United
Government
Securities
Fund, Inc.
SEMIANNUAL
REPORT
-------------------------------------------
For the six months ended September 30, 1994
<PAGE>
This report is submitted for the general information of the shareholders of
United Government Securities Fund, Inc. It is not authorized for distribution
to prospective investors in the Fund unless accompanied with or preceded by the
United Government Securities Fund, Inc. current prospectus.
<PAGE>
PRESIDENT'S LETTER
SEPTEMBER 30, 1994
Dear Shareholder:
This report covers the investment performance of your Fund for the six
months ended September 30, 1994.
During the past six months, bond and equity markets have been affected by
increases in interest rates and the fear of higher inflation. We expect these
markets will continue to react to action, if any, taken by the Federal Reserve
to prevent increases in the inflation rate. Although markets have declined
since the beginning of 1994, historically such intermediate and short-term
fluctuations have had limited impact on achieving investors' long-term financial
goals.
Over time, interest rates follow inflation. Once it has been determined
that the rate of economic growth is manageable, the Federal Reserve Board's
actions will be seen as beneficial to combating inflation, which eventually
should lead to interest rates that are more favorable to the markets.
Based on our 57 years in the financial services industry, we believe that
our commitment to professional portfolio management is the key value-added
service we provide: we select and continuously supervise the Fund's investments
using the most up-to-date information and research available to ensure the
investments meet the Fund's stated objectives.
And, we believe our "hands-on" approach to investment management can help
reward the patient investor over the long term. We never forget that we manage
your money.
The following is an in-depth review of your Fund's recent performance. We
believe the information included in this review continues to reflect our aim of
achieving the goals and purposes of the Fund. Thank you for your continued
confidence in our products and services.
Respectfully,
Keith A. Tucker
President
<PAGE>
SHAREHOLDER SUMMARY
- -------------------------------------------------------------
United Government Securities Fund, Inc.
PORTFOLIO STRATEGY:
Long-term U.S. Government OBJECTIVE: High current income
Securities consistent with safety of principal.
(Fund shares
Short-term U.S. Government are not guaranteed by the
Securities U.S. Government or any
government agency.
Intermediate-term U.S. The value of Fund
Government Securities shares fluctuates due to changing
interest rates or other market
conditions and the investor may
experience a loss.)
STRATEGY: Invests primarily in debt securities
issued or guaranteed by the U.S.
Government, or its agencies or
instrumentalities.
FOUNDED: 1982
DIVIDENDS: PAID MONTHLY
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Six Months Ended September 30, 1994
- -------------------------------------------
DIVIDENDS PAID $0.16
=====
NET ASSET VALUE ON
9/30/94 $5.03
3/31/94 5.23
-----
CHANGE PER SHARE ($0.20)
=====
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 -8.92% -4.88%
5-year period ended 9-30-94 7.07% 8.00%
10-year period ended 9-30-94 9.08% 9.55%
Performance data quoted represents past performance and is based on deduction of
4.25% 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 Government Securities Fund, Inc. had net assets
totaling $159,470,214 invested in a diversified portfolio.
As a shareholder in United Government Securities Fund, Inc., for every $100 you
had invested on September 30, 1994, your Fund owned:
$41.32 Federal National Mortgage Association Bonds
17.76 Government National Mortgage Association Bonds
12.34 Miscellaneous U.S. Government Backed Bonds
11.93 Cash and Cash Equivalents
11.13 Federal Home Loan Mortgage Corporation Bonds
3.12 Federal Home Loan Banks Bond
2.40 United States Treasury Bond
<PAGE>
THE INVESTMENTS OF
UNITED GOVERNMENT SECURITIES FUND, INC.
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Banks,
4.33%, 5-24-96 ........................ $ 5,000 $ 4,965,000
Federal Home Loan Mortgage Corporation:
11.0%, 1-1-2003 ....................... 171 180,786
7.5%, 9-1-2007 ........................ 273 262,863
7.0%, 1-15-2021 ....................... 5,000 4,460,900
6.0%, 12-1-2023 ....................... 9,922 8,536,066
6.0%, 1-1-2024 ........................ 5,008 4,308,809
Total ................................. 17,749,424
Federal National Mortgage Association:
8.5%, 8-1-2001 ........................ 4,919 4,761,615
7.2%, 1-10-2002 ....................... 5,000 4,762,500
7.55%, 4-22-2002 ...................... 10,000 9,965,600
7.5%, 4-25-2002 ....................... 3,388 3,245,060
7.0%, 10-25-2003 ...................... 6,720 6,308,400
7.7%, 8-1-2004 ........................ 5,000 4,846,850
7.5%, 12-25-2006 ...................... 5,000 4,737,500
6.0%, 6-25-2007 ....................... 5,000 4,485,900
8.0%, 5-25-2019 ....................... 4,967 5,030,097
7.0%, 10-1-2023 ....................... 4,913 4,512,235
7.0%, 11-1-2023 ....................... 993 912,212
7.0%, 5-1-2024 ........................ 3,999 3,673,133
11.0%, 8-25-2024 ...................... 7,747 8,657,435
Total ................................. 65,898,537
Government National Mortgage Association:
9.5%, 5-20-2014 ....................... 45 46,921
8.5%, 5-15-2023 ....................... 2,195 2,191,982
7.5%, 6-15-2023 ....................... 882 828,116
7.0%, 7-15-2023 ....................... 9,325 8,451,067
7.5%, 7-15-2023 ....................... 3,586 3,368,204
7.5%, 9-15-2023 ....................... 4,874 4,578,362
7.5%, 2-15-2024 ....................... 4,871 4,575,551
9.75%, 11-15-2028 ..................... 2,977 3,157,362
10.5%, 3-15-2029 ...................... 1,042 1,125,849
Total ................................. 28,323,414
United States Treasury Bond,
4.75%, 2-15-97 ........................ 4,000 3,828,760
See Notes to Schedule of Investments on page 7.
<PAGE>
THE INVESTMENTS OF
UNITED GOVERNMENT SECURITIES FUND, INC.
SEPTEMBER 30, 1994
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES (Continued)
Miscellaneous United States Government
Backed Securities:
Agency for International Development for
the State of Israel,
8.5%, 4-1-2006 ...................... $ 4,960 $ 5,107,014
National Archives Facility Trust,
8.5%, 9-1-2019 ...................... 4,089 4,115,921
Resolution Funding Corporation,
8.625%, 1-15-2021 ................... 5,000 5,279,700
Synthetic Off-the-Run Treasuries,
Series 1994-2,
6.0%, 2-15-2009 ..................... 6,200 5,172,040
Total ............................... 19,674,675
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 88.07% $140,439,810
(Cost: $147,823,196)
SHORT-TERM SECURITIES - 11.28%
J. P. Morgan Securities, 4.8% Repurchase
Agreement dated 9-30-94, to be repurchased
at $17,997,196 on 10-3-94*............. 17,990 $ 17,990,000
(Cost: $17,990,000)
TOTAL INVESTMENT SECURITIES - 99.35% $158,429,810
(Cost: $165,813,196)
CASH AND OTHER ASSETS, NET
OF LIABILITIES - 0.65% 1,040,404
NET ASSETS -- 100.00% $159,470,214
Notes to Schedule of Investments
*Collateralized by $18,470,000 U.S. Treasury Notes, 4.625% due 8-15-95; market
value and accrued interest aggregates $18,384,256.
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 GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $158,429,810
Cash ............................................ 7,510
Receivables:
Interest ........................................ 1,510,006
Fund shares sold ................................ 129,147
Investment securities sold ...................... 14,775
Prepaid insurance premium ........................ 14,774
------------
Total assets .................................. 160,106,022
------------
Liabilities
Payable for Fund shares redeemed ................. 483,771
Dividends payable ................................ 77,127
Accrued service fee .............................. 32,566
Accrued transfer agency and dividend disbursing .. 26,423
Accrued accounting services fee .................. 3,333
Other ............................................ 12,588
------------
Total liabilities ............................. 635,808
------------
Total net assets.............................. $159,470,214
============
Net Assets
$0.01 par value capital stock, authorized --
3,000,000,000; shares outstanding -- 31,698,406
Capital stock ................................... $ 316,984
Additional paid-in capital ...................... 178,260,423
Accumulated undistributed loss:
Accumulated undistributed net realized loss on
investment transactions ....................... (11,723,807)
Net unrealized depreciation in value of
investments at end of period ................... (7,383,386)
------------
Net assets applicable to outstanding units
of capital ................................... $159,470,214
============
Net asset value per share (net assets divided by
shares outstanding) .............................. $5.03
=====
See notes to financial statements.
<PAGE>
UNITED GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended SEPTEMBER 30, 1994
Investment Income
Interest ......................................... $ 5,659,018
-----------
Expenses (Note 2):
Investment management fee ....................... 347,882
Transfer agency and dividend disbursing ......... 166,888
Service fee ..................................... 77,387
Accounting services fee ......................... 20,000
Audit fees ...................................... 11,419
Custodian fees .................................. 9,009
Legal fees ...................................... 2,424
Other ........................................... 47,866
-----------
Total expenses ................................ 682,875
-----------
Net investment income ........................ 4,976,143
-----------
Realized and Unrealized Loss on Investments
Realized net loss on investments ................. (1,780,886)
Unrealized depreciation in value of investments
during the period ............................... (4,610,838)
-----------
Net loss on investments ......................... (6,391,724)
-----------
Net decrease in net assets resulting from
operations ................................... $(1,415,581)
===========
See notes to financial statements.
<PAGE>
UNITED GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
September 30, March 31,
1994 1994
------------ ------------
Decrease in Net Assets
Operations:
Net investment income ............ $ 4,976,143 $ 10,244,346
Realized net gain (loss)
on investments ................. (1,780,886) 7,027,962
Unrealized depreciation .......... (4,610,838) (14,416,849)
------------ ------------
Net increase (decrease) in net
assets resulting from
operations .................... (1,415,581) 2,855,459
------------ ------------
Dividends to shareholders from
net investment income* ........... (4,976,143) (10,244,346)
------------ ------------
Capital share transactions:
Proceeds from sale of shares
(1,854,836 and 7,320,481
shares, respectively) .......... 9,510,531 40,234,132
Proceeds from reinvestment of
dividends (893,337 and 1,684,385
shares, respectively) .......... 4,567,258 9,234,100
Payments for shares redeemed
(4,849,054 and 7,773,993
shares, respectively) .......... (24,864,813) (42,597,526)
------------ ------------
Net increase (decrease) in net
assets resulting from capital
share transactions ............ (10,787,024) 6,870,706
------------ ------------
Total decrease ................ (17,178,748) (518,181)
Net Assets
Beginning of period ............... 176,648,962 177,167,143
------------ ------------
End of period ..................... $159,470,214 $176,648,962
============ ============
Undistributed net investment
income ......................... $--- $---
==== ====
*See "Financial Highlights" on page 11.
See notes to financial statements.
<PAGE>
UNITED GOVERNMENT SECURITIES FUND, INC.
FINANCIAL HIGHLIGHTS
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six months For the fiscal year ended March 31,
ended -----------------------------------
9-30-94 1994 1993 1992 1991 1990
------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $5.23 $5.44 $5.01 $4.85 $4.76 $4.71
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .15 .30 .33 .37 .39 .41
Net realized and
unrealized gain
(loss) on
investments ..... (0.20) (0.21) .43 .16 .09 .05
----- ----- ----- ----- ----- -----
Total from investment
operations ....... (0.05) .09 .76 .53 .48 .46
----- ----- ----- ----- ----- -----
Less dividends declared
from net investment
income ........... (0.15) (0.30) (0.33) (0.37) (0.39) (0.41)
----- ----- ----- ----- ----- -----
Net asset value,
end of period .... $5.03 $5.23 $5.44 $5.01 $4.85 $4.76
===== ===== ===== ===== ===== =====
Total return* ...... -0.85% 1.56% 15.62% 11.22% 10.68% 10.06%
Net assets, end
of period (000
omitted) .........$159,470$176,649$177,167$138,753$118,703$104,045
Ratio of expenses
to average net
assets ........... 0.82%** 0.75% 0.71% 0.75% 0.80% 0.78%
Ratio of net investment
income to average
net assets ....... 5.96%** 5.50% 6.29% 7.40% 8.27% 8.55%
Portfolio turnover
rate ............. 44.06%**122.62%81.41% 124.51%187.55% 257.18%
tal return calculated without taking into account the sales load deducted on an
itial purchase.
nualized.
See notes to financial statements.
<PAGE>
UNITED GOVERNMENT SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
NOTE 1 -- Significant Accounting Policies
United Government Securities 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 -- The Fund invests in securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities and in options
and futures contracts on those securities. Government debt securities are
valued using a pricing system provided by a major dealer in bonds. Other
securities are 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, the average of the
latest bid and asked prices. 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. Interest income is recorded on the accrual basis
and includes differences between cost and face amount on principal
reductions of securities. 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 -- All of the Fund's net investment income is
declared and recorded by the Fund as dividends payable on each day to
shareholders of record at the time of the previous determination of net
asset value. 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, net operating losses and expiring
capital loss carryforwards.
E. Repurchase Agreements -- Repurchase agreements are collateralized by the
value of the resold securities which, during the entire period of the
agreement, remains at least equal to the value of the loan, including
accrued interest thereon. The collateral for the repurchase agreement is
held by the Fund's custodian bank.
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 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 and $0.75 for each
shareholder check which was processed, plus $0.30 for each account on which a
dividend or distribution of cash or shares was paid 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
$283,335, out of which W&R paid sales commissions of $161,260 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 $3,180.
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 U.S. Government securities aggregated $33,027,668 while
proceeds from maturities and sales aggregated $57,215,046. Purchases of short-
term securities aggregated $2,894,135,000 while proceeds from maturities and
sales aggregated $2,890,750,113.
For Federal income tax purposes, cost of investments owned at September 30,
1994 was $165,881,946, resulting in net unrealized depreciation of $7,452,136,
of which $908,424 related to appreciated securities and $8,360,560 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $7,096,712 during the year ended March 31, 1994, which was entirely offset by
utilization of capital loss carryovers. Remaining prior year capital loss
carryovers aggregated $9,878,774 and are available to offset future realized
capital gain net income for Federal income tax purposes through March 31, 1996;
$2,484,922 of this amount is available through March 31, 1997; and $759,434 is
available through March 31, 1998.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United Government Securities 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 Government Securities Fund,
Inc. (the "Fund") at September 30, 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 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>
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
John M. Holliday, Vice President
Theodore W. Howard, Vice President and Treasurer
Sharon K. Pappas, Vice President and Secretary
John E. Sundeen, Jr., 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
NUR1011SA(9-94)
printed on recycled paper
