<PAGE>
UNITED
GOLD &
GOVERNMENT
FUND, INC.
SEMIANNUAL
REPORT
--------------------------------------
For the six months ended June 30, 1996
<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
JUNE 30, 1996
Dear Shareholder:
As President of your Fund, I would like to thank you for your continued
confidence in our products and services. Our goal to provide the best service
possible to our shareholders has not changed since we opened our doors nearly 60
years ago. Waddell & Reed's team of professionals, including the Fund's
manager, our customer service representatives and your personal account
representative continue to strive to meet your financial needs.
Waddell & Reed plays a special role in the investment industry. We take
pride in being one of the few financial services firms committed to locally
based account representatives who provide the personal service you need. When
you're ready to evaluate your financial plan to keep up with life's changes, or
to find an answer to a financial question that you may have, your representative
is ready to assist you--when you need it. He or she is available to help you
plan for your retirement, fund a child's education or make plans for other long-
term financial goals.
All of us are committed to helping you meet the financial goals that are
important to you. This is accomplished by our offering investment products to
meet a variety of personal financial objectives, along with the personal service
to make the investment process more convenient and accessible.
We want to continue to meet your financial needs for many years to come.
Should you have any questions about your account or other financial issues that
are important to you, contact your personal account representative or your local
Waddell & Reed office. They're ready to help you make the most of your
financial future.
Respectfully,
Keith A. Tucker
President
<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.
(May purchase securities subject to
repurchase agreements. May invest in
certain options and futures.)
FOUNDED: 1985
SCHEDULED DIVIDEND FREQUENCY: QUARTERLY (March, June, September,
December)
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Six Months Ended June 30, 1996
- --------------------------------------
DIVIDENDS PAID $0.02
=====
NET ASSET VALUE ON
6/30/96 $9.14
12/31/95 8.75
-----
CHANGE PER SHARE $0.39
=====
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 6-30-96 4.75% 11.14%
5-year period ended 6-30-96 5.64% 6.90%
10-year period ended 6-30-96 7.35% 7.99%
*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 June 30, 1996, United Gold & Government Fund, Inc. had net assets totaling
$33,282,389 invested in a diversified portfolio of:
56.66% Common Stocks and Warrants
23.18% United States Government Securities
16.05% Bullion
3.01% Preferred Stocks
1.10% Cash and Cash Equivalents
As a shareholder of United Gold & Government Fund, Inc. for every $100 you had
invested on June 30, 1996, your Fund owned:
Foreign Mining Stocks $42.75
U.S. Government
Securities 23.18
Bullion 16.05
U.S. Mining Stocks 12.11
Preferred Stocks 3.01
Miscellaneous Stocks 1.80
Cash and Cash Equivalents 1.10
Not all holdings will be represented in the portfolio at all times.
<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
JUNE 30, 1996
Troy
Ounces Value
BULLION
Gold* .................................. 11,853 $ 4,505,284
Platinum* .............................. 2,145 835,207
TOTAL BULLION - 16.05% $ 5,340,491
(Cost: $5,504,328)
Shares
COMMON STOCKS AND WARRANTS
Gold
Australia - 9.10%
Acacia Resources Limited* .............. 300,000 707,040
Golden Shamrock Mines Limited* ......... 1,000,000 895,584
Plutonic Resources Limited ............. 215,000 1,097,876
Ranger Minerals NL* .................... 100,000 329,952
Total ................................. 3,030,452
Canada - 33.65%
Agnico-Eagle Mines Limited ............. 45,500 739,375
Bre-X Minerals Ltd.* ................... 50,000 835,042
Dayton Mining Corporation* ............. 150,000 892,726
Eldorado Gold Corporation* ............. 99,200 544,975
Euro-Nevada Mining Corporation Limited . 13,600 582,772
Franco-Nevada Mining Corporation Limited 9,800 620,935
Goldcorp Inc., Class A* ................ 30,000 496,631
Greenstone Resources Ltd.* ............. 125,000 1,464,987
Miramar Mining Corporation* ............ 58,800 316,569
Pangea Goldfields Inc.* ................ 25,700 93,184
Pangea Goldfields Inc., Special
Warrants* ............................ 45,000 163,163
Pegasus Gold Inc.* ..................... 65,000 796,250
Placer Dome Inc. ....................... 45,000 1,074,375
Rea Gold Corporation* .................. 70,000 148,696
Repadre Capital Corporation,
Special Warrants* ..................... 90,000 375,769
Royal Oak Mines Inc.* .................. 300,000 1,106,100
TVX Gold Inc.* ......................... 65,000 471,250
Triton Mining Corporation* ............. 100,000 476,121
Total ................................. 11,198,920
United States - 10.01%
Homestake Mining Company ............... 70,000 1,198,750
Newmont Gold Company ................... 25,500 1,284,563
Santa Fe Pacific Gold Corporation ...... 60,000 847,500
Total ................................. 3,330,813
Total Gold - 52.76% 17,560,185
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
JUNE 30, 1996
Shares Value
COMMON STOCKS AND WARRANTS (Continued)
Metals - 2.10%
United States
Hecla Mining Company* .................. 100,000 $ 700,000
Miscellaneous
Electric, Gas and Sanitary Services - 0.34%
Sonat Inc. ............................ 2,500 112,500
Oil and Gas Extraction - 0.29%
Enron Oil & Gas Company ................ 3,500 97,563
Primary Metal Industries - 1.17%
Titanium Metals Corporation* ........... 15,000 389,055
Total Miscellaneous - 1.80% 599,118
TOTAL COMMON STOCKS AND WARRANTS - 56.66% $18,859,303
(Cost: $16,703,047)
PREFERRED STOCKS - 3.01%
Gold
United States
Amax Gold Inc., Series B, Convertible ... 10,000 512,500
Battle Mountain Gold Company, Convertible 10,000 490,000
Total ................................. $ 1,002,500
(Cost: $1,022,637)
Principal
Amount in
Thousands
UNITED STATES GOVERNMENT SECURITIES
United States Treasury:
6.25%, 5-31-2000 ...................... $1,000 993,590
5.875%, 6-30-2000 ..................... 2,000 1,961,240
7.25%, 8-15-2004 ...................... 2,000 2,071,560
7.875%, 11-15-2004 .................... 2,500 2,687,100
TOTAL UNITED STATES GOVERNMENT SECURITIES - 23.18% $7,713,490
(Cost: $7,672,301)
TOTAL SHORT-TERM SECURITIES - 1.11%
Repurchase Agreements
J. P. Morgan Securities, 5.3%
Repurchase Agreement dated
6-28-96, to be repurchased
at $370,163 on 7-1-96** ............... 370 $ 370,000
(Cost: $370,000)
See Notes to Schedule of Investments on page 8.
<PAGE>
THE INVESTMENTS OF
UNITED GOLD & GOVERNMENT FUND, INC.
JUNE 30, 1996
TOTAL INVESTMENTS - 100.01% $33,285,784
(Cost: $31,272,313)
LIABILITIES, NET OF CASH AND OTHER ASSETS - (0.01%) (3,395)
NET ASSETS - 100.00% $33,282,389
Notes To Schedule Of Investments
*Non-income producing.
**Collateralized by $287,000 U.S. Treasury Notes, 11.625% due 11-15-2004, market
value and accrued interest aggregate $380,774.
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
JUNE 30, 1996
Assets
Investments -- at value (Notes 1 and 3):
Bullion (cost -- $5,504,328) .................... $ 5,340,491
Securities (cost -- $25,767,985) ................ 27,945,293
-----------
33,285,784
Cash ............................................. 3,737
Receivables:
Interest and dividends .......................... 146,745
Fund shares sold ................................ 15,380
Prepaid insurance premium ........................ 9,477
-----------
Total assets .................................. 33,461,123
-----------
Liabilities
Payable for Fund shares redeemed ................. 135,420
Accrued transfer agency and dividend disbursing .. 15,843
Accrued service fee ............................... 13,350
Accrued accounting services fee .................. 1,667
Other ............................................ 12,454
-----------
Total liabilities ............................. 178,734
-----------
Total net assets ............................. $33,282,389
===========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 3,639,527
Additional paid-in capital ...................... 53,899,117
Accumulated undistributed income (loss):
Accumulated undistributed net investment income . 37,853
Accumulated net realized loss on investment
transactions .................................. (26,307,579)
Net unrealized appreciation in value of
investments at end of period .................. 2,013,471
-----------
Net assets applicable to outstanding units
of capital.................................... $33,282,389
===========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $9.14
Class Y .......................................... $9.15
Capital shares outstanding
Class A .......................................... 3,614,910
Class Y .......................................... 24,617
Capital shares authorized 100,000,000
See notes to financial statements.
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended JUNE 30, 1996
Investment Income
Income:
Interest ........................................ $ 398,318
Dividends ....................................... 45,187
----------
Total income .................................. 443,505
----------
Expenses (Note 2):
Investment management fee ....................... 123,915
Transfer agency and dividend disbursing - Class A 87,112
Service fee - Class A ........................... 41,353
Registration fees ............................... 31,536
Accounting services fee ......................... 10,000
Custodian fees .................................. 8,759
Audit fees ...................................... 7,704
Shareholder servicing - Class Y ................. 124
Other ........................................... 15,682
----------
Total expenses ................................ 326,185
----------
Net investment income ........................ 117,320
----------
Realized and Unrealized Gain (Loss) on Investments
Realized net loss on bullion ..................... (92,335)
Realized net gain on securities .................. 1,911,349
Realized net loss on foreign
currency transactions ........................... (5,262)
----------
Realized net gain on investments ................ 1,813,752
----------
Unrealized depreciation in value of bullion
during the period ............................... (135,599)
Unrealized depreciation in value of securities
during the period ............................... (226,881)
----------
Unrealized depreciation in value of investments
during the period ............................. (362,480)
----------
Net gain on investments ...................... 1,451,272
----------
Net increase in net assets resulting from
operations ................................ $1,568,592
==========
See notes to financial statements.
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
For the For the
six months fiscal year
ended ended
June 30, December 31,
1996 1995
----------- -----------
Increase (Decrease) in Net Assets
Operations:
Net investment income ............... $ 117,320 $ 893,578
Realized net gain on investments .... 1,813,752 3,257,848
Unrealized depreciation ............. (362,480) (963,302)
----------- -----------
Net increase in net
assets resulting from
operations ....................... 1,568,592 3,188,124
----------- -----------
Dividends to shareholders from
net investment income:*
Class A ............................. (73,740) (900,579)
Class Y ............................. (885) ---
----------- -----------
(74,625) (900,579)
----------- -----------
Capital share transactions:
Proceeds from sale of shares:
Class A (1,154,348 and 3,052,102
shares, respectively)............. 10,850,841 25,203,531
Class Y (24,777 and 0
shares, respectively) ............ 231,658 ---
Proceeds from reinvestment of
dividends:
Class A (7,854 and 102,634
shares, respectively) ............ 72,649 885,915
Class Y (96 and 0
shares, respectively) ............ 886 ---
Payments for shares redeemed
Class A (1,289,586 and 3,983,888
shares, respectively)............. (12,097,857) (33,066,367)
Class Y (256 and 0
shares, respectively) ............ (2,383) ---
----------- -----------
Net decrease in net assets
resulting from capital
share transactions ............... (944,206) (6,976,921)
----------- -----------
Total increase (decrease) ........ 549,761 (4,689,376)
Net Assets
Beginning of period .................. 32,732,628 37,422,004
----------- -----------
End of period, including undistributed
net investment income of $37,853
and $420, respectively .............. $33,282,389 $32,732,628
=========== ===========
*See "Financial Highlights" on pages 12 - 13.
See notes to financial statements.
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:
For the
six months For the fiscal year ended December 31,
ended --------------------------------------
6/30/96 1995 1994 1993 1992 1991
---------- ------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $8.75 $8.19 $9.97 $5.70 $6.63 $6.68
----- ----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income........... 0.03 0.24 0.05 0.04 0.06 0.15
Net realized and
unrealized gain
(loss) on
investments ..... 0.38 0.56 (1.78) 4.27 (0.93) (0.05)
----- ----- ----- ----- ----- -----
Total from investment
operations ....... 0.41 0.80 (1.73) 4.31 (0.87) 0.10
----- ----- ----- ----- ----- -----
Less dividends from
net investment
income ........... (0.02) (0.24) (0.05) (0.04) (0.06) (0.15)
----- ----- ----- ----- ----- -----
Net asset value,
end of period ..... $9.14 $8.75 $8.19 $9.97 $5.70 $6.63
===== ===== ===== ===== ===== =====
Total return* ...... 4.68% 9.80%-17.36% 75.82%-13.18% 1.47%
Net assets, end
of period (000
omitted) .........$33,057 $32,733$37,422 $46,908$27,136 $40,587
Ratio of expenses
to average net
assets ........... 1.86%** 1.66% 1.59% 1.69% 1.88% 1.57%
Ratio of net invest-
ment income to average
net assets ....... 0.64%** 2.55% 0.57% 0.48% .90% 2.11%
Portfolio turnover
rate*** .......... 72.80% 164.21% 64.89% 84.00% 61.50% 112.80%
Average commission
rate paid ........ $0.0323
*Total return calculated without taking into account the sales
load deducted on an initial purchase.
**Annualized.
***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.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout the Period:
For the
period
from 2/27/96
through
6/30/96*
--------
Net asset value,
beginning of period $9.35
-----
Income from investment
operations:
Net investment
income .......... 0.03
Net realized and
unrealized loss
on investments... (0.19)
-----
Total from investment
operations ........ (0.16)
-----
Less dividends from
net investment
income........... (0.04)
-----
Net asset value,
end of period ..... $9.15
=====
Total return ....... -1.74%
Net assets, end of
period (000
omitted) ......... $225
Ratio of expenses
to average net
assets ............ 1.22%**
Ratio of net
investment income
to average net
assets ............ 0.96%**
Portfolio
turnover rate ..... 72.80%***
Average commission
rate paid ........ $0.0323***
*On February 19, 1996, the Fund began offering Class Y shares to the
public. Fund shares outstanding prior to that date were designated
Class A shares.
**Annualized.
***For the six months ended June 30, 1996.
See notes to financial statements.
<PAGE>
UNITED GOLD & GOVERNMENT FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
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. Its investment objective is to seek a high total return through
investments in precious metals, minerals-related securities or U.S. Government
Securities. 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 pricing service or 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 System) 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 for current delivery 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. For assets and liabilities other than investments in
securities and bullion, net realized and unrealized gains and losses from
foreign currency translations arise from changes in currency exchange
rates. The Fund combines fluctuations from currency exchange rates and
fluctuations in market value when computing net realized and unrealized
gain or loss from investments.
D. Federal income taxes -- It is the Fund's policy to distribute all of its
taxable income and capital gains to its shareholders and otherwise qualify
as a regulated investment company under the Internal Revenue Code. In
addition, the Fund intends to pay distributions as required to avoid
imposition of excise tax. Accordingly, provision has not been made for
Federal income taxes. See Note 4 -- Federal Income Tax Matters.
E. Dividends and distributions -- Dividends and distributions to shareholders
are recorded by the Fund on the record date. Net investment income
distributions and capital gains distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing treatments
for items such as deferral of wash sales and post-October losses, foreign
currency transactions, net operating losses and expiring capital loss
carryforwards.
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.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
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 $14.3 billion of
combined net assets at June 30, 1996) 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
For Class A shares, the Fund also pays WARSCO a monthly per account charge
for transfer agency and dividend disbursement services of $1.3125 for each
shareholder account which was in existence at any time during the prior month
($1.0208 per account prior to April 1, 1996), plus $0.30 for each account on
which a dividend or distribution of cash or shares had a record date in that
month. With respect to Class Y shares, the Fund pays WARSCO a monthly fee at an
annual rate of .15% of the average daily net assets of the class for the
preceding 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 for Class A shares (which are not an expense of
the Fund) of $46,332, out of which W&R paid sales commissions of $25,407 and all
expenses in connection with the sale of Fund shares, except for registration
fees and related expenses.
Under a Service Plan for Class A shares 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 Class A 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 $676.
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 $19,844,933 while proceeds from maturities and sales
aggregated $10,652,817. Purchases of bullion aggregated $3,596,751 while
proceeds from the sale of bullion aggregated $1,772,913. Purchases of short-
term securities and U.S. Government securities aggregated $291,890,000 and $0,
respectively. Proceeds from maturities and sales of short-term securities and
U.S. Government securities aggregated $292,170,000 and $11,607,226,
respectively.
For Federal income tax purposes, cost of investments owned at June 30, 1996
was $31,272,313, resulting in net unrealized appreciation of $2,013,471, of
which $3,533,236 related to appreciated securities and $1,519,765 related to
depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $3,257,525 during the year ended December 31, 1995. These capital gains were
entirely offset by utilization of capital loss carryforwards. Remaining prior
year capital loss carryforwards aggregated $28,126,593 at December 31, 1995 and
are available to offset future capital gain net income 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.
NOTE 5 -- Commencement of Multiclass Operations
On February 19, 1996, the Fund was authorized to offer investors a choice
of two classes of shares, Class A and Class Y, each of which has equal rights as
to assets and voting privileges. Class Y shares are not subject to a sales
charge on purchases; they are not subject to a Rule 12b-1 Service Plan and have
a separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of either class are
offered is contained in the prospectus and the Statement of Additional
Information for the Fund. The Fund commenced multiclass operations on February
27, 1996.
Income, non-class specific expenses and realized and unrealized gains and
losses are allocated daily to each class of shares based on the value of
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
<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 June 30, 1996, the results of its operations for the six months
then ended and the changes in its net assets and the financial highlights for
each of 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 June 30, 1996 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Kansas City, Missouri
August 5, 1996
<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.
DIRECTORS
Ronald K. Richey, Birmingham, Alabama, Chairman of the Board
Henry L. Bellmon, Red Rock, Oklahoma
Dodds I. Buchanan, Boulder, Colorado
Jay B. Dillingham, Kansas City, Missouri
Linda Graves, Topeka, Kansas
John F. Hayes, Hutchinson, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Doyle Patterson, Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Keith A. Tucker, Overland Park, Kansas
Frederick Vogel III, Milwaukee, Wisconsin
Paul S. Wise, Carefree, Arizona
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 Municipal High Income Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Continental Income Fund, Inc.
United Retirement Shares, Inc.
United Asset Strategy Fund, Inc.
United Income Fund
United Accumulative Fund
United Vanguard Fund, Inc.
United New Concepts Fund, Inc.
United Science and Technology Fund
United International Growth Fund, Inc.
United Gold & Government Fund, Inc.
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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
Our INTERNET address is:
http://www.waddell.com
NUR1013SA(6-96)
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