UNITED
GOLD &
GOVERNMENT
FUND, INC.
ANNUAL
REPORT
-------------------------------------------
For the fiscal year ended December 31, 1994
<PAGE>
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>
PRESIDENT'S LETTER
- -----------------------------------------------------------------
DECEMBER 31, 1994
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>
MANAGER'S LETTER
DECEMBER 31, 1994
- ----------------------------------------------------------------------
Dear Shareholder:
This report relates to the operations of your Fund for the fiscal year ended
December 31, 1994. The following discussion, graphs and tables provide you with
information regarding the Fund's performance during that period.
During the past fiscal year the price of gold decreased by 2% to $383 per ounce
at year end. The fall in gold prices resulted in a decline in the value of most
gold mining company stocks as well. Expectations at the beginning of the year
for rising gold prices were thwarted by increases in interest rates instituted
by the Federal Reserve Bank during the year. Rising interest rates reduced the
demand for gold and led many institutional gold speculators to divest their gold
holdings. In addition, strengthening prices in the base metals markets
attracted capital that might otherwise have gone into precious metals.
We reduced our holdings of South African securities in 1994 as political and
economic developments in South Africa seemed to increase the risks associated
with investments in that country. We increased our holdings in North American
securities, particularly securities in the United States.
The strategies and techniques we applied resulted in performance by the Fund
this past year that fell below two of the three 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 U.S. 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). The Fund's strategy of reducing its holdings in stocks of South
African gold-mining companies impacted the Fund's performance as those stocks
ultimately performed better in 1994 than most other gold-related investments.
In 1995 we expect that the Federal Reserve Bank will raise interest rates
further to slow the rate of economic growth in the United States. As that
happens, yields on fixed income securities will become increasingly attractive,
so we expect to increase our exposure to bonds throughout the coming year and to
liquidate some of our holdings in gold bullion and equity securities. Due to
continuing reservations about the investment climate in South Africa, the Fund
may further reduce its holdings there.
Thank you very much for your continued support and confidence.
Respectfully,
Michael L. Avery
Manager, United Gold & Government Fund
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
UNITED GOLD AND GOVERNMENT FUND, INC.,
THE S&P 500 INDEX, THE LEHMAN BROTHERS GOVERNMENT BOND INDEX,
AND THE LIPPER GOLD ORIENTED FUND UNIVERSE AVERAGE
Average Annual Total Return*
1 year 5 years 9+ years
- -22.11% -1.10% 7.79%
Lipper
Lehman Gold
United Brothers Oriented
Gold & S&P Government Fund
Government 500 Bond Universe
Fund, Inc. Index Index Average
--------- --------- --------- ---------
09/4/85 Purchase 9,425
09/30/85 9,293 10,000 10,000 10,000
12/31/85 9,557 11,720 10,727 9,593
12/31/86 13,521 13,908 12,370 13,123
12/31/87 17,626 14,639 12,643 17,938
12/31/88 16,935 17,070 13,533 14,902
12/31/89 20,055 22,479 15,459 18,189
12/31/90 15,726 21,781 16,809 14,171
12/31/91 15,957 28,418 19,384 13,515
12/31/92 13,855 30,584 20,785 11,460
12/31/93 24,359 33,665 23,000 20,436
12/31/94 20,132 34,109 22,224 17,877
- ----- S&P 500 Index*** -- $34,109
+++++ Lehman Bros. Gov't Bond Indes*** -- $22,224
===== United Gold & Government Fund, Inc.**** -- $20,132
_____ Lipper Gold Oriented Fund Universe Average*** -- $17,877
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.
**9-4-85 (the date the Fund commenced operations) through 12-31-94.
***Because the Fund commenced operations ona date other than at the end of a
month, and partial month calculations of the performance of the S&P 500
Index and the Lehman Brothers Government Bond Indes (both including income)
and of the Lipper Gold Oriented Fund Universe Average are not available,
investments in the two indexes and universe average were effected as of
September 30, 1985.
****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 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 precious metals
Up to 100% in foreign securities. and minerals-related securities during
periods of
Disinflationary strategies: actual or expected inflation or when the
investment
Up to 100% in U.S. Government environment appears favorable;
Securities. invests in U.S. Government
Maximum of 25% in minerals- Securities during periods of
related securities. disinflation or low inflation.
FOUNDED: 1985
SCHEDULED DIVIDEND FREQUENCY: QUARTERLY (March, June, September,
December)
<PAGE>
PERFORMANCE SUMMARY
PER SHARE DATA
For the Fiscal Year Ended December 31, 1994
- -------------------------------------------
DIVIDENDS PAID $ 0.05
======
NET ASSET VALUE ON
12/31/94 $ 8.19
12/31/93 9.97
------
CHANGE PER SHARE ($1.78)
======
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 12-31-94 -22.11% -17.36%
5-year period ended 12-31-94 -1.10% 0.07%
Period from 9-4-85(+)
through 12-31-94 7.79% 8.47%
(+)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, 1994, United Gold & Government Fund, Inc. had net assets
totaling $37,422,004 invested in a diversified portfolio of:
67.45% Common Stocks
19.80% Cash and Cash Equivalents
6.96% Bullion
5.79% Convertible Preferred Stocks
As a shareholder in United Gold & Government Fund, Inc. for every $100 you had
invested on December 31, 1994, your Fund owned:
Foreign Mining Stocks $43.50
U.S. Mining Stocks 20.29
Cash and Cash Equivalents 19.80
Bullion 6.96
Convertible Preferred Stocks 5.79
Miscellaneous Stocks 3.66
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
DECEMBER 31, 1994
Troy
Ounces Value
BULLION
Gold* .................................. 3,399 $ 1,302,157
Platinum* .............................. 3,142 1,302,987
TOTAL BULLION - 6.96% $ 2,605,144
(Cost: $2,625,961)
Shares
COMMON STOCKS
Gold
Australia - 8.61%
Gold Mines of Kalgoorlie Limited . ...... 1,081,660 838,287
Newcrest Mining Limited ................ 125,000 557,125
Normandy Posieden Ltd. ................. 602,100 877,260
Nuigini Mining Ltd.* ................... 309,900 948,914
Total ................................. 3,221,586
Canada - 26.95%
Agnico-Eagle Mines Limited ............. 100,000 1,052,100
Cambior Inc. ........................... 71,600 823,543
Euro-Nevada Mining Corporation Limited . 76,200 1,603,400
Franco-Nevada Mining Corporation Limited 26,800 1,316,657
International Musto Explorations Ltd.* . 200,000 980,800
Kinross Gold Corporation* .............. 162,000 837,702
Pegasus Gold Inc. ...................... 50,000 568,750
Placer Dome Inc. ....................... 50,000 1,087,500
Royal Oak Mines Inc.* .................. 100,000 325,000
TVX Gold Inc.* ......................... 219,700 1,488,687
Total ................................. 10,084,139
South Africa - 7.94%
Driefontein Consolidated Limited, ADR .. 50,000 762,500
Free State Consolidated Gold Mines
Ltd., ADR ............................. 45,000 686,250
Kloof Gold Mining Company Ltd., ADR .... 44,000 646,228
St. Helena Gold Mines Ltd., ADR ........ 20,000 195,000
Vaal Reefs Exploration & Mining Co.
Ltd., New Shares, ADR ................. 75,000 681,975
Total.................................. 2,971,953
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
DECEMBER 31, 1994
Shares Value
COMMON STOCKS (Continued)
Gold (Continued)
United States - 16.86%
Amax Gold Inc. ......................... 106,137 $ 636,822
American Barrick Resources Corporation . 50,000 1,112,500
Battle Mountain Gold Company, Class A .. 100,000 1,100,000
Canyon Resources Corporation* .......... 200,000 325,000
Homestake Mining Company ............... 55,000 941,875
Newmont Gold Company ................... 35,000 1,246,875
Santa Fe Pacific Gold Corporation* ..... 73,600 947,600
Total ................................. 6,310,672
Total Gold Securities - 60.36% 22,588,350
Metals - 3.43%
United States
Cyprus Amax Minerals Company ........... 12,500 326,563
Freeport McMoRan Copper & Gold
Inc., Class A ......................... 45,000 956,250
Total ................................. 1,282,813
Miscellaneous
Coal - 1.57%
Zeigler Coal Holding Company ........... 50,000 587,500
Multi-Industry - 2.09%
RTZ Corporation PLC (The) .............. 60,344 781,696
Total Miscellaneous Securities - 3.66% 1,369,196
TOTAL COMMON STOCKS - 67.45% $25,240,359
(Cost: $22,299,089)
PREFERRED STOCKS - 5.79%
Gold
United States
Amax Gold Inc., Series B, Convertible .. 5,000 242,500
Battle Mountain Gold Company,
Convertible ........................... 10,000 610,000
Echo Bay Finance Corp., Series A,
Convertible ........................... 40,000 1,315,000
Total ................................. $2,167,500
(Cost: $1,748,700)
See Notes to Schedule of Investments on page 10.
<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
DECEMBER 31, 1994
Principal
Amount in
Thousands Value
TOTAL SHORT-TERM SECURITIES - 23.46%
J. P. Morgan Securities, 5.2%
Repurchase Agreement dated
12-30-94, to be repurchased
at $8,785,073 on 1-3-95** ............. $8,780 $ 8,780,000
(Cost: $8,780,000)
TOTAL INVESTMENTS - 103.66% $38,793,003
(Cost: $35,453,750)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (3.66%) (1,370,999)
NET ASSETS - 100.00% $37,422,004
Notes To Schedule Of Investments
*Non-income producing.
**Collateralized by $8,509,000 U.S. Treasury Notes, 8.375% due 8-15-2008, market
value and accrued interest aggregate $8,976,906.
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, 1994
Assets
Investments -- at value (Notes 1 and 3):
Bullion (cost -- $2,625,961) .................... $ 2,605,144
Securities (cost -- $32,827,789) ................ 36,187,859
-----------
38,793,003
Cash ............................................. 4,408
Receivables:
Interest and dividends .......................... 56,262
Fund shares sold ................................ 28,697
Prepaid insurance premium ........................ 10,646
-----------
Total assets .................................. 38,893,016
-----------
Liabilities
Payable for investment securities purchased ...... 1,146,750
Payable for Fund shares redeemed ................. 242,154
Accrued transfer agency and dividend disbursing .. 18,189
Accrued service fee ............................... 10,423
Accrued accounting services fee .................. 1,667
Other ............................................ 51,829
-----------
Total liabilities ............................. 1,471,012
-----------
Total net assets ............................. $37,422,004
===========
Net Assets
$1.00 par value capital stock, authorized --
100,000,000; shares outstanding -- 4,571,446
Capital stock ................................... $ 4,571,446
Additional paid-in capital ...................... 60,888,325
Accumulated undistributed income (loss):
Accumulated undistributed net investment income . 7,099
Accumulated net realized loss on investment
transactions and foreign currency
transactions .................................. (31,384,119)
Net unrealized appreciation in value of
investments at end of period .................. 3,339,253
-----------
Net assets applicable to outstanding units
of capital.................................... $37,422,004
===========
Net asset value per share (net assets divided by
shares outstanding) .............................. $8.19
Sales load (offering price x 5.75%) ................ .50
-----
Offering price per share (net asset value
divided by 94.25%) ............................... $8.69
=====
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, 1994
Investment Income
Income:
Dividends ....................................... $ 576,493
Interest ........................................ 368,506
-----------
Total income .................................. 944,999
-----------
Expenses (Note 2):
Investment management fee ....................... 312,911
Transfer agency and dividend disbursing ......... 191,123
Service fee ..................................... 60,162
Custodian fees .................................. 38,572
Accounting services fee ......................... 20,000
Audit fees ...................................... 14,447
Legal fees ...................................... 3,983
Other ........................................... 55,448
-----------
Total expenses ................................ 696,646
-----------
Net investment income ........................ 248,353
-----------
Realized and Unrealized Gain (Loss) on Investments
Realized net gain on bullion ...................... 81,381
Realized net gain on securities .................. 3,523,579
-----------
Realized net gain on investments ................ 3,604,960
-----------
Unrealized depreciation in value of bullion
during the period ............................... (184,530)
Unrealized depreciation in value of securities
during the period ............................... (12,037,954)
-----------
Unrealized depreciation in value of investments
during the period ............................. (12,222,484)
-----------
Net loss on investments ....................... (8,617,524)
-----------
Net decrease in net assets resulting from
operations ................................. $(8,369,171)
===========
See notes to financial statements.
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the fiscal year
ended December 31,
-----------------------
1994 1993
----------- -----------
Increase (Decrease) in Net Assets
Operations:
Net investment income ............... $ 248,353 $ 178,585
Realized net gain on investments .... 3,604,960 2,095,169
Unrealized appreciation
(depreciation) .................... (12,222,484) 17,844,721
----------- -----------
Net increase (decrease) in net
assets resulting from
operations ....................... (8,369,171) 20,118,475
----------- -----------
Dividends to shareholders from
net investment income* .............. (249,300) (188,719)
----------- -----------
Capital share transactions:
Proceeds from sale of shares
(1,361,695 and 1,720,096 shares,
respectively) ...................... 12,898,882 13,848,251
Proceeds from reinvestment of
dividends (28,118 and 23,934
shares, respectively) ............. 245,912 185,584
Payments for shares redeemed
(1,522,587 and 1,796,401 shares,
respectively) ...................... (14,012,232) (14,191,833)
----------- -----------
Net decrease in net assets
resulting from capital
share transactions ............... (867,438) (157,998)
----------- -----------
Total increase (decrease) ........ (9,485,909) 19,771,758
Net Assets
Beginning of period .................. 46,907,913 27,136,155
----------- -----------
End of period, including undistributed
net investment income of $7,099 and
$8,046, respectively ................ $37,422,004 $46,907,913
=========== ===========
*See "Financial Highlights" on page 14.
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,
--------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $9.97 $5.70 $6.63 $6.68 $8.66
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income........... .05 .04 .06 .15 .11
Net realized and
unrealized gain
(loss) on
investments ..... (1.78) 4.27 (0.93) (0.05) (1.97)
----- ----- ----- ----- -----
Total from investment
operations ....... (1.73) 4.31 (0.87) .10 (1.86)
----- ----- ----- ----- -----
Less dividends from
net investment
income ........... (0.05) (0.04) (0.06) (0.15) (0.12)
----- ----- ----- ----- -----
Net asset value,
end of period ..... $8.19 $9.97 $5.70 $6.63 $6.68
===== ===== ===== ===== =====
Total return* ...... -17.36% 75.82% -13.18% 1.47% -21.59%
Net assets, end
of period (000
omitted) ......... $37,422$46,908 $27,136$40,587 $54,371
Ratio of expenses
to average net
assets ........... 1.59% 1.69% 1.88% 1.57% 1.56%
Ratio of net invest-
ment income to average
net assets ....... 0.57% 0.48% .90% 2.11% 1.43%
Portfolio turnover
rate** ........... 64.89% 84.00% 61.50%112.80% 82.42%
*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, 1994
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 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. 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.
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 $11.0 billion of
combined net assets at December 31, 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
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, 1994.
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
$153,080, out of which W&R paid sales commissions of $88,222 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 $1,589.
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 $15,087,203 while proceeds from maturities and sales
aggregated $17,206,144. Purchases of bullion aggregated $788,900 while proceeds
from the sale of bullion aggregated $3,931,754. Purchases of short-term
securities and U.S. Government securities aggregated $1,356,470,000 and
$6,108,946, respectively. Proceeds from maturities and sales of short-term
securities and U.S. Government securities aggregated $1,351,187,423 and
$5,928,047, respectively.
For Federal income tax purposes, cost of investments owned at December 31,
1994 was $35,453,750, resulting in net unrealized appreciation of $3,339,253, of
which $5,715,214 related to appreciated securities and $2,375,961 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $3,604,961 during the year ended December 31, 1994, which was fully offset by
utilization of capital loss carryforwards. Remaining prior year capital loss
carryforwards of the Fund aggregated $31,384,119 at December 31, 1994. 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, 1994, the results of its operations for the year
then ended, 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
December 31, 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
January 31, 1995
<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
1994 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
- --------- ----- -------------------------------------------------
03-11-94$0.0100 $0.0100 $0.0000 $0.0081 $0.0019 $0.0000
06-17-94 .0100 0.0100 0.0000 0.0079 0.0021 0.0000
09-16-94 .0100 0.0100 0.0000 0.0079 0.0021 0.0000
12-16-94 .0230 0.0230 0.0000 0.0181 0.0049 0.0000
------ ------- ------- ------ ------- -------
Total $0.0530 $0.0530 $0.0000 $0.0420 $0.0110 $0.0000
====== ======= ======= ======= ======= =======
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.
<PAGE>
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>
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
Michael L. Avery, Vice 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
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.
- ---------------------------------
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(12-94)
printed on recycled paper
