<PAGE>
UNITED
GOLD &
GOVERNMENT
FUND, INC.
ANNUAL
REPORT
-------------------------------------------
For the fiscal year ended December 31, 1993
<PAGE>
MANAGER'S LETTER
DECEMBER 31, 1993
- ----------------------------------------------------------------------
Dear Shareholder:
This report relates to the operation of your Fund for the fiscal year ended
December 31, 1993. The following discussion, graphs and tables provide you with
information regarding the Fund's performance during that period.
The past fiscal year was noteworthy for the sharp rally in the price of
gold and other precious metals, beginning in March of 1993. This condition, in
conjunction with other economic factors, generally resulted in significant
increases in the value of common stocks of companies involved in mining and
other industries involving precious metals.
Our strategy has been to increase the proportion of the Fund's holdings in
gold bullion and other precious metals. The Fund has also increased its
investments in common stocks that are sensitive to gold prices, including South
African securities. Our stock strategy has focused on companies that we
perceive as higher in quality, or less speculative, than most of the companies
involved in precious metals activities.
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), the government
securities market (the Lehman Brothers Government Bond Index) and the universe
of funds with similar investment objectives (the Lipper Gold Oriented Fund
Universe Average). Performance of the government securities market is relevant
because, in addition to precious metals and metals-related stocks, the Fund may
also invest in U. S. Government securities, although it did not own any at the
end of the year.
We expect gold prices to continue to rise over the coming year, based on
forecasts for continued high demand for gold, relative to gold supplies, and
expectations that inflation fears may gradually rise as the year progresses.
Thus, we intend to maintain the Fund's orientation toward gold, while seeking
precious metals stocks that we feel offer the potential for above average
returns.
We appreciate your continued confidence.
Respectfully,
John A. Olsen
Manager, United Gold & Government Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
UNITED GOLD AND GOVERNMENT FUND, INC.,
The line graph which appears here in the paper version was filed on Form SE on
February 25, 1994.
<PAGE>
SHAREHOLDER SUMMARY
- ----------------------------------------------------------------------
UNITED GOLD & GOVERNMENT FUND, INC.
PORTFOLIO STRATEGY:
Inflationary strategies: OBJECTIVE: High total return (income plus
appreciation of share value).
Up to 100% in minerals-related
securities.
Minimum of 25% so invested. STRATEGY: Invests in gold and other
Up to 100% in foreign securities. minerals-related securities during
periods of actual or
Disinflationary strategies: expected inflation and U.S. Government
Securities during
Up to 100% in U.S. Government periods of disinflation or
Securities. low inflation.
Maximum of 25% in minerals-
related securities.
FOUNDED: 1985
DIVIDENDS: PAID QUARTERLY (March, June, September,
December)
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Fiscal Year Ended December 31, 1993
- -------------------------------------------
DIVIDENDS PAID $0.04
=====
NET ASSET VALUE ON
12/31/93 $9.97
12/31/92 5.70
-----
CHANGE PER SHARE $4.27
=====
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 12-31-93 65.71% 75.82%
5-year period ended 12-31-93 6.27% 7.54%
Period from 9-4-85(+)
through 12-31-93 11.28% 12.08%
(+)Initial public offering of the Fund.
*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 December 31, 1993, United Gold & Government Fund, Inc. had net assets
totaling $46,907,913 invested in a diversified portfolio of:
75.62% Common Stocks and Warrants
12.47% Bullion
6.81% Cash and Cash Equivalents
5.10% Convertible Preferred Stocks
As a shareholder in United Gold & Government Fund, Inc. for every $100 you had
invested on December 31, 1993, your Fund owned:
Foreign Mining Stocks $63.99
Bullion 12.47
U.S. Mining Stocks 8.13
Cash and Cash Equivalents 6.81
Convertible Preferred Stocks 5.10
Other Stocks 3.50
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
DECEMBER 31, 1993
Troy
Ounces Value
BULLION
Gold* .................................. 12,446 $ 4,863,897
Platinum* .............................. 2,500 987,250
TOTAL BULLION - 12.47% $ 5,851,147
(Cost: $5,687,434)
Shares
COMMON STOCKS AND WARRANTS
Gold
Australia - 10.83%
Gold Mines of Kalgoorlie Limited . ...... 531,660 480,089
Gold Mines of Kalgoorlie
Limited, Warrants* .................... 2,000,000 1,112,000
Mount Burgess Gold Mining Company NL* .. 250,000 202,000
Normandy Poseiden Limited .............. 902,100 1,622,878
Nuigini Mining Limited* ................ 309,900 1,157,477
Resolute Resources Limited* ............ 415,200 507,374
Total ................................. 5,081,818
Canada - 30.65%
Agnico-Eagle Mines, Ltd. ............... 100,000 1,305,000
Euro-Nevada Mining Corporation Limited . 110,400 3,935,981
Franco-Nevada Mining Corporation Limited 56,900 3,917,281
International Musto Explorations Ltd.* . 100,000 784,900
Platinova Resources Ltd.* .............. 400,000 938,000
Royal Oak Mines Inc.* .................. 100,000 472,800
TVX Gold Inc.* ......................... 300,000 1,985,700
Venezuelan Goldfields Ltd.* ............ 109,600 1,036,378
Total ................................. 14,376,040
South Africa - 18.40%
Beatrix Mines Limited, ADR ............. 69,000 487,347
Driefontein Consolidated Limited, ADR .. 25,000 321,875
Free State Consolidated Gold Mines, ADR 135,000 2,303,370
Hartebeestfontein Gold Mining Company
Limited, ADR .......................... 141,400 848,400
Vaal Reefs Exploration & Mining Company
Limited, New Shares, ADR .............. 225,000 2,256,975
Western Deep Levels, Ltd., ADR ......... 50,000 2,412,500
Total.................................. 8,630,467
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
DECEMBER 31, 1993
Shares Value
COMMON STOCKS AND WARRANTS (Continued)
Gold (Continued)
United States - 3.88%
Battle Mountain Gold Company ........... 100,000 $ 1,012,500
Canyon Resources Corporation* .......... 200,000 806,200
Total ................................. 1,818,700
Total Gold Securities - 63.76% 29,907,025
Other Metals
South Africa - 1.80%
De Beers Consolidated Mines Limited,
ADR ................................... 35,000 844,375
United Kingdom - 2.31%
RTZ Corporation PLC (The) .............. 90,344 1,083,676
United States - 4.25%
AMAX Inc. .............................. 106,137 729,692
Cyprus Minerals Company ................ 12,500 323,438
Newmont Mining Corporation ............. 20,000 942,500
Total ................................. 1,995,630
Total Other Metals Securities - 8.36% 3,923,681
Miscellaneous
Public Utilities - Gas - 1.71%
Louis Dreyfus Natural Gas Corp.* ....... 50,000 800,000
Steel - 1.79%
National Steel Corporation, Class B* ... 70,000 840,000
Total Miscellaneous - 3.50% 1,640,000
TOTAL COMMON STOCKS AND WARRANTS - 75.62% $35,470,706
(Cost: $20,963,982)
PREFERRED STOCKS - 5.10%
Gold
United States
Battle Mountain Gold Company,
Convertible ........................... 10,000 645,000
Echo Bay Finance Corp., Convertible .... 40,000 1,745,000
Total ................................. $ 2,390,000
(Cost: $1,498,700)
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
DECEMBER 31, 1993
Principal
Amount in
Thousands Value
TOTAL SHORT-TERM SECURITIES - 6.97%
J. P. Morgan Securities, 3.1%
Repurchase Agreement dated
12-31-93, to be repurchased
at $3,270,845 on 1-3-94** ............. $3,270 $ 3,270,000
(Cost: $3,270,000)
TOTAL INVESTMENTS - 100.16% $46,981,853
(Cost: $31,420,116)
LIABILITIES, NET OF CASH AND OTHER ASSETS- (0.16%) (73,940)
NET ASSETS - 100.00% $46,907,913
Notes To Schedule Of Investments
*Non-income producing.
**Collateralized by $2,780,000 U.S. Treasury Notes, 8.375% due 8-15-2008, market
value and accrued interest aggregate $3,336,840.
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 GOLD & GOVERNMENT FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1993
Assets
Investments -- at value (Notes 1 and 3):
Bullion (cost -- $5,687,434) .................... $ 5,851,147
Securities (cost -- $25,732,682) ................ 41,130,706
-----------
46,981,853
Cash ............................................. 8,013
Receivables:
Fund shares sold ................................ 60,174
Interest and dividends .......................... 53,939
Prepaid insurance premium ........................ 10,482
-----------
Total assets .................................. 47,114,461
-----------
Liabilities
Payable for Fund shares redeemed ................. 164,395
Accrued transfer agency and dividend disbursing .. 17,636
Accrued service fee ............................... 8,141
Accrued accounting services fee .................. 1,667
Other ............................................ 14,709
-----------
Total liabilities ............................. 206,548
-----------
Total net assets ............................. $46,907,913
===========
Net Assets
$1.00 par value capital stock, authorized --
100,000,000; shares outstanding -- 4,704,220
Capital stock ................................... $ 4,704,220
Additional paid-in capital ...................... 61,622,989
Accumulated undistributed income (loss):
Accumulated undistributed net investment income . 8,046
Accumulated net realized loss on investment
transactions .................................. (34,989,079)
Net unrealized appreciation in value of
investments at end of period .................. 15,561,737
-----------
Net assets applicable to outstanding units
of capital.................................... $46,907,913
===========
Net asset value per share (net assets divided by
shares outstanding) .............................. $ 9.97
Sales load (offering price x 5.75%) ................ .61
------
Offering price per share (net asset value
divided by 94.25%) ............................... $10.58
======
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 GOLD & GOVERNMENT FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended DECEMBER 31, 1993
Investment Income
Income:
Dividends (net of foreign withholding taxes
of $64,709) .................................... $ 579,864
Interest ........................................ 230,971
-----------
Total income .................................. 810,835
-----------
Expenses (Note 2):
Investment management fee ....................... 268,796
Transfer agency and dividend disbursing ......... 211,949
Custodian fees .................................. 34,928
Accounting services fee ......................... 20,000
Audit fees ...................................... 19,976
Service fee ..................................... 11,554
Legal fees ...................................... 1,798
Other ........................................... 63,249
-----------
Total expenses ................................ 632,250
-----------
Net investment income ........................ 178,585
-----------
Realized and Unrealized Gain on Investments
Realized net loss on bullion ...................... (5,405)
Realized net gain on securities .................. 2,100,574
-----------
Realized net gain on investments ................ 2,095,169
-----------
Unrealized appreciation in value of bullion
during the period ............................... 427,352
Unrealized appreciation in value of securities
during the period ............................... 17,417,369
-----------
Unrealized appreciation in value of investments
during the period ............................. 17,844,721
-----------
Net gain on investments ....................... 19,939,890
-----------
Net increase in net assets resulting from
operations ................................. $20,118,475
===========
See notes to financial statements.
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year
ended December 31,
-----------------------
1993 1992
----------- -----------
Increase (Decrease) in Net Assets
Operations:
Net investment income ............... $ 178,585 $ 302,931
Realized net gain (loss) on
investments ....................... 2,095,169 (3,804,756)
Unrealized appreciation
(depreciation) .................... 17,844,721 (819,102)
----------- -----------
Net increase (decrease) in net
assets resulting from
operations ....................... 20,118,475 (4,320,927)
----------- -----------
Dividends to shareholders from
net investment income* .............. (188,719) (302,741)
----------- -----------
Capital share transactions:
Proceeds from sale of shares
(1,720,096 and 417,887 shares,
respectively) ...................... 13,848,251 2,625,548
Proceeds from reinvestment of
dividends (23,934 and 48,731
shares, respectively) ............. 185,584 297,163
Payments for shares redeemed
(1,796,401 and 1,834,816 shares,
respectively) ...................... (14,191,833) (11,749,689)
----------- -----------
Net decrease in net assets
resulting from capital
share transactions ............... (157,998) (8,826,978)
----------- -----------
Total increase (decrease) ........ 19,771,758 (13,450,646)
Net Assets
Beginning of period .................. 27,136,155 40,586,801
----------- -----------
End of period ........................ $46,907,913 $27,136,155
=========== ===========
Undistributed net investment
income ............................ $ 8,046 $ 2,506
=========== ===========
*See "Financial Highlights" on page 12.
See notes to financial statements.
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
FINANCIAL HIGHLIGHTS
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the fiscal year ended
December 31,
----------------------------------
1993 1992 1991 1990 1989
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $5.70 $6.63 $6.68 $8.66 $7.47
----- ----- ----- ----- -----
Income from investment
operations:
Net investment income .04 .06 .15 .11 .16
Net realized and
unrealized gain
(loss) on
investments ..... 4.27 (0.93) (0.05) (1.97) 1.20
----- ----- ----- ----- -----
Total from investment
operations ....... 4.31 (0.87) .10 (1.86) 1.36
----- ----- ----- ----- -----
Less dividends from
net investment
income ........... (0.04) (0.06) (0.15) (0.12) (0.17)
----- ----- ----- ----- -----
Net asset value,
end of period ..... $9.97 $5.70 $6.63 $6.68 $8.66
===== ===== ===== ===== =====
Total return* ...... 75.82% -13.18% 1.47% -21.59% 18.42%
Net assets, end
of period (000
omitted) .........$46,908 $27,136$40,587 $54,371$83,154
Ratio of expenses
to average net
assets ........... 1.69% 1.88% 1.57% 1.56% 1.42%
Ratio of net invest-
ment income to average
net assets ....... 0.48% .90% 2.11% 1.43% 1.91%
Portfolio turnover
rate** ........... 84.00% 61.50%112.80% 82.42% 89.92%
*Total return calculated without taking into account the sales load deducted
on an initial purchase.
**This rate is, in general, calculated by dividing the average value of the
Fund's portfolio securities during the period into the lesser of its
purchases or sales of securities in the period, excluding short-term
securities and bullion.
See notes to financial statements.
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
NOTE 1 -- Significant Accounting Policies
United Gold & Government 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. Gold and silver bullion are valued at the last
spot settlement price for current delivery as calculated by the Commodity
Exchange, Inc. as of the close of that Exchange. Platinum bullion is
valued at the last spot settlement price as calculated by the New York
Mercantile Exchange as of the close of that Exchange. Securities for which
quotations are not readily available are valued as determined in good faith
in accordance with procedures established by and under the general
supervision of the Fund's Board of Directors. 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. Original issue discount (as defined in the Internal
Revenue Code), premiums on the purchase of bonds and post-1984 market
discount are amortized for both financial and tax reporting purposes over
the remaining lives of the bonds. Dividend income is recorded on the ex-
dividend date except that certain dividends from foreign securities are
recorded as soon as the Fund is informed of the ex-dividend date. Interest
income is recorded on the accrual basis. See Note 3 -- Investment
Securities Transactions.
C. Foreign currency translations -- All assets and liabilities expressed in
foreign currencies are converted into U.S. dollars at the mean of the bid
and asked prices of such currencies against U.S. dollars at the end of the
respective period. The cost of portfolio securities is translated at the
rates of exchange prevailing when acquired. Income is translated at rates
of exchange prevailing when accrued or received. The resulting transaction
exchange gains or losses have been included in the results of operations
with the type of transaction giving rise to the gain or loss.
D. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code. In
addition, the Fund intends to pay distributions as required to avoid
imposition of excise tax. Accordingly, provision has not been made for
Federal income taxes. See Note 4 -- Federal Income Tax Matters.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. During the twelve months
ended December 31, 1993, the Fund adopted Statement of Position 93-2
Determination, Disclosure, and Financial Statement Presentation of Income,
Capital Gain, and Return of Capital Distributions by Investment Companies.
Accordingly, permanent book and tax basis differences relating to future
shareholder distributions have been reclassified to additional paid-in
capital. As of January 1, 1993, the cumulative effect of such differences
totaling $137 was reclassified from accumulated undistributed net realized
gain on investment transactions to additional paid-in capital. At the same
time, $15,674 was reclassified from undistributed net investment income to
accumulated undistributed net realized gain on investment transactions to
more appropriately conform book and tax treatment of dividend distributions
paid to shareholders. Net investment income, net realized gains and net
assets were not affected by this change.
F. 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 two elements: (i) a "Specific" fee computed on net asset value as of
the close of business each day at the annual rate of .30% of net assets and (ii)
a "Group" fee computed each day on the combined net asset values of all of the
funds in the United Group of mutual funds (approximately $11.1 billion of
combined net assets at December 31, 1993) 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
At present, the Fund operates under state expense requirements which limit
the amount of aggregate annual expenses, adjusted for certain excess expenses,
that the Fund may incur during its fiscal year. The Manager will reimburse the
Fund for any expenses in excess of the limitation. No such reimbursement is
required for the period ended December 31, 1993.
The Fund pays WARSCO a 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
$180,359, out of which W&R paid sales commissions of $100,480 and all expenses
in connection with the sale of Fund shares, except for registration fees and
related expenses.
On September 28, 1993, shareholders of the Fund approved the adoption of a
12b-1 Service Plan with a maximum fee of .25%. The Plan went into effect
October 1, 1993.
The Fund paid Directors' fees of $1,337.
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 Securities Transactions
Purchases of investment securities, other than U.S. Government and short-
term securities, aggregated $25,596,671 while proceeds from maturities and sales
aggregated $26,470,912. Purchases of bullion aggregated $3,883,964 with proceeds
from the sale of bullion aggregating $727,021. Purchases of short-term
securities aggregated $808,115,000 while proceeds from maturities and sales
aggregated $807,743,028. Proceeds from the sale of U.S. Government securities
aggregated $3,093,010, resulting in a gain of $630,383. There was no gain or
loss on the sale of short-term securities.
For Federal income tax purposes, cost of investments owned at December 31,
1993 was $31,420,116, resulting in net unrealized appreciation of $15,561,737,
of which $15,956,816 related to appreciated securities and $395,079 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $2,095,170 during the year ended December 31, 1993, which was fully offset by
utilization of capital loss carryforwards. Remaining prior year capital loss
carryforwards of the Fund aggregated $34,989,079 at December 31, 1993. This
amount is available to offset future realized capital gain net income for
Federal income tax purposes through December 31, 1996; $11,894,711 of this
amount is available through December 31, 1997, $11,331,322 is available through
December 31, 1998; $6,823,792 is available through December 31, 1999 and
$4,958,441 is available through December 31, 2000.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
United Gold & Government 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 Gold & Government Fund, Inc.
(the "Fund") at December 31, 1993, 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 portfolio positions at December 31, 1993 by correspondence with
the custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE
Kansas City, Missouri
January 31, 1994
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends 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
1993 Federal income tax return.
PER-SHARE AMOUNTS REPORTABLE AS:
----------------------------------------------
For Individuals For Corporations
-------------------------------------------------------
Record Ordinary Long-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
- --------- ----- ----------\---------------------------------------
03-12-93 $0.010 $0.0100 $0.0000 $0.0086 $0.0014 $0.0000
06-11-93 0.010 .0100 .0000 .0090 .0010 .0000
09-17-93 0.010 .0100 .0000 .0090 .0010 .0000
12-17-93 0.010 .0100 .0000 .0900 .0010 .0000
------ ------- ------- ------ ------- -------
Total $0.040 $.0400 $0.0000 $0.0356 $0.0044 $0.000
====== ======= ======= ======= ======= =======
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.
Shareholders are advised to consult with their tax adviser concerning the tax
treatment of dividends and distributions from the Fund.
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.
This report is submitted for the general information of the shareholders of
United Gold & Government Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United Gold & Government Fund, Inc. current prospectus.
<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
Rodney O. McWhinney, Vice President
John A. Olsen, Vice President
Sharon K. Pappas, Vice President and Secretary
Carl E. Sturgeon, Vice President
<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.
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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
NUR1013A(12-93)
printed on recycled paper
