United
Continental
Income Fund,
Inc.
ANNUAL
REPORT
----------------------------------------
For the fiscal year ended March 31, 2000
<PAGE>
MANAGER'S LETTER
-----------------------------------------------------------------
MARCH 31, 2000
Dear Shareholder:
This report relates to the operation of United Continental Income Fund for
the fiscal year ended March 31, 2000. The following discussion, graphs and
tables provide you with information regarding the Fund's performance during that
period.
Rising interest rates were of concern to investors during much of 1999.
The Federal Reserve raised interest rates in order to keep inflation and growth
in check. As a result, midyear, the S&P 500 corrected by approximately 10%.
However, thereafter the economic data continued to indicate a resilient economy
and concurrent robust profit growth. On the consumer side, retail sales,
overall consumption and personal income maintained a strong upward trend. On
the manufacturing side of the economy, industrial production grew and
inventories remained lean. Inflation stayed in check due to rising labor
productivity, despite the strong underlying economy. These very favorable
forces overwhelmed concerns over rising interest rates and we saw a very
powerful rally in the fourth quarter of 1999 that continued through the first
quarter of 2000.
While we made no significant changes to our allocation of stocks, bonds and
cash during the year, we did increase our focus on high-quality growth stocks
during the second half of 1999, particularly in the technology sector. We did
this to capture some of the powerful underlying trends that seemed to be
accelerating throughout the year. For example, there was an increase in
consolidation and strategic alliances in order to capture market share of the
developing Internet. In addition, the wireless world seemed to be taking off as
more applications were developed. More recently, we reduced some of our larger
positions as the markets headed towards what appeared to be extreme valuation
differences between what is called the "new economy" and the "old economy,"
adding to old economy stocks where the valuations looked compelling.
The strategies and techniques we applied resulted in the Fund outperforming
the Lipper Balanced Fund Universe Average and significantly outperforming the
Salomon Brothers Treasury/Government Sponsored/Corporate Index, but falling
moderately below the S&P 500 Index, all as charted on the following page. Those
indexes reflect the performance of securities that generally represent the stock
market (the S&P 500 Index), the bond market (the Salomon Brothers
Treasury/Government Sponsored/Corporate Index) and the universe of funds with
similar investment objectives (the Lipper Balanced Fund Universe Average). A
variety of indexes is presented because the Fund invests in stocks, bonds and
other instruments. The Fund's performance was aided by large advances in
certain of the Fund's technology holdings.
The end of the year rally in the stock market was certainly impressive,
particularly in the technology sector. However, the markets are still
contending with a strong economic backdrop in a rising interest rate
environment. The Fed seems likely to raise interest rates further as economic
growth remains above their targets. If evidence of inflation becoming a big
problem develops, the Fed may have to become much more aggressive. Until such
time as the interest rate outlook clarifies, we are hesitant to make any
significant changes to the Fund's portfolio. We are cautiously optimistic and
will continue to try to provide competitive returns that are consistent with the
Fund's objectives.
Thank you very much for your continued support and confidence in our
organization.
Respectfully,
Cynthia P. Prince-Fox
Manager, United Continental Income Fund, Inc.
<PAGE>
Comparison of Change in Value of $10,000 Investment in
United Continental Income Fund, Inc. Class A Shares,
The S&P 500 Index,
The Salomon Brothers Treasury/Government Sponsored/Corporate Index
and The Lipper Balanced Fund Universe Average
Salomon
United Brothers
Continental Treasury/ Lipper
Income Government Balanced
Fund, Inc., S&P Sponsored/ Fund
Class 500 Corporate Universe
A Shares Index Bond Index Average
--------- --------- ---------- ----------
03/31/90 Purchase9,425 10,000 10,000 10,000
03/31/91 10,048 11,441 11,237 11,233
03/31/92 11,553 12,705 12,545 12,649
03/31/93 13,180 14,640 14,341 14,270
03/31/94 14,024 14,855 14,751 14,674
03/31/95 14,921 17,168 15,430 15,680
03/31/96 18,397 22,679 17,124 18,949
03/31/97 19,481 27,156 17,897 20,987
03/31/98 24,391 40,202 20,122 26,876
03/31/99 25,215 47,652 21,438 28,622
03/31/00 29,341 56,310 21,777 31,567
==== United Continental Income Fund, Class A Shares* -- $29,341
++++ S&P 500 Index -- $56,310
**** Salomon Brothers Treasury/Government Sponsored/Corporate Index - $21,777
---- Lipper Balanced Fund Universe Average -- $31,567
*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.
Average Annual Total Return+
Class A Class B Class C Class Y
----------------------------------------------
Year Ended
3/31/00 9.67% N/A N/A 16.72%
5 Years Ended
3/31/00 13.13% N/A N/A N/A
10 Years Ended
3/31/00 11.36% N/A N/A N/A
Since inception of
Class** through
3/31/00 N/A 8.75% 11.98% 12.78%
+Performance data quoted represents past performance and is based on deduction
of the maximum applicable sales load for each of the periods. Class A shares
carry a maximum front-end sales load of 5.75%. Class B and Class C shares
carry maximum contingent deferred sales charges of 5% and 1%, respectively.
Total returns reflect share price appreciation, including reinvestment of all
income and capital gains distributions. Investment return and principal value
will fluctuate and an investor's shares, when redeemed, may be worth more or
less than their original cost.
++10/4/99 for Class B shares, 10/5/99 for Class C shares and 1/4/96 for Class Y
shares (the date on which shares were first acquired by shareholders).
Past performance is not predictive of future performance. Indexes are
unmanaged.
<PAGE>
SHAREHOLDER SUMMARY
--------------------------------------------------------------
United Continental Income Fund, Inc.
PORTFOLIO STRATEGY:
Normally not more than OBJECTIVE: To seek current income with a
75% Common Stocks secondary goal of long-term appreciation
of capital.
Normally at least 25%
Debt Securities or STRATEGY: Invests primarily in income-
Preferred Stock producing securities that
include common stock,
Generally less than 10% preferred stocks and debt
Foreign Securities securities.
FOUNDED: 1970
SCHEDULED DIVIDEND FREQUENCY: QUARTERLY (March, June, September,
December)
PERFORMANCE SUMMARY -- Class A Shares
PER SHARE DATA
For the Fiscal Year Ended March 31, 2000
----------------------------------------
DIVIDENDS PAID $0.18
=====
CAPITAL GAINS DISTRIBUTION $0.81
=====
NET ASSET VALUE ON
3/31/00 $8.20 adjusted to: $9.01 (A)
3/31/99 7.97
-----
CHANGE PER SHARE $1.04
=====
(A)This number includes the capital gains distribution of $0.81 paid in December
1999 added to the actual net asset value on March 31, 2000.
Past performance is not necessarily indicative of future results.
TOTAL RETURN HISTORY
Average Annual Total Return
---------------------------
With Without
Period Sales Load* Sales Load**
------ ----------- ------------
1-year period ended 3-31-00 9.67% 16.36%
5-year period ended 3-31-00 13.13% 14.48%
10-year period ended 3-31-00 11.36% 12.03%
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 March 31, 2000, United Continental Income Fund, Inc. had net assets totaling
$599,668,182 invested in a diversified portfolio of:
62.80% Common Stocks
27.52% United States Government Securities
6.61% Corporate Debt Securities
2.32% Cash and Cash Equivalents
0.75% Preferred Stock
As a shareholder of United Continental Income Fund, Inc., for every $100 you had
invested on March 31, 2000, your Fund owned:
$35.35 Manufacturing Stocks
27.52 United States Government Securities
8.40 Services Stocks
6.61 Corporate Debt Securities
6.49 Transportation, Communication, Electric
and Sanitary Services Stocks
6.00 Finance, Insurance and Real Estate Stocks
3.63 Wholesale and Retail Trade Stocks
2.93 Mining Stocks
2.32 Cash and Cash Equivalents
0.75 Preferred Stock
<PAGE>
THE INVESTMENTS OF
UNITED CONTINENTAL INCOME FUND, INC.
MARCH 31, 2000
Shares Value
COMMON STOCKS
Amusement and Recreation Services - 0.96%
Walt Disney Company (The) .............. 140,000 $ 5,792,500
Business Services - 5.76%
Electronic Data Systems Corporation .... 75,000 4,814,063
Intuit Inc.* ........................... 80,000 4,347,500
Microsoft Corporation* ................. 82,000 8,735,562
Oracle Corporation* .................... 72,000 5,613,750
SAP AG, ADR ............................ 105,000 6,273,750
Young & Rubicam Inc. ................... 100,800 4,737,600
Total ................................. 34,522,225
Chemicals and Allied Products - 6.96%
Air Products and Chemicals, Inc. ....... 222,600 6,330,187
American Home Products Corporation ..... 123,800 6,638,775
Colgate-Palmolive Company .............. 85,000 4,791,875
Merck & Co., Inc. ...................... 110,000 6,833,750
Pfizer Inc. ............................ 168,000 6,142,500
Pharmacia & Upjohn, Inc. ............... 47,000 2,784,750
Smith International, Inc.* ............. 17,800 1,379,500
Warner-Lambert Company ................. 70,000 6,825,000
Total ................................. 41,726,337
Communication - 4.44%
Cox Communications, Inc., Class A* ..... 86,000 4,171,000
Nextel Communications, Inc.* ........... 50,000 7,410,937
SBC Communications Inc. ................ 200,000 8,400,000
Vodafone Airtouch Public Limited
Company, ADR ......................... 120,000 6,667,500
Total ................................. 26,649,437
Depository Institutions - 1.40%
Bank of America Corporation ............ 159,904 8,384,966
Electric, Gas and Sanitary Services - 1.03%
Unicom Corporation ..................... 170,000 6,205,000
Electronic and Other Electric Equipment - 9.57%
Analog Devices, Inc.* .................. 114,000 9,184,125
General Electric Company ............... 55,700 8,643,944
Intel Corporation ...................... 70,000 9,226,875
Koninklijke Philips Electronics N.V.,
NY Shares ............................. 40,800 6,989,550
LSI Logic Corporation* ................. 121,400 8,816,675
Motorola, Inc. ......................... 34,800 4,954,650
Nokia Corporation, Series A, ADR ....... 25,000 5,431,250
Texas Instruments Incorporated ......... 25,900 4,144,000
Total ................................. 57,391,069
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED CONTINENTAL INCOME FUND, INC.
MARCH 31, 2000
Shares Value
COMMON STOCKS (Continued)
Fabricated Metal Products - 1.74%
Parker Hannifin Corporation ............ 117,400 $ 4,850,087
Tower Automotive, Inc.* ................ 340,000 5,567,500
Total.................................. 10,417,587
Food and Kindred Products - 2.43%
Anheuser-Busch Companies, Inc. ......... 50,000 3,112,500
PepsiCo, Inc. .......................... 185,000 6,394,062
Seagram Company Ltd. (The) ............. 85,000 5,057,500
Total.................................. 14,564,062
Food Stores - 1.03%
Kroger Co. (The)* ...................... 350,000 6,146,875
Furniture and Fixtures - 0.68%
Lear Corporation* ...................... 145,400 4,089,375
General Merchandise Stores - 2.60%
BJ's Wholesale Club, Inc.* ............. 170,000 6,566,250
Target Corporation ..................... 65,000 4,858,750
Wal-Mart Stores, Inc. .................. 75,000 4,162,500
Total ................................. 15,587,500
Industrial Machinery and Equipment - 4.79%
Apple Computer, Inc.* .................. 57,000 7,739,531
Applied Materials, Inc.* ............... 51,200 4,827,200
Dell Computer Corporation* ............. 100,000 5,396,875
EMC Corporation* ....................... 59,400 7,425,000
Hewlett-Packard Company ................ 25,000 3,314,063
Total ................................. 28,702,669
Insurance Agents, Brokers and Service - 1.35%
Hartford Financial Services
Group Inc. (The) ...................... 154,000 8,123,500
Insurance Carriers - 1.51%
Berkshire Hathaway Inc., Class B* ...... 2,000 3,640,000
Lincoln National Corporation ........... 80,000 2,680,000
ReliaStar Financial Corp. .............. 80,000 2,710,000
Total ................................. 9,030,000
Motion Pictures - 1.68%
News Corporation Limited (The), ADR .... 90,000 5,062,500
Time Warner Incorporated ............... 50,000 5,000,000
Total ................................. 10,062,500
Nondepository Institutions - 1.74%
Fannie Mae ............................. 70,000 3,950,625
Freddie Mac ............................ 147,000 6,495,562
Total ................................. 10,446,187
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED CONTINENTAL INCOME FUND, INC.
MARCH 31, 2000
Shares Value
COMMON STOCKS (Continued)
Oil and Gas Extraction - 2.93%
Burlington Resources Incorporated ...... 218,600 $ 8,088,200
Schlumberger Limited ................... 110,000 8,415,000
Transocean Sedco Forex Inc. ............ 21,296 1,092,751
Total ................................. 17,595,951
Paper and Allied Products - 2.14%
Consolidated Papers, Inc. .............. 205,000 7,879,688
International Paper Company ............ 116,000 4,959,000
Total ................................. 12,838,688
Petroleum and Coal Products - 2.66%
BP Amoco p.l.c., ADR ................... 88,096 4,674,594
Exxon Mobil Corporation ................ 83,169 6,471,588
Texaco Inc. ............................ 90,000 4,826,250
Total ................................. 15,972,432
Primary Metal Industries - 0.52%
Corus Group plc, ADR ................... 185,000 3,098,750
Printing and Publishing - 1.21%
Belo (A. H.) Corporation, Class A ...... 135,800 2,427,425
Meredith Corporation ................... 175,000 4,845,313
Total.................................. 7,272,738
Stone, Clay and Glass Products - 0.89%
Corning Incorporated ................... 27,500 5,335,000
Transportation by Air - 1.02%
UAL Corporation* ....................... 102,000 6,107,250
Transportation Equipment - 1.76%
Boeing Company (The) ................... 125,000 4,742,188
General Motors Corporation ............. 70,000 5,796,875
Total ................................. 10,539,063
TOTAL COMMON STOCKS - 62.80% $376,601,661
(Cost: $287,990,690)
PREFERRED STOCK - 0.75%
Communication
Cox Communications, Inc.,
7.0%, Convertible ..................... 71,000 $ 4,508,500
(Cost: $3,550,000)
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED CONTINENTAL INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES
Chemicals and Allied Products - 0.38%
American Home Products Corporation,
7.9%, 2-15-05 ......................... $ 2,250 $ 2,304,225
Communication - 1.86%
Bell Atlantic Financial Services, Inc.,
Convertible,
5.75%, 4-1-03 (A) ..................... 3,000 3,052,500
BellSouth Savings and Security ESOP Trust,
9.125%, 7-1-03 ........................ 1,887 1,942,392
Comcast Corporation, ZONES, Convertible,
2.0%, 10-15-29 ........................ 2,750 4,849,597
Southwestern Bell Telephone Company,
5.77%, 10-14-03 ....................... 1,350 1,285,632
Total ................................. 11,130,121
Depository Institutions - 0.34%
Wachovia Corporation,
6.25%, 8-4-08 ......................... 2,250 2,054,633
Electric, Gas and Sanitary Services - 0.28%
California Infrastructure and Economic Development
Bank, Special Purpose Trust SCE-1,
6.38%, 9-25-08 ........................ 1,750 1,685,460
Food and Kindred Products - 0.73%
Coca-Cola Enterprises Inc.,
6.7%, 10-15-36 ........................ 4,500 4,408,110
General Merchandise Stores - 0.38%
JCP Master Credit Card Trust,
9.625%, 6-15-00 ....................... 2,250 2,255,625
Industrial Machinery and Equipment - 0.35%
Tyco International Group S.A.,
6.375%, 6-15-05 ....................... 2,250 2,110,432
Nondepository Institutions - 1.16%
General Electric Capital Corporation,
8.3%, 9-20-09 ......................... 6,500 6,961,955
Rubber and Miscellaneous Plastics Products - 0.57%
Mark IV Industries, Inc., Convertible,
4.75%, 11-1-04 (A) .................... 4,000 3,410,000
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED CONTINENTAL INCOME FUND, INC.
MARCH 31, 2000
Principal
Amount in
Thousands Value
CORPORATE DEBT SECURITIES (Continued)
Transportation by Air - 0.56%
Southwest Airlines Co.,
7.875%, 9-1-07 ........................ $ 3,300 $ 3,328,644
TOTAL CORPORATE DEBT SECURITIES - 6.61% $ 39,649,205
(Cost: $38,728,053)
UNITED STATES GOVERNMENT SECURITIES
Federal Home Loan Mortgage Corporation,
6.625%, 9-15-09 ....................... 5,000 4,807,800
Federal National Mortgage Association:
6.0%, 6-25-07 ......................... 3,000 2,959,680
6.51%, 5-6-08 ......................... 6,750 6,327,045
8.25%, 6-1-08 ......................... 290 290,922
6.19%, 7-7-08 ......................... 4,500 4,125,240
6.625%, 9-15-09 ....................... 4,000 3,846,880
7.25%, 1-15-10 ........................ 5,000 5,033,600
Government National Mortgage Association:
9.0%, 7-15-16 ......................... 44 46,230
9.0%, 8-15-16 ......................... 200 208,665
9.0%, 10-15-16 ........................ 359 374,261
9.0%, 11-15-16 ........................ 107 111,130
9.0%, 1-15-17 ......................... 57 59,205
9.0%, 3-15-17 ......................... 121 126,347
9.0%, 4-15-17 ......................... 105 109,145
9.0%, 7-15-17 ......................... 72 74,375
6.5%, 8-15-28 ......................... 9,331 8,800,278
United States Treasury:
8.875%, 5-15-00 ....................... 17,000 17,053,040
8.0%, 5-15-01 ......................... 20,000 20,328,200
6.375%, 8-15-02 ....................... 12,000 11,970,000
7.5%, 2-15-05 ......................... 33,000 34,505,460
6.5%, 8-15-05 ......................... 4,000 4,023,760
7.25%, 5-15-16 ........................ 8,500 9,392,500
6.25%, 8-15-23 ........................ 30,000 30,426,600
TOTAL UNITED STATES GOVERNMENT SECURITIES - 27.52% $165,000,363
(Cost: $168,794,629)
TOTAL SHORT-TERM SECURITIES - 2.08% $ 12,463,417
(Cost: $12,463,417)
TOTAL INVESTMENT SECURITIES - 99.76% $598,223,146
(Cost: $511,526,789)
CASH AND OTHER ASSETS, NET OF LIABILITIES - 0.24% 1,445,036
NET ASSETS - 100.00% $599,668,182
See Notes to Schedule of Investments on page 11.
<PAGE>
THE INVESTMENTS OF
UNITED CONTINENTAL INCOME FUND, INC.
MARCH 31, 2000
Notes To Schedule of Investments
*No income dividends were paid during the preceding 12 months.
(A) Security was purchased pursuant to Rule 144A under the Securities Act of
1933 and may be resold in transactions exempt from registration, normally
to qualified institutional buyers. At March 31, 2000, the value of these
securities amounted to $6,462,500 or 1.08% of net assets.
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 CONTINENTAL INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2000
(In Thousands, Except for Per Share Amounts)
Assets
Investment securities - at value
(Notes 1 and 3) ................................. $598,223
Cash ............................................ 2
Receivables:
Dividends and interest .......................... 3,400
Fund shares sold ................................ 273
Prepaid insurance premium ........................ 20
--------
Total assets .................................. 601,918
--------
Liabilities
Payable to Fund shareholders ..................... 1,994
Accrued service fee (Note 2) ..................... 107
Accrued transfer agency and dividend
disbursing (Note 2) ............................. 106
Accrued distribution fee (Note 2) ................ 17
Accrued management fee (Note 2) .................. 11
Accrued accounting services fee (Note 2) ......... 6
Other ............................................ 9
--------
Total liabilities ............................. 2,250
--------
Total net assets ............................. $599,668
========
Net Assets
$1.00 par value capital stock
Capital stock ................................... $ 73,120
Additional paid-in capital ...................... 401,242
Accumulated undistributed income:
Accumulated undistributed net investment income . 873
Accumulated undistributed net realized gain
on investment transactions .................... 37,737
Net unrealized appreciation in value of
investments ................................... 86,696
--------
Net assets applicable to outstanding
units of capital ............................. $599,668
========
Net asset value per share (net assets divided
by shares outstanding)
Class A .......................................... $8.20
Class B ........................................... $8.20
Class C ........................................... $8.20
Class Y .......................................... $8.20
Capital shares outstanding
Class A .......................................... 72,778
Class B ........................................... 172
Class C ........................................... 34
Class Y .......................................... 136
Capital shares authorized .......................... 200,000
See notes to financial statements.
<PAGE>
UNITED CONTINENTAL INCOME FUND, INC.
STATEMENT OF OPERATIONS
For the Fiscal Year Ended MARCH 31, 2000
(In Thousands)
Investment Income
Income (Note 1B):
Interest and amortization........................ $14,251
Dividends ....................................... 5,530
-------
Total income .................................. 19,781
-------
Expenses (Note 2):
Investment management fee ....................... 3,887
Service fee:
Class A ........................................ 1,382
Class B ........................................ 1
Class C ........................................ ---*
Transfer agency and dividend
disbursing:
Class A ........................................ 1,064
Class B ........................................ 1
Class C ........................................ ---*
Distribution fee:
Class A ........................................ 105
Class B ........................................ 3
Class C ........................................ 1
Accounting services fee ......................... 70
Custodian fees .................................. 30
Audit fees ...................................... 17
Legal fees ...................................... 10
Shareholder servicing - Class Y ................. 2
Other ........................................... 156
-------
Total expenses ................................ 6,729
-------
Net investment income ........................ 13,052
-------
Realized and Unrealized Gain (Loss) on
Investments (Notes 1 and 3)
Realized net gain on securities .................. 76,590
Unrealized depreciation in value of investments
during the period ............................... (671)
-------
Net gain on investments ....................... 75,919
-------
Net increase in net assets resulting from
operations ................................. $88,971
=======
*Not shown due to rounding.
See notes to financial statements.
<PAGE>
UNITED CONTINENTAL INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
(In Thousands)
For the fiscal year ended
March 31,
------------------------
2000 1999
Increase (Decrease) in Net Assets ------------ ------------
Operations:
Net investment income ............... $13,052 $ 15,903
Realized net gain on investments .... 76,590 36,348
Unrealized depreciation ............. (671) (32,734)
-------- --------
Net increase in net assets
resulting from operations ........ 88,971 19,517
-------- --------
Distributions to shareholders from (Note 1E):*
Net investment income:
Class A ........................... (12,798) (15,474)
Class B ........................... (6) ---
Class C ........................... (1) ---
Class Y ........................... (27) (268)
Realized gains on securities transactions:
Class A ........................... (56,127) (28,169)
Class B ........................... (50) ---
Class C ........................... (10) ---
Class Y ........................... (98) (562)
-------- --------
(69,117) (44,473)
-------- --------
Capital share transactions
(Note 5) ............................ (2,587) (2,963)
-------- --------
Total increase (decrease) ...... 17,267 (27,919)
Net Assets
Beginning of period .................. 582,401 610,320
-------- --------
End of period, including undistributed
net investment income of $873 and
$653, respectively................... $599,668 $582,401
======== ========
*See "Financial Highlights" on pages 15 - 18.
See notes to financial statements.
<PAGE>
UNITED CONTINENTAL INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class A Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:*
For the fiscal year ended March 31,
-----------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Net asset value,
beginning of
period ........... $7.97 $8.32 $7.57 $8.00 $6.95
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.18 0.33 0.24 0.24 0.24
Net realized and
unrealized gain
on investments .. 1.04 0.04 1.58 0.22 1.35
----- ----- ----- ----- -----
Total from investment
operations ....... 1.22 0.37 1.82 0.46 1.59
----- ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.18) (0.32) (0.24) (0.24) (0.23)
From capital gains (0.81) (0.40) (0.83) (0.65) (0.31)
----- ----- ----- ----- -----
Total
distributions .... (0.99) (0.72) (1.07) (0.89) (0.54)
----- ----- ----- ----- -----
Net asset value,
end of period .... $8.20 $7.97 $8.32 $7.57 $8.00
===== ===== ===== ===== =====
Total return** ..... 16.36% 3.38% 25.20% 5.88% 23.29%
Net assets, end of
period (in
millions) ........ $597 $581 $599 $508 $502
Ratio of expenses to
average net assets 1.15% 0.99% 0.91% 0.93% 0.89%
Ratio of net investment
income to average net
assets ........... 2.22% 2.69% 2.88% 3.01% 3.06%
Portfolio turnover
rate ............. 72.40% 50.68% 55.46% 40.29% 41.34%
*Per-share amounts have been adjusted retroactively to reflect the 200%
stock dividend effected June 26, 1998.
**Total return calculated without taking into account the sales load
deducted on an initial purchase.
See notes to financial statements.
<PAGE>
UNITED CONTINENTAL INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class B Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/4/99*
through
3/31/00
-------
Net asset value,
beginning of period $8.11
----
Income from investment
operations:
Net investment income 0.05
Net realized and
unrealized gain
on investments .. 0.91
----
Total from investment
operations ....... 0.96
----
Less distributions:
From net investment
income .......... (0.06)
From capital gains (0.81)
----
Total distributions (0.87)
----
Net asset value,
end of period .... $8.20
====
Total return ....... 12.75%
Net assets, end of
period (in
millions) ........ $1
Ratio of expenses to
average net assets 2.08%**
Ratio of net investment
income to average
net assets ....... 1.14%**
Portfolio turnover
rate ............. 72.40%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED CONTINENTAL INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class C Shares
For a Share of Capital Stock Outstanding
Throughout The Period:
For the
period
from
10/5/99*
through
3/31/00
-------
Net asset value,
beginning of period $8.09
----
Income from investment
operations:
Net investment income 0.05
Net realized and
unrealized gain
on investments .. 0.93
----
Total from investment
operations ....... 0.98
----
Less distributions:
From net investment
income .......... (0.06)
From capital gains (0.81)
----
Total distributions (0.87)
----
Net asset value,
end of period .... $8.20
====
Total return ....... 12.98%
Net assets, end of
period (000 omitted) $279
Ratio of expenses to
average net assets 2.23%**
Ratio of net investment
income to average
net assets ....... 1.09%**
Portfolio turnover
rate ............. 72.40%**
*Commencement of operations.
**Annualized.
See notes to financial statements.
<PAGE>
UNITED CONTINENTAL INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
Class Y Shares
For a Share of Capital Stock Outstanding
Throughout Each Period:*
For the
period
For the fiscal from
year ended March 31, 1/4/96**
--------------------------- through
2000 1999 1998 1997 3/31/96
------ ------ ------ ------ ------
Net asset value,
beginning of period $7.97 $8.33 $7.57 $8.00 $7.78
----- ----- ----- ----- -----
Income from investment
operations:
Net investment
income .......... 0.21 0.07 0.26 0.26 0.03
Net realized and
unrealized gain
on investments .. 1.03 0.32 1.58 0.21 0.25
----- ----- ----- ----- -----
Total from investment
operations ....... 1.24 0.39 1.84 0.47 0.28
----- ----- ----- ----- -----
Less distributions:
From net investment
income .......... (0.20) (0.35) (0.26) (0.26) (0.06)
From capital gains (0.81) (0.40) (0.82) (0.64) (0.00)
----- ----- ----- ----- -----
Total distributions (1.01) (0.75) (1.08) (0.90) (0.06)
----- ----- ----- ----- -----
Net asset value,
end of period .... $8.20 $7.97 $8.33 $7.57 $8.00
===== ===== ===== ===== =====
Total return ....... 16.72% 3.58% 25.43% 6.07% 3.53%
Net assets, end of
period (in
millions) ........ $1 $1 $11 $6 $6
Ratio of expenses
to average net
assets ........... 0.86% 0.81% 0.75% 0.75% 0.80%***
Ratio of net
investment income
to average net
assets ........... 2.50% 3.32% 3.01% 3.20% 3.35%***
Portfolio
turnover rate .... 72.40% 50.68% 55.46% 40.29% 41.34%***
*Per-share amounts have been adjusted retroactively to
reflect the 200% stock dividend effected June 26, 1998.
**Commencement of operations.
***Annualized.
See notes to financial statements.
<PAGE>
UNITED CONTINENTAL INCOME FUND, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 -- Significant Accounting Policies
United Continental Income 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 provide current income to the extent
that, in the opinion of the Fund's investment manager, market and economic
conditions permit. As a secondary goal, this Fund seeks long-term appreciation
of capital. 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 accounting principles generally
accepted in the United States of America.
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 the Nasdaq Stock Market, which provides information on bid and
asked prices quoted by major dealers in such stocks. Restricted securities
and securities for which market quotations are not readily available are
valued at fair value as determined in good faith under 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. Interest income is recorded on the accrual basis. See Note
3 -- Investment Security 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, 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 Subchapter M of 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 business day following record date. Net
investment income dividends and capital gains distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. 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 carryovers.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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
is payable by the Fund at the annual rates of: 0.70% of net assets up to $1
billion, 0.65% of net assets over $1 billion and up to $2 billion, 0.60% of net
assets over $2 billion and up to $3 billion, and 0.55% of net assets over $3
billion. The Fund accrues and pays the 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, Class B and Class C shares, the Fund 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, 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 0.15% 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 gross sales
commissions for Class A shares (which are not an expense of the Fund) of
$362,698. With respect to Class A, Class B and Class C shares, W&R paid sales
commissions of $311,239 and all expenses in connection with the sale of Fund
shares, except for registration fees and related expenses.
A contingent deferred sales charge ("CDSC") may be assessed against a
shareholder's redemption amount of Class B and Class C shares and is paid to
W&R. The purpose of the deferred sales charge is to compensate W&R for the
costs incurred by W&R in connection with the sale of Fund shares.
With respect to Class B shares, the amount of the CDSC will be the
following percent of the total amount invested during a calendar year to acquire
the shares or the value of the shares redeemed, whichever is less. Redemption
at any time during the first calendar year of investment, 5%; the second
calendar year, 4%; the third calendar year, 3%; the fourth calendar year, 3%;
the fifth calendar year, 2%; the sixth calendar year, 1% and thereafter, 0%.
If Class C shares are sold within 12 months of buying these shares, a 1%
CDSC will be imposed.
The deferred sales charge will not be imposed on shares representing
payment of dividends or distributions or on amounts which represent an increase
in the value of the shareholder's account resulting from capital appreciation
above the amount paid for shares purchased during the deferred sales charge
period. During the period ended March 31, 2000, W&R received $11 and $12 in
deferred sales charges from Class B and C shares, respectively.
Under a Distribution and 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 distribution and/or service fee to W&R in an amount not to
exceed 0.25% 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 distribution of the
Class A shares and/or provision of personal services to Fund shareholders and/or
maintenance of shareholder accounts.
Under the Distribution and Service Plan adopted by the Fund for Class B and
Class C shares, respectively, the Fund may pay W&R, on an annual basis, a
service fee of up to 0.25% of the average daily net assets of the class to
compensate W&R for providing services to shareholders of that class and/or
maintaining shareholder accounts for that class and a distribution fee of up to
0.75% of the average daily net assets of the class to compensate W&R for
distributing the shares of that class. The Class B Plan and the Class C Plan
each permit W&R to receive compensation, through the distribution and service
fee, respectively, for its distribution activities for that class, which are
similar to the distribution activities described with respect to the Class A
Plan, and for its activities in providing personal services to shareholders of
that class and/or maintaining shareholder accounts of that class, which are
similar to the corresponding activities for which is it entitled to
reimbursement under the Class A Plan.
The Fund paid Directors' fees of $444, which are included in other
expenses.
W&R is a subsidiary of Waddell & Reed Financial, Inc., a holding company,
and a direct subsidiary of Waddell & Reed Financial Services, Inc., a holding
company.
NOTE 3 -- Investment Security Transactions
Purchases of investment securities, other than U.S. Government obligations
and short-term securities, aggregated $395,727,461 while proceeds from
maturities and sales aggregated $438,412,730. Purchases of short-term
securities and U.S Government securities aggregated $752,206,818 and
$18,026,855, respectively. Proceeds from maturities and sales of short-term
securities and U.S. Government securities aggregated $750,121,362 and
$33,935,614, respectively.
For Federal income tax purposes, cost of investments owned at March 31,
2000 was $512,606,399, resulting in net unrealized appreciation of $85,616,747,
of which $103,524,430 related to appreciated securities and $17,907,683 related
to depreciated securities.
NOTE 4 -- Federal Income Tax Matters
For Federal income tax purposes, the Fund realized capital gain net income
of $77,669,478 during the year ended March 31, 2000, of which a portion was paid
to shareholders during the period ended March 31, 2000. Remaining capital gain
net income will be distributed to the Fund's shareholders.
NOTE 5 -- Multiclass Operations
The Fund is authorized to offer four classes of shares, Class A, Class B,
Class C and Class Y, each of which have equal rights as to assets and voting
privileges. Class Y shares are not subject to a sales charge on purchases, are
not subject to a Rule 12b-1 Distribution and Service Plan and are subject to a
separate transfer agency and dividend disbursement services fee structure. A
comprehensive discussion of the terms under which shares of each class are
offered is contained in the Prospectus and the Statement of Additional
Information for the Fund.
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 their
relative net assets as of the beginning of each day adjusted for the prior day's
capital share activity.
Transactions in capital stock are summarized below. Amounts are in
thousands.
For the fiscal
year ended March 31,
--------------------------
2000 1999
------------ ------------
Shares issued from sale
of shares:
Class A ............ 4,530 5,841
Class B ............. 181 ---
Class C ............. 33 ---
Class Y ............ 25 298
Shares issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 8,645 5,312
Class B ............. 8 ---
Class C ............. 1 ---
Class Y ............ 16 105
Shares redeemed:
Class A ............ (13,314) (10,253)
Class B ............. (17) ---
Class C ............. ---* ---
Class Y ............ (41) (1,563)
------ ------
Increase (decrease) in
outstanding capital
shares .............. 67 (260)
====== ======
Value issued from sale
of shares:
Class A ............ $36,528 $47,279
Class B ............. 1,432 ---
Class C ............. 259 ---
Class Y ............ 202 2,444
Value issued from
reinvestment of dividends
and/or capital gains
distribution:
Class A ............ 66,193 41,926
Class B ............. 56 ---
Class C ............. 11 ---
Class Y ............ 125 829
Value redeemed:
Class A ............ (106,928) (82,940)
Class B ............. (128) ---
Class C ............. (2) ---
Class Y ............ (335) (12,501)
-------- -------
Decrease in outstanding
capital ............ $ (2,587) $(2,963)
======== =======
*Not shown due to rounding.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
United Continental Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of United Continental Income Fund, Inc. (the
"Fund") as of March 31, 2000, and the related statement of operations for the
fiscal year then ended, the statements of changes in net assets for each of the
two fiscal years in the period then ended, and the financial highlights for each
of the five fiscal years in the period then ended. These financial statements
and the financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements and
the financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of March 31, 2000, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of United
Continental Income Fund, Inc. as of March 31, 2000, the results of its
operations for the fiscal year then ended, the changes in its net assets for
each of the two fiscal years in the period then ended, and the financial
highlights for each of the five fiscal years in the period then ended in
conformity with accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Kansas City, Missouri
May 5, 2000
<PAGE>
INCOME TAX INFORMATION
The amounts of the dividends and long-term capital gains 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 Federal income tax return for the years in which
they were received or reinvested.
PER-SHARE AMOUNTS REPORTABLE AS:
--------------------------------------------------------
For Individuals For Corporations
-------------------------------------------------------
Record Ordinary Long-Term Non- Long-Term
Date Total IncomeCapital GainQualifyingQualifyingCapital Gain
----------- ----- -------- ---------------------------------------
Class A
06-09-99 $0.0400 $0.0400 $ --- $0.0115 $0.0285 $ ---
09-15-99 0.0400 .0400 --- .0117 .0283 ---
12-15-99 0.8690 .1431 .7259 .0176 .1255 .7259
03-15-00 0.0400 .0400 --- .0120 .0280 ---
------- ------- ------- ------- ------- -------
Total $0.9890 $0.2631 $0.7259 $0.0528 $0.2103 $0.7259
======= ======= ======= ======= ======= =======
Class B
12-15-99 $0.8510 $0.1251 $0.7259 $0.0123 $0.1128 $0.7259
03-15-00 0.0230 .0230 --- .0069 .0161 ---
------- ------- ------- ------- ------- -------
Total $0.8740 $0.1481 $0.7259 $0.0192 $0.1289 $0.7259
======= ======= ======= ======= ======= =======
Class C
12-15-99 $0.8510 $0.1251 $0.7259 $0.0123 $0.1128 $0.7259
03-15-00 0.0190 .0190 --- .0057 .0133 ---
------- ------- ------- ------- ------- -------
Total $0.8700 $0.1441 $0.7259 $0.0180 $0.1261 $0.7259
======= ======= ======= ======= ======= =======
Class Y
06-09-99 $0.0450 $0.0450 $ --- $0.0130 $0.0320 $ ---
09-15-99 0.0470 .0470 --- .0138 .0332 ---
12-15-99 0.8740 .1481 .7259 .0190 .1291 .7259
03-15-00 0.0480 .0480 --- .0144 .0336 ---
------- ------- ------- ------- ------- -------
Total $1.0140 $0.2881 $0.7259 $0.0602 $0.2279 $0.7259
======= ======= ======= ======= ======= =======
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.
The tax status of dividends paid will be reported to you on Form 1099-DIV after
the close of the applicable calendar year.
Shareholders are advised to consult with their tax adviser concerning the tax
treatment of dividends and distributions from the Fund.
<PAGE>
Shareholder Meeting Results
A special meeting of United Continental Income Fund, Inc. was held on June 22,
1999. The matters voted upon by the shareholders and the resulting votes for
each matter are presented below.
Item 1. To elect the Board of Directors:
Broker
For Withhold Non-Votes*
J. Concannon 38,257,556 1,234,712 0
J. Dillingham 38,269,041 1,223,227 0
D. Gardner 38,186,387 1,305,881 0
L. Graves 38,240,090 1,252,178 0
J. Harroz Jr. 38,170,439 1,321,829 0
J. Hayes 38,141,112 1,351,156 0
R. Hechler 38,204,647 1,287,621 0
H. Herrmann 38,217,133 1,275,135 0
G. Johnson 38,084,484 1,407,784 0
W. Morgan 38,194,512 1,297,756 0
R. Reimer 38,150,063 1,342,205 0
F. Ross 38,263,402 1,228,866 0
E. Schwartz 38,196,439 1,295,829 0
K. Tucker 38,247,930 1,244,338 0
F. Vogel 38,256,560 1,235,708 0
Item 2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent accountants for its current fiscal year:
Broker
For Against Abstain Non-Votes*
37,793,521 155,169 1,543,578 0
Item 3. To approve or disapprove the amendment to the Fund's investment
management agreement with Waddell & Reed Investment Management Company:
Broker
For Against Abstain Non-Votes*
35,617,261 2,062,861 1,768,483 43,663
Item 4. To approve or disapprove amendment of the Fund's policy regarding
securities lending:
Broker
For Against Abstain Non-Votes*
35,665,491 1,241,739 2,541,375 43,663
Item 5. To approve or disapprove the Fund's Articles of Incorporation to
change the par value of Fund shares to $0.001:
Broker
For Against Abstain Non-Votes*
35,354,917 1,146,708 2,990,643 0
*Broker Non-Votes are proxies received by the Fund from brokers or nominees when
the broker or nominee neither has received instructions from the beneficial
owner or other persons entitled to vote nor has discretionary power to vote on a
particular matter.
<PAGE>
DIRECTORS
Keith A. Tucker, Overland Park, Kansas, Chairman of the Board
James M. Concannon, Topeka, Kansas
John A. Dillingham, Kansas City, Missouri
David P. Gardner, San Mateo, California
Linda K. Graves, Topeka, Kansas
Joseph Harroz, Jr., Norman, Oklahoma
John F. Hayes, Hutchinson, Kansas
Robert L. Hechler, Overland Park, Kansas
Henry J. Herrmann, Overland Park, Kansas
Glendon E. Johnson, Miami, Florida
William T. Morgan, Coronado, California
Ronald C. Reimer, Mission Hills, Kansas
Frank J. Ross, Jr., Kansas City, Missouri
Eleanor B. Schwartz, Kansas City, Missouri
Frederick Vogel III, Milwaukee, Wisconsin
OFFICERS
Robert L. Hechler, President
Henry J. Herrmann, Vice President
Theodore W. Howard, Vice President and Treasurer
Cynthia P. Prince-Fox, Vice President
Kristen A. Richards, Vice President and Secretary
Daniel C. Schulte, Vice President
This report is submitted for the general information of the shareholders of
United Continental Income Fund, Inc. It is not authorized for distribution to
prospective investors in the Fund unless accompanied with or preceded by the
United Continental Income Fund, Inc. current prospectus.
To all traditional IRA Planholders:
As required by law, income tax will automatically be withheld from any
distribution or withdrawal from a traditional IRA unless you make a written
election not to have taxes withheld. The election may be made by submitting
forms provided by Waddell & Reed, Inc. which can be obtained from your Waddell &
Reed representative or by submitting Internal Revenue Service Form W-4P. Once
made, an election can be revoked by providing written notice to Waddell & Reed,
Inc. If you elect not to have tax withheld you may be required to make payments
of estimated tax. Penalties may be imposed by the IRS if withholding and
estimated tax payments are not adequate.
<PAGE>
The United Group of Mutual Funds
United Accumulative Fund
United Asset Strategy Fund, Inc.
United Bond Fund
United Cash Management, Inc.
United Continental Income Fund, Inc.
United Government Securities Fund, Inc.
United High Income Fund, Inc.
United High Income Fund II, Inc.
United Income Fund
United International Growth Fund, Inc.
United Municipal Bond Fund, Inc.
United Municipal High Income Fund, Inc.
United New Concepts Fund, Inc.
United Retirement Shares, Inc.
United Science and Technology Fund
United Small Cap Fund, Inc.
United Tax-Managed Equity Fund, Inc.
United Vanguard Fund, 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
(888)-WADDELL
(888)-923-3355
Our INTERNET address is:
http://www.waddell.com
NUR1004A(3-00)
printed on recycled paper
