United
Government
Securities
Fund, Inc.
ANNUAL
REPORT
----------------------------------------
For the fiscal year ended March 31, 1995
<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
- -----------------------------------------------------------------
MARCH 31, 1995
Dear Shareholder:
As President of your Fund, I would like to take this opportunity to share
my thoughts on a subject that I believe is very important to all of us; the need
for tax incentives that will help Americans take personal responsibility for
their futures.
Voters all across America sent two clear messages in the elections held in
November 1994. They want their taxes reduced and they want their concern for
financial security addressed without adding new bureaucracies or government
programs. One of the methods to do this is to expand the availability of tax
incentives for individuals to invest in Individual Retirement Accounts. This
could be done in several ways such as:
restoring the universal availability of fully tax-deductible Individual
Retirement Accounts,
allowing non-working spouses to make a full contribution of $2,000 to an
Individual Retirement Account instead of only $250 as currently allowed,
eliminating the taxation on the distribution of earnings from Individual
Retirement Accounts.
All of us recognize that future generations will need to supplement social
security benefits by private savings in order to provide an adequate level of
retirement income. Expanding the benefits of IRA's provides tax incentives to
encourage savings which allows all individuals the opportunity to provide
financial security for themselves and their families. Encouraging savings
through tax incentives has additional indirect benefits. Americans' personal
savings rate has fallen from 8% in the 1960's to just 2% of disposable income
today. Expanding the benefits of IRA's will help reverse this trend, will
increase the amount of U.S. capital available for investment and should make the
U.S. less dependent on capital from foreign sources.
Changes to our current IRA laws, such as the ones I mentioned above, are
being discussed in Congress. I urge you to write to your Members of Congress
and to the President to tell them that you support expanded IRA legislation that
provides incentives and opportunities for all Americans to improve their
financial well being.
Finally, I appreciate your continued confidence in our products and
services.
Respectfully,
Keith A. Tucker
President
<PAGE>
FUND MANAGER'S LETTER
- -----------------------------------------------------------------
MARCH 31, 1995
Dear Shareholder:
This report relates to the operation of United Government Securities Fund
for the fiscal year ended March 31, 1995. 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 Bank raised interest rates
several times as it attempted to preempt perceived inflationary pressures and
achieve a sustainable level of economic growth. The Federal Reserve Bank's
actions caused interest rates on government bonds to experience a sharp rise
throughout most of 1994, peaking in November. Since then, however, interest
rates have fallen as it appears the Fed's actions have achieved their intended
effect. In response to the declining interest rates in the last part of the
fiscal year, the market for fixed income securities, including U.S. Government
instruments, has staged a modest rally.
We reduced the average maturity of the Fund's bond holdings to protect
against erosion in bond principal values as interest rates were rising during
the first half of the fiscal year. As longer-term interest rates began to fall
later in the fiscal year, we lengthened maturities. We increased the proportion
of the Fund's holdings in mortgage-backed securities, emphasizing the more
conservative of these instruments because of their relatively stable returns.
Our investment strategies allowed for some asset value protection while enabling
maintenance of a reasonable level of income.
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 represent the performance of securities
that generally represent the U.S. Government securities market (the Lehman
Brothers Government Bond Index) and the universe of funds with similar
investment objectives (the Lipper General U.S. Government Fund Universe
Average). The Fund's performance during the past fiscal year was slightly
better than that of these indexes due to the Fund's well-timed adjustments in
the average maturity of its portfolio.
We expect the economy to grow slowly, and we believe the Federal Reserve
Bank will not raise interest rates as long as the economy grows at a slow pace.
We also believe that low rates of inflation are likely to continue. However,
the possibility of new upward pressures on producer and consumer prices exists,
and concerns about the weakness of the U.S. dollar in the international currency
market remain. Thus, we plan to manage the Fund in a relatively conservative
manner. We will continue seeking competitive returns while striving to preserve
principal value for the Fund's shareholders.
Thank you very much for your continued support and confidence in our
organization.
Respectfully,
John E. Sundeen, Jr.
Manager, United Government Securities Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
UNITED GOVERNMENT SECURITIES FUND, INC.,
THE LEHMAN BROTHERS GOVERNMENT BOND INDEX,
AND THE LIPPER GENERAL U.S. GOVERNMENT FUND UNIVERSE AVERAGE
Average Annual Total Return*
1 year 5 years 10 years
0.05% 7.65% 8.93%
Lehman
Brothers Lipper
UnitedGovernment General U.S.
Government Bond Govt. Fund
SecuritiesIndex Universe
Fund Average
------------------ ----------
03/31/85 Purchase 9,575 10,000 10,000
03/31/86 12,817 12,814 12,506
03/31/87 14,015 13,762 13,400
03/31/88 13,587 14,358 13,784
03/31/89 14,147 15,036 14,373
03/31/90 15,570 16,786 15,764
03/31/91 17,232 18,880 17,530
03/31/92 19,165 20,938 19,280
03/31/93 22,158 23,883 21,672
03/31/94 22,505 24,525 22,024
03/31/95 23,516 25,583 22,673
- ---------- Lipper General U.S. Govt. Fund Universe Average -- $22,673
- - - - - - Lehman Brothers Government Bond Index - $25,583
===== United Government Securities Fund, Inc.** -- $23,516
Past performance is not predictive of future performance. Indexes are
unmanaged.
*Performance data quoted represents past performance and is based on deduction
of a 4.25% 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 Government Securities Fund, Inc.
PORTFOLIO STRATEGY:
Long-term U.S. Government OBJECTIVE: As high a current income
Securities as is consistent with
safety of principal. (Fund shares are
not
Short-term U.S. Government guaranteed by the
Securities U.S. Government or any
government agency.
Intermediate-term U.S. Fund share value and
Government Securities yield will fluctuate 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. (May purchase
securities subject to repurchase
agreements. May invest in certain
options and futures.)
FOUNDED: 1982
SCHEDULED DIVIDEND FREQUENCY: MONTHLY
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Fiscal Year Ended March 31, 1995
- ----------------------------------------
DIVIDENDS PAID $0.32
=====
NET ASSET VALUE ON
3/31/95 $5.13
3/31/94 5.23
-----
CHANGE PER SHARE ($0.10)
=====
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
- ------ ------------ -------------
1-year period ended 3-31-95 0.05% 4.49%
5-year period ended 3-31-95 7.65% 8.59%
10-year period ended 3-31-95 8.93% 9.40%
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 March 31, 1995, United Government Securities Fund, Inc. had net assets
totaling $149,532,941 invested in a diversified portfolio.
As a shareholder of United Government Securities Fund, Inc., for every $100 you
had invested on March 31, 1995, your Fund owned:
$46.96 Federal National Mortgage Association Bonds
19.01 Government National Mortgage Association Bonds
14.60 Cash and Cash Equivalents
13.65 Miscellaneous U.S. Government Backed Bonds
5.78 Federal Home Loan Mortgage Corporation Bonds
<PAGE>
THE INVESTMENTS OF
UNITED GOVERNMENT SECURITIES FUND, INC.
MARCH 31, 1995
Principal
Amount in
Thousands Value
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation:
11.0%, 1-1-2003 ....................... $ 161 $ 170,245
7.5%, 9-1-2007 ........................ 245 240,491
7.0%, 1-15-2021 ....................... 5,000 4,618,750
8.0%, 2-1-2023 ........................ 3,648 3,613,479
Total ................................. 8,642,965
Federal National Mortgage Association:
8.5%, 8-1-2001 ........................ 4,902 4,999,929
7.2%, 1-10-2002 ....................... 5,000 4,812,500
7.5%, 4-25-2002 ....................... 3,388 3,322,341
7.0%, 10-25-2003 ...................... 6,720 6,413,366
7.7%, 8-10-2004 ....................... 5,000 4,973,450
7.5%, 12-25-2006 ...................... 5,000 4,868,750
6.0%, 6-25-2007 ....................... 5,000 4,553,100
8.4%, 2-25-2009 ....................... 5,000 5,148,450
8.0%, 5-25-2019 ....................... 4,312 4,339,011
11.0%, 10-15-2020 ..................... 6,985 7,718,805
7.0%, 10-1-2023 ....................... 4,845 4,563,460
7.0%, 11-1-2023 ....................... 974 917,871
7.0%, 12-1-2023 ....................... 10,447 9,839,316
7.0%, 5-1-2024 ........................ 3,976 3,744,835
Total ................................. 70,215,184
Government National Mortgage Association:
9.5%, 5-20-2014 ....................... 35 36,334
8.5%, 5-15-2023 ....................... 2,187 2,216,742
7.5%, 6-15-2023 ....................... 837 807,452
7.0%, 7-15-2023 ....................... 9,132 8,540,807
7.5%, 7-15-2023 ....................... 3,507 3,383,871
7.5%, 9-15-2023 ....................... 4,764 4,597,167
7.5%, 2-15-2024 ....................... 4,734 4,568,757
9.75%, 11-15-2028 ..................... 2,972 3,155,526
10.5%, 3-15-2029 ...................... 1,040 1,119,722
Total ................................. 28,426,378
See Notes to Schedule of Investments on page 9.
<PAGE>
THE INVESTMENTS OF
UNITED GOVERNMENT SECURITIES FUND, INC.
MARCH 31, 1995
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 $ 5,217,573
National Archives Facility Trust,
8.5%, 9-1-2019 ...................... 4,064 4,285,507
Resolution Funding Corporation,
8.625%, 1-15-2021 ................... 5,000 5,510,150
Synthetic Off-the-Run Treasuries,
Series 1994-2,
6.0%, 2-15-2009 ..................... 6,200 5,400,200
Total ............................... 20,413,430
TOTAL UNITED STATES GOVERNMENT
SECURITIES - 85.40% $127,697,957
(Cost: $130,226,885)
SHORT-TERM SECURITIES - 14.13%
J. P. Morgan Securities, 6.15% Repurchase
Agreement dated 3-31-95, to be repurchased
at $21,145,832 on 4-3-95*.............. 21,135 $ 21,135,000
(Cost: $21,135,000)
TOTAL INVESTMENT SECURITIES - 99.53% $148,832,957
(Cost: $151,361,885)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.47% 699,984
NET ASSETS -- 100.00% $149,532,941
Notes to Schedule of Investments
*Collateralized by $21,694,000 U.S. Treasury Notes, 6.625% due 3-31-97; market
value and accrued interest aggregates $21,644,963.
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
MARCH 31, 1995
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $148,832,957
Cash ............................................ 8,176
Receivables:
Interest ........................................ 1,159,559
Fund shares sold ................................ 172,222
Investment securities sold ...................... 3,601
Prepaid insurance premium ........................ 11,338
------------
Total assets .................................. 150,187,853
------------
Liabilities
Payable for Fund shares redeemed ................. 469,703
Dividends payable ................................ 112,957
Accrued service fee .............................. 31,713
Accrued transfer agency and dividend disbursing .. 23,592
Accrued accounting services fee .................. 3,333
Other ............................................ 13,614
------------
Total liabilities ............................. 654,912
------------
Total net assets.............................. $149,532,941
============
Net Assets
$0.01 par value capital stock, authorized --
3,000,000,000; shares outstanding -- 29,171,985
Capital stock ................................... $ 291,720
Additional paid-in capital ...................... 165,668,249
Accumulated undistributed loss:
Accumulated undistributed net realized loss on
investment transactions ....................... (13,898,100)
Net unrealized depreciation in value of
investments at end of period ................... (2,528,928)
------------
Net assets applicable to outstanding units
of capital ................................... $149,532,941
============
Net asset value per share (net assets divided by
shares outstanding) .............................. $5.13
Sales load (offering price x 4.25%) ................ .23
-----
Offering price per share (net asset value divided
by 95.75%) ........................................ $5.36
=====
On sales of $100,000 or more the sales load is reduced
as set forth in the Prospectus.
See notes to financial statements.
<PAGE>
UNITED GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended MARCH 31, 1995
Investment Income
Interest ......................................... $11,357,277
-----------
Expenses (Note 2):
Investment management fee ....................... 665,237
Transfer agency and dividend disbursing ......... 320,346
Service fee ..................................... 170,596
Accounting services fee ......................... 40,000
Audit fees ...................................... 18,279
Custodian fees .................................. 16,259
Legal fees ...................................... 4,350
Other ........................................... 68,350
-----------
Total expenses ................................ 1,303,417
-----------
Net investment income ........................ 10,053,860
-----------
Realized and Unrealized Gain (Loss) on Investments
Realized net loss on securities .................. (3,397,565)
Realized net loss on options ..................... (557,614)
-----------
Net realized loss on investments ................ (3,955,179)
Unrealized appreciation in value of investments
during the period ............................... 243,620
-----------
Net loss on investments ......................... (3,711,559)
-----------
Net increase in net assets resulting from
operations ................................... $ 6,342,301
===========
See notes to financial statements.
<PAGE>
UNITED GOVERNMENT SECURITIES FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year ended
March 31,
-------------------------
1995 1994
------------ ------------
Decrease in Net Assets
Operations:
Net investment income ............ $ 10,053,860 $ 10,244,346
Realized net gain (loss)
on investments ................. (3,955,179) 7,027,962
Unrealized appreciation
(depreciation) ................. 243,620 (14,416,849)
------------ ------------
Net increase in net assets
resulting from operations ..... 6,342,301 2,855,459
------------ ------------
Dividends to shareholders from
net investment income* ........... (10,053,860) (10,244,346)
------------ ------------
Capital share transactions:
Proceeds from sale of shares
(3,328,430 and 7,320,481
shares, respectively) .......... 16,881,689 40,234,132
Proceeds from reinvestment of
dividends (1,794,421 and 1,684,385
shares, respectively) .......... 9,097,091 9,234,100
Payments for shares redeemed
(9,750,153 and 7,773,993
shares, respectively) .......... (49,383,242) (42,597,526)
------------ ------------
Net increase (decrease) in net
assets resulting from capital
share transactions ............ (23,404,462) 6,870,706
------------ ------------
Total decrease ................ (27,116,021) (518,181)
Net Assets
Beginning of period ............... 176,648,962 177,167,143
------------ ------------
End of period ..................... $149,532,941 $176,648,962
============ ============
Undistributed net investment
income ......................... $--- $---
==== ====
*See "Financial Highlights" on page 13.
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 fiscal year ended March 31,
-----------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $5.23 $5.44 $5.01 $4.85 $4.76
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... .32 .30 .33 .37 .39
Net realized and
unrealized gain
(loss) on
investments ..... (0.10) (0.21) .43 .16 .09
----- ----- ----- ----- -----
Total from investment
operations ....... .22 .09 .76 .53 .48
----- ----- ----- ----- -----
Less dividends declared
from net investment
income ........... (0.32) (0.30) (0.33) (0.37) (0.39)
----- ----- ----- ----- -----
Net asset value,
end of period .... $5.13 $5.23 $5.44 $5.01 $4.85
===== ===== ===== ===== =====
Total return* ...... 4.49% 1.56% 15.62% 11.22% 10.68%
Net assets, end
of period (000
omitted) ......... $149,533$176,649$177,167$138,753$118,703
Ratio of expenses
to average net
assets ........... 0.82% 0.75% 0.71% 0.75% 0.80%
Ratio of net investment
income to average
net assets ....... 6.30% 5.50% 6.29% 7.40% 8.27%
Portfolio turnover
rate ............. 41.57%122.62% 81.41%124.51% 187.55%
tal return calculated without taking into account the sales load deducted on an
itial purchase.
See notes to financial statements.
<PAGE>
UNITED GOVERNMENT SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
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 $11.5
billion of combined net assets at March 31, 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 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
$456,390, out of which W&R paid sales commissions of $263,765 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 $6,053.
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 $60,249,729 while
proceeds from maturities and sales aggregated $100,397,588. Purchases of
options aggregated $557,614 while proceeds from expired options aggregated $0.
Purchases of short-term securities aggregated $4,451,210,000 while proceeds from
maturities and sales aggregated $4,445,014,781.
For Federal income tax purposes, cost of investments owned at March 31,
1995 was $151,599,776, resulting in net unrealized depreciation of $2,766,819,
of which $1,718,108 related to appreciated securities and $4,484,927 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized net capital losses of
$3,786,038 during the year ended March 31, 1995 of which $2,174,332 was deferred
to the year ending March 31, 1996 (see discussion below). Capital loss
carryovers aggregated $11,490,480 at March 31, 1995 and are available to offset
future realized capital gain net income for Federal income tax purposes through
March 31, 1996; $4,096,629 of this amount is available through March 31, 1997;
$2,371,140 is available through March 31, 1998 and $1,611,706 is available
through March 31, 2003.
Internal Revenue Code regulations permit the Fund to defer into its next
fiscal year net capital losses incurred between each November 1 and the end of
its fiscal year ("post-October losses"). From November 1, 1994 through March
31, 1995, the Fund incurred net capital losses of $2,174,332 which have been
deferred to the fiscal year ending March 31, 1996.
NOTE 5 -- Options
Options purchased by the Fund are accounted for in the same manner as
marketable portfolio securities. The cost of portfolio securities acquired
through the exercise of call options is increased by the premium paid to
purchase the call. The proceeds from securities sold through the exercise of
put options are decreased by the premium paid to purchase the put.
<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 March 31, 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 March 31, 1995 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Kansas City, Missouri
May 5, 1995
- -----------------------------------------------------------------
<PAGE>
INCOME TAX INFORMATION
Dividends are declared and recorded by the Fund on each day the New York
Stock Exchange is open for business. Dividends are paid monthly on the 27th of
the month or on the preceding business day if the 27th is a weekend or holiday.
The dividends are not eligible for the dividend received deduction.
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
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
NUR1011A(3-95)
printed on recycled paper
