<PAGE>
United
Vanguard
Fund, Inc.
ANNUAL
REPORT
--------------------------------------------
For the fiscal year ended September 30, 1995
<PAGE>
FUND MANAGER'S LETTER
- -----------------------------------------------------------------
SEPTEMBER 30, 1995
Dear Shareholder:
This report relates to the operation of your Fund for the fiscal year ended
September 30, 1995. The discussion, graphs and tables contained in this report
will provide you with information regarding the Fund's performance during that
period.
During the past fiscal year, a number of economic and political events affected
the Fund's performance. Over the course of the year, long-term interest rates
decreased substantially. On the political front, the newly empowered Republican
party pledged to make long-term reductions in the federal budget deficit. Both
factors had a positive influence on domestic financial markets.
During the course of the year, we invested the Fund's available cash to increase
the Fund's exposure to equity securities. We renewed our emphasis on stocks in
the technology sector, particularly stocks of computer-related companies, and we
also focused on companies in the capital goods industry. We have continued to
search for investment opportunities in companies that appear 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).
We expect that inflation will remain low and that the economy will continue its
slow pace of growth well into 1996. We anticipate a particularly slow growth
rate for retail and consumer nondurable companies in the United States. In
light of current and anticipated conditions, we expect to continue to pursue the
same strategies we have employed recently. This includes continued emphasis on
computer-related and capital goods stocks, which we believe show promise for
superior earnings in the year ahead. Our constant mission is to seek
investments that provide excellent prospects for long-term growth.
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
Average Annual Total Return*
1 year 5 years 10 years
19.53% 15.54% 13.76%
Lipper
United Growth
Vanguard S&P Fund
Fund, 500 Universe
Inc. Index Average
------------------ ----------
09/30/85 Purchase 9,425 10,000 10,000
09/30/86 11,998 13,174 12,616
09/30/87 16,812 18,895 16,809
09/30/88 15,380 16,559 14,796
09/30/89 19,023 22,025 19,009
09/30/90 16,613 19,989 16,463
09/30/91 21,743 26,219 22,127
09/30/92 21,616 29,118 23,778
09/30/93 25,589 32,903 28,115
09/30/94 28,624 34,115 28,491
09/30/95 36,300 44,263 36,284
++++ S&P's 500 Index -- $44,263
==== United Vanguard Fund** -- $36,300
---- Lipper Growth Fund Universe Average -- $36,284
Past performance is not predictive of future performance. Indexes are
unmanaged.
*Performance data quoted represents past performance and is based on deduction
of a 5.75% sales load on the initial purchase in each of the three periods.
Investment return and principal value will fluctuate and an investor's shares,
when redeemed, may be worth more or less than their original cost.
**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.
<PAGE>
SHAREHOLDER SUMMARY
- --------------------------------------------------------------
United Vanguard Fund, Inc.
PORTFOLIO STRATEGY:
Common stock of companies OBJECTIVE: Appreciation of
thought to have superior capital.
prospects for growth and/or
other unique investment STRATEGY: Invests in securities
characteristics primarily issued by
companies believed to
May invest in Foreign have the potential for
Securities appreciation in
value and seeks to
Cash Reserves achieve proper timing of purchases and
sales relative to market conditions.
(May purchase securities subject to
repurchase agreements. May invest in
certain options and futures.)
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
SCHEDULED DIVIDEND FREQUENCY: SEMIANNUALLY (June and December)
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Fiscal Year Ended September 30, 1995
- ---------------------------------------------
DIVIDENDS PAID $0.035
======
CAPITAL GAINS DISTRIBUTION $0.616
======
NET ASSET VALUE ON
9/30/95 $8.97 adjusted to:$9.59 (A)
9/30/94 7.73
-----
CHANGE PER SHARE $1.86
=====
(A)This number includes the capital gains distribution of $0.62 paid in December
1994 added to the actual net asset value on September 30, 1995.
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 9-30-95 19.53% 26.82%
5-year period ended 9-30-95 15.54% 16.92%
10-year period ended 9-30-95 13.76% 14.44%
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, 1995, United Vanguard Fund, Inc. had net assets totaling
$1,286,715,560 invested in a diversified portfolio of:
86.57% Common Stocks
13.04% Cash and Cash Equivalents
0.39% Preferred Stock
As a shareholder of United Vanguard Fund, Inc., for every $100 you had invested
on September 30, 1995, your Fund owned:
$52.56 Technological Stocks
18.78 Consumer Stocks
13.04 Cash and Cash Equivalents
8.55 Basic Industries Stocks
6.68 Financial Stocks
0.39 Preferred Stock
- -----------------------------------------------------------------
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, 1995
Shares Value
COMMON STOCKS
Airlines - 1.18%
Southwest Airlines Co. ................. 600,000 $ 15,150,000
Automotive - 0.94%
AB Volvo (A) ........................... 490,000 12,023,499
Banks and Savings and Loans - 1.29%
HSBC Holdings Plc (A) .................. 1,192,873 16,585,466
Beverages - 1.59%
PepsiCo, Inc. .......................... 400,000 20,400,000
Biotechnology and Medical Services - 2.34%
Biogen, Inc.* .......................... 300,000 18,075,000
Centocor, Inc.* ........................ 511,100 5,589,901
Ventritex, Inc.* ....................... 300,000 6,487,500
Total ................................. 30,152,401
Building - 0.77%
Metsa-Serla Oy, Series B (A) ........... 249,800 9,929,851
Chemicals Specialty and Miscellaneous
Technology - 0.46%
Calgon Carbon Corporation .............. 500,000 5,875,000
Computers and Office Equipment - 21.22%
Adobe Systems Incorporated ............. 450,000 23,371,650
America Online, Inc.* .................. 350,000 24,127,950
Broderbund Software, Inc.* ............. 370,000 28,189,190
Cerner Corporation* .................... 600,000 20,400,000
Compaq Computer Corporation* ........... 200,000 9,675,000
First Data Corporation ................. 500,000 31,000,000
General Motors Corporation, Class E .... 500,000 22,750,000
Informix Corporation* .................. 1,400,000 45,675,000
Intuit Inc.* ........................... 400,000 18,950,000
Microsoft Corporation* ................. 100,000 9,056,200
Oracle Systems Corporation* ............ 500,000 19,156,000
Silicon Graphics, Inc.* ................ 600,000 20,625,000
Total ................................. 272,975,990
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1995
Shares Value
COMMON STOCKS (Continued)
Electrical Equipment - 1.53%
Emerson Electric Co. ................... 275,000 $ 19,662,500
Electronics - 13.00%
AMP Incorporated ....................... 700,000 26,950,000
Applied Materials, Inc.* ............... 300,000 30,750,000
cisco Systems, Inc.* ................... 700,000 48,343,400
Intel Corporation ...................... 300,000 18,056,100
Photronics, Inc.* ...................... 167,000 5,636,250
Silicon Valley Group, Inc.* ............ 600,000 23,137,200
Xilinx, Inc.* .......................... 300,000 14,456,100
Total ................................. 167,329,050
Financial - 4.02%
Federal National Mortgage Association .. 500,000 51,750,000
Hospital Management - 4.89%
Quorum Health Group, Inc.* ............. 300,000 6,750,000
United HealthCare Corporation .......... 1,150,000 56,206,250
Total ................................. 62,956,250
Household Products - 1.11%
Gillette Company (The) ................. 300,000 14,287,500
Insurance - 1.37%
MBIA, Inc. ............................. 250,000 17,625,000
Leisure Time - 5.82%
British Sky Broadcasting Group
plc, ADS .............................. 217,000 7,839,125
Comcast Corporation, Class A ........... 1,250,000 25,077,500
Walt Disney Company (The) .............. 200,000 11,475,000
Tele-Communications, Inc., Class A* .... 1,000,000 17,562,000
Tele-Communications, Inc., Class A* .... 250,000 6,656,250
Viacom Inc., Class B* .................. 126,442 6,290,489
Total ................................. 74,900,364
Machinery - 1.53%
Mannesmann AG (A) ...................... 60,000 19,693,470
Multi-Industry - 1.95%
First Pacific Company Limited (A) ......11,831,037 12,624,139
Grupo Carso, S.A. de C.V.,
Series 1A (A)* ........................ 2,100,000 12,442,006
Total ................................. 25,066,145
Paper - 0.65%
International Paper Company ............ 200,000 8,400,000
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1995
Shares Value
COMMON STOCKS (Continued)
Publishing and Advertising - 1.54%
News Corporation Limited (The), ADR .... 900,000 $ 19,800,000
Retailing - 0.84%
Cifra, S.A. de C.V., C (A) ............. 9,315,000 10,804,232
Services, Consumer and Business - 2.99%
Block (H&R), Inc. ...................... 600,000 22,800,000
CUC International Inc.* ................ 450,000 15,693,750
Total ................................. 38,493,750
Telecommunications - 15.54%
General Instrument Corporation* ........ 300,000 9,000,000
MCI Communications Corporation ......... 800,000 20,849,600
MFS Communications Company, Inc.* ...... 500,000 21,937,500
Motorola, Inc. ......................... 500,000 38,187,500
Nokia Corporation, Series K (A) ........ 899,200 63,078,146
Petersburg Long Distance Inc.* ......... 225,000 1,462,500
Telefonaktiebolaget LM Ericsson, ADR,
Class B ............................... 800,000 19,549,600
Telefonos de Mexico S.A. de C.V., ADR .. 300,000 9,525,000
Vodafone Group Plc, ADR ................ 400,000 16,400,000
Total ................................. 199,989,846
TOTAL COMMON STOCKS - 86.57% $1,113,850,314
(Cost: $707,415,095)
PREFERRED STOCK - 0.39%
Publishing and Advertising
News Corporation Limited (The),
Convertible, ADR ...................... 250,000 $ 4,968,750
(Cost: $6,177,375)
Principal
Amount in
Thousands
SHORT-TERM SECURITIES
Commercial Paper
Chemicals Major - 0.93%
Hercules, Inc.,
5.72%, 10-27-95 ....................... $12,000 11,950,427
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1995
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Financial, including Banks and Savings and Loans - 3.36%
Dana Credit Corp.:
5.88%, 10-13-95 ....................... $ 2,320 $ 2,315,453
5.87%, 10-23-95 ....................... 3,600 3,587,086
International Business Machines Credit
Corp.,
5.73%, 10-4-95 ........................ 3,680 3,678,243
Kerr-McGee Credit Corp.,
5.85%, 10-19-95 ....................... 3,560 3,549,587
Philip Morris Capital Corp.,
5.73%, 10-5-95 ........................ 4,150 4,147,358
GTE Finance Corp.,
5.83%, 10-24-95 ....................... 4,500 4,483,239
PS Colorado Credit Corp.,
5.83%, 10-19-95 ....................... 10,800 10,768,518
Textron Financial Corp.,
5.86%, 11-3-95 ........................ 10,800 10,741,986
U.S. Bancorp,
Master Note ........................... 26 26,000
Total ................................. 43,297,470
Food and Related - 1.96%
ConAgra, Inc.:
5.82%, 10-13-95 ....................... 6,260 6,247,856
5.85%, 11-1-95 ........................ 4,700 4,676,324
General Mills, Inc.,
Master Note ........................... 6,950 6,950,000
Sara Lee Corporation,
Master Note ........................... 7,330 7,330,000
Total ................................. 25,204,180
Machinery - 0.73%
Cooper Industries, Inc.,
5.78%, 10-12-95 ....................... 9,395 9,378,407
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1995
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (Continued)
Multi-Industry - 0.18%
Textron, Inc.,
5.88%, 10-16-95 ....................... $ 2,310 $ 2,304,340
Public Utilities - Electric - 0.31%
Idaho Power Company,
5.73%, 10-23-95 ....................... 4,000 3,985,993
Public Utilities - Gas - 1.16%
National Fuel Gas Company,
5.77%, 10-13-95 ....................... 5,000 4,990,383
5.77%, 10-20-95 ....................... 10,000 9,969,547
Total ................................. 14,959,930
Publishing and Advertising - 0.79%
American Greetings Corporation:
5.73%, 10-25-95 ....................... 8,825 8,791,289
5.75%, 10-25-95 ....................... 1,380 1,374,710
Total ................................. 10,165,999
Railroads - 0.10%
Burlington Northern Railroad Co.,
5.88%, 10-18-95 ....................... 1,305 1,301,376
Retailing - 0.08%
K Mart Corporation,
5.9%, 10-24-95 ........................ 1,000 996,231
Services, Consumer and Business - 1.20%
Hertz Corp.,
5.73%, 10-2-95 ........................ 15,425 15,422,545
Telecommunications - 1.45%
BellSouth Telecommunications Inc.,
5.71%, 10-11-95 ....................... 2,660 2,655,781
NYNEX Corporation:
5.8%, 10-23-95 ........................ 15,250 15,195,947
5.82%, 10-23-95 ....................... 890 886,835
Total ................................. 18,738,563
Tobacco - 0.36%
Philip Morris Companies Inc.,
5.72%, 10-20-95 ....................... 4,600 4,586,113
Total Commercial Paper - 12.61% 162,291,574
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED VANGUARD FUND, INC.
SEPTEMBER 30, 1995
Principal
Amount in
Thousands Value
SHORT-TERM SECURITIES (Continued)
Commercial Paper (backed by irrevocable
bank letter of credit) - 0.26%
Spiegel Funding Corp. (Dresdner
Bank AG),
5.78%, 10-4-95 ........................ $ 3,375 $ 3,373,374
TOTAL SHORT-TERM SECURITIES - 12.87% $ 165,664,948
(Cost: $165,664,948)
TOTAL INVESTMENT SECURITIES - 99.83% $1,284,484,012
(Cost: $879,257,418)
CASH AND OTHER ASSETS, NET OF
LIABILITIES - 0.17% 2,231,548
NET ASSETS - 100.00% $1,286,715,560
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, 1995
Assets
Investment securities -- at value
(Notes 1 and 3) ................................. $1,284,484,012
Cash ............................................ 9,240
Receivables:
Investment securities sold ...................... 3,050,288
Dividends and interest .......................... 924,023
Fund shares sold ................................ 880,009
Prepaid insurance premium ........................ 42,252
--------------
Total assets .................................. 1,289,389,824
--------------
Liabilities
Payable for Fund shares redeemed ................. 2,106,412
Accrued service fee .............................. 255,760
Accrued transfer agency and dividend
disbursing ...................................... 162,447
Accrued accounting services fee .................. 8,333
Other ............................................ 141,312
--------------
Total liabilities ............................. 2,674,264
--------------
Total net assets ............................. $1,286,715,560
==============
Net Assets
$1.00 par value capital stock, authorized --
600,000,000; shares outstanding -- 143,497,939
Capital stock ................................... $ 143,497,939
Additional paid-in capital ...................... 668,261,282
Accumulated undistributed income:
Accumulated undistributed net investment
income ......................................... 5,120,017
Accumulated undistributed net realized gain on
investment transactions ....................... 64,609,442
Net unrealized appreciation in value of
investments at end of period ................... 405,226,880
--------------
Net assets applicable to outstanding
units of capital ............................. $1,286,715,560
==============
Net asset value per share (net assets divided
by shares outstanding) ........................... $8.97
Sales load (offering price x 5.75%)................. .55
-----
Offering price per share (net asset value
divided by 94.25%)............................... $9.52
=====
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, 1995
Investment Income
Income:
Interest ........................................ $ 13,436,792
Dividends ....................................... 7,655,719
------------
Total income .................................. 21,092,511
------------
Expenses (Note 2):
Investment management fee ....................... 7,870,715
Transfer agency and dividend disbursing ......... 1,709,499
Service fee ..................................... 1,348,046
Custodian fees .................................. 208,488
Accounting services fee ......................... 100,000
Audit fees ...................................... 37,536
Legal fees ...................................... 28,298
Other ........................................... 233,348
------------
Total expenses ................................ 11,535,930
------------
Net investment income ........................ 9,556,581
------------
Realized and Unrealized Gain on Investments
Realized net gain on securities .................. 68,304,281
Realized net gain on foreign currency
transactions .................................... 72,927
------------
Realized net gain on investments ................ 68,377,208
Unrealized appreciation in value of investments
during the period ............................... 194,298,937
------------
Net gain on investments ....................... 262,676,145
------------
Net increase in net assets resulting
from operations ............................ $272,232,726
============
See notes to financial statements.
<PAGE>
UNITED VANGUARD FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year
ended September 30,
-----------------------------
1995 1994
-------------- ------------
Increase in Net Assets
Operations:
Net investment income ............ $ 9,556,581 $ 356,304
Realized net gain on
investments .................... 68,377,208 77,998,361
Unrealized appreciation .......... 194,298,937 30,273,787
-------------- --------------
Net increase in net assets
resulting from operations ..... 272,232,726 108,628,452
-------------- --------------
Dividends to shareholders from:*
Net investment income ............ (4,857,502) (2,315,396)
Realized gains on securities
transactions ................... (81,376,803) (22,767,798)
-------------- --------------
(86,234,305) (25,083,194)
-------------- --------------
Capital share transactions:
Proceeds from sale of shares
(24,811,530 and 11,403,314
shares, respectively) .......... 183,466,280 83,173,561
Proceeds from reinvestment of
dividends and/or capital gains
distribution (622,043 and
3,461,005 shares, respectively) . 4,701,960 24,607,745
Payments for shares redeemed
(13,070,843 and 13,569,912 shares,
respectively) .................. (101,713,982) (98,880,083)
-------------- --------------
Net increase in net assets
resulting from capital
share transactions ............ 86,454,258 8,901,223
-------------- --------------
Total increase ................ 272,452,679 92,446,481
Net Assets
Beginning of period ............... 1,014,262,881 921,816,400
-------------- --------------
End of period, including undistributed
net investment income of $5,120,017
and $371,101, respectively ....... $1,286,715,560 $1,014,262,881
============== ==============
*See "Financial Highlights" on page 15.
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,
------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Net asset value,
beginning of period $7.73 $7.10 $6.03 $6.36 $5.18
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.07 .00 .04 .06 .14
Net realized and
unrealized gain
(loss) on
investments...... 1.82 .83 1.07 (0.10) 1.39
----- ----- ----- ----- -----
Total from investment
operations ........ 1.89 .83 1.11 (0.04) 1.53
----- ----- ----- ----- -----
Less distributions:
Dividends from net
investment
income........... (0.03) (0.02) (0.04) (0.09) (0.14)
Distribution from
capital gains.... (0.62) (0.18) (0.00) (0.20) (0.21)
----- ----- ----- ----- -----
Total distributions. (0.65) (0.20) (0.04) (0.29) (0.35)
----- ----- ----- ----- -----
Net asset value,
end of period ..... $8.97 $7.73 $7.10 $6.03 $6.36
===== ===== ===== ===== =====
Total return*....... 26.82% 11.86% 18.38% -0.58% 30.88%
Net assets, end of
period (000
omitted) ......... $1,286,716$1,014,263$921,816$843,978$875,293
Ratio of expenses
to average net
assets ............ 1.05% 1.05% 0.97% 0.96% 0.97%
Ratio of net
investment income
to average net
assets ............ 0.87% 0.04% 0.50% 0.96% 2.28%
Portfolio
turnover rate ..... 30.01% 36.70% 62.12% 84.82% 173.44%
*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, 1995
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
reported. 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. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards. At October 1, 1994, $23,090 was reclassified between
undistributed net investment income and accumulated undistributed net
realized gain on investment transactions.
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 $13.3 billion of
combined net assets at September 30, 1995) 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
$3,648,513, out of which W&R paid sales commissions of $1,996,980 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 $39,235.
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 $337,551,684 while proceeds from maturities and
sales aggregated $263,662,438. Purchases of short-term securities aggregated
$2,714,101,849 while proceeds from maturities and sales aggregated
$2,721,203,848.
For Federal income tax purposes, cost of investments owned at September 30,
1995 was $879,257,418, resulting in net unrealized appreciation of $405,226,594,
of which $425,599,227 related to appreciated securities and $20,372,633 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $68,304,281 during its fiscal year ended September 30, 1995, of which a
portion was paid to shareholders during the period ended September 30, 1995.
Remaining net capital gains will be distributed to the Fund's shareholders.
NOTE 5 -- Commencement of Multiclass Operations
On August 15, 1995, the Fund was authorized to offer investors a choice of
two classes of shares, Class A and Class Y. A comprehensive discussion of the
terms under which shares of either class are offered is contained in the
prospectus and the Statement of Additional Information for the Fund.
The Fund commenced multiclass operations on September 11, 1995. The
following class specific information is presented in footnote format in lieu of
presentation in the principal financial statements due to the small amount of
Class Y share transactions during the reporting period:
Class A Class Y Total
------------ ---------- ------------
Value issued from sale
of shares.......... $181,684,410 $1,781,870 183,466,280
Value issued from
reinvestment of
dividends ......... 4,701,960 --- 4,701,960
Value redeemed ..... (101,713,982) --- (101,713,982)
----------- ---------- -----------
Increase in outstanding
capital ........... $ 84,672,388 $1,781,870 $86,454,258
============= ============ =============
Shares outstanding . 143,301,047 196,892 143,497,939
Net asset value per share $8.97 $8.97
<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, 1995, 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, 1995 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
November 3, 1995
<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 dates, will give you the total
amounts to be reported in your Federal income tax return for the years 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
- --------- ----- ---------------------------------------------------
12-16-94 $0.631 $0.1531 $0.4779 $0.0095 $0.1436 $0.4779
06-16-95 0.020 0.0200 0.0000 0.0103 0.0097 0.0000
------- ------- ------- ------- ------- -------
Total $0.651 $0.1731 $0.4779 $0.0198 $0.1533 $0.4779
======= ======= ======= ======= ======= =======
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 adviser 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
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
James B. Judd, Kansas City, Missouri
William T. Morgan, Los Angeles, California
Doyle Patterson, Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
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 Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Continental Income Fund, Inc.
United Retirement Shares, Inc.
United Asset Strategy Fund, Inc.
United Income Fund
United Accumulative Fund
United Vanguard Fund, Inc.
United New Concepts Fund, Inc.
United Science and Technology Fund
United International Growth Fund, Inc.
United Gold & Government Fund, Inc.
FOR MORE INFORMATION:
Contact your representative, or your
local office as listed on your
Account Statement, or contact:
WADDELL & REED
CUSTOMER SERVICE
6300 Lamar Avenue
P.O. Box 29217
Shawnee Mission, KS 66201-9217
(913) 236-1303
Our INTERNET address is:
http://www.waddell.com
NUR1005A(9-95)
printed on recycled paper
