 Basic Industries Stocks
8.34 Financial Stocks
0.17 Preferred Stock
<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.
SEPTEMBER 30, 1994
Shares Value
COMMON STOCKS AND RIGHTS
Airlines - 1.55%
Southwest Airlines Co. ................. 700,000 $ 15,750,000
Automotive - 3.68%
Ford Motor Company ..................... 600,000 16,650,000
Harley-Davidson, Inc. .................. 750,000 20,718,750
Total ................................. 37,368,750
Banks and Savings and Loans - 3.42%
HSBC Holdings plc (A) .................. 1,161,843 12,967,330
Wells Fargo & Company .................. 150,000 21,768,750
Total ................................. 34,736,080
Beverages - 2.04%
Buenos Aires Embotelladora S.A., ADR ... 200,000 7,475,000
PepsiCo, Inc. .......................... 400,000 13,250,000
Total ................................. 20,725,000
Biotechnology and Medical Services - 2.51%
Biogen, Inc.* .......................... 200,000 10,925,000
Chiron Corporation* .................... 100,000 6,675,000
Ventritex, Inc.* ....................... 400,000 7,900,000
Total ................................. 25,500,000
Building - 4.74%
Cemex, S.A., CPO Shares (A) ............. 3,037,500 27,282,825
Georgia-Pacific Corporation ............ 115,000 8,797,500
Metsa Serla Oy, Class B (A) ............ 249,800 12,022,874
Total ................................. 48,103,199
Chemicals Specialty and Miscellaneous
Technology - 0.57%
Calgon Carbon Corporation .............. 500,000 5,812,500
Computers and Office Equipment - 14.12%
Broderbund Software, Inc.* ............. 350,000 18,637,500
Cerner Corporation* .................... 300,000 12,225,000
Compaq Computer Corporation* ........... 300,000 9,787,500
First Data Corporation ................. 400,000 20,100,000
General Motors Corporation, Class E .... 500,000 19,000,000
Informix Corporation* .................. 1,000,000 27,687,000
Microsoft Corporation* ................. 100,000 5,618,700
Oracle Systems Corporation* ............ 400,000 17,250,000
Silicon Graphics, Inc.* ................ 500,000 12,875,000
Total ................................. 143,180,700
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1994
Shares Value
COMMON STOCKS AND RIGHTS (Continued)
Electronics - 7.63%
AMP Incorporated ....................... 350,000 $ 27,081,250
Applied Materials, Inc.* ............... 300,000 13,950,000
cisco Systems, Inc.* ................... 800,000 21,949,600
Silicon Valley Group, Inc. ............. 300,000 4,312,500
Xilinx, Inc.* .......................... 200,000 10,050,000
Total ................................. 77,343,350
Financial - 2.33%
Federal National Mortgage Association .. 300,000 23,625,000
Hospital Management - 4.18%
United HealthCare Corporation .......... 800,000 42,400,000
Household Products - 1.40%
Gillette Company (The) ................. 200,000 14,150,000
Insurance - 2.59%
MBIA, Inc. ............................. 250,000 14,906,250
TIG Holdings, Inc. ..................... 575,000 11,356,250
Total ................................. 26,262,500
Leisure Time - 4.68%
Comcast Corporation, Class A ........... 750,000 11,437,500
Walt Disney Company (The) .............. 400,000 15,550,000
Tele-Communications, Inc., Class A* .... 650,000 14,462,500
Viacom Inc., Class A ................... 16,688 682,122
Viacom Inc., Class B ................... 126,442 5,026,070
Viacom Inc., Rights* ................... 208,600 273,683
Total ................................. 47,431,875
Machinery - 1.24%
Mannesmann AG (A) ...................... 50,000 12,557,200
Multi-Industry - 1.23%
Grupo Carso, S.A. de C. V.,
Class 1 (A)*........................... 1,100,000 12,471,800
Publishing and Advertising - 1.25%
News Corporation Limited, ADR .......... 250,000 12,656,250
Retailing - 3.81%
Cifra, S.A. de C.V., C (A) ............. 9,315,000 26,054,055
Home Depot, Inc. (The) ................. 300,000 12,600,000
Total ................................. 38,654,055
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1994
Shares Value
COMMON STOCKS AND RIGHTS (Continued)
Telecommunications - 14.07%
General Instrument Corporation* ........ 600,000 $ 17,100,000
MCI Communications Corporation ......... 600,000 15,225,000
MFS Communications Company, Inc.* ...... 500,000 17,125,000
Motorola, Inc. ......................... 400,000 21,100,000
Nokia Corporation (A) .................. 250,000 29,104,250
Telefonaktiebolaget LM Ericsson, ADR,
Class B ............................... 500,000 26,812,500
Telefonos de Mexico S.A. de C.V., ADR .. 260,000 16,250,000
Total ................................. 142,716,750
TOTAL COMMON STOCKS AND RIGHTS - 77.04% $ 781,445,009
(Cost: $571,040,878)
PREFERRED STOCK - 0.17%
Telecommunications
Nokia Corporation, ADS ................. 28,900 $ 1,690,650
(Cost: $1,166,838)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Banks and Savings and Loans - 0.83%
U.S. Bancorp,
Master Note ........................... $ 8,471 8,471,000
Building - 1.56%
Weyerhaeuser Company,
4.78%, 10-21-94 ....................... 15,840 15,797,936
Chemicals Major - 0.61%
du Pont (E.I.) de Nemours
and Company,
4.74%, 10-25-94 ....................... 6,180 6,160,471
Computers and Office Equipment - 1.24%
Electronic Data Systems Corp.:
4.79%, 10-14-94 ....................... 5,800 5,789,968
4.89%, 11-15-94 ....................... 6,805 6,763,404
Total ................................. 12,553,372
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Drugs and Hospital Supply - 1.19%
Warner-Lambert Company,
4.75%, 11-1-94 ........................ $12,130 $ 12,080,385
Electrical Equipment - 1.04%
Emerson Electric Co.,
4.9%, 10-26-94 ........................ 10,550 10,514,101
Financial - 5.52%
Associates Corporation of North America,
Master Note ........................... 7,535 7,535,000
International Business Machines
Credit Corp.,
4.76%, 10-5-94 ........................ 2,380 2,378,741
Merrill Lynch & Co. Inc.,
4.75%, 10-6-94 ........................ 7,420 7,415,105
PHH Corp.,
4.9%, 10-26-94 ........................ 2,950 2,939,962
Textron Financial Corp.:
4.9%, 10-26-94 ........................ 9,800 9,766,653
5.08%, 10-27-94 ....................... 5,390 5,370,225
Transamerica Financial Group,
4.8%, 10-18-94 ........................ 3,000 2,993,200
Whirlpool Financial Corp.:
4.77%, 10-3-94 ........................ 7,596 7,592,987
4.92%, 10-25-94 ....................... 10,000 9,967,200
Total ................................. 55,959,073
Food and Related - 0.36%
Sara Lee Corporation,
Master Note ........................... 3,713 3,713,000
Public Utilities - Electric - 0.73%
Public Service Electric & Gas Co.,
4.82%, 10-11-94 ....................... 7,400 7,390,092
Public Utilities - Pipelines - 0.58%
Enron Corp.,
5.1%, 10-24-94 ........................ 5,960 5,940,580
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Retailing - 0.50%
K Mart Corporation,
4.95%, 10-31-94 ....................... $ 5,130 $ 5,108,839
Services, Consumer and Business - 0.83%
Hertz Corp.,
4.78%, 10-12-94 ....................... 8,420 8,407,702
Telecommunications - 0.77%
BellSouth Telecommunications Inc.,
4.8%, 10-19-94 ........................ 5,410 5,397,016
Southwestern Bell Telephone Company,
4.81%, 10-14-94 ....................... 2,375 2,370,875
Total ................................. 7,767,891
TOTAL SHORT-TERM SECURITIES - 15.76% $ 159,864,442
(Cost: $159,864,442)
TOTAL INVESTMENT SECURITIES - 92.97% $ 943,000,101
(Cost: $732,072,158)
CASH AND OTHER ASSETS, NET OF
LIABILITIES - 7.03% $ 71,262,780
NET ASSETS - 100.00% $1,014,262,881
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
SEPTEMBER 30, 1994
Assets
Investment securities -- at value
(Notes 1 and 3) ................................. $ 943,000,101
Cash ............................................ 35,997
Receivables:
Investment securities sold ...................... 71,274,560
Fund shares sold ................................ 1,307,449
Dividends and interest .......................... 939,005
Prepaid insurance premium ........................ 42,598
--------------
Total assets .................................. 1,016,599,710
--------------
Liabilities
Payable for Fund shares redeemed ................. 1,950,370
Accrued service fee .............................. 192,581
Accrued transfer agency and dividend
disbursing ...................................... 123,417
Accrued accounting services fee .................. 8,333
Other ............................................ 62,128
--------------
Total liabilities ............................. 2,336,829
--------------
Total net assets ............................. $1,014,262,881
==============
Net Assets
$1.00 par value capital stock, authorized --
400,000,000; shares outstanding -- 131,135,209
Capital stock ................................... $ 131,135,209
Additional paid-in capital ...................... 594,169,754
Accumulated undistributed income:
Accumulated undistributed net investment
income ......................................... 371,101
Accumulated undistributed net realized gain on
investment transactions and foreign
currency transactions ......................... 77,658,874
Net unrealized appreciation in value of
investments at end of period ................... 210,927,943
--------------
Net assets applicable to outstanding
units of capital ............................. $1,014,262,881
==============
Net asset value per share (net assets divided
by shares outstanding) ........................... $7.73
Sales load (offering price x 5.75%)................. .47
-----
Offering price per share (net asset value
divided by 94.25%).............................. $8.20
=====
See notes to financial statements.
On sales of $100,000 or more the sales load is reduced as set forth in
the prospectus.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended SEPTEMBER 30, 1994
Investment Income
Income:
Dividends ....................................... $ 6,190,306
Interest ........................................ 4,166,367
------------
Total income .................................. 10,356,673
------------
Expenses (Note 2):
Investment management fee ....................... 6,826,535
Transfer agency and dividend disbursing ......... 1,630,411
Service fee ..................................... 990,242
Custodian fees .................................. 249,340
Accounting services fee ......................... 86,250
Audit fees ...................................... 37,467
Legal fees ...................................... 19,030
Other ........................................... 161,094
------------
Total expenses ................................ 10,000,369
------------
Net investment income ........................ 356,304
------------
Realized and Unrealized Gain (Loss) on Investments
Realized net gain on securities .................. 78,021,451
Realized net loss on foreign currency
transactions .................................... (23,090)
------------
Realized net gain on investments ................ 77,998,361
Unrealized appreciation in value of investments
during the period ............................... 30,273,787
------------
Net gain on investments ....................... 108,272,148
------------
Net increase in net assets resulting
from operations ............................ $108,628,452
============
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year
ended September 30,
-----------------------------
1994 1993
-------------- ------------
Increase in Net Assets
Operations:
Net investment income ............ $ 356,304 $ 4,369,067
Realized net gain on
investments .................... 77,998,361 26,314,492
Unrealized appreciation........... 30,273,787 117,706,476
-------------- ------------
Net increase in net assets
resulting from operations ..... 108,628,452 148,390,035
-------------- ------------
Dividends to shareholders from:*
Net investment income ............ (2,315,396) (4,820,030)
Realized gains on securities
transactions ................... (22,767,798) ---
-------------- ------------
(25,083,194) (4,820,030)
-------------- ------------
Capital share transactions:
Proceeds from sale of shares
(11,403,314 and 10,417,512
shares, respectively) .......... 83,173,561 67,105,227
Proceeds from reinvestment of
dividends and/or capital gains
distribution (3,461,005 and
713,365 shares, respectively) .. 24,607,745 4,654,207
Payments for shares redeemed
(13,569,912 and 21,266,075 shares,
respectively) .................. (98,880,083) (137,491,017)
-------------- ------------
Net increase (decrease) in net
assets resulting from capital
share transactions ............ 8,901,223 (65,731,583)
-------------- ------------
Total increase ................ 92,446,481 77,838,422
Net Assets
Beginning of period ............... 921,816,400 843,977,978
-------------- ------------
End of period, including undistributed
net investment income of $371,101
and $2,330,193, respectively ..... $1,014,262,881 $921,816,400
============== ============
*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 fiscal year ended
September 30,
------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
Net asset value,
beginning of period $7.10 $6.03 $6.36 $5.18 $6.91
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .00 .04 .06 .14 .17
Net realized and
unrealized gain
(loss) on
investments...... .83 1.07 (0.10) 1.39 (0.95)
----- ----- ----- ----- -----
Total from investment
operations ........ .83 1.11 (0.04) 1.53 (0.78)
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income........... (0.02) (0.04) (0.09) (0.14) (0.22)
Distribution from
capital gains.... (0.18) (0.00) (0.20) (0.21) (0.73)
----- ----- ----- ----- -----
Total distributions. (0.20) (0.04) (0.29) (0.35) (0.95)
----- ----- ----- ----- -----
Net asset value,
end of period ..... $7.73 $7.10 $6.03 $6.36 $5.18
===== ===== ===== ===== =====
Total return*....... 11.86% 18.38% -0.58% 30.88% -12.67%
Net assets, end of
period (000
omitted) ......... $1,014,263$921,816$843,978$875,293$679,765
Ratio of expenses
to average net
assets ............ 1.05% 0.97% 0.96% 0.97% 0.98%
Ratio of net
investment income
to average net
assets ............ 0.04% 0.50% 0.96% 2.28% 2.85%
Portfolio
turnover rate ..... 36.70% 62.12% 84.82%173.44% 161.54%
*Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 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. 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 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 record date. During the period ended
September 30, 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 $11.2 billion of
combined net assets at September 30, 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
$3,180,392, out of which W&R paid sales commissions of $1,663,016 and all
expenses in connection with the sale of Fund shares, except for registration
fees and related expenses.
Under a Service Plan adopted by the Fund pursuant to Rule 12b-1 under the
Investment Company Act of 1940, the Fund may pay monthly a fee to W&R in an
amount not to exceed .25% of the Fund's average annual net assets. The fee is
to be paid to reimburse W&R for amounts it expends in connection with the
provision of personal services to Fund shareholders and/or maintenance of
shareholder accounts.
The Fund paid Directors' fees of $34,421.
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 $307,993,398 while proceeds from maturities and
sales aggregated $431,792,878. Purchases of short-term securities aggregated
$1,192,582,327 while proceeds from maturities and sales aggregated
$1,180,530,902. There were no transactions in U.S. Government securities during
the period.
For Federal income tax purposes, cost of investments owned at September 30,
1994 was $732,072,158, resulting in net unrealized appreciation of $210,927,943,
of which $222,440,086 related to appreciated securities and $11,512,143 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income of
$77,830,586 during its fiscal year ended September 30, 1994, of which a portion
was paid to shareholders during the period ended September 30, 1994. Remaining
net capital gains will be distributed to the Fund's shareholders.
<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 September 30, 1994, the results of its operations for the year 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
September 30, 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 LLP
Kansas City, Missouri
October 31, 1994
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends and long-term capital gains 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
- --------------- ---------------------------------------------------
12-17-93$0.1950 $0.0185 $0.1765 $0.0181 $0.0004 $0.1765
====== ======= ======= ======= ======= =======
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>
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
Sharon K. Pappas, Vice President and Secretary
Carl E. Sturgeon, Vice President
James D. Wineland, Vice President
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.
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
NUR1005A(9-94)
printed on recycled paper
